Morgan Stanley became the latest Wall Street bank to report a benefit from an “improving” outlook for investment banking.
In the three months to June, the bank’s profit jumped 40 per cent, rising to $3.1bn from $2.2bn in the same period last year.
The bulk of the increase came from a better performance at its investment bank. Investment bank revenue jumped 50 per cent compared to last year. Morgan Stanley attributed higher income from mergers and acquisitions and initial public offerings for the growth.
Ted Pick, who has headed the bank since the turn of the year, said Morgan Stanley “delivered another strong quarter in an improving capital markets environment”.
“We continue to execute on our strategy and remain well positioned to deliver growth and long-term value for our shareholders,” he added.
Like other US banks, Morgan Stanley has benefited from a rebound in dealmaking activity, which fell off a cliff last year due to the impact of higher interest rates and economic uncertainty.
All the major US banks have reported a much healthier outlook for capital markets than a year ago. Profit at Goldman Sachs more than doubled in the second quarter thanks to the resurgence in investment banking while Citi and JP Morgan also saw much higher revenue from their dealmaking divisions.
Morgan Stanley has historically been highly dependent on investment banking.
Over recent years, it has attempted to diversify its revenue away from the traditionally volatile sector by beefing up its wealth management arm.
It reported today that wealth management revenue rose two per cent year-on-year. The growth, it said, was driven by fee-based asset flows and a positive market environment. However, this was a worse performance than expected by many analysts.
Bank of America also reported results for the second quarter today. Net income in the three months to June fell to $6.9bn from $7.4bn as it had to set aside more to cover bad loans on its credit card portfolio.
Revenue increased slightly to $25.4bn from $25.2bn, thanks to a strong performance from the bank’s wealth management arm and a recovery in investment banking. This offset a three per cent decline in interest income.
“Our team produced another strong quarter, serving a growing client base,” Brian Moynihan, chair and chief executive said.