Morgan Stanley beats second-quarter estimates on record wealth management revenue

Key takeaways

Morgan Stanley posted record wealth management revenues and beat earnings and sales estimates.
The bank benefited from higher interest rates as the Federal Reserve raised rates to fight inflation.
Profits were driven down by severance pay for layoffs.

Morgan Stanley (MS) posted a 13% drop in profits due to lower trading volumes, but record wealth management revenue helped the bank post better-than-expected results. Shares soared more than 6% on Tuesday following the news.

Morgan Stanley said second-quarter earnings fell to $2.18 billion, or $1.24 per share. Earnings were impacted by a $308 million charge to pay severance benefits to some 3,000 employees laid off during the period. Sales rose 2.5% to $13.46 billion. Earnings per share (EPS) and sales were above analysts' estimates.

Wealth management revenue jumped 16% to $6.66 billion. The bank benefited from higher interest rates as the Federal Reserve raised rates to fight inflation. Net interest income jumped 23% to $2.16 billion. Transactional sales more than tripled from a year earlier to $869 million. In contrast, asset management revenues declined.

Investment banking revenue was little changed. Fixed income net income fell 31% and equity net income fell 14%.

CEO James Gorman said that Morgan Stanley “delivered strong results in a challenging market environment”. He said the quarter started with “macroeconomic uncertainties and subdued client activity” but ended on what he called a “more constructive tone.”

Morgan Stanley shares are were trading at four-month highs in the morning session.