Thursday 15 July 2021 2:57 pm | Updated: Thursday 15 July 2021 2:58 pm

Morgan Stanley beats expectations as investment banking income climbs

US bank Morgan Stanley smashed analysts’ expectations for second quarter earnings and revenue, driven by record levels of capital market activity boosting its investment banking business.

Revenue at the banking giant came in at $14.8bn, much higher than the $13.98bn estimate.

Earnings per share hit $1.85, topping analysts’ estimates of $1.65.

Investment banking revenue was a bright spot for the Wall Street bank, up 16 per cent in the second quarter to $2.38bn. Rampant M&A activity helped lift deal advisory and equity underwriting revenues.

The American banking giant advised on 216 deals in the first six months of the year, ranking third in the global M&A league tables during the quarter, behind Goldman Sachs and JPMorgan, according to Refinitiv.

Net income applicable to common shareholders rose to $3.4bn in the second quarter, up from $3.05bn a year earlier.

Equity trading was a sour spot for Morgan Stanley, falling over the last quarter. Wall Street rivals have reported similar contractions in equity trading revenue as a result of baseline comparison effects with a year ago when the Covid pandemic first hit and injected volatility into capital markets.

James Gorman, CEO of Morgan Stanley, said: “The firm delivered another very strong quarter, with contributions from all of our businesses.”

“With our transformed business model providing more stable and durable earnings, we have doubled our dividend and announced a $12bn buyback as we move to return our excess capital to shareholders.”

The strong results round off a positive earnings quarter for Wall Street banks, mainly driven by the release of loan loss reserves after a wave of pandemic-induced defaults failed to materialise.