Trading lifts US banks to post a profit
MORGAN Stanley yesterday smashed Wall Street expectations to report $757m (£456m) in net profit, with its riskier trading operations stealing the thunder from its growing brokerage.
Strong fixed income sales and trading revenue and improved investment banking underwriting results broke a three-quarter losing streak as Morgan Stanley belatedly joined rivals like Goldman Sachs in returning to the black after the collapse of the financial sector a year ago.
The New York-based bank reported third quarter net income of $498m, or 38 cents a share, beating analysts’ average forecast of 27 cents a share.
The bank has pledged to play a more conservative hand as it develops its brokerage business.
Morgan Stanley chief financial officer Colm Kelleher said that the results were an “affirmation” that the firm’s strategy was bearing fruit.
But the third-quarter rebound came largely because of solid results in trading, a riskier area of the business where Morgan Stanley has hired hundreds of people in recent months.
Co-president James Gorman is set to succeed chief executive John Mack – credited with keeping the bank alive during the darkest days of the crisis, but criticised for struggling to manage risk – early next year.
Meanwhile Wells Fargo reported record profits of $3.2bn in the third-quarter, almost double the same period in 2008.
The bank added that shareholder profit rose 60 per cent in the third quarter as mortgage banking revenue surged. It reported net income for common shareholders of $2.6bn, or 56 cents a share.