(Oct 16): Morgan Stanley's profit surpassed estimates on a bumper third quarter for investment banking that had also buoyed rivals, sending its shares up more than 3.5% before the market open.

A revival in corporate debt issuance, initial public offerings (IPOs) and mergers has bolstered profits for Wall Street banks this year.

As markets hover near record highs and the US Federal Reserve begins its policy-easing cycle, bankers expressed optimism that mergers and acquisitions will continue to recover after a two-year drought.

Morgan Stanley benefitted from a "constructive environment", CEO Ted Pick said in a statement. "Institutional securities saw momentum in the markets and underwriting businesses on solid client engagement."

Its investment banking revenue jumped 56% in the third quarter. Competitors Goldman Sachs had posted a 20% surge in fees, while JPMorgan Chase saw a 31% gain.

Morgan Stanley's profit jumped to US$1.88 per share, exceeding analyst views of US$1.58, according to estimates compiled by LSEG.

Across the industry, global investment banking revenue rose 21% in the first nine months of the year, led by a 31% surge in North America, according to data from Dealogic.

Morgan Stanley earned the fourth highest fees globally over the same period, the data showed.

It was a lead underwriter on big initial public offerings in the quarter, including by cold storage giant Lineage and airplane engine maintenance services provider StandardAero.

"We are seeing a rise in equity capital markets activity led by financial sponsors, not only for IPOs in the US but also in Europe", Morgan Stanley CFO Sharon Yeshaya said in a phone interview.

The institutional securities business, which houses investment banking and trading, generated revenue of US$6.82 billion (RM29.3 billion), compared with US$5.67 billion a year ago.

Equity trading revenue was another bright spot, jumping 21% as stocks rallied. Fixed-income revenue rose 3%.

The investment bank's profit climbed to US$3.19 billion from US$2.41 billion a year earlier.

"The company is executing very well across all the segments... Ted Pick has quickly built a leadership presence and confidence from investors," said Macrae Sykes, portfolio manager at Gabelli Funds.

Under former CEO James Gorman, who will serve as executive chairman until year-end, Morgan Stanley expanded into wealth management to generate stable revenue and even out volatility from trading and investment banking.

"The company has been a leader in wealth technology implementation, which should lead to better advisor productivity and share gains in asset gathering," said Sykes said.

Wealth management revenue — a key area of focus — increased to US$7.27 billion, compared with US$6.40 billion, a year ago.

The business added US$64 billion in net new assets and total client assets reached US$6 trillion.

Considering the investment management division assets of US$1.6 trillion, Morgan Stanley is closer to its goal of managing US$10 trillion in client assets.

"Total client assets have surpassed US$7.5 trillion across wealth and investment management supported by buoyant equity markets and net asset inflows," Pick said.

Investment management revenue climbed to US$1.5 billion compared with US$1.3 billion a year ago, helped by higher asset management and related fees.

Uploaded by Magessan Varatharaja