Global investment firm Morgan Stanley delivered strong quarterly earnings for Q3, with reported net revenues of $11.7bn, up $1.7bn from the same period of the previous year.
Alongside revenue increases of up to 16%, net income also increased by 25% since 2019, equating to a rise of $0.5bn to a total of $2.7bn.
The wealth management division reported net revenues of $4.7bn, representing an increase of $0.3bn from last year. Asset management revenues also increased, “reflecting higher asset levels and strong fee-based flows”.
Both compensation and non-compensation expenses increased. The former was driven by increases in compensable revenues whilst the latter was due to regulatory charges and expenses associate with the acquisition of financial services firm E-Trade.
James P. Gorman, chairman and CEO, said: “Our balanced business model continued to deliver consistent, high returns. The completion of the E-Trade acquisition, the subsequent ratings upgrade from Moody’s, and the recently announced acquisition of Eaton Vance significantly strengthen our Firm and position us well for future growth.”
In investment management, net revenues increased by 38% to £1.1bn, driven by record asset management fees and assets under management, primarily in Asia private equity. Pre-tax income was also up $150m from 2019 values, to $315m.
Under investment management, both compensation and non-compensation expenses increased since 2019, due to factors such as higher asset management revenues and higher brokerage and clearing costs.
The acquisition of E-Trade, announced in February this year, meant the combined platforms would have $3.3trn in assets, positioning the firm as “an industry leader in Wealth Management across all channels and segments” according to Gorman.
E-Trade, a pioneer in the online brokerage industry, was valued at approximately $13bn through the deal.
Morgan Stanley’s acquisition of the firm also formed the basis of Moody’s decision to upgrade their long- and short-term ratings, citing the investment banks “clear and consistent strategy to shift its business mix towards generating recurring, profitable revenue-streams in wealth and investment management”.
These revenue streams are typically more stable and of lower risk than the activities and exposures in the institutional securities’ business segment.