Wealth management units post standout results, powered by rising client balances and increased trading.
Morgan Stanley and Bank of America both delivered third-quarter earnings that surpassed analyst expectations, as robust equities markets and a resurgence in investment banking activity buoyed results across their wealth and institutional businesses.
Morgan Stanley beats earnings forecasts
Morgan Stanley reported earnings per share of $2.80, well above the $2.10 consensus, and revenue of $18.22 billion, an 18% increase from a year ago and a new record for the firm. Net income rose 45% to $4.61 billion, driven by broad-based gains in equities trading, investment banking, and wealth management.
Equities trading revenue climbed 35% to $4.12 billion, exceeding analyst expectations by $720 million, as the firm cited increased activity across business lines and regions, including record results in its prime brokerage business. Investment banking revenue surged 44% to $2.11 billion, supported by more completed mergers, more initial public offerings, and increased fixed income fundraising.
The wealth management division continued to be a major contributor, with revenue up 13% to $8.23 billion. Net new assets totaled $81 billion for the quarter, and total client assets across wealth and investment management reached $8.9 trillion, up from $7.7 trillion a year earlier. The division’s pre-tax margin improved to 30.3% from 28% in the same period last year.
The Wall Street Journal highlighted that the wealth management unit accounted for 45% of Morgan Stanley’s overall revenue, with assets overseen by financial advisors rising 17% and retail wealth assets, including those from E*Trade, up 24%. The average daily number of retail trades handled by the firm increased 24% year over year, reflecting greater investor engagement.
BofA’s wealth business boasts double-digit growth
Bank of America’s third-quarter results also beat expectations, with earnings per share of $1.06 on revenue of $28.24 billion. Net income rose 23% to $8.5 billion, while revenue increased nearly 11% from a year earlier. While consumer banking contributed $3.4 billion in net income, the wealth and investment management segment was a significant driver of growth.
The wealth and investment management division reported net income of $1.3 billion on revenue of $6.3 billion, up 10% from the prior year. Client balances rose 11% to $4.6 trillion, propelled by higher market valuations and positive net client flows. Asset management fees increased 12% to $3.9 billion, reflecting strong flows and market appreciation. Average loans and leases in the division grew 9% to $246 billion.
The division added approximately 5,400 net new relationships across Merrill and the private bank, with assets under management balances rising 13% to $2.1 trillion. Digital engagement remained high, with 86% of Merrill and private bank clients classified as digitally active.
“We believe our investments in technology, talent and client experiences aided in an improved efficiency ratio as well as operating leverage,” said chief financial officer Alastair Borthwick, who also pointed to the firm’s strong capital position and ability to support clients and return capital to shareholders.
The wealth business saw its pretax margin improve to 27% from 25% a year ago, and return on average allocated capital rose to 26%.
Last month, the bank unveiled an initiative to offer its ultra-high-net-worth clients access to private equity funds, most of which are direct and open-ended investments.
Across the company, investment banking fees surged 43% to $2 billion, while equities trading revenue rose 14% to $2.3 billion. Net interest income climbed 9% to $15.39 billion, supported by loan and deposit growth.
Market backdrop supports results
Both firms benefited from a strong market environment, with stocks at or near record highs and increased activity in capital markets. The results mirror a broader trend among Wall Street banks, as heightened trading and deal-making have lifted earnings across the sector.
JPMorgan, Goldman Sachs, and Citi each surpassed analyst expectations in their respective earnings reports on Tuesday, with investment banking and trading emerging as strong areas.
