Reuters reported that Morgan Stanley has stunned Wall Street with better than expected second quarter results, outperforming Goldman Sachs and other rivals as it gained market share in tough trading conditions.
The bottom line was helped by strong equity and sales trading, surprisingly resilient fixed income, currency and commodities trading, and a lead underwriting position on several big technology IPOs. Morgan Stanley shares rose 6.3% to USD 23.09 in morning trading.
The bank appears to have won market share from rivals, most notably Goldman Sachs Group Inc, which posted a 53% decline in quarterly FICC trading, compared with Morgan Stanley's 10% drop.
Mr Shannon Stemm, an analyst at Edward Jones, said that "We're seeing some progress here on the turnaround in Morgan Stanley's trading business, which has been a long time in the making."
The bank reported a quarterly loss to common shareholders of USD 558 million weighed down by a charge for restructuring some of its preferred stock that amounted to USD 1.02 per share. The loss was much smaller than analysts expected. The average Wall Street forecast was a loss of 62 cents a share.
The bank's other businesses also showed gains. Morgan Stanley Smith Barney, a JV with Citigroup Inc, contributed USD 180 million of income to Morgan Stanley, a 64% increase from a year earlier. Asset management eked out USD 19 million of income as compared with a loss of USD 44 million in the same quarter last year.
Mr Richard Bove, a bank analyst at the brokerage Rochdale Securities, said that "Morgan Stanley is the new Goldman Sachs. Every one of their divisions shows an improvement, and the improvement in trading operations is especially impressive."
Mr James Gorman CEO of Morgan Stanley has been on an aggressive campaign to increase market share in FICC trading, trying to woo clients away from competitors and get existing customers to trade more on Morgan Stanley's platform. He reinstalled Ken deRegt as head of FICC trading in January to revitalize the business.
Ms Ruth Porat CFO of Morgan Stanley said that it still has work to do in FICC. She added that "It's progress against a level that we thought was too low for this franchise."
(Sourced from www.reuters.com)
