- Profit boosted by equity trading, wealth management
- Equity trading revenue rose 45% due to portfolio rebalancing
- Investment banking revenue up 8% on big transactions
April 11 (Reuters) - Morgan Stanley beat first-quarter profit estimates on Friday, helped by record equity trading and strong wealth management results.
The bank reported record equity net revenue with a 45% jump from a year ago, reflecting increases across business lines and regions, particularly in Asia, with its biggest gains in prime brokerage and derivatives.
The bank earned $4.3 billion, or $2.60 per share, in the three months ended March 31. That compares with a profit of $3.4 billion, or $2.02 per share, a year ago. Analysts expected earnings per share of $2.20, according to estimates compiled by LSEG.
Shares dropped 1.9% in choppy trading before markets opened.
U.S. President Donald Trump's decision to impose heavy tariffs on major economies and the launch of China's generative AI model, DeepSeek, triggered a broad selloff in global markets.
"The volatility increased trading activity and there was deleveraging," said Chief Financial Officer Sharon Yeshaya, adding that clients continued to be active. "We have not seen, so far, signs of market dysfunction."
Potential for a recession and uncertainty over the Federal Reserve's interest-rate trajectory have kept investors on edge.
Equity trading revenue rose as investors rebalanced their portfolios, boosting volumes, mainly in technology and industrial stocks.
Fixed income trading revenue increased, as renewed concerns about stagflation due to tariffs led investors to hedge aggressively and change the types of bonds they held, and over what periods.
Morgan Stanley's total revenue rose to $17.7 billion in the first quarter, compared with $15.1 billion a year ago.
Wall Street's investment banks face a murky dealmaking climate, as trade tensions rattle markets and delay transactions.
A rebound in Asia helped lift global M&A volumes in the first quarter, but U.S. activity — a key revenue driver for firms like Morgan Stanley — slumped 13% amid growing uncertainty, according to Dealogic data.
"The volatility has an impact on strategic activity. We had the largest pipeline in years but that is taking longer to materialize. Companies' boards became more cautious," Yeshaya added.
The CFO said companies are not cancelling deals, just delaying them. Morgan Stanley's investment banking revenue rose 8% from a year ago, with higher advisory and fixed income underwriting revenue.
Equity underwriting revenues fell as issuers and investors considered market uncertainty.
Bankers and analysts warn the prolonged trade war, disappointing IPO debuts and weak follow-through on major deals could dampen investor sentiment and advisory pipelines in the second quarter.
Stable markets support deal activity by giving buyers and sellers more confidence around valuations, reducing execution risk and encouraging companies to move ahead with transactions.
Morgan Stanley ranked fourth globally in investment banking fees in the first quarter, according to Dealogic data.
The bank advised on several big transactions in the quarter, including Walgreens' $24 billion take-private deal with Sycamore Partners. It also served as lead underwriter for AI cloud firm CoreWeave's $1.5 billion U.S. initial public offering.
Morgan Stanley's Institutional Securities business, which houses investment banking and trading, reported revenue of $9 billion compared with $7 billion a year earlier.
JPMorgan Chase also topped first-quarter profit estimates, driven by record equities trading and higher fees from debt underwriting and merger advisory.
Wells Fargo's first-quarter profit rose 6% as it collected more fees in wealth management and investment banking, even though its CEO warned of risks from U.S. tariffs.
Morgan Stanley's wealth management revenue - a key area of focus - came in at $7.3 billion, compared with $6.9 billion a year ago.
Under former CEO James Gorman, Morgan Stanley expanded into wealth management to diversify the bank and generate more steady income in contrast to the volatility in trading and investment banking.
Reporting by Niket Nishant, Noor Zainab Hussain and Manya Saini in Bengaluru and Tatiana Bautzer in New York; Editing by Lananh Nguyen, Arun Koyyur and Rod Nickel
Source: Reuters