Morgan Stanley reported a massive 74 percent jump in quarterly profit, easily topping analyst estimates as bond trading revenue nearly doubled following the Federal Reserve interest rate hikes. In addition, Morgan Stanley also hit a key milestone which had been set out by chief executive James Gorman by reaching variable of 10.7 percent equity return, a certain measure of the bank’s profitability. In January of 2016, Gorman has also set a target between 9 and 11 percent ROE by the end of this year.
Perhaps most notably, revenue on fixed-income nearly doubled, reaching $7.1 billion. The New York-based company remarks these numbers easily minimize gains reported by the Goldman Sachs Group, on Tuesday. Morgan Stanley remains they equities trading industry but revenues were down 1.9 percent—to $2.02 billion—compared to with the earlier $1.92 billion estimate.
Gorman comments, “We reported one of our strongest quarters in recent years. All our businesses performed well in improved market conditions. We are confident in our business model and the opportunities ahead, while recognizing that the environment remains uncertain.”
Overall, then, these results make for the fourth straight quarter that Morgan Stanley has posted bond trading revenues higher than $1 billion. But the bank’s fixed-income trading businesses soared to $1.7 billion, up from $873 million, which is the best quarter in two years. This is also the fourth consecutive quarter that the bank hit its $1 billion target for bond trading.
In a note to clients, Oppenheimer analyst Chris Kotowski comments, “This is quite a number for a company that just two years ago was setting a billion dollars a quarter as an aspirational goal, and it stands in sharp relief to Goldman’s airball yesterday.”
Finally, it is important to note that Morgan Stanley chief financial officer Jonathan Pruzan remains cautious. He warns that some of this optimism which fueled the stock market to reach all-time highs must end sometime: and that time could be very soon.
He says, “At the end of the first quarter, some of the clouds that were far off into the distance are becoming closer into view. The outlook of these is uncertain and so I still have continued caution.”
Through close of day on Tuesday, shares of Morgan Stanley had risen by about 20 percent since the presidential election in the US (since November, essentially).