Morgan Stanley reported its second quarter net income almost doubled to $980 million following a jump in demand for trading and investment banking activity.
Revenues rose 22% to $8.5 billion in the three months to July. Adjusted earnings per share, which strip out the effect of an acquisition were 45 cents a share – just above the 43 cents expected by analysts. The bank took a charge of 8 cents related to the acquisition of its remaining 35% stake in brokerage firm Morgan Stanley Smith Barney.
The bank also surprised investors by announcing it had received the go-ahead from regulators to buy back $500 million worth of its shares. The news sent Morgan Stanley stock sharply higher in pre-market trading – up almost 6% to $28.10.
Morgan Stanley’s results took part of strong quarter on Wall Street. Banks including Goldman Sachs and JP Morgan Chase also reported higher than expected profits. Big banks so far appear to ha ve largely shrugged off the volatility that intermittently rocked markets in May and June as investors were burned over higher interest rates.
“This quarter, we saw significant year-over-year revenue growth in each of our five major business units and higher year-over-year profitability,” James Gorman, Morgan Stanley chairman and chief executive, said in a statement, cited by Financial Times.
Morgan Stanley didn’t disclose its supplementary leverage ratio. U.S. regulators last week proposed minimum levels of 5% for holding companies and 6% for banking subsidiaries. The U.S. plan goes beyond the 3% global minimum requirement that the Basel Committee on Banking Supervision approved to help prevent a repeat of the 2008 financial crisis.
Morgan Stanley’s CFO, Ruth Porat, said the bank had succeeded to reduce some of its trading risk following dramatic moves in markets. The bank’s “Value at Risk” – a key measure of the amount of risk it assumes through its daily trading activities – fell to $61m from $76m in the same period last year.