Morgan Stanley said its wealth-management business pulled in a record $232.4 billion in net new client assets during the third quarter, even as the firm's overall profit slipped from the previous quarter, as Wall Street's largest banks wrapped up a mixed stretch of earnings reports.
The bank's third-quarter results, filed with regulators, showed firmwide net revenue of $20.3 billion, up 12% from a year earlier but down 5% from the second quarter's $21.3 billion. Net income applicable to the firm was $4.9 billion, or $3.03 a diluted share, compared with $4.6 billion, or $2.80 a share, a year ago. Return on tangible common equity was 22.6%, down from 23.5% in the year-ago quarter and from 26.6% in the second quarter.
Wealth management keeps setting records
The headline number came from Wealth Management, which posted record net revenue of $9.1 billion and record pretax income of $2.8 billion, a 30.4% pretax margin. Net new assets of $232.4 billion were nearly triple the $81 billion the unit added a year earlier and well above the then-record $148 billion it had added just one quarter earlier, when combined wealth and investment-management client assets first crossed $10 trillion. Fee-based flows totaled $80.5 billion, and total client assets across the wealth and investment-management businesses reached $10.5 trillion.
Chief Executive Ted Pick said the firm "reported another strong quarter with net revenues of $20.3 billion, EPS of $3.03 and a ROTCE of 22.6%," adding that Morgan Stanley continues "to invest for growth while delivering strong returns for shareholders." Institutional Securities, the trading and investment-banking arm, posted net revenue of $10.0 billion, up 18%, driven by a 41% jump in equities trading revenue to $5.8 billion, while fixed-income trading revenue fell 7%. Investment banking revenue rose a modest 2%, as a rebound in advisory fees helped offset softer equity and debt underwriting. Investment Management, the smallest of the three divisions, saw revenue fall 12% after a swing in performance-based fees.
A mixed season for the big banks
Morgan Stanley's results capped a bank earnings season that delivered no single narrative. Wells Fargo beat earnings estimates but missed on revenue earlier in the week, Goldman Sachs topped forecasts on a surge in equities trading, and JPMorgan fell short on both earnings and revenue as expenses rose and fixed-income trading softened. Bank of America's results were overshadowed by its $1.2 billion anti-money-laundering penalty.
Morgan Stanley repurchased $1.5 billion of its own stock during the quarter and declared a quarterly dividend of $1.15 a share. Its common equity tier 1 capital ratio stood at 14.9%, down slightly from 15.1% a year earlier. With wealth management now accounting for an ever-larger share of the firm's earnings, investors will be watching whether the momentum in asset-gathering — much of it tied to this year's heavy flow of initial public offerings and corporate stock-plan business — can hold up if a less accommodative Fed slows the broader dealmaking environment that has fueled Wall Street's trading and underwriting revenue this year.