Morgan Stanley tops Wall Street estimates as equity trading revenue soars

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Morgan Stanley beats profit forecasts

Highlights

Morgan Stanley profit beats estimates at $3.03 per share.
Equity trading revenue surges nearly 41% to $5.8 billion.
Wealth management attracts $232 billion in new assets.

Morgan Stanley earned $4.91 billion, or $3.03 per share, in the quarter ended September 30, compared with $4.61 billion, or $2.80 per share, a year earlier. Earnings exceeded the $2.91-per-share analyst estimate, while net revenue rose to $20.34 billion from $18.22 billion, beating expectations of $19.95 billion, Reuters reports.

Equity trading drives quarterly earnings

Equity trading revenue climbed nearly 41% to $5.8 billion as uncertainty surrounding interest rates and the U.S.-Iran conflict encouraged clients to reposition investments. Increased transaction volumes provided a substantial boost to the bank's trading operations, echoing a similar improvement reported by Goldman Sachs a day earlier.

Fixed-income trading moved in the opposite direction, with revenue declining 7.3% to $2.01 billion. Sharp increases in interest rates disrupted bond portfolios and widened credit spreads, making it more difficult for dealers to manage securities inventories. The contrast between the two businesses highlights how the same market volatility can benefit equity trading while creating losses or higher costs elsewhere.

Investment banking revenue increased 2% to $2.16 billion despite a slowdown in global dealmaking. Worldwide merger and acquisition activity fell 41% from the previous quarter to $993 billion, according to LSEG data, dropping below $1 trillion for the first time since the second quarter of 2025. Morgan Stanley advised on major transactions involving Uber and Delivery Hero, as well as GE Aerospace's planned acquisition of Consolidated Precision Products.

Wealth management benefits from IPO activity

Morgan Stanley's wealth management division attracted a record $232 billion in net new assets during the quarter, with slightly more than half linked to initial public offerings. The June SpaceX listing contributed to the movement of holdings into managed accounts as early investors converted private stakes into publicly traded shares.

Wealth management revenue increased 10.1% to $9.07 billion, although it fell slightly short of market expectations. The business had already reached $10 trillion in client assets during the second quarter, reinforcing its importance as a source of recurring revenue.

Trading gains face a test from private credit

The results underline Morgan Stanley's reliance on several distinct earnings streams. Strong equity trading and IPO-related asset inflows helped offset weaker fixed-income activity, but investment management revenue declined to $1.46 billion from $1.65 billion a year earlier.

Private credit remains a particular concern. Investors requested withdrawals equivalent to 11.4% of shares in the North Haven Private Income Fund, compared with 11.6% in the preceding quarter, despite easing redemption pressure elsewhere in the industry.

For investors, the quarter demonstrates that market turbulence can generate substantial trading income without necessarily improving conditions across the entire bank. Sustained earnings growth will depend on a recovery in dealmaking, continued wealth management inflows and stabilization in less liquid credit investments.

As we previously reported, Morgan Stanley delays tokenized equities support to Q1 2027.

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