Justin Zhou

Morgan Stanley surpassed first-quarter profit expectations on Friday, driven by record equity trading and robust wealth management results. CEO Ted Pick expressed greater optimism about deal-making compared to his peers in the industry.

The investment bank achieved record equity trading revenue, reflecting a 45% increase from the same period last year. This growth was seen across various sectors and regions, particularly in Asia, with significant gains in prime brokerage and derivatives.

In the investment banking division, the bank reported $692 million in the “other” revenue category, a notable rise from $242 million a year earlier. According to Bloomberg, this increase was largely due to the sale of loans tied to Elon Musk’s social media platform, X.

Despite market instability caused by sweeping U.S. tariffs, some transactions in Morgan Stanley’s pipeline have been paused, as noted by Pick during a call with analysts. However, he emphasized that companies remain interested in pursuing these deals.

“We are still, I would say, ‘cautiously optimistic’ that we won’t enter a recession,” Pick stated. CFO Sharon Yeshaya reinforced this sentiment, indicating that the bank’s pipeline of potential transactions remains strong and unaffected.

Pick also highlighted that corporations might consider potential tax cuts and deregulation as reasons to move forward with deals, even amid rising market volatility.

Morgan Stanley’s investment banking revenue rose by 8% from the previous year, supported by increased advisory services and fixed-income underwriting.

Equity trading revenue experienced an uptick as investors adjusted their portfolios, particularly in technology and industrial stocks, leading to increased trading volumes.

Fixed income trading also saw growth, driven by renewed concerns about stagflation due to tariffs. Investors are hedging more aggressively and reassessing the types of bonds they hold and their investment durations.

However, bankers and analysts caution that the ongoing trade war, disappointing IPO performances, and lackluster follow-through on major deals could negatively impact investor sentiment and advisory pipelines in the second quarter.

Stable market conditions tend to bolster deal activity by enhancing buyer and seller confidence in valuations, reducing execution risk, and encouraging companies to proceed with transactions.

Notably, the bank played a key role in a syndicate of lenders, including Bank of America, Barclays, BNP Paribas, MUFG, Mizuho, and Société Générale, which maintained $13 billion in loans on their balance sheets for over two years.

In related news, JPMorgan Chase and Wells Fargo both reported profits that exceeded forecasts. While Wells Fargo posted lower revenue of $20.15 billion—a 3.4% decline year-on-year—it still achieved a net profit increase of 6%, reaching $4.89 billion.

CEO Charlie Scharf stated, “We support the administration’s willingness to address barriers to fair trade for the U.S., although there are certainly risks involved with such significant actions.”

Morgan Stanley Core Business Performance:

• Wealth Management: Revenue was $7.3 billion, estimated at $7.44 billion;
• Equity Sales and Trading: Revenue was $4.13 billion, a year-on-year increase of 45%, estimated at $3.42 billion;
• Fixed Income Underwriting: Revenue was $677 million, estimated at $552.6 million;
• FICC Sales and Trading: Revenue was $2.6 billion, expected to be $2.6 billion;
• Institutional Investment Banking: Revenue was $1.56 billion, expected to be $1.51 billion;
• Advisory: Revenue was $563 million, estimated at $642.1 million;
• Equity Underwriting: Revenue was $319 million, estimated at $357.8 million.