Updated Version 3 - Morgan Stanley Beats Quarterly Profit Expectations Thanks to Strong Stock Trading Performance

Paragraph 24 adds details about investment wealth management, while paragraph 25 supplements analyst commentary.

Pritam Biswas/Tatiana Bautzer

Reuters, October 14 - Morgan Stanley MS.N reported third-quarter profits on Wednesday that exceeded market expectations, mainly due to interest rate decisions and market volatility triggered by the US-Iran conflict, which boosted equity trading, while advisory and M&A fees also lifted investment banking income.

Market turbulence prompted investors to rebalance their portfolios, resulting in increased trading volumes and driving the bank’s trading division’s income growth. Morgan Stanley’s equity trading revenue reached $5.8 billion, up almost 41% compared to the same period last year.

Goldman Sachs (link) GS.N—which reported third-quarter profit exceeding expectations just a day earlier—also recorded a similar increase in equity trading revenue.

“The company’s equities business made a significant contribution to the bank’s overall third quarter performance,” said Daniel Coatsworth, Head of Markets at AJ Bell.

Morgan Stanley’s fixed income trading revenue fell 7.3% to $2.01 billion. This slowdown was similar to Goldman Sachs, whose fixed income, currencies, and commodities revenue declined 1% from a year earlier.

For the three months ended September 30, Morgan Stanley’s net income attributable to common shareholders was $4.91 billion, or $3.03 per share, compared with $4.61 billion, or $2.80 per share, a year earlier.

According to analyst estimates compiled by London Stock Exchange Group (LSEG), the market had previously expected earnings per share of $2.91.

Investment banking flat

LSEG data showed global deal volumes plunged 41% over the previous quarter to $993 billion, marking the first quarter since Q2 2025 that the figure dropped below the $1 trillion level.

The IPO market remained sluggish as many companies withdrew plans for public listings, citing challenging market conditions.

Morgan Stanley’s investment banking revenue rose 2% year-on-year to $2.16 billion. Goldman Sachs also reported revenue growth in investment banking, while JPMorgan (link) JPM.N reported a slowdown in growth.

Morgan Stanley served as the lead financial adviser to Uber UBER.N on its $14.8 billion acquisition of Germany’s Delivery Hero DHER.DE.

The bank also advised casting supplier Consolidated Precision Products on its $11.75 billion acquisition by GE Aerospace.

Additionally, the investment bank has secured underwriting mandates for the upcoming IPOs of AI firms Anthropic and OpenAI.

In the third quarter, US bank stocks tumbled sharply as Treasury yields soared to multi-decade highs, fueling investor concerns about rising funding costs and a prolonged slowdown in M&A activity.

Morgan Stanley’s share price has risen about 5.1% cumulatively in 2026, underperforming the broader market but outperforming peer Goldman Sachs GS.N. Shares dipped slightly before the market open.

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Private credit cools

In the third quarter, investor redemption requests for Morgan Stanley’s North Haven Private Income Fund remained elevated, defying the industry’s broader trend of easing redemptions.

In this latest tender offer, investors sought to redeem 11.4% of their interests in the private credit fund—almost unchanged from 11.6% the previous quarter.

The private credit industry has faced redemption pressure as investors worry that artificial intelligence may disrupt software companies in their portfolios.

However, with asset management firms working through redemption backlogs and sentiment improving, overall redemption rates at major funds eased during Q3.

Morgan Stanley’s investment management division (which houses the private credit fund) reported revenue of $1.46 billion for the three months to September, down from $1.65 billion a year earlier.

Meanwhile, its wealth management unit’s net revenue was $9.07 billion, up 10.1% from the previous year. The division achieved its long-term target of $10 trillion in assets under management in the second quarter of 2026.

“Some may be disappointed by the wealth management business’s revenue, which came in slightly below expectations—a significant miss as wealth management is one of the bank’s key strategic growth engines,” Coatsworth said.

Goldman Sachs and Morgan Stanley have both expanded their wealth management businesses in recent years to generate more stable income and reduce reliance on their more volatile trading and investment banking operations.

Net new assets hit a record $232 billion, just over half of which related to IPO-linked fund flows, according to the bank.

Total net revenue was $20.34 billion, up from $18.22 billion a year earlier and beating market expectations of $19.95 billion.

(To make its reporting more accessible to non-English speakers, Reuters has automated the translation of this article into several other languages. Automated translation may contain errors or lack required context, and Reuters does not guarantee the accuracy of the translated text. It is provided solely for reader convenience. Reuters accepts no responsibility for any damage or loss arising from the use of automated translation.)