By Pritam Biswas and Tatiana Bautzer
Oct 14 (Reuters) – Morgan Stanley beat third-quarter profit estimates on Wednesday, as market volatility due to the interest-rate decision and the US-Iran war boosted equity trading, while advisory roles and M&A fees lifted investment banking income.
The market turbulence led investors to realign their portfolios, driving up trading volumes and boosting revenue at the bank’s trading desks. Morgan Stanley posted equity trading revenue of $5.8 billion, a nearly 41% rise from a year ago.
Goldman Sachs, which beat estimates for third-quarter profit a day ago, also reported a similar jump in equities trading.
“The company’s equities trading activity has done a lot of the heavy lifting for the bank’s third quarter overall,” said Daniel Coatsworth, head of markets at AJ Bell.
Morgan Stanley’s revenue from its fixed-income trading dropped 7.3% to $2.01 billion. The slowdown also mirrored that of Goldman Sachs whose fixed income, currency and commodities revenue came in 1% down from a year ago.
Morgan Stanley CFO Sharon Yeshaya said fixed-income trading was affected by interest-rate volatility, with the sharp and in some instances unexpected rise during the third quarter, affecting investors with bond portfolios. “That created a widening of credit spreads, and then for anyone who has to hold inventory, that becomes challenging as well.”
Profit attributable to Morgan Stanley came in at $4.91 billion, or $3.03 per share, in the three months ended September 30, compared with $4.61 billion, or $2.80 per share, a year ago.
Analysts were expecting a profit of $2.91 per share, according to estimates compiled by LSEG.
INVESTMENT BANKING HOLDS
Global deal value plunged 41% from the prior quarter to a total of $993 billion, LSEG data showed, dipping below the $1 trillion quarterly threshold for the first time since the second quarter of 2025.
Morgan Stanley’s investment banking revenue rose 2% to $2.16 billion from a year ago. Goldman Sachs also reported higher income from its investment banking division whereas JPMorgan Chase reported a slowdown.
Morgan Stanley was the lead financial advisor to Uber’s deal to buy Germany’s Delivery Hero at an equity value of $14.8 billion.
The bank was also the lead financial advisor to castings supplier Consolidated Precision Products in its deal to be acquired by GE Aerospace for $11.75 billion.
The investment bank has also secured underwriting roles in the expected IPOs of artificial intelligence companies Anthropic and OpenAI. Yeshaya said many of the IPOs canceled in the third quarter were being discussed in the second quarter, before the spike in interest rates. But the CFO believes transactions will come back over the next quarters. “I think there are just expectations for where certain valuations are. Now the markets have come up slightly, so you need management teams to get comfortable with the valuations.”
US bank stocks fell sharply in the third quarter as a surge in Treasury yields to multi-decade highs triggered investor fears over rising funding costs and a prolonged slowdown in mergers and acquisitions.
Shares of Morgan Stanley have gained about 5.1% in 2026, underperforming the broader markets, but outperforming peer Goldman Sachs. The stock was down 2.5% before the bell.
Net revenue at the bank came in at $20.34 billion, up from $18.22 billion a year ago and compared to expectations of $19.95 billion.
IPOS BRING RECORD INFLOWS TO WEALTH MANAGEMENT
Wealth management had record net new assets, $232 billion in the third quarter, with just over half associated with IPO-related flows, the bank said. Yeshaya did not elaborate on which IPOs led to the flow, but she said they happened in the second quarter. Morgan Stanley and Goldman Sachs led the SpaceX IPO in June.
The flows were not related only to employees, but also to large investors that first bought their stakes in SpaceX when it was a private company, the Morgan Stanley CFO added. Many are Morgan Stanley clients, and then the stake in the private company is converted into shares that go to a Morgan Stanley account and have an advisor assigned.
Meanwhile, net revenue at its wealth management arm, which reached a longtime goal of $10 trillion in assets in the second quarter of 2026, stood at $9.07 billion, up 10.1% from a year ago.
“The revenue came in a touch below forecasts and is significant because wealth management is one of the bank’s key strategic growth engines,” Coatsworth said.
Goldman Sachs and Morgan Stanley have expanded their wealth management businesses in recent years to generate steadier earnings and reduce reliance on their volatile trading and investment banking units.
Morgan Stanley’s investment management arm, which houses the private credit funds, reported net revenue of $1.46 billion in the three months ended in September, down from $1.65 billion a year ago.
Investor withdrawal requests at Morgan Stanley’s North Haven Private Income Fund remained high in the third quarter, bucking a broader industry trend of slowing redemptions.
Investors sought to cash out 11.4% of shares in the private credit fund’s latest tender offer, nearly matching the 11.6% requested in the prior quarter.
The private credit sector has faced redemption pressure over investor fears that AI could disrupt software companies within their portfolios.
However, overall withdrawal requests at major funds eased in the third quarter as asset managers cleared existing backlogs and investor sentiment recovered.
(Reporting by Pritam Biswas in Bengaluru and Saeed Azhar in New York; Editing by Arun Koyyur and Nick Zieminski)
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