Morgan Stanley reports Q3 trading revenues down 14% year-on-year

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James Gorman, Morgan Stanley.

Morgan Stanley has reported its Q3 results, with trading taking a hit. The firm saw trading revenue US$2.86 billion, down from US$3.33 billion in Q2 2021, a drop of 14%, and down 9% or US$3.15 billion against Q3 2020.

Overall, its Institutional Securities division reported net revenues for the current quarter to be US$7.5 billion which were up 23% compared with US$6.1 billion for the same quarter in 2020. Pre-tax income was US$3 billion compared with US$2 billion a year ago.

In its investment bank revenues were up 67% from a year ago driven by record advisory revenues driven by higher completed M&A transactions.

“We are not complacent in what is obviously a slightly more turbulent market environment,” said CEO James Gorman, in a call with analysts. “We do expect the Federal Reserve to begin tapering soon and that will be followed by increasing rates in 2022.”

Equity underwriting revenues increased from a year ago primarily from IPOs and blocks driven by more issuances and activity in a constructive market, while equity net revenues were up 24% from the same quarter in 2020 reaching US$2.88 billion up from US$2.31 billion. The bank reported that this reflecting higher results across products, driven by strong client engagement in a favourable market environment, with particular strength in Asia.

Fixed income underwriting revenues also increased from a year ago driven by higher non-investment grade loan issuances on the back of increased event financing, partially offset by lower investment grade bond volumes. However, fixed Income net revenues were down 16% on Q3 2020, hitting US$1.64 billion from US$1.95 billion, which the firm reports reflected a decrease in its macro businesses in a less volatile environment and lower results in our micro businesses driven by tighter bid-offer and credit spreads. It noted that the decrease was partially offset by higher revenues in commodities driven by an increase in client activity.

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