Morgan Stanley said stock trading generated $5.8 billion of third-quarter revenue, ahead of the $4.9 billion analysts expected. Across trading overall, revenue reached $7.81 billion versus a $7.31 billion consensus. It was the quarter when the biggest US banks, capped by Morgan Stanley and Bank of America, showed a split picture: equity desks riding volatility-driven demand while bond traders contended with higher rates that can cool client activity.
On the wealth side, the firm pulled in a record $232 billion of net new assets, more than double what Wall Street expected. The wealth business has become Morgan Stanley's post-2008 centerpiece and now spans $8.4 trillion in client assets. Wealth-management revenue climbed to $9.1 billion, up from $8.2 billion in the prior-year period.
About half of the new wealth assets were linked to initial public offerings. Morgan Stanley's IPO team has been involved in several of the largest transactions this year, including efforts connected to SpaceX. SpaceX, Elon Musk's aerospace company, is among the clients of the firm's workplace channel, which provides employees with stock-based compensation programs, retirement plan options, and additional executive services.
Chief Financial Officer Sharon Yeshaya said, "Should this IPO market continue over the next 12 months, we expect to continue to benefit from it," and indicated that the pace of new public listings is unlikely to decelerate. She also flagged that investors should expect "ebbs and flows," noting some clients may prefer to convert new stock into cash. A rolling cadence of IPO lockups expiring could keep those inflows coming beyond the quarter a deal prices.
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Investment banking posted $2.16 billion in net revenue, up from $2.11 billion a year ago. While activity slowed in September, Yeshaya said conversations have picked up. "There has been a real inflow of strategic deal activity and the pipeline there is building," she said. "The corporates are there and they are interested."
In investment management, revenue declined from last year due to a reversal of accrued carried interest tied to an infrastructure fund. Co-president Dan Simkowitz said last month the fund has "a really strong track record," and "a lot of unrealized carry," but two European assets aren't "doing as well," which led to "a couple of hundred million dollars of unrealized carry reversal."
The market is also watching potential listings from Anthropic PBC and OpenAI in the coming months, and Morgan Stanley is expected to secure a prominent role in both deals.
Net income climbed to $4.97 billion from $4.66 billion. Shares, which were up 2.2% for the year heading into the report, fell 2.7% to $181.60 as of 10:44 a.m. in New York on Wednesday. In contrast to most rivals, the equities division at Morgan Stanley has for years been the bigger of its two trading arms, buoyed by robust activity in Asia and an expanded derivatives effort. It used to be Wall Street's biggest stock-trading shop, though Goldman Sachs has taken that title in recent years.
The through-line: a busy IPO calendar is feeding Morgan Stanley's wealth engine, and its equity trading teams are still thriving in active markets. If issuance stays lively and lockups keep unwinding, those wealth inflows could have legs. Just keep Yeshaya's caution in mind about "ebbs and flows" as newly minted shareholders decide whether to hold or cash out.
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