Morgan Stanley followed its Wall Street rivals in reaping the benefits of a strong third quarter for banks’ fixed-income businesses. On October 19 it posted a set of results that showed revenues from fixed-income sales and trading more than doubled from $ 583 million a year ago to $ 1.5 billion this time.
The bank attributed the rise principally to its credit and rates businesses as market conditions were better than a year ago.
The fixed-income surge was supported by robust equity sales and trading revenues, which edged up from $ 1.8 billion a year ago to $ 1.9 billion.
The performance in fixed income marked a turnaround versus a year earlier, when sales and trading revenues dived 42% from the same period in 2014.
That drop sparked a 75% fall in pre-tax profits from the overall institutional securities unit, which earned just $ 253 million in the third quarter of 2015.
But a year on, the fixed-income resurgence drove a $ 1 billion-plus increase in pre-tax profits from institutional securities, with the unit earning $ 1.4 billion.
Morgan Stanley’s chairman and chief executive James Gorman noted the “strong performance” in sales and trading during the quarter. On an earnings call, he said the bank was “back on track” after a “challenging end to 2015 and a frankly difficult start to the year”.
But he warned there was no room for complacency, saying the bank had “much more work to do” and its fixed income business “needs to evidence consistency”.
The bank’s third-quarter trading strength helped Morgan Stanley more than offset slightly lower revenues from traditional investment banking businesses. Advisory revenues dipped 9% year-on-year to $ 504 million, while equity underwriting was 5% lower at $ 236 million and debt underwriting 3% down at $ 364 million.
UPDATED: This story was updated with James Gorman’s comments from the earnings call