Morgan Stanley overtakes arch-rival Goldman Sachs in equities trading

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Morgan Stanley outperformed archrival Goldman Sachs in third-quarter stock trading for the first time since 2022, helping the investment bank’s profits jump by nearly half.

Morgan Stanley said on Wednesday that net income for the three months through the end of September was $4.6 billion, more than $1 billion better than analysts had expected.

Wall Street’s core investment banking and trading businesses delivered better-than-expected results across the largest U.S. banks.

Goldman, JPMorgan Chase, Bank of America, Citigroup and Wells Fargo have all beaten expectations in the past two days on the strength of their investment banks.

In stock trading, Morgan Stanley had revenue of $4.1 billion, up 35 percent from a year ago and ahead of the $3.7 billion reported by Goldman on Tuesday.

Equity trading has been a major point of competition between the two investment banks, and this quarter was the first time Morgan Stanley has outperformed Goldman in this area since the fourth quarter of 2022.

Morgan Stanley has traditionally been Wall Street’s dominant force in stock trading.

But it ceded that position to Goldman after it suffered huge losses linked to investment firm Archegos Capital Management, and has made a concerted effort to regain its top position under the leadership of CEO Ted Beck, who took over from James Gorman at the beginning of 2024.

“We are trying to create a more sustainable business,” Sharon Yeshaya, Morgan Stanley’s chief financial officer, told the Financial Times.

“Part of that comes from lending and equity-related prime brokerage work. Part of it comes from the relationships we continue to build on the corporate side.”

Investment banking generated revenues of $2.1 billion, a 44 percent improvement over the same quarter last year, which is in line with Goldman Sachs expectations.

Goldman Sachs reported a 43 percent increase in investment banking revenue to $2.7 billion on Tuesday, while JPMorgan managed a more modest gain of 16 percent to $2.6 billion, and Citigroup reported a 17 percent increase to $1.2 billion.

Yeshaya said the bank has reached “record levels when you look at the pipeline and backlog” of potential deals.

Morgan Stanley’s wealth management business also performed much better than expected, attracting $81 billion in net new assets in the quarter compared with the $67 billion investors were looking for.

That number is closely followed by investors as a measure of the business’ growth trajectory, as Morgan Stanley’s revenues are split relatively evenly between its investment bank and wealth management divisions.

Morgan Stanley’s earnings came on the same day as Bank of America’s earnings, which also beat expectations for its investment bank. Bank of America announced a 43 percent increase in investment banking fees to just over $2 billion. Analysts expected the company to generate only $1.6 billion.

Bank of America also announced an 11 percent increase in revenues from its markets division to $6.2 billion, which helped raise the bank’s profits by about a quarter compared to last year to reach $8.5 billion.

Shares of Morgan Stanley and Bank of America rose more than 4 percent in pre-market trading.

This article has been updated since publication to correct revenues in Bank of America’s Markets division.