Morgan Stanley Capital Markets Segment Shines, Wealth Metrics Lag: Analysts Praise 'Strong Cost Discipline'

Morgan Stanley MS reported second-quarter earnings per share (EPS) of $1.82 on Tuesday. That’s up from $1.24 a year ago and beating the consensus of $1.65.

The U.S. bank reported second-quarter sales of $15.02 billion, up 11.6% year over year, beating the consensus of $14.30 billion. Sales were balanced across Wealth Management and Institutional Securities.

Goldman Sachs writes the revenue beat was entirely in capital markets (14.5% better than the Street). Wealth (ex DCP) and investment management revenue were weaker, the firm noted.

The analyst notes that Capital markets drove the revenue beat, but this may be partially offset by misses in wealth revenue (excluding DCP), wealth net interest income, and wealth net new assets compared to expectations. Additionally, the 3% quarter-over-quarter wealth net interest income decline raises concerns about future performance.

Goldman Sachs writes investment banking came in 21% above the Street estimates.

Goldman Sachs keeps the Buy rating, with a price target of $112.

JP Morgan notes robust overall investment banking performance, with equity investments at the upper end of the peer range, showing a year-over-year (YoY) increase of 7% to 21% and an average of 15%.

Fixed Income, Currencies, and Commodities (FICC) also show strength, with a 16% YoY increase compared to the US peers’ average of 4% and a range of -3% to 17%.

However, wealth management net interest income decreased by 3% quarter-over-quarter (QoQ), falling short of the guidance for flat growth. The pre-tax margin of 27% aligns with JP Morgan’s estimates, limiting significant upgrade potential.

“Overall, management is showing strong cost discipline with headcount declining -1% quarter-over-quarter,” JPMorgan’s analyst notes.

JPMorgan analyst maintains a Neutral rating for Morgan Stanley.

Price Action: Morgan Stanley shares are up 1.01% at $106.33 at last check Tuesday.

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