Gorman’s Brokerage Play Lifts Morgan Stanley to Higher Profits

Bond-trading revenue fell 21 percent to $1.17 billion, compared with the $1.15 billion estimate of analysts surveyed by Bloomberg. Equities trading was little changed at $1.89 billion, compared to the $1.86 billion estimate.

The quarter's subdued trading environment included low volatility in rates and currency trading, tight spreads in credit and a lack of "idiosyncratic" events, Chief Financial Officer Jonathan Pruzan said Tuesday in an interview.

"People are waiting for tax reform, people are waiting for inflation, changes in the regulatory landscape," Pruzan said. "So there are catalysts out there, but whether or not they're realized this quarter or not, there's a lot of speculation."

Wealth-management revenue advanced 9 percent to $4.22 billion, compared with the $4.1 billion prediction of KBW Inc. Pretax profit from that business rose 24 percent to $1.12 billion.

Another area of strength in the quarter was investment banking: Revenues there rose 15 percent to $1.27 billion, exceeding the $1.15 billion estimate of analysts surveyed by Bloomberg. Mergers activity maintained its momentum and the "pipelines remain healthy across products and geographies," Pruzan said, adding that he is optimistic about that business if markets remain stable.

Morgan Stanley's net income rose 12 percent to $1.8 billion, or 93 cents a share, from $1.6 billion, or 81 cents, a year earlier. That compares with the 82-cent average estimate of 19 analysts surveyed by Bloomberg.

Several firms reported earnings that exceeded analysts' estimates despite the drag from lower bond-trading revenue. JPMorgan Chase & Co., the biggest U.S. bank, said profit rose 7.1 percent, while Bank of America Corp. and Citigroup Inc. posted increases of 13 percent and 8 percent respectively.