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Morgan Stanley’s profits rose more than 40 percent in the second quarter, but the bank reported slowing growth in its flagship wealth management business.
Morgan Stanley reported quarterly net income of $3.1 billion, up from $2.2 billion a year earlier and beating analysts’ estimates.
The surge was helped by a more than 50 percent increase in investment banking fees from a year ago, to $1.6 billion.
The return of investment banking business has been a theme of big bank results in the past two quarters.
After two years of investors delaying deal-making and initial public offerings due to rising interest rates, investment banking revenue jumped in the quarter by 50 percent at JPMorgan and 21 percent at rival Goldman Sachs.
Morgan Stanley chief executive Ted Pick told analysts that barring a recession, “I think you’re going to see in the next few quarters, and even in the next few years, a resumption of more normal M&A activity.”
Morgan Stanley shares rose more than 2 percent in morning trading Tuesday in New York.
The $5.7 trillion firm’s wealth management division missed analysts’ growth estimates. The bank attracted just $36.4 billion in net new assets, well below expectations of about $57.5 billion and down from nearly $90 billion a year ago.
Net new assets in wealth management were the lowest since 2020 through the first six months of this year.
Morgan Stanley chief financial officer Sharon Yeshaya blamed the slowdown partly on higher tax payments, with the US reporting deadline in April.
“We believe tax-related outflows and increased spending, particularly among high net worth clients, impacted cash flow this quarter,” he told analysts.
Yeshaya said wealthy clients spent more money in the quarter, even as JPMorgan, Citigroup and Wells Fargo last week showed signs of financial stress among lower-income clients.
Wealth management has been a key driver of Morgan Stanley’s growth in recent years, fueled by its purchase of online trading platform ETrade in 2020. But its expansion has slowed recently as client assets have become harder to withdraw when interest rates are higher.
Profit margins in that business have also shrunk, as wealthy clients can stash money in cash and other more liquid products that offer higher yields in a higher interest rate environment but are less profitable for banks.
