Morgan Stanley’s Wealth Arm Brings in Record New Money From IPOs

(Bloomberg) -- Morgan Stanley's profit for the third quarter climbed as the firm's equity traders trounced analysts' estimates and the firm's wealth-management operation brought in a record amount of money.

The stock-trading business generated revenue of $5.8 billion, compared with expectations for $4.9 billion, while the closely watched wealth business soaked up a record $232 billion in net new assets, according to a statement Wednesday.

Morgan Stanley said half of those net new assets were tied to initial public offerings. The firm's IPO bankers have worked on some of the year's biggest listings, including SpaceX. Elon Musk's aerospace company is a customer of Morgan Stanley's workplace channel, which provides clients' employees with benefits like equity compensation, retirement plans and other executive services.

Morgan Stanley and Bank of America Corp. wrapped up third-quarter earnings announcements for the biggest US banks Wednesday in a quarter marked a stark divergence between the performance of equities and fixed-income trading desks. Bond traders are grappling with rising interest rates, which can crimp client activity, while stock traders have notched record after record this year on volatility fueled demand.

In the years following the 2008 financial crisis, Morgan Stanley executives reshaped the firm to focus more on wealth management and less on trading and investment banking. It has swelled into a $8.4 trillion juggernaut in the space, boosted by acquisitions along the way.

Total revenue from the trading operation was $7.81 billion, compared with expectations for $7.31 billion, according to a Wednesday. Wealth management revenue jumped to $9.1 billion from $8.2 billion a year earlier. Net income was $4.97 billion, up from $4.66 billion a year earlier.

Shares of Morgan Stanley, up 5.1% through Tuesday, advanced 0.5% in early New York trading.

Unlike most of its peers, Morgan Stanley's equities business has long been the larger of the two. The firm used to be the biggest stock-trading shop on Wall Street, but Goldman Sachs Group Inc. has claimed that title in recent years.

Morgan Stanley's investment bankers, meanwhile, posted $2.16 billion in net revenue, compared with $2.11 billion a year earlier.