(Bloomberg) -- Morgan Stanley shares swung to a gain of as much as 1.2% after declining during pre-market trading on Thursday, after the bank reported second-quarter results. Earnings per share and wealth management revenue beat estimates, while equities and fixed income trading revenue missed.
Other big banks rose in early trading, too, as 10-year Treasury yields inched up a few basis points to 2.071%. The KBW Bank Index rose about 0.4%, led by U.S. Bancorp and trust banks State Street Corp. and BNY Mellon Corp. Bank of America Corp. rallied about 0.9%, while JPMorgan Chase & Co. and Citigroup Inc. both rose about 0.6%.
Here's a sample of analyst commentary:
Evercore ISI, Glenn Schorr
Morgan Stanley's results were “stable but a little lethargic,” Schorr wrote in a note. “While it's never fun to see double-digit declines in M&A, debt underwriting, FICC and equities, the stability and underlying growth of the franchise was still able to shine through as strong equity underwriting, investment management and wealth management trends led the way.”
Schorr flagged positives including an approximate 2% drop in total expenses compared to last year; gains in institutional and wealth management loans of 5% and 6%, and an increase in total loans and commitments of 4%.
Credit Suisse, Susan Roth Katzke
Katzke in a note saw pluses and minuses in Morgan Stanley's results: Earnings per share topped estimates, with revenue upside from Tradeweb and investing gains, she said, though she also noted that the EPS beat was tax-rate driven. FICC fell short, while investment banking beat, and equities “was in line and similar to the peer group experience.”
And, while the absolute dollar amount of expenses topped her forecast, firm-wide efficiency at 71.7% was better-than-expected.
Wolfe, Steven Chubak
“Overall a good result, but questions concerning the outlook may dampen optimism,” Chubak wrote in a note.
Key highlights were better wealth margins, which topped 28% and exceeded the upper bound of the bank's 26%-28% target range, along with “good expense discipline,” he said. Disappointments included weaker investment banking and trading results, which trailed peers, and a worse-than-expected 10% sequential decline in wealth management net interest income.
Opimas CEO, Octavio Marenzi
Morgan Stanley beat expectations in the quarter only by “papering over weakness in its Investment Banking and Sales & Trading units with strong returns on Morgan Stanley's principal investments,” Marenzi said via email.
A continued reduction in expenses points to a “tightly run ship,” he said, but, “in coming quarters, the bank will need to bolster top-line growth in its core businesses. The bump from principal investments will be hard to replicate.”
Morgan Stanley Posts Steepest Trading Slide on Wall Street
To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Morwenna Coniam
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