Morgan Stanley posted stronger-than-expected third-quarter results on Wednesday amid increased asset levels and noteworthy gains in investment banking that highlight elevated deal activities and ongoing initial public offerings (IPOs). The company reported a revenue increase to $15.38 billion for the three months ending September 30, up from $13.27 billion in the previous year, significantly exceeding the $14.29 billion average analyst estimate compiled by Capital IQ.
Earnings per share rose to $1.88, compared to $1.38 last year, surpassing the anticipated figure of $1.58 from Wall Street projections. Following these compelling results, shares of Morgan Stanley experienced a substantial rise of 7.7% during Wednesday's trading session. A closer look at the lender's wealth management division reveals that net revenue saw a remarkable 14% increase year-over-year, reaching $7.27 billion.
This growth can be primarily attributed to higher asset levels, substantial fee-based flows, and transactional revenues that have bolstered the division. Conversely, net interest income faced a decline, dropping to $1.77 billion from $1.95 billion in the previous year, a movement largely linked to lower average sweep deposits. Furthermore, revenue from investment management posted a 9% increase, amounting to $1.46 billion, as total client assets across wealth and investment management exceeded $7.5 trillion.
This strong performance was supported by buoyant equity markets and significant net asset inflows, as noted by Chief Executive Ted Pick in a recent statement. In the realm of investment management, assets under management reached an impressive $1.598 trillion, showing an increase from $1.388 trillion during the same timeframe last year. Additionally, institutional securities revenue climbed to $6.82 billion, up from $5.67 billion in the corresponding quarter the previous year.
Investment banking revenue saw a dramatic increase of 56%, reaching $1.46 billion, driven by stronger advisory revenues linked to completed M&A transactions, particularly in Europe, the Middle East, and Africa. The surge in equity underwriting revenues was also notable, attributed to heightened IPO activities, as reported by the lender. On the fixed income front, revenue increased by 3% to $2 billion, reflecting higher client engagement.
The firm’s rates business adeptly navigated the challenging markets amidst shifting expectations regarding the magnitude and timing of the Federal Reserve's upcoming rate cut, a reflection echoed by Chief Financial Officer Sharon Yeshaya during a recent conference call. Just last month, the central bank's Federal Open Market Committee enacted a rate cut of 50 basis points. Looking ahead to the fourth quarter, a modest decrease in net interest income is anticipated on a sequential basis, following lower rate expectations consistent with the forward curve, as Yeshaya highlighted during the call..