By Philip Scipio
NEW YORK (IFR) - Morgan Stanley beat arch rival Goldman Sachs in debt trading for the second quarter in a row, posting revenue of US$1.24 billion, down 4% compared to last year.
On Tuesday, Goldman set off alarms reporting revenue from fixed income commodity and currency trading of US$1.16bn, down 40%.
The result was stunning considering Morgan Stanley cut its FICC group by 25% more than a year ago. Despite the cut, the bank said it would wring more than US$1bn a quarter from FICC trading and this was the fifth consecutive quarter the bank beat the benchmark.
"The quarter was basically flat," said Morgan Stanley financial chief Jonathan Pruzan told IFR. "The one are area where we saw some decent activity was in foreign exchange and emerging markets where there was some volatility and geopolitical events."
But across the board there were no real stand outs, he said, just solid results reflective of the environment and existing opportunities, he said.
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Rival Goldman pointed to its commodities trading business as one of the anchors dragging down its FICC performance.
Morgan Stanley said its commodities trading business, obviously very different than it was in the past, is more of a traditional sales and trading business around hedging and facilitating client activity and while down didn't materially impact performance in the quarter.
BEATING EXPECTATIONS
Morgan Stanley held onto its top ranking in equity trading, reporting revenue of US$2.2bn in the segment, easily beating a tough benchmark set by Goldman on Tuesday when it reported its best quarter in equity trading in two years. In equity trading, derivatives remained solid, partially offset by lower cash revenues driven by lower volatility.
The bank reported net income of US$1.8bn, or 87 cents a share, on revenue of US$9.5bn, up 7% from the year ago quarter. Analysts had expected earnings of 76 cents per share, on average, according to Thomson Reuters I/B/E/S, according to Reuters.
In investment banking Morgan Stanley saw revenue rise 35% on the strength of debt and equity underwriting. In equity underwriting revenue rose 87% to US$504m, the best in the quarter among big US banks and easily outperforming Goldman which was the only one of the five major US banks to see its equity underwriting revenue fall in the quarter.
In the quarter Morgan Stanley worked on roughly 30 IPOs, double what the bank did in the first quarter and double the average rate per quarter last year.
"Underwriting has recovered quite well there was good activity in follow-ons as well," Pruzan said. Global footprint we have continued to invest in that global footprint post crisis where others have not.
Revenue from debt underwriting at Morgan Stanley was up 77% at US$504m, reflecting higher non-investment grade loan and investment grade bond fees. Revenue from advisory was down 8% at US$504m.
(Reporting by Philip Scipio; Editing by Jack Doran)
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