Banking Stock to Watch: Morgan Stanley (NYSE: MS)

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Morgan Stanley (NYSE: MS) stock rose over 0.7% on 16th October, 2020 (As of 11:10 am GMT-4; Source: Google finance) after the company posted better than expected results for the third quarter of FY 20. Net income applicable to Morgan Stanley was $2.7 billion compared to net income of $2.2 billion for the same period a year ago.

Institutional Securities reported net revenues for the third quarter of $6.1 billion compared with $5.0 billion a year ago, an increase of 21%. Investment Banking revenues up 11% from a year ago on the back of more than double Equities underwriting revenue to $874 million due to handsome fees from a number of high-profile initial public offerings such as Snowflake Inc, Royalty Pharma, KE Holdings Inc and Warner Music. But revenue from underwriting bonds dropped from last year due to fall in loan issuances and muted deal making activity. Advisory revenues declined from a year ago due to lower completed M&A activity and fewer large transactions. Fixed income underwriting revenues fell from a year ago driven by declines in loan issuances as large event-driven and M&A financings were muted.

Moreover, Wealth Management reported net revenues for the third quarter of $4.7 billion compared to $4.4 billion from a year ago. Investment Management reported net revenues of $1.1 billion compared to $764 million a year ago. Pre-tax income fell to $315 million compared with $165 million a year ago. Asset management revenues rose 20% from a year ago due to record AUM on strong investment performance and positive long-term net flows.

MS in the third quarter of FY 20 has reported the adjusted earnings per share of $1.66, beating the analysts’ estimates for the adjusted earnings per share of $1.28 per share, according to IBES data from Refinitiv. The company had reported the adjusted revenue growth of 16 percent to $11.7 billion in the third quarter of FY 20, beating the analysts’ estimates.

Additionally, the company has s declared a $0.35 quarterly dividend per share, payable on November 13, 2020 to common shareholders of record on October 30, 2020. On September 30, 2020, the Federal Reserve had extended its requirement to suspend share repurchases through the end of the fourth quarter of 2020.

Meanwhile, the company’s provision for credit losses on loans and lending commitments was $111 million for the third quarter of 2020, compared with $51 million for the third quarter of 2019 and $239 million for the second quarter of 2020.

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