Morgan Stanley profit races past estimates on trading strength By Reuters

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© Reuters. FILE PHOTO: A sign is displayed on the Morgan Stanley building in New York

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By Ambar Warrick, Matt Scuffham and Noor Zainab Hussain

(Reuters) – Morgan Stanley (NYSE:)’s profits surged in the fourth quarter, comfortably beating estimates as the Wall Street bank’s trading business benefited from coronavirus-induced volatility in financial markets.

The bank on Wednesday also confirmed plans to buy back $10 billion of shares this year, after the Federal Reserve allowed major banks to resume doing so in December.

Net income applicable to common shareholders rose to $3.27 billion, or $1.81 per share, in the quarter ended Dec. 31, compared with $2.09 billion, or $1.30 per share, a year earlier.

Analysts had expected a profit of $1.27 per share, according to Refinitiv IBES data.

Revenue from the bank’s institutional securities business, its largest source of income, rose to $7 billion from $5.05 billion last year.

High trading volumes during the quarter, stemming from the U.S. elections and the release of coronavirus vaccines, benefited the bank’s trading unit, which is housed within the institutional securities business.

Net revenue rose to $13.64 billion in the quarter, from $10.86 billion last year, while revenue from the company’s investment banking division rose to $2.30 billion from $1.58 billion.

Chief Executive Officer James Gorman has been taking steps to insulate the bank from its reliance on trading, and engineered two large back-to-back acquisitions, those of Eaton Vance (NYSE:) and E*Trade, to bolster its investment management and broking arms.

Morgan Stanley’s most comparable rival, Goldman Sachs Group Inc (NYSE:), on Tuesday posted a blockbuster fourth-quarter profit that dwarfed Wall Street estimates, but executives warned that capital markets activity fueling results lately will probably slow down.

Morgan Stanley’s revenue from sales and trading rose to $4.22 billion from $3.19 billion.

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