Morgan Stanley saw its profits jump over 40% in the second quarter. However, the bank’s wealth management division faced challenges in attracting new assets.
The bank posted a quarterly net income of $3.1 billion, up from $2.2 billion a year earlier. This exceeded analysts’ estimates. Investment banking fees rose by just over 50% from a year ago, reaching $1.6 billion. This increase contributed significantly to the profit surge.
Investment banking has been a bright spot for big banks in recent quarters. JPMorgan and Goldman Sachs also saw significant increases in their investment banking revenues. JPMorgan’s revenues jumped 50%, and Goldman Sachs reported a 21% rise.
However, Morgan Stanley’s wealth management division, managing $5.7 trillion in assets, attracted only $36.4 billion in net new assets. This fell short of analysts’ expectations of about $57.5 billion. It was also down from nearly $90 billion a year ago. Net new assets in wealth management were the lowest since 2020 in the first half of the year.
Morgan Stanley’s CFO, Sharon Yeshaya, partially blamed the slowdown on higher tax payments due to the US filing deadline in April. “In the second quarter, there are large tax flows,” Yeshaya said. “We saw more taxes paid out this year compared to last year.”
Morgan Stanley’s stock dropped over 2% in pre-market trading in New York.
Wealth management has been a key growth driver for Morgan Stanley in recent years. This growth was boosted by its 2020 purchase of online trading platform ETrade. However, the expansion has slowed as higher interest rates make it tougher to attract client assets. Profit margins in the wealth management business have also shrunk. Clients now prefer to keep money in cash and other liquid products that offer better returns in a higher interest rate environment but are less lucrative for banks.
