Morgan Stanley shares gain as equities trading, dealmaking fuel Q2 earnings beat

Investing.com -- Morgan Stanley reported second-quarter earnings that sharply beat expectations on Tuesday, powered by a surge in equities trading and a wave of merger activity that has pushed global dealmaking to its strongest first-half pace on record.

Shares in the U.S. banking giant rose around 1% in premarket trading by 07:40 ET.

The bank posted earnings per share of $3.46, well above the $2.93 analysts had forecast, on revenue of $21.3 billion versus a $19.62 billion consensus estimate.

Equities sales and trading revenue came in at $6.30 billion, far outpacing the $4.47 billion estimate, while institutional investment banking revenue reached $2.44 billion against expectations of $2.2 billion.

Advisory revenue rose to $798 million, and both equity and fixed income underwriting revenue also topped forecasts.

The results reflect a broader boom in mergers and acquisitions, aided by a lenient regulatory environment and buoyant equity markets that have encouraged executives to pursue large-scale deals. The total value of announced M&A hit $2.8 trillion in the first half of the year, up 48% from a year earlier and the strongest first-half total since LSEG began tracking records in 1980.

Morgan Stanley advised Fertitta Entertainment on its $17.6 billion agreement to acquire Caesars Entertainment during the quarter. The bank also served as lead underwriter on SpaceX’s record $2 trillion market debut and chipmaker Cerebras’ IPO, and acted as a joint book-running manager on Alphabet’s equity capital raise announced last month.

The bank’s return on equity came in at 20.7% for the quarter, above the 17.4% estimate, while return on tangible equity reached 26.6% versus expectations of 22.1%.

Standardized CET1 ratio held at 14.8%, in line with forecasts, and assets under management rose to $2.00 trillion, ahead of the $1.94 trillion analysts had expected. The expense efficiency ratio improved to 65%, better than the 68.1% forecast.

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