Morgan Stanley’s bond traders are 2-0 this year against Goldman Sachs Group Inc.
For a second straight quarter, Morgan Stanley posted more fixed-income revenue than its bigger competitor in one of Wall Street’s most hotly contested arenas, reporting the smallest drop among top U.S. investment banks on Wednesday. Equities trading also outperformed Goldman Sachs, as did the firm’s return on equity.
Chief Executive Officer James Gorman’s strategic moves to reduce dependence on fickle trading markets are paying off. He bolstered the wealth-management division by buying Citigroup Inc.’s brokerage after the financial crisis and overhauled the New York-based bank’s fixed-income business by cutting 25 percent of the division’s staff in late 2015 and putting former equities executive Sam Kellie-Smith in charge.
“Our second quarter results demonstrated the resilience of our franchise in a subdued trading environment,” Gorman said in a statement.
Before this year, Goldman Sachs had topped Morgan Stanley in bond trading for more than 20 consecutive quarters.
Morgan Stanley also scaled back in commodities trading, selling stakes in businesses after regulatory scrutiny and low returns. That may have helped in a quarter in which Goldman Sachs said it generated the least commodities revenue since it went public 73 quarters ago.
Morgan Stanley’s $1.24 billion in fixed-income revenue — a 4.5 percent drop — edged out the $1.16 billion that Goldman Sachs reported Tuesday and beat analysts’ estimates.
Morgan Stanley’s net income rose 11 percent to $1.76 billion, or 87 cents a share, from $1.58 billion, or 75 cents a share a year earlier. That compares with the 77-cent average estimate of 22 analysts surveyed by Bloomberg.
The company was the last of the five biggest U.S. banks to report second-quarter results. Several firms reported earnings that exceeded analysts’ estimates despite the drag from lower bond-trading revenue. JPMorgan, the biggest U.S. bank, said profit rose 13 percent to $7.03 billion. Bank of America Corp., the second largest, said profit climbed 10 percent to $5.27 billion and Wells Fargo & Co. said profit increased 4.5 percent to $5.81 billion. Citigroup Inc. said net income slipped 3.2 percent to $3.87 billion.