Morgan Stanley beat Wall Street expectations for first-quarter profit this week, as the investment bank benefited from a surge in dealmaking and raked in record revenue from its equities trading business, sending its shares up 5 per cent.
Heightened M&A activity in a friendlier regulatory environment and extreme volatility in stock markets triggered by the recent software selloff and the Iran war have bolstered investment banking and trading businesses at big Wall Street banks.
Morgan Stanley’s investment banking revenue soared 36 per cent to $2.12 billion, boosted by a rise in M&A advisory fees. Revenue from its equities trading business also jumped 25 per cent to a record $5.15 billion, while that from fixed income surged 29 per cent to $3.36 billion, mainly due to increased commodities trading due to volatility in energy markets.
Morgan Stanley wrapped up a strong quarter for big banks as peers Goldman Sachs (GS.N), JPMorgan (JPM.N), Citigroup (C.N) and Bank of America (BAC.N) also reported a surge in investment banking and trading revenue.
Deal volumes globally have already hit $1.38 trillion in the latest first quarter, according to data compiled by Dealogic, after a near record-breaking 2025 in which global M&A surpassed $4.81 trillion.
Among the notable deals in the quarter, Morgan Stanley was one of the advisers to Unilever (ULVR.L) on the proposed merger of its food business with McCormick (MKC.N) that will create a $65 billion global food behemoth.
IPO MARKET IMPACTED
Global markets have swung sharply in recent weeks as the Iran war drove up oil prices and fueled worries that inflation could stay elevated for longer.
The volatility across asset classes has prompted investors to rebalance portfolios and increase hedging against potential losses, a trend that typically boosts activity at trading desks.
However, dampening risk appetite has impacted the IPO market, though some companies, particularly in the industrial and defense sectors, are still pursuing listings.
Morgan Stanley CFO Sharon Yeshaya told Reuters in an interview that IPOs had slowed in the quarter, adding she expects some delays but not canceled transactions. She compared the current moment to the pause in IPOs that happened a year ago with new US tariff policy announced by the Donald Trump administration.
The firm’s revenue rose 24 per cent to $396 million from equity underwriting and 9.6 per cent to $742 million from debt underwriting.
The bank is among the lead bookrunners on SpaceX’s bumper IPO, where the Elon Musk-led firm could raise $75 billion at a potential valuation of $1.75 trillion.
PRIVATE CREDIT ‘COMING OF AGE’
“Private credit is having a learning, an adolescent moment,” Morgan Stanley CEO Ted Pick said during the earnings call. Exposure to private credit within Morgan Stanley is low, less than 1 per cent of total assets under management, “well under $20 billion,” Pick added.
As spreads widened, institutional investors became interested in transactions where private credit vehicles raise capital. “We’ve seen in the last week a number of the top asset managers have underwritten, and we’ve been very happy to act as underwriter, on some benchmark issuances,” the CEO said.
The Wall Street giant limited redemptions at one of its private credit funds last month, after investors sought to withdraw almost 11 per cent of shares outstanding, joining other managers as investors soured on the asset class.
The multi-trillion-dollar private credit industry is facing a wave of redemptions as investors become wary about lending standards and outsized exposure to an AI-threatened software sector, pushing some firms to limit withdrawals.
Morgan Stanley, which is focusing on its wealth business for steadier returns, reported record revenues of $8.5 billion from the division. Investment management revenue, however, fell 4.2 per cent to $1.54 billion.
Total quarterly revenue at Morgan Stanley rose to a record $20.6 billion in the first quarter from $17.7 billion a year earlier. The $3.43 profit per share surpassed the $3 expected by analysts, according to data compiled by LSEG.
“Overall, it was a well-rounded beat and I’d expect wealth management flows to be strong in the future,” said David Wagner, a portfolio manager at Aptus Capital Advisors, which holds Morgan Stanley’s shares.