CEO Jim Gorman's bet on wealth management to stabilize Morgan Stanley's earnings is starting to pay off. Fred Katayama reports.
The slump in trading revenue didn't stop Morgan Stanley from doubling its profit in the second quarter from the prior year. A surge in revenue from investment banking and wealth management offset the drop in fixed income and commodities trading. Low volatility and volume hurt bond trading at the other major banks as well, but those results were better than feared. Equities trading was flat, but Morgan Stanley again managed to beat archrival Goldman Sachs on that front. The 5 percent growth in wealth management revenue is a sign that CEO Jim Gorman's turnaround plan to stabilize earnings is paying off. Morgan Stanley managed to boost the profitability of that unit nearly to the goal it set for next year. And it boosted its long suffering return on equity to double digits on par with Goldman. Investors drove Morgan Stanley's stock higher at the start of trade. With a return of 3.6 percent, it's among the best performers among the major banks this year. UBS analyst Brennan Hawken said, "These results provided another positive step in the Morgan Stanley story."