Morgan Stanley’s Trading Business Outshines Peers

Morgan Stanley (ticker: MS) reported second-quarter earnings and revenue beats Wednesday, but its trading business impressed investors the most. With relatively low volatility in global financial markets in recent months, big banks have struggled to find trading opportunities, but Morgan Stanley’s trading business held up relatively well.

Morgan Stanley reported second-quarter earnings of 87 cents per share on revenue of $9.5 billion. Both numbers topped consensus analyst expectations of 76 cents per share and $9.09 billion, respectively. Overall sales and trading revenue declined just 2 percent from a year ago.

Bank of America Corp. (BAC) and Goldman Sachs Group (GS) both delivered second-quarter earnings and revenue beats on Tuesday morning, but shares traded lower on concerns over lackluster trading revenue.

Bank of America reported earnings of 46 cents per share on revenue of $22.8 billion for the quarter, topping consensus analyst estimates of 43 cents and $21.8 billion, respectively. Despite rising interest rates, net interest margin of 2.34 percent was down five basis points compared to the first quarter. Sales and trading revenue of $3.2 billion was down 9 percent from a year ago.

Goldman also reported earnings and revenue beats. The investment bank earned $3.95 per share on revenue of $7.89 billion, topping Wall Street estimates of $3.39 and $7.521 billion, respectively. However, investors zeroed in on Goldman’s surprising 40 percent decline in its fixed income, currency and commodities business. An 8 percent increase in equities income helped offset some of the weakness, but overall trading revenue declined 17 percent to $3.05 billion.

So far this earnings season, investors concerned with persistently low net interest margins and lackluster trading revenue are taking…

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