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Morgan Stanley: Institutional Securities See Decent 2Q Growth

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Mergers, acquisitions, and equity trading

Morgan Stanley (MS) reported that total revenues from Institutional Securities expanded to $5.2 billion from $4.2 billion a year ago. This was nevertheless lower than revenues of $5.5 billion in the previous quarter.

The division benefited from a gradual global recovery in the second quarter, led by developed markets. Revenues declined in comparison to the previous quarter mainly due to the commodities business, where the company saw less client engagement and reduced volatility.

The company’s advisory revenues were $423 million, its equity underwriting revenues were $489 million, and its fixed income underwriting revenues were $528 million. These were all flat compared to the second quarter of the previous year.

Greater client activity across product categories and regions helped push equity sales and trading revenues to $2.3 billion, up from $1.8 billion a year ago. Revenues from fixed income and commodities trading also increased to $1.3 billion as compared to $1 billion in the same quarter a year ago.

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Investment banking and corporate lending

Morgan Stanley advises corporations and governments on fund-raising activities through equity and other related routes. The company also manages and participates in public offerings and private placements of debt.

The company’s corporate advisory services relate to key strategic matters, restructuring, mergers and acquisitions, joint ventures, divestitures, leverage buyouts, spin-offs, and takeover defenses. Plus, Morgan Stanley lends to companies, including offering bridge financing.

The company witnessed increased levels of strategic activity during the second quarter. Investor reactions to strategic transactions have been positive, and this has led to nearly $2 trillion in global activity year-to-date.

The company expects muted activity in the Eurozone, good growth in the US, and hopes to see significant client engagement in Greater China.

Morgan Stanley achieved revenues totaling $38 billion over the past twelve months. Here’s how its peers compare:

  • Goldman Sachs (GS) – $40.1 billion
  • JPMorgan Chase (JPM) – $51.5 billion
  • Bank of America (BAC) – $50.9 billion
  • Wells Fargo (WFC) – $47.6 billion

Together, these banks account for approximately 28% of the Financial Select Sector SPDR Fund (XLF).

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