With big bank earnings on the books, we can draw at least one conclusion: Dealmaking picked up whatever slack there was in trading.
Morgan Stanley on Thursday joined its Wall Street peers in reporting what, on the surface, appeared to be a dramatic drop in FICC revenue, which fell 45%.
Remember, the YoY comp is mostly meaningless. Q2 2020 was an anomaly. Morgan cited lower bid-offer spreads and volatility in its characteristically spartan press release. The market wanted $1.9 billion in FICC revenue. Investors got $1.68 billion instead.
In equities, sales and trading revenue was $2.83 billion in Q2, up 8% YoY. That was easily better than the $2.5 billion the market expected. Notably, Citi stood out last quarter in equities (figure above).
But, the story in Q2 was in IB. Morgan reported $2.38 billion in revenue there, up 16% from Q2 of 2020 and easily ahead of consensus ($2.1 billion). Like Goldman, Morgan flagged lower high-grade issuance in fixed income underwriting, but it was more than compensated by a 21.5% increase in equity underwriting and sharply higher advisory revenues. Again: M&A is alive and well.
Bloomberg characterized IB as a “bonanza” for Wall Street in Q2. In an interview, Morgan CFO Sharon Yeshaya summed it up in one sentence. “The fixed-income decline was in line with peers [and] investment-banking pipelines are strong,” she said. That’s applicable across the board. That was the story of Wall Street in Q2.
Ultimately, Morgan reported net income of $3.5 billion, the second-most ever, trailing only Q1. Revenue was $14.8 billion.
Gorman called it “another very strong quarter.” Yeshaya said the bank is “firing on all cylinders.”
One way or another, Wall Street seems to always be “firing on all cylinders.” It’s always “another very strong quarter.”
Maybe one day, we’ll be able to say the same for Main Street. I’m just kidding. That’ll never happen.
