Morgan Stanley reported better-than-expected adjusted quarterly earnings yesterday as it boosted revenue from trading bonds, long a sore spot for the investment bank.
The bank’s debt ratings were downgraded over the summer to three steps above junk. The cut was smaller than many observers had feared, and Morgan Stanley’s trading business picked up steam in the third quarter after sagging ahead of the downgrade, chief financial officer Ruth Porat said. “Clients re-engaged and continued to re-engage throughout the quarter,” Porat told Reuters in an interview.
Progress has been halting, but yesterday Morgan Stanley said bond-trading revenue in the third quarter climbed 33% from a year earlier to $1.5bn, excluding the accounting impact of changes in value of the bank’s debt.
Overall adjusted trading revenue rose 21%, to $3.6bn, with gains in interest rate and credit trading. Most of the gains came from increased client activity, rather than rising asset values, Porat said.
Also helping third-quarter earnings was a reduction in compensation as a portion of revenue in Morgan Stanley’s trading and investment banking business. The company paid out 45% of net revenue, excluding accounting swings, to employees, down from 49% in the previous quarter and 51% a year ago.
In an article published earlier this month, chief executive James Gorman told the Financial Times that he plans to reduce compensation at the firm.
Morgan Stanley shares were down 1% to $18.29 in late-morning trading.
Overall, Morgan Stanley’s income from continuing operations totaled $561mn, or 28 cents per share, in the third quarter, compared with $64mn, or 2¢ per share, a year earlier. On that basis, analysts had been expecting 24¢ per share, according to Thomson Reuters I/B/E/S. Morgan Stanley shares fell 1.7% to $18.17.
The main driver of the higher adjusted earnings were improvements in its institutional securities business, which includes trading and investment banking.
Pretax income in that business, excluding debt valuation adjustments, was $345mn, up from $37mn a year ago.
Morgan Stanley’s global wealth management business also showed improvement, excluding one-time integration costs and buying an additional stake in a retail brokerage joint venture with Citigroup. The adjusted pretax profit margin for the business rose to 13% from 11%. Management has targeted a pretax margin in the “mid-teens” for wealth management by next year.
Overall, Morgan Stanley lost money in the third quarter due to a $2.3bn accounting charge to reflect an increase in the value of the bank’s debt. Including that charge, Morgan Stanley lost $1bn, or 55 cents per share, in the quarter.
Nokia reported another quarterly loss and dwindling cash reserves yesterday, but results were better than expected ahead of next month’s launch of new smartphones it hopes can win back market share from Apple and Samsung.
The third-quarter results were helped by its telecoms equipment company, Nokia Siemens Networks which the company said had achieved record profits. Nokia shares jumped and were up 8.9% to 2.396 euros at 1028 GMT.
Nokia’s quarterly underlying loss before one-off items was €0.07 per share compared to a profit of €0.03 a year earlier. Analysts had forecast a loss of €0.11 in a Reuters poll.
Nokia’s net cash position fell to €3.6bn ($4.7bn) by the end of the quarter from 4.2bn in June but still came in ahead of market forecasts of €3.4bn.
The Finnish group is now pinning its hopes on new, top-of-the-range Lumia 820 and 920 phones, which use Microsoft’s latest Windows 8 software and are due to hit stores in November.
Some analysts were wary despite the stronger-than-expected numbers, saying much depended on sales of the new Lumias.EBay
EBay Inc has reported strong quarterly results, but the e-commerce company gave a cautious forecast for the crucial holiday season amid a brewing price war between big retailers and rival Amazon.com
EBay said third-quarter revenue rose 15% to $3.4bn, while profit climbed 14% to $718mn, or 55¢ a share, compared with 48¢ last year. The revenue matched Wall Street estimates, while profit beat by a penny.
EBay forecast fourth-quarter revenue of $3.85bn to $4bn and profit of 66¢ to 69¢ per share. Wall Street was looking for fourth-quarter earnings of 68¢ a share on revenue of $3.94bn, according to Thomson Reuters.
EBay shares were up 1%, to $48.40, in after-hours trading following the results.
EBay may be giving a cautious outlook for the holiday season because big retailers including Target Corp and Best Buy Co Inc are planning to match Amazon’s online prices, Hottovy noted. This price tussle may put more shoppers and revenue up for grabs during the fourth quarter, he added.
EBay shares have jumped so far this year, outpacing those of Amazon, on optimism that growth has resumed at the Marketplaces business and on hope for an expansion of PayPal from its online roots into physical stores.
American Express Co’s third-quarter profit rose only marginally as card member spending growth remained muted for the second quarter in a row.
Cardmember spending in the US rose 8% in the quarter. That figure, though up from the second quarter, is still below the double-digit growth the company had posted for the nine preceding quarters.
Amex’s profit rose just 1% $1.25bn, or $1.09 per share from a year earlier.
Revenue grew at the slowest rate in 11 quarters. Total revenue, net of interest expense, was $7.86bn, up 4%.
Analysts on average had expected the company to earn $1.09 per share, on revenue of $7.90bn, according to Thomson Reuters. The company has the lowest delinquency rate among the large credit card companies, including JPMorgan Chase, Discover Financial, Capital One, Bank of America and Citigroup.
But it set aside $479mn to cover future bad loans, reflecting its larger lending portfolio, 92% more than it had provisioned last year.
The large increase also reflects a $421mn reserve release in the year-ago quarter.
American Express, which lends directly to consumers and also competes with Visa Inc and MasterCard Inc to process credit card transactions, said global network and merchant services revenue grew 5% to $1.3bn.
Shares of the company, which have risen more than 24% so far this year, were down about 1% at $58.80 after the bell.
They closed at $59.37 on Wednesday on the New York Stock Exchange.
Net income was S$74.3mn ($61mn) in the three months ended September 30, from S$87.5mn a year ago, the company said in a statement yesterday. That compares with the S$75mn average of six analyst estimates compiled by Bloomberg. Operating revenue declined 10% to S$160.5mn.
“Securities and derivatives volumes have held up well relative to other markets,” chief executive officer Magnus Bocker said in the statement. “Open interest for derivatives contracts achieved a record high in September, reflecting SGX’s stature as a clearing house of choice in Asia. We are also pleased to see increased capital raising activities this quarter.”
The average value of equities traded daily slipped 15% to S$1.36bn in the July-to-September quarter from a year earlier, according to data compiled by Bloomberg. While average daily derivatives trading volume dropped 4.8% to 306,811 from a year earlier, open interest climbed to a record high of 2.3mn contracts on Sept. 26, SGX said.
Companies raised about $1.7bn from initial public offerings in Singapore in the three months through September 30, compared with $125mn in the same period last year. IHH Healthcare Bhd. and Far East Hospitality Trust were among this year’s biggest IPOs.
Keppel Corp, the world’s largest oil-rig maker, reported a 15% decline in third-quarter profit amid rising competition from Chinese shipbuilders.
Net income fell to S$346.4mn ($285mn) in the three months ended September 30 from S$406.1mn a year earlier, the company said in a statement to the Singapore stock exchange yesterday. That was lower than the S$388.7mn average of three analysts’ estimates compiled by Bloomberg. Sales climbed 19% to S$3.2bn.
Prices for oil rigs and other offshore units have come under pressure, Keppel said, as Chinese shipbuilders including Cosco Corp Singapore and China Rongsheng Heavy Industries Group Holdings expand into the market. The Chinese yards are targeting the sector because of a collapse in demand for dry-bulk vessels, their traditional focus.
Operating Profit at Keppel’s offshore and marine unit fell 33% to S$287mn. Operating margins to sales narrowed to 13%, from 26% a year earlier. The company also has a property unit.
Keppel has won S$8.8bn of new orders this year. Its order book stands at S$13.1bn, with deliveries stretching into 2019, the company said. Oil companies are boosting spending on new equipment because of higher crude prices and declining reserves.
Nucor Corp, the largest US steelmaker by market value, posted third-quarter profit that beat analysts’ estimates after a decline in the price of scrap metal used as a raw material.
Net income declined to $110.3mn, or 35¢ a share, from $181.5mn, or 57¢, a year earlier, the Charlotte, North Carolina-based company said yesterday in a statement. Earnings excluding a loss on an asset sale and a charge related to the purchase of inventory were 45¢, exceeding the 43¢ average of 14 estimates compiled by Bloomberg.
Sales dropped 8.6% to $4.8bn from $5.25bn, missing the $4.83bn average of 14 estimates.
The average scrap costs in the quarter decreased 11% to $380 a tonne from $427 in the previous quarter and 15% from a year earlier, Nucor said in the statement.
Blackstone Group, the world’s largest private-equity firm by assets, reported a third-quarter profit as the carrying value of its holdings gained at a quicker pace than a year ago and its assets exceeded $200bn for the first time.
Economic net income, a measure of earnings excluding some costs tied to the firm’s 2007 initial public offering, was $621.8mn, or 55¢ a share, compared with a loss of $380mn, or 34¢, a year earlier, New York-based Blackstone said yesterday in a statement. Analysts had expected earnings of 42¢ a share, according to the average of 13 estimates in a Bloomberg survey.
Blackstone, under chief executive officer Stephen Schwarzman, is leading a push among the largest so-called alternative-asset firms to expand their businesses beyond traditional leveraged buyouts.