Morgan Stanley’s profit beats estimates

Morgan Stanley’s first-quarter profit beat estimates on Tuesday, fueled by a resurgence in investment banking and growth in wealth management, sending shares up 3.7 percent.

Investment banking revenue climbed 16 percent from a year earlier. Fixed-income underwriting did well for a second quarter in row, driven by higher bond issuance. The Wall Street giant’s wealth and investment management divisions also benefited from surging client assets.

“It was an excellent quarter all around,” Chris Kotowski, an analyst at Oppenheimer, wrote in a note. The bank achieved a “near-perfect print” like rival Goldman Sachs did on Monday, Kotowski added.

Morgan Stanley reported profit of $2.02 per share, sailing past analysts’ average estimate of $1.66, according to LSEG data. Total revenue rose to $15.14 billion compared with $14.5 billion a year earlier.

“We saw building momentum in investment banking, both in our M&A and underwriting pipelines across corporate and financial sponsor clients,” CEO Ted Pick told investors on Tuesday. He expects a “multi-year M&A cycle” to begin now and last 3 to 5 years.

Geopolitical risks may even create incentive for more deals, he said, adding that some companies will need to shift their international footprint partly because of the disruption two major conflicts are creating on supply chains.

“The fact that the U.S. economy continues to grow, that China is weaker, the parts of Europe are weaker highlights the fact that people want to get even more exposure to the U.S.”, the CEO told investors. He also cited the need of financial sponsors to make deals, sell private companies and return money to investors.

Surging equity markets and high-profile initial public offerings (IPOs) are also helping to fuel more activity, CFO Sharon Yeshaya told Reuters in an interview.

“The IPOs that have come to market have done well, and that is positive, it helps the advisory business,” she said.

Goldman Sachs impressed markets on Monday with a 28 percent rise in profit due to more fees in leading large deals and also good results in trading. In their earnings last week, JPMorgan Chase and Citigroup cited rising activity, particularly in debt and equity capital markets.

Total revenue for Morgan Stanley’s institutional securities division, which houses investment banking, equities and fixed income, climbed to $7 billion from $6.8 billion a year earlier. Fixed income trading revenue slid 4 percent, while equities rose 4 percent.