Morgan Stanley (NYSE: MS) revealed strong quarterly earnings, partly due to a rise in trading over a tumultuous year. With more people shifting around assets, investors may look to a broker-dealer related ETFs to capitalize on the activity.
Morgan Stanley saw second quarter earnings jump 39% year-over-year. MS shares rose 2.5% in response on Wednesday.
The bank pointed to a steady economic growth, lower taxes, an uptick in demand for loans and renewed volatility in the price of some securities as contributing factors to its success, the Wall Street Journal reports.
Despite the escalating global tensions and ongoing trade war concerns, investment fnds and corporations have not scaled back demand for Morgan Stanley’s services to trade securities, advise on deals and arrange financing.
“Corporations feel good, consumers feel good,” Morgan Stanley’s finance chief, Jonathan Pruzan, told the Wall Street Journal. “The pockets of volatility seem to be isolated and not rolling over into the broader market. If that changes, and it starts to put people in defensive mode, we’ll have different second half of the year.”
Morgan Stanley’s Return on Equity
Morgan Stanley’s return on equity, a measure of how profitably it invests shareholders’ money, was at 13% in the second quarter, which hit CEO James Gorman’s goals.
The combined trading and investment-banking revenues of $5.7 billion at Morgan Stanley were 20% higher year-over-year and marked the best first-half in those businesses since 2007. Furthermore, fees from merger advice, stock trading and stock-underwriting were all up double digits compared to last year. Debt trading and underwriting also increased but less dramatically.
Additionally, while trading activity may have been slightly lowered, Goldman Sachs (NYSE: GS) also recently announced higher earnings partly due to improved fixed-income, currency and commodities trading revenue, which jumped 45% to $1.68 billion while equities trading revenue was flat at $1.89 billion, Investor’s Business Daily reports.
Investors can track these brokerages through a targeted financial ETF, the iShares US Broker-Dealers & Securities Exchanges ETF (NYSEArca: IAI), which includes exposure to investment banks, brokerages and stock exchanges that may have more to gain from trading activities. IAI includes a 10.3% tilt toward GS and 9.2% to MS, the two largest components in the ETF’s portfolio.
For more information on the financials sector, visit our financial category.