By Elizabeth Martinez,
Money and Investing Writer
Morgan Stanley (NYSE:MS) reported third quarter stock price that beat analysts’ expectations by 12 cents on the dollar according to FactSet. This may be due largely to the company’s recent fixation on wealth management, which serves as a more steady form of business than simply trading.
In fact, it was Morgan Stanley’s wealth management team that was responsible for both the company’s growth in assets under management, as well as its 9 percent rise in revenue. That said, their banking revenue also saw a slight increase of .2 billion dollars.
Combine this data with the rest of the companies various revenues and Morgan Stanley saw a total revenue increase of .29 billion dollars, which translates to an increase of about 3%. Across the board, Morgan Stanley’s numbers consistently beat the expert’s expectations.
This had many investors and market specialists shocked, as Morgan Stanley was nowhere near immune to the snail paced summer that hindered the vast majority of its competitors. Not to mention, when you take into consideration the quiet nature of the Market this past year.
Since investment banks tend to thrive most when the market is at its peak activity level, this hushed trend proved increasingly detrimental to the trading profits of many of these such companies. This further supports that Morgan Stanley’s emphasis on its wealth management division was their third quarter’s saving grace.
Goldman Sachs (NYSE:GS) on the other hand, saw a slightly different picture during their third quarter. The company reported a decrease in their share price of 14 cents a share, and an overall decrease in profits of approximately 60 million dollars. This may be in part due to their somewhat predictable method of dealing largely with bonds, currencies, and commodities. A method which is similar to that of their competitors, such as JP Morgan (NYSE:JPM), and Bank of America (NYSE:AIG) which saw similar declining results this quarter.
That said, Goldman Sachs saw a 17 percent rise in their investment banking divisions revenue, and a companywide revenue increase of approximately .16 billion dollars this quarter.
This once again shocked analysts, as the company’s previous performance left them with the low expectations of actually decreasing the company’s total revenue by .64 billion dollars.
When we look at these two competitors side by side, the picture becomes clear. Morgan Stanley, which saw a third quarter net revenue of approximately 9.2 billion dollars, and Goldman Sachs which saw a third quarter net revenue of 8.33 billion dollars are neck and neck competitors.
The previously substantial gap between the two companies has been closed, and a new one in favor of Morgan Stanley may be soon to arise if Morgan Stanley is able to maintain their current trend.
While of course, no one can perfectly predict which way the market will go, it seems like the race between these two giants has become a much closer one. Clearly, the experts predicting these two companies’ fates were greatly mistaken in their analysis, which may leave many novice investors with a slightly shaken confidence level.
A version of this article appeared in the Tuesday, October 24th print edition.
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