What’s Going On Here?Morgan Stanley might’ve been late to the party, but the investment bank finally joined three of its rivals in celebrating record-setting earnings late last week. What Does This Mean?Morgan Stanley’s earnings blew past expectations last quarter, with revenue from the firm’s investment banking business more than doubling compared to the same time last year. That segment raked in massive fees by helping special-purpose acquisition companies list on the stock market – just like Wells Fargo, Goldman Sachs, and JPMorgan, all of which reported blowout earnings of their own earlier in the week. So despite losing nearly $1 billion from the Archegos Capital Management debacle, Morgan Stanley still pocketed a record-breaking profit of over $4 billion. Why Should I Care?Zooming in: Morgan Stanley’s strategy is paying off.
Morgan Stanley spent $13 billion buying online broker E*TRADE last year, and the move looks like a shrewd one: E*TRADE – which now boasts over 7 million clients, 7% more than at the end of 2020 – benefited heavily from the burst of new retail traders last quarter. Eaton Vance was money well spent too: Morgan Stanley bought the investment management firm for $7 billion in 2020, pushing up the pot of money it looks after to $1.4 trillion dollars – from “just” $600 billion this time last year.
The bigger picture: Banks’ bread and butter looks a little stale.
The interest banks make on loans is a more stable source of revenue than, say, investment banking, making it essential to their survival. And while Morgan Stanley lent out 15% more cash last quarter, it might be worried that the four biggest US banks all reported a drop-off. Households, it seems, not only don’t need new loans: they have enough loose change to pay off existing ones. And even though businesses are keen to borrow, there’s a much cheaper way for them to do it: they can sell bonds – which currently boast ultra-low yields – to fund their future growth. | 
