Morgan Stanley 3Q Numbers Beats Peers on Accounting Trick

Morgan Stanley, one of the world’s most prestigious investment banks reported its 3Q results today. Earnings were better than expected and beat the expectations of industry analysts.

According to Bloomberg, “Earnings beat the 30-cent average estimate of 25 analysts surveyed”.

James P. Gorman, President and Chief Executive Officer, said, “Morgan Stanley effectively navigated turbulent markets while consolidating our market share gains with Institutional clients and demonstrating resilience across the Global Wealth Management …The Firm delivered progress across many of our key initiatives, increasing client penetration in equity derivatives and interest rate products.”

Nine-month Investment Banking Revenues were up 17% to $ 3.9 Billion from $ 3.4 Billion over the same period from last year. Morgan Stanley led the league tables and is no. 1 in global completed mergers & Acquisitions and no. 2 in global announce mergers & acquisitions, beating other investment firms like Goldman Sachs.

The Global Wealth Management arm of the firm, a collaboration with Smith Barney, boosted the firms overall income posting net revenues of $ 3.3 Billion.

The bank’s results were largely helped by an accounting trick called a Debt Valuation Adjustment (DVA) which allows an organization to book a profit when the prices of their bonds fall below the nominal value. It is a theoretical profit which can be used to spruce up their financial statements, but has nothing to do with the actual operations of the company.