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Morgan Stanley was handed an earnings boost by offloading debt linked to Elon Musk’s X that has become more attractive to investors over recent months, helping the Wall Street bank to report a jump in quarterly profits.
The US lender reported nearly $700mn in “other” revenue in its investment bank in the three months to March, up from $242mn during the same period last year, which it said was “principally driven by realised gains on the sale of corporate loans held-for-sale”.
A person familiar with the matter said much of the boost was related to offloading debt linked to Musk’s acquisition of Twitter, now renamed X.
Morgan Stanley, Musk’s lead banker, was one of several lenders that were initially saddled with debt from the billionaire’s $44bn takeover of the social media platform in 2022. The banks had to fund the takeover themselves after Musk’s ownership of the business and broader market volatility damped enthusiasm for the debt.
However, investor appetite in the X debt has been bolstered by Musk’s relationship with US President Donald Trump, as well as the return of some of the advertisers who had previously pulled back from the platform, the Financial Times previously reported.
The boost came as Morgan Stanley reported a 26 per cent rise in first-quarter profits, powered by its equities trading business, which benefited from volatile financial markets during the early months of the Trump administration.
The lender reported net income of $4.3bn during the three months, more than a quarter higher than the same period last year and beating analysts’ estimates of $3.7bn.
“These results demonstrate the consistent execution of our clear strategy to drive durable growth across our global footprint,” said chief executive Ted Pick.
The robust performance was fuelled by the equities trading operation, which posted a 45 per cent surge in revenues to $4.1bn during the period. The fixed income trading arm reported a 5 per cent rise in revenues to $2.6bn.
Net new assets at its closely watched wealth management business came in at $94bn for the quarter, slightly lower than the same period last year, but comfortably beating analysts’ expectations.
While choppy financial markets have been a boon for trading activity, they have hit the outlook for investment banking advisory work as clients reassess deals. This concern has worsened over the past 10 days with the US’s plans for sweeping global tariffs.
Morgan Stanley’s investment banking revenues climbed 8 per cent in the first quarter to $1.6bn, although much of this was from fees being paid for deals that had already been announced.
Shares in Morgan Stanley were trading about 0.8 per cent lower in New York.
