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Morgan Stanley Credits Asian Demand for Return to Global Equity Top Slot
  • Morgan Stanley returns to No-1 slot for global equity revenue thanks to Asia

  • Goldman Sachs highlights ICBC wealth management opportunity

 

(AF) Morgan Stanley highlighted Asian activity as a key factor in its return to the number one global ranking for equity sales and trading revenue in the second quarter.

“Results in Asia were particularly strong, reflecting increased interest in the region from both Asia and non Asia-based clients,” recently appointed chief financial officer Sharon Yeshaya told analysts on Morgan Stanley’s second quarter earnings call on Thursday July 15.

She was emphasising a rise of 8% in the bank’s equities revenues compared to the second quarter of 2020 to a total of $2.8 billion.

This restored Morgan Stanley to the top slot for equities revenues after it had ceded its longstanding leadership in the sector to Goldman Sachs in the first quarter of this year.

JPMorgan, which now ranks in a closely bunched top three for global equities revenues with Goldman and Morgan Stanley, ranked second in the most recent quarter at $2.7 billion.

Goldman Sachs was not too far behind its rivals, with $2.6 billion of equities revenue in the second quarter, but its chief executive David Solomon chose to highlight the potential future impact for asset management earnings of the deal it recently announced with China’s ICBC in the firm’s second quarter earnings call on Tuesday July 13.

Goldman, BlackRock JVs

“We received preliminary approval for a joint venture (JV) with ICBC, China’s largest bank,” Solomon noted. “The JV will combine our expertise in asset management with ICBC’s extensive access to retail and institutional clients. The partnership is a testament to our longstanding relationship with ICBC and represents a significant opportunity for us to grow internationally.”

Goldman Sachs invested just over $2.5 billion in ICBC in 2006 and later sold its stake in different tranches in the following seven years for more than $10 billion, so its relationship with the Chinese bank as an investor was a happy one.

Goldman’s wealth management joint venture with ICBC that was approved by Chinese regulators at the end of May is designed to produce a growing revenue stream, rather than a trading score, but is clearly a priority for the management of the US bank in New York.

Goldman’s asset management group will be competing in China with BlackRock, which has far greater scale – at close to $10 trillion of assets under management globally – and received approval in May for a majority-owned joint venture with China’s second biggest bank, China Construction Bank.

And other specialist asset managers such as Amundi and Schroders have also set up wealth management joint ventures in China.

Goldman’s joint venture in China with ICBC is nevertheless a key part of its move to diversify away from reliance on volatile trading and investment banking revenues.

Bank of America also cited Asian demand as a factor in its 33% rise in global equities revenue for the second quarter, compared to the same quarter in 2020, in its earnings call this week.

And Citigroup chief executive Jane Fraser echoed Goldman’s David Solomon in alerting analysts to growth opportunities for wealth management revenues in Asia, where she said Citi is already ranked in the top three.

 

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Big-name banks pushing hard to tap China’s growing wealth

Jon Macaskill

Jon Macaskill has over 25 years experience covering financial markets from New York and London. He won the State Street press award for 'Best Editorial Comment' in 2016

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