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Morgan Stanley Profit Dips Amid Higher Credit Loss Provisions, Interactive Brokers Thrives in Q3

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On Wednesday, Morgan Stanley reported a 9% decrease in Q3 profit, attributing the decline to increased credit loss provisions and expenses. The firm’s net income was $2.41 billion, or $1.38 per share, down from the same period last year but above analysts’ earnings estimate of $1.22 per share for the quarter. According to InvestingPro data, the company’s P/E ratio stands at 13.92, indicating a relatively low price for each dollar of earnings. Despite this, the company outperformed analysts’ revenue estimates of $12.58 billion with a 2% increase to $13.27 billion. The firm’s shares traded lower at $77.88 on NYSE, down 3.05%.

CEO James Gorman highlighted the company’s solid performance, reflected in a ROTCE of 13.5%. However, the Institutional Securities net revenues declined by 27%, influenced by muted Investment Banking activity despite robust Equity and Fixed-income business performance. On a positive note, Wealth Management net revenues grew by 5% due to increased asset management revenues on higher average asset levels, while Investment Management net revenues rose by 14%, driven by higher AUM.

The company’s provision for credit losses rose sharply to $134 million from last year’s $35 million. The board of directors declared a quarterly dividend of $0.85 per share, payable on November 15, 2023, to shareholders registered by October 31, 2023. This aligns with the InvestingPro Tip that Morgan Stanley has maintained dividend payments for 31 consecutive years. The company also completed the E*TRADE integration during the quarter.

In contrast, Interactive Brokers (NASDAQ:) Group demonstrated robust financial performance in Q3 2023 with key metrics showing substantial growth. The firm’s GAAP diluted EPS was $1.56, up from last year’s $0.97, while adjusted EPS was $1.55, a rise from the previous year’s $1.08. InvestingPro data shows a P/E ratio of 15.72, suggesting a balance between price and earnings. Pretax profit margin reached 73% with net revenues of $1,145 million GAAP and $1,139 million adjusted.

Commission revenue increased by 4% to $333 million despite mixed customer trading volumes. Options contracts saw an 18% increase, while futures contracts and stock share volumes contracted by 1% and 22%, respectively. Net interest income surged by 55% to $733 million due to higher benchmark interest rates and increased customer credit balances.

Gains from the Tiger Brokers investment and the GLOBAL currency strategy drove other income to $27 million, although the latter negatively impacted comprehensive earnings by $93 million this quarter due to a decrease in the U.S. dollar value of the GLOBAL by approximately 0.66%. Execution, clearing, and distribution fees rose by 14% to $98 million due to higher trading volumes in options.

The company declared a quarterly cash dividend of $0.10 per share payable in December 2023. Customer accounts grew by 21% to 2.43 million, customer equity jumped by 29% to nearly $370 billion, while customer credits and margin loans rose by 3% and 8% respectively. According to InvestingPro Tips, Interactive Brokers has consistently increased earnings per share and has maintained dividend payments for 14 consecutive years. For more insights, check out the additional 8 tips available on InvestingPro’s site .

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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