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Morgan Stanley recently received a significant earnings boost from selling debt linked to Elon Musk’s X, which has become increasingly attractive to investors in recent months. This boost helped the Wall Street bank report a substantial jump in quarterly profits.
In the three months leading up to March, Morgan Stanley reported nearly $700 million in “other” revenue in its investment bank, a significant increase from the $242 million reported during the same period last year. The bank attributed this increase to realized gains on the sale of corporate loans held-for-sale. A source familiar with the matter mentioned that a large portion of this boost came from offloading debt linked to Musk’s acquisition of Twitter, now rebranded as X.
Morgan Stanley, as Musk’s lead banker, was among several lenders initially burdened with debt from Musk’s $44 billion takeover of the social media platform in 2022. The banks had to finance the takeover themselves due to Musk’s ownership of the business and market volatility dampening enthusiasm for the debt.
However, investor interest in the X debt has grown due to Musk’s relationship with US President Donald Trump and the return of advertisers who had previously withdrawn from the platform. This boost in revenue coincided with Morgan Stanley reporting a 26% increase in first-quarter profits, driven by its equities trading business benefitting from volatile financial markets during the early months of the Trump administration.
The bank reported a net income of $4.3 billion in the three months, surpassing analysts’ estimates of $3.7 billion. CEO Ted Pick attributed the strong performance to the execution of their strategy for global growth.
The equities trading operation saw a 45% surge in revenues to $4.1 billion, while the fixed income trading arm reported a 5% increase in revenues to $2.6 billion. Net new assets in the wealth management business totaled $94 billion for the quarter, slightly lower than the previous year but exceeding analysts’ expectations.
Despite the positive results in trading activity, choppy financial markets have impacted the outlook for investment banking advisory work as clients reevaluate deals. Concerns have heightened in recent days with the US’s plans for global tariffs.
Morgan Stanley’s investment banking revenues grew by 8% in the first quarter to $1.6 billion, with a significant portion coming from fees related to previously announced deals. Shares in Morgan Stanley were trading around 0.8% lower in New York following these reports.
