As financial markets trend higher, trading fees and an increase in other market activity is driving the profits of big banks higher. Even with shifting interest rates, which some have seen as a potential drag on productivity, Wall Street banks are on set to grow their profits.
In fact, many of the big banks have seen a surge in fixed-income activity, likely from investors looking to lock in high rates ahead of the Federal Reserve’s first interest rate cut.
That’s allowed firms like Morgan Stanley (MS) to see its profits surge by 32% over the past year. The investment bank is now up nearly 50% over the past year.
Operationally, the bank has gotten more efficient, growing earnings by 41% amid a mere 12% increase in revenues. Continued improvement in providing services could also help increase Morgan Stanley’s profit margins, which stand at a solid 19%.
Action to take: With profits increasing, there’s likely more room for shares to run. And Morgan Stanley is still inexpensive at 15 times forward earnings.
Investors may like shares now, as the current uptrend looks set to continue into next year. Morgan Stanley pays a 3.3% dividend, and has a history of increasing its payout over time.
For traders, the February 2025 $130 calls, last trading for about $3.50, could see high double-digit returns from a continued rally into next year.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.