Thanks, Elon! How X debt sale helped Morgan Stanley's earnings
Jeenah Moon/Reuters
- Morgan Stanley posted strong 1Q earnings on Friday, boosted by its equities trading business.
- Earnings also reflected the sale of loans tied to Elon Musk's purchase of X.
- The loans were on the company's books until recently, as Musk's star rose in relation to Trump.
Morgan Stanley's long-time relationship with Tesla CEO Elon Musk is paying off.
The investment bank on Friday posted net income of $4.3 billion in the first quarter, up 26% over last year, surpassing analysts' forecasts. The bank's $17.7 billion in quarterly revenue was boosted by a 45% increase in its equity trading business, whose revenue soared to a record $4.1 billion amid heightened market volatility.
The bank also saw a jump in "other" revenue in its institutional securities group. That line includes the bank's corporate loan book, which benefited from the sale of loans the bank raised in 2022 to help Musk buy the social media platform now called X, according to a person with knowledge of the company's finances.
Morgan Stanley led a group of seven banks in raising $13 billion in debt for the 2022 buyout.
Bloomberg first reported that the boost in the "other" category was tied to the sale of the X loans.
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Morgan Stanley has long been a banker to Musk. The firm's star tech banker, Michael Grimes, recently left Morgan Stanley after 30 years for a role with the Commerce Department, which is headed by Howard Lutnick, who also hails from Wall Street.
Grimes played an important role in helping the Tesla CEO buy X, then called Twitter, in 2022. The deal ended up costing Morgan Stanley and the other lending banks billions in so-called hung loans, or debt that banks are having trouble offloading to investors.
Morgan Stanley and other banks began selling the debt this year amid a brightened financial picture for X, according to a person with knowledge of the sales.
On Friday, Morgan Stanley CEO Ted Pick said he is "cautiously optimistic" about the state of the economy, a stark contrast to comments made earlier on Friday by JPMorgan CEO Jamie Dimon.
"We have not seen a slowdown," Pick said, referring to market activity since the start of April. "Is it bumpier for some clients? Of course, it is," he said, adding, "But we are still, we'll call it, cautiously optimistic that we won't go into recession, and we will just keep going."