What's going on?

Morgan Stanley might�ve been late to the party, but the investment bank finally joined three of its rivals in celebrating record-setting earnings late last week.

What does this mean?

Morgan Stanley�s earnings blew past expectations last quarter, with revenue from the firm�s investment banking business more than doubling compared to the same time last year. That segment raked in massive fees by helping special-purpose acquisition companies list on the stock market � just like Wells Fargo, Goldman Sachs, and JPMorgan, all of which reported blowout earnings of their own earlier in the week. So despite losing nearly $1 billion from the Archegos Capital Management debacle, Morgan Stanley still pocketed a record-breaking profit of over $4 billion.

Why should I care?

Zooming in: Morgan Stanley�s strategy is paying off.
Morgan Stanley spent $13 billion buying online broker E*TRADE last year, and the move looks like a shrewd one: E*TRADE � which now boasts over 7 million clients, 7% more than at the end of 2020 � benefited heavily from the burst of new retail traders last quarter. Eaton Vance was money well spent too: Morgan Stanley bought the investment management firm for $7 billion in 2020, pushing up the pot of money it looks after to $1.4 trillion dollars � from �just� $600 billion this time last year.

The bigger picture: Banks� bread and butter looks a little stale.
The interest banks make on loans is a more stable source of revenue than, say, investment banking, making it essential to their survival. And while Morgan Stanley lent out 15% more cash last quarter, it might be worried that the four biggest US banks all reported a drop-off. Households, it seems, not only don�t need new loans: they have enough loose change to pay off existing ones. And even though businesses are keen to borrow, there�s a much cheaper way for them to do it: they can sell bonds � which currently boast ultra-low yields � to fund their future growth.