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Morgan Stanley reported better than expected fourth quarter earnings before the bell Wednesday as a resurgence in investment banking dealmaking saw a 46 per cent surge in Q4 revenues versus a year earlier. $MS will resume $2bn in share repurchases back. The bank followed Bank of America, JPMorgan Chase, Wells FargoPNC FinancialGoldman Sachs and Citigroup reporting.

 Morgan Stanley 

Morgan Stanley NYSE: MS Reported Before Open Wednesday

 $1.81 Beat $1.25 AND $13.6Bn Beat $9.08 Billion Forecast in Revenue

Earnings

Morgan Stanley reported fourth-quarter net income of $3.39bn versus $2.24bn a year earlier. Earnings per share for the three months, at $1.81 were much higher than the $1.25 predicted by analysts in a Bloomberg poll. Revenues also beat expectations and hit $13.6bn revenues versus $11.54 billion estimated.. Annual profits came in at $11bn, surpassing the $9bn record set last year. Full-year net revenue was a record $48.2 billion compared with $41.4 billion a year ago,;

“It was a combination [of the firm and the environment],” said Jon Pruzan, chief financial officer. “We saw exceptional support from central banks and strong fiscal policy supports during the health crisis . . . We supported our clients and were extraordinarily active, and very disciplined around our risk, and that led to record results.”

Morgan Stanley NYSE: MS

Market Reaction: Close 74.84 ▼ 0.40 (-0.53%)

Highlights

  • Net interest income rose to $1.2 billion from $1.03 billion, below analysts' forecasts of $1.33 billion.
  • Equities trading revenue was $2.5 billion versus $2.14 billion estimated
  • Investment banking revenue was up 46% from a year ago, driven by advisory revenuefrom higher M&A completed transactions as well as stronger equity underwriting revenue from IPOs, blocks and follow-on offerings.
  • Investment management revenue was $1.1 billion, down from $1.4 billion a year ago, reflecting record asset management fees in both the quarter and full year driven by record assets under management of $781 billion and record long-term net flows of $41 billion, the bank said.
  • Provision for credit losses on loans and lending commitments was $5 million for the fourth quarter of 2020, compared with $57 million for the fourth quarter of 2019 and $111 million for the third quarter of 2020.
  • The allowance for credit losses on loans and lending commitments was $1.2 billion as of the end of December, a decrease of approximately $29 million from the end of September and an increase of approximately $641 million from a year ago.
  • Wealth management revenue rose to $5.7 billion rose 24% from $4.6 billion a year ago
  • Wealth management at Morgan Stanley is expanding through the acquisition of ETrade, That division’s net profits fell 5 per cent year on year, as it absorbed the cost of integrating ETrade. Executives said the integration was going well, and reiterated plans for a margin in wealth management of more than 30 per cent over the medium term.

In its annual strategic update, Morgan Stanley marginally increased its targets for return on tangible equity, to more than 17 per cent, versus a previous target of 15 per cent to 17 per cent. This is at the upper end of peers including Goldman and JPMorgan. “Our firm is at an inflection point and the next decade will be characterised by growth,” said Mr Gorman.

 

 

MS Q4 2020 earnings

E Trade

On Feb. 20, Morgan Stanley agreed to acquire E-Trade Financial (ETFC) in a $13 billion, all-stock deal. The Wall Street investment bank said the purchase would add E-Trade's consumer-oriented business to its advisor-driven model. The deal closed in Q4, 2020

Wealth management, which Morgan Stanley is expanding through the acquisition of ETrade, increased revenues by 24 per cent year on year, to $5.7bn. That division’s net profits fell 5 per cent year on year, as it absorbed the cost of integrating ETrade. Executives said the integration was going well, and reiterated plans for a margin in wealth management of more than 30 per cent over the medium term. In its annual strategic update, Morgan Stanley marginally increased its targets for return on tangible equity, to more than 17 per cent, versus a previous target of 15 per cent to 17 per cent. This is at the upper end of peers including Goldman and JPMorgan. “Our firm is at an inflection point and the next decade will be characterised by growth,” said Mr Gorman.

Outlook

“We enter 2021 in probably the best position we’ve been in in over a decade in terms of open, active and constructive markets, very engaged institutional and retail clients; the brand is in great shape and we have nice momentum,” said on Pruzan, chief financial officer.

The volatility, liquidity and rate cuts assisted trading desks as it produced the right type of volatility for the bank, will that continue?. Net interest income has collpased and that is important to them, but not as important as it is to some of the other banks,

 

From The TradersCommunity News Desk Live From The Pit

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