Earnings Reports

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Morgan Stanley reported better the expected third quarter earnings before the bell Thursday with eyes on trading and investment banking results. Equities trading revenue jumped 24% from a year earlier while fixed income revenue dropped 16%. Bank of America, JPMorgan Chase, Wells Fargo  PNC Financial, Goldman Sachs and Citigroup reporting this week

 Morgan Stanley 

Morgan Stanley NYSE: MS Reported Before Open Thursday

$1.98 Beat $1.69 EPS AND $14.75 Billion Beat $13.90 Billion Forecast in Revenue

Earnings

  • Q3 2021 earnings release: before the opening bell; conference call: 8:30 a.m.

Morgan Stanley reported third quarter earnings of $1.98 a share on revenue of $14.75 billion beating the projected profit of $1.69 a share on projected revenue of $13.9 billion.

The market will look if there are any lagging affects for MS in the first quarter when they lost $911 mln from the collapse of a fund run by Archegos, but that event is behind them now apparently isn't viewed as serious risk factor moving forward.

However in light of recent events, around Archegos Capital and Morgan Stanley’s involvement in it, questions are likely to be asked in terms of their risk processes, and how much the episode has cost the bank.

 Big Banks Kick Off Third Quarter 2021 Earnings Season

The bank rally has been fueled by expectations for the economy reopening and infrastructure spending.  The new surge in home prices has also buoyed optimism for the mortgage business and banks profits thereto.

Morgan Stanley NYSE: MS

Market Reaction: Pre-market $100.25 +1.68 (+1.70%)

Highlights

Morgan Stanley is one of the most watched of the six largest U.S. banks  earnings.  Key rival Goldman Sachs reports on Friday with expectations of strong advisory and trading results.  

CEO James Gorman said “The Firm delivered another very strong quarter, with robust revenues and improved efficiency,” Gorman said in the release. “We had standout performance of our integrated investment bank and record net new assets of $135 billion in wealth management.”

  • Equities trading revenue jumped 24% from a year earlier to $2.88 billion, topping the StreetAccount estimate by more than $500 million.
  • Fixed income revenue dropped 16% to $1.64 billion, edging out the $1.53 billion estimate. 
  • investment banking, propelled by robust mergers and IPO activity, and Morgan Stanley is a top player there as well.
  • Morgan Stanley’s investment banking franchise posted a 67% increase in revenue to a record $2.85 billion, exceeding the StreetAccount estimate by more than $600 million, helped by strong mergers advisory fees.
  • Wealth management division revenue jumped 28% to $5.94 billion. The increase was driven by record asset management revenues of $3.63 billion. However revenue from Morgan Stanley’s wealth management division was below a StreetAccount forecast of $6.18 billion.

MS Q3 2021 earnings

E Trade and Eaton Vance

Morgan Stanley's acquisition of E*TRADE continues reward the banks as the record-setting stock market is drawing in waves of new capital to the online brokerage company. For the quarter, net revenue for the Wealth Management segment grew by 47%, primarily due to the addition of E*TRADE.

CEO James Gorman announced $20 billion in deals last year, marking the industry's most aggressive takeovers since the financial crisis. The bank spent $13 billion to acquire E-Trade to further its reach with the mass affluent, and $7 billion to buy Eaton Vance to bulk up its investment management business. The Eaton Vance acquisition closed during the first quarter. 

On Feb. 20 last year, 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.

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