Morgan Stanley Dealmaking and Trading Drive Record Profits

Morgan Stanley reported better than expected first quarter earnings before the bell Fridayon stronger-than-expected trading and investment banking results. The boom in SPAC-issuance has been a boon in fees for for $MS.Bank of America, JPMorgan Chase, Wells Fargo  PNC Financial, Goldman Sachs and Citigroup reporting.

Morgan Stanley report first quarter earnings before the bell Friday. Last quarter a resurgence in investment banking dealmaking saw a 46 per cent surge in Q4 revenues versus a year earlier. The bank followed Bank of America, JPMorgan Chase, Wells Fargo  PNC Financial, Goldman Sachs and Citigroup reporting.

 Morgan Stanley 

Morgan Stanley NYSE: MS Reported Before Open Friday

$2.22 Beat $1.69 EPS AND $15.7 Billion Beat $13.81 Billion Forecast in Revenue


Morgan Stanley posted profit of $4.1 billion, or $2.19 a share, more than double the $1.7 billion earnings of the year-earlier period. The firm said that excluding merger related expenses, adjusted profit was $2.22 a share; analysts had expected $1.70. Companywide revenue surged 61% to a record $15.7 billion, exceeding analysts’ estimate by $1.6 billion.

A negative is MS said 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.

Expectations are for EPS of $1.69 on revenue of $13.81 billion

Morgan Stanley is expected to post quarterly earnings of $1.69 per share in its upcoming report, which represents a year-over-year change of +70.7%. Revenues are expected to be $13.81 billion, up 45.5% from the year-ago quarter.

Morgan Stanley full-year net revenues hit a record of $48.2bn in 2020, net income rose to $11bn, from $9bn the year before. In Q4  revenues were $13.64bn, well over $2bn above estimates. The outperformance was driven by investment banking and the equities trading division, which saw revenues surge $350m above estimates. Wealth management was a strong contributor,.

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 First 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: NY Lunch $78.08 ▼ 2.73 (-3.38%)


  • Morgan Stanley’s fixed income trading desks produced $2.97 billion in revenue, almost $850 million more than what analysts had expected for the quarter, on strong results in credit trading.
  • Equity trading produced $2.88 billion in revenue, or about $170 million more than the estimate.
  • Investment banking revenue jumped 128% to $2.61 billion, exceeding estimates by almost $500 million, fueled by what Morgan Stanley said were record equity underwriting revenues.
  • The bank said wealth management revenue in the quarter jumped 47% to $5.96 billion, matching analysts’ expectations.

Morgan Stanley is the last of the six largest U.S. banks to report first-quarter earnings. JPMorgan Chase, Bank of America, Wells Fargo and Citigroup all beat analysts’ expectations with help from releasing money set aside earlier for loan losses. Key rival Goldman Sachs beat estimates on strong advisory and trading results.  

 MS Earnings Q4 21

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.

From The TradersCommunity Research Desk

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