Morgan Stanley Revenue Increased in Wealth Management and Investment Management

Morgan Stanley reported better than expected fourth quarter earnings before the bell Wednesday on stronger-than-expected wealth management and investment banking results. $MS was the last of the big banks to post fourth-quarter results following major competitor Goldman Sachs (GS), and four of the largest U.S. lenders Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) reporting mixed results. Trading activity has been weak across the board.

Morgan Stanley

  

Morgan Stanley NYSE: MS Reported Before Open Wednesday

$2.01 Beat $1.91 EPS AND $14.5 Billion Missed $14.56 Billion Forecast in Revenue

Earnings

Morgan Stanley posted profit of $3.7 billion, or $2.01 per share, beating expectations of analysts surveyed by FactSet of $1.91 per share. Revenue of $14.5 billion was slightly below analyst expectations of $14.56 billion FactSet estimate. Revenue was up from $13.4 billion a year ago, with gains logged for the wealth management and investment management segments.

“2021 was an outstanding year for our Firm…with stand-out results in each of our business segments,” Morgan Stanley chief executive James Gorman said. “We have a sustainable business model with scale, capital flexibility, momentum and growth.”

Highlights

  • Advisory revenue rose 6% from the year-ago quarter and 43% for the full year.
  • Fixed-income trading was down 31%
  • Equities trading revenue climbed 13%.
  • Morgan Stanley’s wealth management division revenue roses to $6.3 billion, up from $5.7 billion in the year-ago quarter.
  • Morgan Stanley’s investment management division revenue surged 59%, helped by the bank’s acquisition of Eaton Vance.

“Combined with Investment Management, we now have $6.5 trillion in client assets. Our integrated investment bank has continued to gain wallet share. We have a sustainable business model with scale, capital flexibility, momentum and growth,” CEO James Gorman said in the earnings statement.

 Big Banks Kick Off First Quarter 2022 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.  

Overall, analysts and banks are looking for a strong earnings season, partly in response to the improving economy and the vaccine rollout but predominantly from the rise in interest rates with the Fed looking to raise rates. Banks will benefit from rising rates, provided that they don’t go up too rapidly and hurt demand for mortgages, credit cards and other loans.

Bank Earnings Q4 2021

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.


E Trade and Eaton Vance Aquisition’s

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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