Morgan Stanley has raked in some serious cash for the first quarter of the year, exceeding Refinitiv’s estimate by earning a whopping $1.70 per share instead of the $1.62 anticipated. The bank’s revenue also managed to exceed expectations by reaching $14.52 billion, while the initial estimate was only $13.92 billion. How about them apples?
Unfortunately, things aren’t all sunshine and rainbow farts for the New York-based bank as earnings fell 19% to $2.98 billion from the previous year because of a decline in investment banking and trading. Hey, nobody’s perfect.
Morgan Stanley might be feeling a little bit of buyer’s remorse as expenses at the bank climbed up by 4% to $10.52 billion. Talk about high maintenance. The higher-than-expected compensation costs were the culprit, and it didn’t do any wonders for the bank’s profit margin either.
Analyst Mike Mayo of Wells Fargo wrote in a research note that the profit margins at Morgan Stanley’s wealth division and investment bank were hit by these additional costs. If the bank is so good, why did he need to spell that out for us? He also mentioned that if they excluded the benefit of a low tax rate, the bank would have only earned $1.64 per share. Way to crash the party, Mike.
Shares of Morgan Stanley took a slight hit, dropping less than 1% in early trading. But they did fall as much as 4% in premarket action. Ouch, that must’ve hurt.
Thankfully, the bank’s wealth management division was there to save the day. Under the leadership of CEO James Gorman, the bank has become a wealth management juggernaut thanks to a series of acquisitions. What can we say? The man’s got a type. Gorman believes that their investments in wealth management are finally paying off, with an impressive $110 billion added in net new assets this quarter.
The bank’s first-quarter trading revenue took a dip from the previous year, but Morgan Stanley’s traders were still able to exceed expectations by roughly $250 million. That’s one way to get a pat on the back.
Investment banking revenue wasn’t so lucky, dropping 24% to $1.25 billion due to fewer completed M&A deals and lower stock and debt issuance. You win some, you lose some.
Smallest’s business, investment management, witnessed a decrease of 3% to $1.29 billion in revenue. This wasn’t too shabby, as it was only slightly below the $1.34 billion estimate. This was mainly due to the management fees decreasing because of the declining markets.
When asked about the current turmoil brought about by the March collapse of two American regional banks, Gorman boldly declared that they weren’t in a banking crisis. He did mention that nothing was imminent, but he was confident that they would acquire more companies in wealth management. The man has a type, and he’s sticking to it.
All in all, Morgan Stanley shares have climbed by 5.7% this year before Wednesday, outperforming the 16% decline of the KBW Bank Index. JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America each topped expectations, but Goldman Sachs missed them due to the costs tied to unloading consumer loans amidst their pivot away from retail banking. Wow, talk about being fashionably late to the party.
Serious News: cnbc
