Morgan Stanley Earnings Exceed Expectations, Driven by Record Wealth Management Revenue

Morgan Stanley reported fourth-quarter earnings on Tuesday that were better than what analysts had expected. The bank’s wealth management business had record revenue, and its trading business also saw growth.

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After the results were announced, the company's stock prices rose by more than 2%.
In the fourth quarter, net income fell to $2.11 billion, or $1.26 per share, from $3.59 billion, or $2.01 per share, a year ago. However, it still managed to beat Refinitiv's estimate of $1.19 per share.

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Profits have been hurt by a slowdown in dealmaking over the past year, prompting the New York-based firm to cut about 2% of its staff in December. The job cuts impacted about 1,600 of its 81,567 employees and touched nearly every corner of the global investment bank. The firm posted severance costs of $133 million in the latest period.

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Morgan Stanley reported earnings of $1.31 per share, excluding certain costs and a tax gain of $89 million.
Revenue for the quarter totaled $12.75 billion, which is higher than the $12.64 billion that Wall Street was expecting, according to Refinitiv.
"We reported solid fourth quarter results amidst a difficult market environment," Chairman and CEO James Gorman said in a statement. "Overall, 2022 was a strong year for the Firm as our clear strategy and balanced business model enabled us to deliver an ROTCE of 16% despite the complex macro backdrop."

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The company's wealth management business posted record net revenue of $6.63 billion in the latest quarter, 6% higher than a year ago. The result was helped by an increase in net interest income on higher interest rates and bank lending growth, the bank said.

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Trading revenue increased to $3.02 billion from $2.39 billion a year ago. This increase was driven by higher trading volume and improved market conditions.
Revenue from equity investments fell 24% from the previous year, due to markdowns on certain strategic investments. However, fixed income net revenue rose by 15%, driven by stronger results in macro and credit products.

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The firm's investment banking business suffered a significant slowdown in the fourth quarter, with revenues falling 49% year-on-year to $1.25 billion. The bank attributed the decline to a sharp drop in global equity underwriting volumes and fewer completed M&A transactions.

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Morgan Stanley's investment management division reported revenue of $1.46 billion, a 15% decline from the previous year. The bank attributed the decline to extreme market volatility caused by the Federal Reserve's aggressive rate hikes. As a result of the volatility, the bank's assets under management shrank to $1.30 trillion from $1.57 trillion.

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In the latest quarter, the bank set aside $85 million for credit losses, compared with just $5 million in the same quarter a year ago. This increase is due to the current economic conditions and the bank's exposure to certain industries.
Morgan Stanley's stock price has increased by nearly 8% so far this year, after falling by 13% in 2020.