Wednesday, 26 September, 2018

Morgan Stanley flies high on wealth management

Reuters Reuters
Nellie Chapman | 18 January, 2018, 19:32

Morgan Stanley is the last to report of the big United States banks, and like the others, its non-adjusted earnings took a one-time hit from tax reform. That's despite weaker trading revenues and the one-off United States tax payment.

For the full year, Morgan Stanley had a profit of $7.08 billion, excluding the tax impact, or $3.60 a share.

Analysts had been expecting Morgan Stanley to produce adjusted earnings of $0.77 a share.

Revenue from investment banking, which included advising on M&A and equity and fixed income underwriting, rose 12.4 percent to $1.55 billion, while wealth management rose 10.5 percent.

Overall, Morgan Stanley's fourth-quarter earnings fell 66 percent to $516 million, or 29 cents per share, from $1.7 billion or 81 cents per share, in the same period a year earlier. Morgan Stanley lifted that target to 26 percent to 28 percent for this year and next.

Revenue rose to $9.5 billion from $9.02 billion in the year-ago quarter.

James Gorman's bank reported its best-ever quarter for its core business, wealth management, buoyed by a huge client base investing in stock markets that just doesn't seem to ever go down. Mr. Gorman has targeted a minimum of 9% by the end of the year.

Morgan Stanley is historically stronger in stock-trading and IPOs, Goldman in bond-trading and mergers. The firm's return on common equity, which measures how well the bank is performing with the assets it has, was 9.4 percent excluding the tax charges. Analysts were looking for $9.20 billion. The lender wants to continue improving how well it generates profits from shareholder capital, and now has a medium-term target of 10 percent to 13 percent.

Shares of Morgan Stanley (NYSE:MS) have seen a consistent move higher lately.

But Morgan Stanley's net $1.2 billion loss on the new tax law - primarily from deferred tax assets that declined in value - came in below the $1.25 billion that analysts projected and well below its Wall Street counterparts.