Morgan Stanley reported fourth-quarter earnings and revenue on Wednesday that exceeded analysts’ expectations for solid business, investment banking and wealth management results.
The company reported a 51% increase in earnings, to $ 3.39 billion, or $ 1.81 per share. Excluding $ 189 million in integration costs linked to the acquisition of E-Trade last year, earnings were $ 1.92 per share, compared to an estimate of $ 1.27 from analysts polled by Refinitiv. Revenue of $ 13.64 billion was more than $ 2 billion, in addition to the estimated $ 11.54 billion.
“The company produced a very strong quarter and record results for the entire year, with excellent performance in all three businesses and geographies,” said CEO James Gorman in the statement. “Our unique business model continues to serve us well as we execute our long-term strategy with the acquisitions of E * TRADE and Eaton Vance.”
The bank’s shares rose 1.9% in the pre-market.
Expectations were high after the robust trading and investment banking results of rivals Goldman Sachs and JPMorgan Chase helped boost earnings, and Morgan Stanley did not disappoint.
Investment banks generated revenues of $ 2.3 billion, half a billion dollars more than the estimate of $ 1.81 billion by analysts surveyed by FactSet. The results were driven by stock subscription revenue that more than doubled over the previous year in a robust IPO and subsequent activities.
Stock trading generated revenue of $ 2.49 billion, $ 350 million more than the estimated $ 2.14 billion. Fixed income trading generated $ 1.66 billion, $ 200 million more than analysts had expected.
The wealth management division generated revenue of $ 5.68 billion, almost half a billion dollars more than analysts had predicted, thanks to higher asset levels and higher tax-generating activity, as well as the impact of the deal of e-commerce.
Morgan Stanley has the largest wealth management business among the six largest banks in the U.S., operations that typically benefit from rising markets. This business is being strengthened by the $ 13 billion E-Trade acquisition announced a year ago, and the fourth quarter is the first period in which E-Trade is integrated with the larger company.
Investment management revenue of $ 1.1 billion exceeded analysts’ estimate of $ 1.02 billion.
Gorman took a small victory lap in his annual update of the company’s strategic goals, exposing the case that his company was at an inflection point. The next decade will see a higher and more sustained level of revenues and returns than in previous periods, thanks to market share gains and Gorman’s acquisitions.
The company kept its long-term goals largely unchanged, saying that the return on tangible equity would be 17% or more, instead of the 15% to 17% range presented a year earlier.
“We are in the growth phase of this company in the next decade,” Gorman told analysts after the results were released.
Morgan Stanley is the last major US bank to report fourth quarter earnings. JPMorgan and Goldman Sachs exceeded analysts’ expectations for revenue and profit, aided by trade, while Citigroup, Wells Fargo and Bank of America disappointed in revenue as loan margins were squeezed.
Shares in the New York-based Morgan Stanley rose 33% in 2020, outpacing the 4.3% drop in the KBW Bank Index.
Here are the numbers:
- Adjusted earnings of $ 1.92 per share against $ 1.27 estimated by analysts surveyed by Refinitiv.
- Revenue of $ 13.64 billion vs. estimate of $ 11.54 billion.