CEO Morning Brief

Morgan Stanley's Profit Beats as Investment Banking Rebounds

Publish date: Wed, 17 Apr 2024, 09:20 AM
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TheEdge CEO Morning Brief

NEW YORK/BENGALURU (April 16): Morgan Stanley's first-quarter profit beat estimates on Tuesday, fuelled by a resurgence in investment banking led by equity underwriting, where revenue more than doubled, sending its shares up 2.7% before the bell.

Investment banking revenue climbed 16% from a year ago, while fixed-income underwriting remained a bright spot for a second quarter in row, driven by higher bond issuance.

"As a result of strong net new asset growth, the firm has reached US$7 trillion (RM33.54 trillion) of client assets across wealth and investment management," chief executive officer Ted Pick said on Morgan Stanley's first quarter under his helm.

The Wall Street giant reported profit of US$2.02 per share, sailing past analysts' average estimate of US$1.66, according to LSEG data. Its total revenue rose to US$15.14 billion compared with US$14.5 billion a year ago.

Investment banking recovery in sight

Investment banking activity has rebounded from a two-year dealmaking drought, as large corporates issued near-record levels of debt and equity capital markets became more active.

Still, Morgan Stanley revenue from the segment came in weaker than its main rival Goldman Sachs. Goldman impressed markets on Monday with a 28% rise in profit, due to more fees in leading large deals and also good results in trading.

In their earnings last week, JPMorgan Chase and Citigroup cited rising activity, particularly in debt and equity capital markets.

Total revenue for the institutional securities division that houses investment banking, equities and fixed income stood at US$7 billion, compared with US$6.8 billion a year ago. Fixed income trading revenue slid 4%, while equities rose 4%.

Morgan Stanley has built its wealth business into a powerhouse that generates more stable revenue and helps smooth out revenue from more volatile businesses such as trading and investment banking.

But as the race for market share in wealth management increases, markets are focused on whether Morgan Stanley can grow assets.

Net new assets for the quarter stood at US$95 billion, of which around half came from family offices, the bank said.

Wealth management revenue rose to US$6.9 billion from US$6.6 billion a year ago.

The unit is also reportedly facing higher regulatory scrutiny, with multiple US regulators probing whether Morgan Stanley is vetting its clients and knows the origin of their wealth. The Wall Street Journal reported the probes earlier this month.

Investment management revenue of US$1.4 billion was higher than US$1.3 billion a year ago.

The bank's asset management unit is aiming to double its private credit portfolio to US$50 billion in the medium term, Reuters reported in January, as it gathers funds from large investors to loan out to companies.

Source: TheEdge - 17 Apr 2024

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