Morgan Stanley Shares Rebound On Strong Revenues

Morgan Stanley shares are quickly recovering from last week’s mauling (after WSJ reported regulatory probes of how the bank handles wealth management clients “who are at risk of laundering money”), this morning after reporting Q1 wealth management and equities trading revenue that beat expectations.

Net revenue $15.14 billion, estimate $14.46 billion (Bloomberg Consensus)

• Wealth management net revenue $6.88 billion, estimate $6.69 billion (Net new assets in the division, a key metric tracked by Morgan Stanley watchers, were $95 billion, higher than the previous two quarters combined and in excess of what the bank needs to meet the target it has sought to grow the business).

• Equities sales & trading revenue $2.84 billion, estimate $2.65 billion (less than Goldman Sachs’ $3.31 billion in the same period).

• FICC sales & trading revenue $2.49 billion, estimate $2.33 billion

• Institutional Investment Banking revenue $1.45 billion, estimate $1.34 billion

• Advisory revenue $461 million, -28% y/y, estimate $510.1 million, due, of course, to “lower completed M&A transactions.”

• Equity underwriting rev. $430 million vs. $202 million y/y, estimate $326.3 million

• Fixed Income Underwriting revenue $556 million, +37% y/y, estimate $505.8 million

Under the hood, equity net revenues were up 4% from a year ago thanks to “solid results across business lines and regions, with notable strength in derivatives against a constructive market backdrop.”

On the flip side, fixed income’s net revenues fell 4% from a year ago “on lower client activity in macro and credit, partially offset by higher revenues in commodities.”

But overall, traders liked what they saw, sending MS shares up around 3% in the pre-market…

Additionally the firm delivered what it calls “strong” ROTCE of 19.7%.

“In the first quarter of 2024 Morgan Stanley generated net revenues of $15 billion and earnings of $2.02 per share for a 20% return on tangible equity,” said freshly appointed CEO Ted Pick.

“As a result of strong net new asset growth, the Firm has reached $7 trillion of client assets across Wealth and Investment Management. Institutional Securities also saw strength across the markets and underwriting businesses. The Morgan Stanley Integrated Firm model is delivering durable results.”

But, net interest income fell, “driven by changes in deposit mix,” though that was “partially offset by the impact of interest rates.”

As a reminder, the bank’s stock has been the worst performer among the biggest US banks so far this year after outpacing rivals through much of the previous decade.