Morgan Stanley reported a strong start to the year, surpassing first-quarter profit expectations due to robust performances in investment banking and wealth management. Shares of the financial giant rose by 3.7% following the announcement of these results.
The company experienced a significant 16% increase in investment banking revenue, propelled by heightened bond issuance that benefited fixed-income underwriting for the second consecutive quarter.
Both the wealth and investment management divisions saw gains, thanks to increasing client assets.
Analyst Chris Kotowski from Oppenheimer described the quarter as “excellent all around,” highlighting the bank’s performance as a “near-perfect print,” akin to that of Goldman Sachs the previous day.
Morgan Stanley announced earnings of $2.02 per share, comfortably beating the analysts’ average projection of $1.66, according to LSEG data.
Overall, the firm’s revenue escalated to $15.14 billion from $14.5 billion in the same period last year.
CEO Ted Pick conveyed optimism during the investor call, citing momentum in the bank’s M&A and underwriting activities.
He predicted the onset of a “multi-year M&A cycle,” expected to persist for three to five years.
Pick also noted that geopolitical tensions might spur further deal-making as companies adjust their international operations in response to global supply chain disruptions.
“The fact that the U.S. economy continues to grow, that China is weaker, the parts of Europe are weaker highlights the fact that people want to get even more exposure to the U.S.”, Pick explained.
He also emphasized the ongoing demand from financial sponsors to engage in transactions, dispose of private entities, and return capital to investors.
CFO Sharon Yeshaya reported to Reuters that the firm is benefiting from a surge in equity markets and successful initial public offerings, which bolster the advisory segment.
“The IPOs that have come to market have done well, and that is positive, it helps the advisory business,” she remarked.
Goldman Sachs also impressed the market with a 28% profit increase, driven by its prominent role in large deals and strong trading results.
Other major banks like JPMorgan Chase and Citigroup have reported increased activity, especially in debt and equity capital markets.
Morgan Stanley’s institutional securities division, encompassing investment banking along with equities and fixed income, saw revenue rise to $7 billion from $6.8 billion the previous year, though fixed income trading dipped by 4%, and equities trading saw a 4% increase.
The firm has significantly grown its wealth management business, creating a more stable revenue stream and balancing the volatility of trading and banking sectors.
New assets in wealth management reached $95 billion, with a notable contribution from family offices, and the division’s revenue increased to $6.9 billion from $6.6 billion.
Despite facing regulatory scrutiny over client vetting processes, CEO Pick reassured that the onboarding issues were being actively addressed.
“We’ve been focused on our client onboarding and monitoring processes for a good while.
“We have ongoing communications with our regulators as all the large banks do,” he stated during the investor call.
Investment management also saw growth, with revenue climbing to $1.4 billion from $1.3 billion a year prior. Morgan Stanley aims to double its private credit portfolio to $50 billion in the medium term, leveraging large investor funds for company loans.