Morgan Stanley reported a 40 per cent year-on-year drop in net income to $2.2bn for the fourth quarter, as record revenues in its wealth management businesses failed to offset a sharp fall at its investment bank.
The results on Tuesday for earnings of $1.26 a share nonetheless beat analysts’ estimates of $1.19 and highlighted the impact of chief executive James Gorman’s strategy to diversify into wealth and asset management. So far, amid difficult markets, he has only partially succeeded in providing a counterbalance to highly cyclical investment banking earnings.
But investors have cheered the approach, helping to open up a stock market valuation gap with longtime rival Goldman Sachs, which also reported earnings on Tuesday.
Morgan Stanley’s results included the impact of job cuts, amounting to about 2 to 3 per cent of the company’s workforce, that the bank made late last year. Chief financial officer Sharon Yeshaya said that no further lay-offs were expected unless the economy worsened. “We’re comfortable with our position,” she said.
Investment banking had another challenging quarter, with Morgan Stanley’s revenues falling 49 per cent year on year to $1.25bn, in line with analysts’ estimates of $1.2bn. Rivals JPMorgan Chase, Bank of America and Citigroup on Friday reported that investment banking revenues in the latest quarter more than halved from a year ago.
The drop underscored the difference from 2021, when Morgan Stanley and rivals raked in revenue from advising on mergers and acquisitions and new stock market listings. Such activity has slowed dramatically in 2022.
Revenues in wealth management, which includes online trading platform ETrade, were up 6 per cent to more than $6.6bn. But investment management, which now houses Eaton Vance following Morgan Stanley’s acquisition of the money manager in 2021, was hit by falling markets, which cut assets under management. Revenues dropped 17 per cent to $1.5bn but topped analyst estimates of $1.3bn.
“We reported solid fourth-quarter results amidst a difficult market environment,” Gorman said in a statement. “Overall, 2022 was a strong year for the firm . . . Wealth management provided stability with record revenues and over $310 billion in net new assets.”
Morgan Stanley shares were up more than 2 per cent in premarket trading.