Morgan Stanley on Tuesday, July 16, released information on revenue and profit for the second quarter of the current year.
The mentioned performance of the specified New York-based financial institution exceeded analysts’ preliminary expectations regarding the dynamic of the lender’s earnings. The corresponding result is largely due to Morgan Stanley’s strong figures in the trading and investment banking areas.
The financial institution’s second-quarter 2024 profit was recorded at $3.08 billion, or $1.82 per share. This figure increased by 41% compared to the result for the same period last year. It is worth noting that LSEG’s preliminary estimate provided that the financial institution’s second-quarter 2024 profit would reach $1.65 per share.
Morgan Stanley’s revenue for April-June of the current year was recorded at $15.02 billion. This figure increased by 12% compared to the result for the same period in 2023. LSEG’s preliminary estimate provided that the financial institution’s second-quarter 2024 revenue would be $14.3 billion.
On Tuesday, the value of the bank’s shares showed minimal growth, which did not exceed 1%. Before this, the securities of the financial institution fell in price after the unit of Morgan Stanley, which specializes in wealth management activities, missed estimates on a decline in interest income.
The financial institution’s revenue from the specified activities for the second quarter of 2024 was recorded at $6.79 billion. This figure increased by 2% year on year. It is worth noting that LSEG’s preliminary estimate provided that Morgan Stanley’s revenue from the mentioned activities would be equal to $6.88 billion.
At the same time, the interest income of the bank for the second quarter of 2024 was $1.79 billion. This figure fell by 17% compared to the result for the same period last year. Morgan Stanley said the aforementioned result is a consequence of wealthy clients continuing to shift cash into high-yield assets due to changes in interest rates, against the backdrop of which is formed a tendency towards lower deposit levels.
Financial institution investors value the more sustainable nature of the wealth management business. They demonstrate much less interest in investment banking and trading areas characterized by a low level of predictability. Investors also want to have more information about expectations for the business in the future.
However, the financial institution still managed to benefit from its Wall Street-focused strategy last quarter. The rebound in the areas of trading and investment banking has become a favorable circumstance for the unit lender, specializing in institutional securities. At the same time, the environment was less positive for the arm of the financial institution that focuses on wealth management.
Morgan Stanley’s revenue from equity trading activities for April-June of the current year was recorded at $3.02 billion. This indicator showed an increase of 18% compared to the result for the same period last year. It’s worth noting that the bank’s equity trading revenue last quarter beat StreetAccount’s preliminary estimate by about $330 million.
The financial institution’s fixed-income trading revenue for April-June 2024 was $1.99 billion. This figure increased by 16% year on year. It is worth noting that the mentioned revenue exceeded StreetAccount’s preliminary estimate by $130 million.
The financial institution’s investment activities generated $1.62 billion in revenue in the second quarter of 2024. This figure increased by 51% compared to the result for the same period last year. The bank’s investment income in the second quarter of 2024 exceeded StreetAccount’s forecast by $220 million. Morgan Stanley reports that this result was achieved primarily due to the raising of debt funds by companies that are not investment grade.
Morgan Stanley Chief Executive Officer Ted Pick said the lender delivered another strong quarter amid improving capital markets. He also noted that the financial institution remains committed to its strategy and continues to be well-positioned to deliver growth and long-term shareholder value.
Last week, JPMorgan Chase, Wells Fargo, and Citigroup also published earnings data that exceeded preliminary expectations.
Morgan Stanley is one of the US institutions that benefited significantly from investment banking activities last quarter. This tendency is the result of the fact that recently there has been an increase in confidence in the prospects of the United States economic system. Against the backdrop of appropriate sentiments, companies began to raise more money and strike deals.
Ted Pick is confident in the prospects of dealmaking. In this context, the CEO of the financial institution also stated that Morgan Stanley is on track to achieve its goal, which is a 30% pre-tax margin in the wealth business, a key performance target.
Moreover, Ted Pick said that the lender is currently in the early stages of a multi-year investment banking-led cycle. Morgan Stanley Chief Financial Officer Sharon Yeshaya said that pipelines are healthy and diverse, dialogs are active, and markets are open.
Ted Pick says the financial institution is actively investing in trading in Asia and the United Kingdom. In this context, he also noted that macroeconomic uncertainty and a similar situation in the context of envisioning the prospects for the further vector of the dynamic of the state of affairs in the space of geopolitical relations generate opportunities for Morgan Stanley clients.
The financial institution intends to raise its quarterly dividend by 7.5 cents, to $0.925 per share. Morgan Stanley’s CEO said that paying dividends is a priority in the use of the bank’s capital.
Many analysts positively assessed the financial institution’s performance for the second quarter of the current year. At the same time, they drew attention to the weak growth rates in wealth.
Mike Taiano, senior analyst at Moody’s Ratings, said Morgan Stanley’s strong second-quarter results this year were largely due to an industry-wide rebound in investment banking, while wealth and asset management remained steady contributors on the back of a robust equities market.
UBS analyst Brennan Hawken said that the financial institution’s earnings for April- June 2024 were a tale of two segments. The expert also noted that impressive results in institutional securities offset by a mixed performance in wealth.
It is worth noting that under Morgan Stanley’s former CEO James Gorman wealth management flourished. He has set a goal of managing $10 trillion in client assets. It is worth noting that in the second quarter of the current year, the mentioned amount decreased to $7.2 trillion.
Morgan Stanley executives told analysts that the financial institution’s wealth unit is growing within an expected range of 5% to 7% annually. They also separately noted that the corresponding upward movement continues, despite such a negative circumstance as a slowdown in the inflow of net assets.
Morgan Stanley’s CEO says that the financial institution is not considering acquisitions in the short term. At the same time, he noted that the bank could consider the mentioned opportunities in two to four years.
Currently, the financial institution is making efforts to increase enthusiasm for its shares. It is worth noting that in the current year, the bank’s securities demonstrate a high level of competitiveness. This means that the lender’s efforts are realized in the context of circumstances that are favorable in terms of prospects for achieving the goal. The financial institution is convincing investors that it will be able to make its intentions regarding wealth management activities a reality. Also, the lender is currently engaged in a kind of struggle for its stake in the investment banking revival that has been a boon to Wall Street businesses.
Morgan Stanley was founded in 1935. The lender’s clients include governments, corporations, institutions, and individuals. The financial institution ranked No. 61 in the 2023 Fortune 500 list of the largest United States corporations by total revenue and also in that year ranked #30 in Forbes Global 2000. The bank currently has offices in 41 countries and more than 75,000 employees.
