Morgan Stanley reported a 40 per cent year-on-year drop in net income to $2.2bn for the fourth quarter, as record profits in its wealth management business failed to offset falls in its investment bank.
Tuesday’s result for earnings of $1.26 a share still 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 a tough market, they have only partially managed to provide balance to highly cyclical investment banking income.
But investors have cheered the approach, helping to open a gap in the stock market’s valuation with longtime rival Goldman Sachs, which also reported earnings on Tuesday.
Morgan Stanley’s results include the impact of job cuts, amounting to about 2 to 3 percent of the company’s workforce, which the bank made at the end of last year. Chief financial officer Sharon Yeshaya said there will be no more layoffs unless the economy worsens. “We are comfortable with our position,” he said.
Investment banking had another challenging quarter, with Morgan Stanley’s profits 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 profits in the last quarter more than halved from a year ago.
The decline underscores the difference from 2021, when Morgan Stanley and rivals profit from advising on mergers and acquisitions and new stock market listings. The activity has slowed significantly in 2022.
Revenue at wealth management, including online trading platform ETrade, rose 6 per cent to more than $6.6bn. But investment management, which is now the home of Eaton Vance following the acquisition of money manager Morgan Stanley in 2021, has been affected by the falling market, which has reduced assets under management. Revenue fell 17 per cent to $1.5bn but topped analysts’ estimates of $1.3bn.
“We report fourth quarter results amid a difficult market environment,” Gorman said in a statement. “Overall, 2022 is a strong year for the company. . . Wealth management provides stability with record profits and more than $310 billion in new assets.
Morgan Stanley shares were up more than 2 percent in premarket trading.