A booming market for deals and brisk demand for financial advice lifted Morgan Stanley’s MS 1.83% fourth-quarter earnings and helped the Wall Street firm set a full-year profit record.
The bank posted a profit of $3.7 billion, up 9%, or $2.01 a share. Analysts expected $1.94 a share, according to FactSet. Revenue rose 7% to $14.5 billion in the quarter, which fell just short of expectations.
Morgan Stanley capped off a mixed quarter for the nation’s biggest banks. Windfall trading revenues across Wall Street are slowing down as market volatility subsides. Banks are offering bigger paydays to attract and keep employees in a tight labor market. Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. all reported lower fourth-quarter profits, ending a streak of big gains. Morgan Stanley, Bank of America Corp. and Wells Fargo & Co. saw profits rise.
Morgan Stanley shares closed up 1.8% on Wednesday.
Deal making remains a bright spot. Morgan Stanley’s investment banking revenue rose 6% in the fourth quarter. Goldman, JPMorgan and Citigroup also reported gains in investment banking.
The year is off to a good start, with a healthy pipeline for new deals, Morgan Stanley Chief Financial Officer Sharon Yeshaya said on a conference call with analysts. “That said, a lot will depend on monetary and fiscal policy and its impact on sentiment,” she added.
Stock and bond trading revenue fell 6% in the fourth quarter. Trading revenue also fell at Goldman, JPMorgan and Citigroup.
Full-year compensation expenses at Morgan Stanley rose 18% to $24.6 billion. Banks increased salaries for junior bankers across Wall Street in 2021, and firms are also paying up to keep senior executives.
“We feel good that we’ve paid for performance,” Ms. Yeshaya said in an interview.
JPMorgan Chief Executive Jamie Dimon said last week that his bank would remain competitive in compensating its traders and bankers, even if it pressured profit margins.
Morgan Stanley’s wealth-management division grew fourth-quarter revenue 10% from a year earlier. The unit’s net interest income, a measure of its lending profitability, grew 16%. That growth could continue in the year ahead, as the Federal Reserve has signaled that several interest-rate increases are likely in 2022.
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The number of retail-trading clients at Morgan Stanley was 7.4 million, in line with the third quarter total. The average daily number of retail trades the company handled for the quarter topped one million but was down 6% from a year ago.
Investment management revenue rose 59% from a year earlier. That rate was boosted by Morgan Stanley’s acquisition of Eaton Vance, which closed last March.
Write to Charley Grant at [email protected]
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Appeared in the January 20, 2022, print edition as ‘Deals Propel Profit At Morgan Stanley.’
