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Morgan Stanley revenue beats on dealmaking rebound, takes $535 million in charges

Morgan Stanley’s revenue beat fourth-quarter expectations on Tuesday, as debt underwriting powered a rebound in investment banking, but its profit took a hit due to $535 million in charges.

Toward the end of the year secondary share sales returned alongside high-profile initial public offerings and merger announcements, helped by lower market volatility and increased investor appetite.

“We are not changing our guidance to 2024, and we are optimistic and working on a premise of a soft landing,” said Chief Financial Officer Sharon Yeshaya in an interview with Reuters.

Investment banking revenue rose 5% in the fourth quarter from a year ago, outperforming the broader industry. Fixed income underwriting revenue jumped 25% on higher investment grade issuance.

Shares in the bank which had initially climbed 2% in premarket trading reversed course to drop 1%.

Morgan Stanley is among the banking giants that are paying special fees to replenish a government deposit insurance fund that was drained by almost $16 billion after the collapse of two regional lenders last year.

It took a combined $535 million in charges, which included $286 million in special assessment fee to the regulator and $249 million in legal charges.

Earlier this month, Morgan Stanley agreed to pay $249.4 million to end years-long criminal and civil investigations into its handling of large stock trades for customers.

“Although the announcement happened in January, we had an estimate of the cost in December,” CFO Yeshaya said.

Net revenue came in at $12.9 billion compared with analysts’ expectations of $12.75 billion, according to LSEG data.

Its net income fell to $1.5 billion, or 85 cents per diluted share, in the three months ended Dec. 31, compared with $2.2 billion, or $1.26 per diluted share, a year ago.

The gain in investment banking driven by M&A advisory was “encouraging,” wrote Chris Kotowski, an analyst at brokerage Oppenheimer.

“We begin 2024 with a clear and consistent business strategy and a unified leadership team,” CEO Ted Pick said. “We are focused on achieving our long-term financial goals and continuing to deliver for shareholders.”


Morgan Stanley’s former CEO James Gorman, who became executive chairman at the start of the year, had turned the bank into a wealth management powerhouse that was less dependent on volatile revenue from trading and investment banking.

He set an ambitious target of reaching $10 trillion in assets under management.

The unit has been central to Morgan Stanley’s growth, but analysts have now begun to flag worries about a slowdown in new client assets, clouding the outlook for the business.

Net revenue in wealth management were flat at $6.65 billion compared to last year.

Morgan Stanley’s fixed income and equity net revenue were also flat in the fourth quarter.

For the full year, net revenue came in at $54.1 billion compared with $53.7 billion a year ago. Net income fell to $5.18 per diluted share versus $6.15 per diluted share, a year ago.

The results compare with fellow Wall Street giants that reported lower profit on Friday, clouded by special charges and job cuts.

Rival Goldman Sachs beat estimates for fourth-quarter profit on Tuesday as its equity traders capitalized on a market recovery and revenue from asset and wealth management rose, offsetting weaker investment banking.

Source : Reuters



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