MS earnings 4Q 2021

Morgan Stanley on Wednesday posted better-than-expected fourth-quarter profits on strong equities trading revenue and as the firm held the line on compensation costs.

Here are the numbers:

·        Earnings: $2.01 a share vs. estimate $1.91 a share, according to Refinitiv.

·        Revenue: $14.52 billion vs. estimate $14.6 billion

Unlike its rivals, which disclosed that compensation costs for Wall Street personnel soared in the quarter, Morgan Stanley kept the line on expenses. The bank posted $5.49 billion in compensation expenses, below the $5.98 billion estimate of analysts surveyed by FactSet. Within its securities division, the bank said compensation fell from a year ago because of deferred compensation plans “linked to investment performance.”

The bank said that equities trading revenue rose 13% from a year ago to $2.86 billion, roughly $400 million higher than the $2.44 billion FactSet estimate. The improvement was driven by rising prime brokerage revenue and a $225 million gain on a strategic investment.

Investment management also topped estimates, rising 59% to $1.75 billion because of the bank’s Eaton Vance acquisition. Analysts had expected $1.66 billion.

Meanwhile, wealth management revenue rose 10% to $6.25, essentially matching the $6.28 billion estimate, on rising asset management fees and growth in lending to clients.

Investment banking revenue rose 6% to $2.43 billion, just under the $2.54 billion estimate, on higher advisory fees from mergers activity. And fixed income trading generated $1.23 billion in revenue, a 31% decline from a year earlier and below the $1.47 billion estimate.

Shares of the bank climbed 1.6% in premarket trading.

Trading in particular has begun to return to more normal volumes, if results from Goldman Sachs and JPMorgan Chase are any indication. Morgan Stanley has the No. 1 ranked equities trading business globally.

It’s also a top player in mergers advice, particularly in the technology and communications realms.

One area that should prove resilient is wealth management, which typically relies on fees based on assets under management that have been climbing along with rising markets.

Shares of the bank have dropped 4.2% this year, underperforming the 8.6% gain of the KBW Bank Index.

JPMorgan and Citigroup each reported the smallest earnings beats in the last seven quarters, and Goldman Sachs missed estimates for fourth quarter profit because of elevated expenses. Wells Fargo has been the sole bright spot so far in bank earnings after it gave targets for higher interest income and lower expenses.  

This story is developing. Please check back for updates.