Morgan Stanley’s ( MS Quick Quote MS - Free Report) fourth-quarter 2020 adjusted earnings of $1.92 per share easily outpaced the Zacks Consensus Estimate of $1.29. Also, the bottom line improved 48% from the year-ago quarter. Shares of Morgan Stanley gained almost 2% in pre-market trading as investors cheered solid trading and investment banking (IB) performance, and E*Trade Financial deal (closed in October 2020) provided support to the Wealth Management segment. As anticipated, Morgan Stanley’s trading business delivered a solid performance. Fixed income trading revenues grew 31% year over year and equity trading income rose 30%. Thus, overall trading revenues increased 32%. Further, IB business was impressive despite weaknesses in fixed income underwriting (corresponding fees down 5%). Equity underwriting fees soared 137% from the prior-year quarter, while advisory fees were up 26%. Therefore, IB fees jumped 46%. Additionally, higher net interest income, mainly driven by a rise in loan balance (up 22%) and plunge in interest expenses supported the top line. However, mounting operating expenses hurt the results to some extent. Results excluded integration-related expenses related to E*Trade Financial deal. Including this, net income applicable to common shareholders was $3.3 billion, which grew 57% from a year ago. Trading, IB Aid Revenues Increase, Costs Rise
Net revenues were $13.6 billion, increasing 26% from the prior-year quarter. Also, the top line beat the Zacks Consensus Estimate of $10.3 billion.
Net interest income was $1.9 billion, which grew 31% from the year-ago quarter. This was largely due to an 85% plunge in interest expenses. Total non-interest revenues of $11.8 billion surged 25% year over year. Total non-interest expenses were $9.2 billion, up 13% from the prior-year number. The company recorded provision for credit losses on loans and lending commitments of $5 million, down significantly from $57 million in the prior-year quarter. Allowance for credit losses on loans and lending commitments was $1.2 billion as of Dec 31, 2020, down 2% sequentially. Decent Quarterly Segment Performance Institutional Securities: Pre-tax income from continuing operations was $3.2 billion, surging significantly from $1.2 billion in the prior-year quarter. Net revenues were $7 billion, growing 39%. The rise was mainly driven by higher equity underwriting, advisory and trading revenues, partially offset by decline in fixed income underwriting revenues. Wealth Management: The segment includes results of E*Trade Financial. Pre-tax income from continuing operations totaled $1.1 billion, down 8% from the year-ago figure. Net revenues were $5.7 billion, increasing 24% driven by higher transactional, net interest income and asset management revenues. Investment Management: Pre-tax income from continuing operations was $196 million, falling 56% from the year-ago quarter. Net revenues were $1.1 billion, down 19%. The decline was mainly due to lower investment revenues, partly offset by a rise in asset management fees. As of Dec 31, 2020, total assets under management or supervision were $781 billion, up 41% on a year-over-year basis. Strong Capital Position
As of Dec 31, 2020, book value per share was $51.13, up from $45.82 in the corresponding period of 2019. Tangible book value per share was $41.95, up from $40.01 on Dec 31, 2019.
Morgan Stanley’s Tier 1 capital ratio was 19.8% compared with 19.2% in the year-ago quarter. Tier 1 common equity ratio was 17.7%, up from 16.9%. Our Take
Morgan Stanley’s efforts to diversify operations with more focus on those that are less dependent on capital markets are commendable. The planned acquisition of
Eaton Vance ( EV Quick Quote EV - Free Report) and the buyout of E*Trade Financial are steps in this direction. However, coronavirus-related concerns and economic slowdown are expected to continue hurting the company’s financials in the near term.
Currently, Morgan Stanley carries a Zacks Rank #3 (Hold). You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Performance of Other Big Banks
Unexpected large reserve releases, along with solid capital markets performance, drove
JPMorgan’s ( JPM Quick Quote JPM - Free Report) fourth-quarter 2020 earnings of $3.79 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $2.72. Aided by revenue strength, Goldman Sachs ( GS Quick Quote GS - Free Report) reported fourth-quarter 2020 earnings per share of $12.08, significantly surpassing the Zacks Consensus Estimate of $6.99. Also, the bottom-line figure compares favorably with the earnings of $4.69 per share recorded in the year-earlier quarter. Breakout Biotech Stocks with Triple-Digit Profit Potential
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