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Morgan Stanley (MS) Q1 Earnings Beat as IB Business Rebounds
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Morgan Stanley’s (MS - Free Report) first-quarter 2024 earnings of $2.02 per share handily outpaced the Zacks Consensus Estimate of $1.69. The bottom line compared favorably with $1.70 per share reported in the prior-year quarter.
Shares of the company gained more than 3.5% in the pre-market trading as better-than-expected results were largely driven by a rebound in investment banking (IB) business.
Though advisory fees declined 28% year over year, underwriting fees witnessed solid improvement in the quarter. Specifically, equity underwriting income jumped 113% and fixed income underwriting income was up 37%. So, total IB fees (in the Institutional Securities division) grew 16% to $1.45 billion. We had projected it to be $1.26 billion.
The company also posted a decent trading performance. Equity trading revenues increased 4% year over year, while fixed-income trading income declined 4%.
A provision benefit was another tailwind for Morgan Stanley.
However, despite a 30% increase in interest income, the company’s net interest income (NII) declined due to higher interest expenses. Also, an increase in total non-interest expenses was a headwind.
Net income applicable to common shareholders (GAAP) was $3.27 billion, up 15% from the year-ago quarter. Our estimate for the metric was $2.69 billion.
Revenues Improve, Expenses Rise
Quarterly net revenues were $15.14 billion, up 4% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $14.47 billion.
NII was $1.8 billion, down 23%. We had projected NII of $1.89 billion.
Total non-interest revenues of $13.34 billion increased 10%. Our estimate for the metric was $12.51 billion.
Total non-interest expenses were $10.74 billion, up 2%. Our estimate for expenses was $10.67 billion.
Provision for credit losses was a benefit of $6 million against a provision expense of $234 million in the prior-year quarter.
Quarterly Segment Performance
Institutional Securities: Pre-tax income was $2.35 billion, up 24% from the prior-year quarter. Our estimate for the same was $1.65 billion.
Net revenues were $7.02 billion, up 3% year over year. The upside resulted from increased underwriting revenues and equity trading revenues. We had projected revenues of $6.33 billion.
Wealth Management: Pre-tax income totaled $1.81 billion, up 5% year over year. Our estimate for this was the same as the reported number.
Net revenues were $6.88 billion, up 5%, driven by higher asset management revenues and transactional revenues. We had projected revenues of $6.82 billion.
Total client assets were $5.5 trillion as of Mar 31, 2024, up 21% year over year. We had projected the metric to be $5.03 trillion.
Investment Management: Pre-tax income was $241 million, jumping 45% from the year-ago quarter. Our estimate for the same was $241.5 million.
Net revenues were $1.38 billion, up 7%. The improvement is attributable to a rise in asset management and related fees. We had projected revenues of $1.4 billion.
As of Mar 31, 2024, total assets under management or supervision were $1.51 trillion, up 10% year over year. Our estimate for the metric was $1.47 trillion.
Capital Position Solid
As of Mar 31, 2024, the book value per share was $55.60, up from $55.13 in the corresponding period of 2022. The tangible book value per share was $41.07, up from $40.68 as of Mar 31, 2023.
Morgan Stanley’s Tier 1 capital ratio (advanced approach) was 17.2% compared with 17.5% in the year-ago quarter. The common equity Tier 1 capital ratio was 15.3%, down from 15.6% a year ago.
Share Repurchase Update
In the reported quarter, Morgan Stanley repurchased 12 million shares for $1 billion.
Our View
Elevated expenses due to investments in franchises will likely continue to hurt MS’ profits. Uncertainty about the performance of the capital markets makes us apprehensive. Yet, the company’s increased focus on the wealth management business will likely keep aiding revenues.
The Goldman Sachs Group, Inc.’s (GS - Free Report) first-quarter 2024 earnings per share of $11.58 surpassed the Zacks Consensus Estimate of $8.54. Also, the bottom line increased 16.3% from the year-earlier quarter.
Goldman’s results have benefited from the strength in the consumer banking and investment banking businesses, along with improved fee income. However, increased expenses and provisions were the undermining factors.
Citigroup’s (C - Free Report) first-quarter 2024 net income from continuing operations per share of $1.58 surpassed the Zacks Consensus Estimate of $1.13. However, the metric declined 28% from the year-ago quarter.
Citigroup witnessed declines in total loans and deposits in the quarter. Also, a decrease in revenues and deteriorating credit quality are near-term woes.
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Morgan Stanley (MS) Q1 Earnings Beat as IB Business Rebounds
Morgan Stanley’s (MS - Free Report) first-quarter 2024 earnings of $2.02 per share handily outpaced the Zacks Consensus Estimate of $1.69. The bottom line compared favorably with $1.70 per share reported in the prior-year quarter.
Shares of the company gained more than 3.5% in the pre-market trading as better-than-expected results were largely driven by a rebound in investment banking (IB) business.
Though advisory fees declined 28% year over year, underwriting fees witnessed solid improvement in the quarter. Specifically, equity underwriting income jumped 113% and fixed income underwriting income was up 37%. So, total IB fees (in the Institutional Securities division) grew 16% to $1.45 billion. We had projected it to be $1.26 billion.
The company also posted a decent trading performance. Equity trading revenues increased 4% year over year, while fixed-income trading income declined 4%.
A provision benefit was another tailwind for Morgan Stanley.
However, despite a 30% increase in interest income, the company’s net interest income (NII) declined due to higher interest expenses. Also, an increase in total non-interest expenses was a headwind.
Net income applicable to common shareholders (GAAP) was $3.27 billion, up 15% from the year-ago quarter. Our estimate for the metric was $2.69 billion.
Revenues Improve, Expenses Rise
Quarterly net revenues were $15.14 billion, up 4% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $14.47 billion.
NII was $1.8 billion, down 23%. We had projected NII of $1.89 billion.
Total non-interest revenues of $13.34 billion increased 10%. Our estimate for the metric was $12.51 billion.
Total non-interest expenses were $10.74 billion, up 2%. Our estimate for expenses was $10.67 billion.
Provision for credit losses was a benefit of $6 million against a provision expense of $234 million in the prior-year quarter.
Quarterly Segment Performance
Institutional Securities: Pre-tax income was $2.35 billion, up 24% from the prior-year quarter. Our estimate for the same was $1.65 billion.
Net revenues were $7.02 billion, up 3% year over year. The upside resulted from increased underwriting revenues and equity trading revenues. We had projected revenues of $6.33 billion.
Wealth Management: Pre-tax income totaled $1.81 billion, up 5% year over year. Our estimate for this was the same as the reported number.
Net revenues were $6.88 billion, up 5%, driven by higher asset management revenues and transactional revenues. We had projected revenues of $6.82 billion.
Total client assets were $5.5 trillion as of Mar 31, 2024, up 21% year over year. We had projected the metric to be $5.03 trillion.
Investment Management: Pre-tax income was $241 million, jumping 45% from the year-ago quarter. Our estimate for the same was $241.5 million.
Net revenues were $1.38 billion, up 7%. The improvement is attributable to a rise in asset management and related fees. We had projected revenues of $1.4 billion.
As of Mar 31, 2024, total assets under management or supervision were $1.51 trillion, up 10% year over year. Our estimate for the metric was $1.47 trillion.
Capital Position Solid
As of Mar 31, 2024, the book value per share was $55.60, up from $55.13 in the corresponding period of 2022. The tangible book value per share was $41.07, up from $40.68 as of Mar 31, 2023.
Morgan Stanley’s Tier 1 capital ratio (advanced approach) was 17.2% compared with 17.5% in the year-ago quarter. The common equity Tier 1 capital ratio was 15.3%, down from 15.6% a year ago.
Share Repurchase Update
In the reported quarter, Morgan Stanley repurchased 12 million shares for $1 billion.
Our View
Elevated expenses due to investments in franchises will likely continue to hurt MS’ profits. Uncertainty about the performance of the capital markets makes us apprehensive. Yet, the company’s increased focus on the wealth management business will likely keep aiding revenues.
Morgan Stanley Price, Consensus and EPS Surprise
Morgan Stanley price-consensus-eps-surprise-chart | Morgan Stanley Quote
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 Banks
The Goldman Sachs Group, Inc.’s (GS - Free Report) first-quarter 2024 earnings per share of $11.58 surpassed the Zacks Consensus Estimate of $8.54. Also, the bottom line increased 16.3% from the year-earlier quarter.
Goldman’s results have benefited from the strength in the consumer banking and investment banking businesses, along with improved fee income. However, increased expenses and provisions were the undermining factors.
Citigroup’s (C - Free Report) first-quarter 2024 net income from continuing operations per share of $1.58 surpassed the Zacks Consensus Estimate of $1.13. However, the metric declined 28% from the year-ago quarter.
Citigroup witnessed declines in total loans and deposits in the quarter. Also, a decrease in revenues and deteriorating credit quality are near-term woes.