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Morgan Stanley (MS) Q1 Earnings Top on Revival of IB Business
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Morgan Stanley’s (MS - Free Report) first-quarter 2024 earnings of $2.02 per share handily surpassed the Zacks Consensus Estimate of $1.69. The figure also compared favorably with $1.70 per share reported in the prior-year quarter.
Additionally, MS’ net revenues of $15.14 billion beat the Zacks Consensus Estimate of $14.47 billion. The top line grew 4% year over year.
The primary reason for Morgan Stanley’s better-than-expected performance was the resurgence of the investment banking (IB) business. Since 2022, the performance of the IB business has been subdued because of a host of factors, including high inflation, central banks’ monetary tightening policy and geopolitical tension, among others.
These factors kept the clients on the sidelines, and hence, global deal-making and underwriting activities almost crashed. Nonetheless, since mid-2023, some green shoots were visible in the IB business, with a proper rebound occurring in the first quarter of 2023. Morgan Stanley’s quarterly performance immensely benefited from this revival.
Morgan Stanley’s Institutional Securities (IS) segment, which mainly runs its capital markets operations, posted decent top-line performance in the first quarter. The segment’s revenues grew 3% year over year to $7.02 billion, driven by increased underwriting revenues and equity trading revenues.
Specifically, the company’s equity underwriting income jumped 113% and fixed income underwriting income was up 37%. On the other hand, advisory business was still a weak point for Morgan Stanley, with advisory revenues declining 28%. Thus, total IB fees (in the IS segment) grew 16% to $1.45 billion.
Likewise, JPMorgan (JPM - Free Report) witnessed a decline in advisory fees while underwriting business performance improved. The company’s equity underwriting fees jumped 51% and debt underwriting fees were up 58%. On the other hand, advisory fees fell 21%. Overall, total IB fees grew 21% from the prior-year quarter to $2 billion.
In contrast, Goldman (GS - Free Report) posted a solid improvement in advisory fees. The metric was up 24% year over year in the first quarter. Further, both debt and equity underwriting fees were up 38% and 45%, respectively. Its IB fees jumped 32% to $2.08 billion.
Morgan Stanley also posted a decent trading performance. Equity trading revenues increased 4% year over year, while fixed-income (FICC) trading income declined 4%.
Similar to MS, JPMorgan witnessed lower FICC markets revenues, while equity markets revenues remained stable. Here GS also bucked the trend, and both FICC and equity revenues grew 10% each in the first quarter.
Additionally, the performance of Morgan Stanley’s Wealth Management and Investment Management segments was decent in the first quarter. The company witnessed a 21% year-over-year rise in total client assets and a 10% increase in total assets under management or supervision.
Thus, the company’s fee income grew 10% to $13.34 billion. On the other hand, Morgan Stanley’s net interest income declined 23% because of higher interest expenses.
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Morgan Stanley (MS) Q1 Earnings Top on Revival of IB Business
Morgan Stanley’s (MS - Free Report) first-quarter 2024 earnings of $2.02 per share handily surpassed the Zacks Consensus Estimate of $1.69. The figure also compared favorably with $1.70 per share reported in the prior-year quarter.
Additionally, MS’ net revenues of $15.14 billion beat the Zacks Consensus Estimate of $14.47 billion. The top line grew 4% year over year.
The primary reason for Morgan Stanley’s better-than-expected performance was the resurgence of the investment banking (IB) business. Since 2022, the performance of the IB business has been subdued because of a host of factors, including high inflation, central banks’ monetary tightening policy and geopolitical tension, among others.
These factors kept the clients on the sidelines, and hence, global deal-making and underwriting activities almost crashed. Nonetheless, since mid-2023, some green shoots were visible in the IB business, with a proper rebound occurring in the first quarter of 2023. Morgan Stanley’s quarterly performance immensely benefited from this revival.
Morgan Stanley Price, Consensus and EPS Surprise
Morgan Stanley price-consensus-eps-surprise-chart | Morgan Stanley Quote
IB Majorly Supports Revenues
Morgan Stanley’s Institutional Securities (IS) segment, which mainly runs its capital markets operations, posted decent top-line performance in the first quarter. The segment’s revenues grew 3% year over year to $7.02 billion, driven by increased underwriting revenues and equity trading revenues.
Specifically, the company’s equity underwriting income jumped 113% and fixed income underwriting income was up 37%. On the other hand, advisory business was still a weak point for Morgan Stanley, with advisory revenues declining 28%. Thus, total IB fees (in the IS segment) grew 16% to $1.45 billion.
Likewise, JPMorgan (JPM - Free Report) witnessed a decline in advisory fees while underwriting business performance improved. The company’s equity underwriting fees jumped 51% and debt underwriting fees were up 58%. On the other hand, advisory fees fell 21%. Overall, total IB fees grew 21% from the prior-year quarter to $2 billion.
In contrast, Goldman (GS - Free Report) posted a solid improvement in advisory fees. The metric was up 24% year over year in the first quarter. Further, both debt and equity underwriting fees were up 38% and 45%, respectively. Its IB fees jumped 32% to $2.08 billion.
Morgan Stanley also posted a decent trading performance. Equity trading revenues increased 4% year over year, while fixed-income (FICC) trading income declined 4%.
Similar to MS, JPMorgan witnessed lower FICC markets revenues, while equity markets revenues remained stable. Here GS also bucked the trend, and both FICC and equity revenues grew 10% each in the first quarter.
Additionally, the performance of Morgan Stanley’s Wealth Management and Investment Management segments was decent in the first quarter. The company witnessed a 21% year-over-year rise in total client assets and a 10% increase in total assets under management or supervision.
Thus, the company’s fee income grew 10% to $13.34 billion. On the other hand, Morgan Stanley’s net interest income declined 23% because of higher interest expenses.
Further, non-interest expenses for this Zacks Rank #3 (Hold) company increased during the quarter. The metric was $10.74 billion, up 2% from the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.