 "Morgan Stanley")
By Sridhar Natarajan
Morgan Stanley’s investment bank and its giant wealth unit surpassed analysts’ expectations in the first quarter even as profits fell from a year earlier, dragged down by a dropoff in dealmaking and a jump in loan-loss provisions.
Net income slid 20% from a year earlier to $2.84 billion amid a slowdown in the trading and banking businesses. The firm’s investment bank was able to stave off a steeper drop as the two key divisions edged past analysts’ expectations, propelled by its fixed-income traders and merger-advisory fees. Still, the company’s provisions for credit losses quadrupled to $234 million from a year earlier, primarily related to commercial real estate and deterioration in the macroeconomic outlook.
The firm’s wealth business recorded $6.56 billion in revenue, higher than estimated and up 11% from a year earlier. Morgan Stanley now oversees $4.6 trillion in that unit after adding $110 billion in net new assets.
“About $20 billion came from events associated with March,” Chief Financial Officer Sharon Yeshaya said of the net new assets added to the wealth-management business. She attributed the vast chunk of the new assets to the bank’s investments paying off. “The durability of our business model is being shown through our results.”
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It has already laid out a target of attracting $1 trillion in net new assets every three years for the wealth business. New York-based Morgan Stanley has sought to reinforce a message that the fast-growing wealth- and asset-management operations will help curtail big swings in trading and investment banking.
Morgan Stanley shares fell 3.2% at 8:27 a.m. in early New York trading. They had climbed 5.7% this year through Tuesday, including a big gain after its last earnings call, in January.
Revenue from equity underwriting slumped 22% to $202 million, while debt underwriting declined 5.8% to $407 million. Mergers-and-acquisitions bankers also slipped, with advisory revenue dropping 32%. The $1.25 billion in fees from those business was ahead of the $1.12 billion forecast by analysts.
Morgan Stanley’s fixed-income trading business reported $2.58 billion in revenue, compared with estimates of $2.42 billion for the quarter. In equities, the bank posted $2.73 billion of revenue, losing its equities-leader crown to Goldman Sachs Group Inc. again.
The bank’s investment-management business posted $1.29 billion in revenue, down 3.4%.
