Morgan Stanley: Profit hit by $500m in one-time charges but investment bank shines
Morgan Stanley‘s profit missed analysts’ estimates in the fourth quarter as it was hit by more than $500m (£395m) in one-time charges which offset a stronger performance from its flagship investment bank.
The US investment banking giant’s pretax income plunged by almost a third to $2.1bn from $2.8bn from the same quarter in 2022.
Last Friday, Morgan Stanley agreed to pay $249m to end an investigation by the Manhattan US attorney’s office into whether employees leaked confidential information about clients’ stock sales.
The bank, alongside its peers, also incurred a $286m special charge related to a special assessment to recover losses to the Federal Deposit Insurance Corporation’s insurance fund when regional lenders Silicon Valley Bank and Signature collapsed last year.
These results are the first released under the bank’s new chief executive Ted Pick, a company veteran who replaced James Gorman on 1 January.
His responsibilities include shoring up Morgan Stanley’s investment bank, which lags behind its Wall Street rivals, and dealing with regulatory scrutiny over its wealth management business.
Morgan Stanley’s net revenues rose to $12.9bn last quarter, with the full-year figure also ticking up to $54.1bn. Its earnings per share came in at 85 cents.
The bank has diversified its business model to focus on wealth management and be less reliant on investment banking, which can be a volatile revenue stream and has struggled with a slowdown in capital markets activity.
Investment banking revenues ticked up five per cent last quarter from the same period in 2022, although the full-year figure has slid 13 per cent from 2022.
Fixed-income revenue was also down 15 per cent in 2023, which the bank blamed on “declines in foreign exchange and commodities on less favorable market conditions and lower client activity”.
These losses were partly offset by improved revenues from wealth management, up 7.6 per cent in 2023 from the previous year. However, the division’s net new assets tumbled to $47.5m in the fourth quarter, falling nine per cent in the full year.
“In 2023, the firm reported a solid [return on tangible equity] against a mixed market backdrop and a number of headwinds,” Pick said on Tuesday.
“We begin 2024 with a clear and consistent business strategy and a unified leadership team. We are
focused on achieving our long-term financial goals and continuing to deliver for shareholders.”
Morgan Stanley’s shares dropped 4.5 per cent at the open in New York on Tuesday.