Morgan Stanley Shares Cling To Gains After Equity Trading Unit Beats, Wealth Mgmnt Disappoints

Morgan Stanley shares are holding on to gains in the pre-market after the bank reported Q1 equities sales and trading revenue better than expected (while net revenue at the wealth management unit disappointed).

These are record results for Morgan Stanley…

Net revenue $17.7 billion, estimate $16.56 billion (Bloomberg Consensus)

• Wealth management net revenue $7.3 billion, estimate $7.44 billion

• Equities sales & trading revenue $4.13 billion, +45% y/y, estimate $3.42 billion

• FICC sales & trading revenue $2.60 billion, estimate $2.6 billion

• Institutional Investment Banking revenue $1.56 billion, estimate $1.51 billion

• Advisory revenue $563 million, estimate $642.1 million

• Equity underwriting rev. $319 million, estimate $357.8 million

• Fixed Income Underwriting revenue $677 million, estimate $552.6 million

The firm earned a record $4.13 billion from equities trading in the first quarter, up 45% from a year ago and ahead of expectations. 

The firm’s closely watched wealth business saw higher-than-anticipated net new assets of $93.8 billion, but profits and margins disappointed:

• Wealth Management pretax profit $2.0 billion, estimate $2.09 billion

• Wealth management pretax margin +26.6%, estimate +28.2%

Dan Simkowitz, the firm’s co-president, said last month that M&A announcements and new equity issuance are “certainly on pause” as clients assess Trump’s policy changes. 

Still, it “just gets paused, it doesn’t get deleted,” he said, adding that deal flow would probably stay “a little light” until there’s more policy certainty.

Morgan Stanley’s non-interest expenses came in at $12.1 billion in the quarter, higher than expected. That included severance costs of $144 million after the firm laid off about 2,000 employees in March to keep a lid on costs. The reductions were across business segments and geographies and impacted about 2% of the bank’s workforce at that time, according to its earnings statement.

MS shares were up more than 3% at one pint after the announcement but that has faded as the open approaches…

Morgan Stanley’s results come following Pick’s first year atop the firm. Ted Pick, who’s best-known for resurrecting the company’s equities business after the financial crisis, became chairman of the board earlier this year, replacing James Gorman, who ran Morgan Stanley for more than a decade.