On Wednesday morning, Morgan Stanley (MS, Financial) reported better-than-anticipated results for its fourth quarter of 2021 on the back of strong equities trading revenue. The investment bank’s shares climbed 5% due partially to the positive results. Also boosting shares was the fact that management upped its profitability targets. Equities trading revenue reached $2.86 billion for the quarter.
For the full year, net income grew 37% compared to 2020. Net revenues were $14.5 billion for the fourth quarter, which ended Dec. 31, 2021, compared with $13.6 billion a year ago. Net income applicable to Morgan Stanley shareholders was $3.7 billion, or $2.01 per diluted share, compared with $3.4 billion, or $1.81 per diluted share, for the same period a year ago.
James P. Gorman, Chairman and CEO, had the following to say:
“2021 was an outstanding year for our firm. We delivered record net revenues of $60 billion and a ROTCE of 20%, with stand-out results in each of our business segments. Wealth Management grew client assets by nearly $1 trillion to $4.9 trillion this year, with $438 billion in net new assets. Combined with Investment Management, we now have $6.5 trillion in client assets. Our integrated investment bank has continued to gain wallet share. We have a sustainable business model with scale, capital flexibility, momentum and growth.”
Full year net revenues were $59.8 billion compared with $48.8 billion a year ago, the company said in the press release. Net income for the year was $15.0 billion, or $8.03 per diluted share, compared with $11.0 billion, or $6.46 per diluted share, a year ago. The comparisons of current year results to prior periods were impacted by the acquisitions of E*TRADE and Eaton Vance, though, so investors should take the growth numbers with a grain of salt.
By segment, Institutional Securities reported record full-year net revenues of $29.8 billion, up 13% with strong revenues across Advisory, Underwriting and Equity. Wealth Management delivered a full year pre-tax margin of 25.5%, or 26.9% excluding integration-related expenses. The business added net new assets of $438 billion and total client assets under management were up 23% from a year ago. Investment Management reported full year net revenues above $6 billion, driven by strong fee-based asset management revenues on record AUM of $1.6 trillion. Institutional Securities reported net revenues for the current quarter of $6.7 billion compared with $7.0 billion a year ago. Investment Banking revenues gained 6% from a year ago.
While Advisory revenues increased from a year ago, driven by higher completed M&A transactions, Equity underwriting revenues decreased from a year ago due to declines in follow-on offerings and blocks, partially offset by higher revenues from private placements.
It was also reported today that Morgan Stanley paid out more for its investment bankers than at the height of the pre-crisis boom as its dealmakers “hauled in record fees, but the bank followed rivals with missing market expectations on trading revenue,” according to Financial News London. “The Wall Street bank paid $9.2bn in compensation costs within its institutional securities unit, an increase of 10% on 2020 and the highest figure in 14 years, according to historical analysis of pay figures. Banks have battled to hold on to both junior staff and key dealmakers amid an unprecedented boom in investment banking.”
