Morgan Stanley's Profit Surged in the Fourth Quarter

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On Wednesday, Morgan Stanley announced that quarter 4 profit had risen 51 percent in the past year.
  • Profit: $3.39 billion, or $1.81 a share (analysts polled by FactSet predicted $1.30)
  • Revenue: $13.64 billion, increasing 26 percent from a year earlier (analysts polled by FactSet predicted $11.58 billion)

Morgan Stanley was the last of the big banks to report quarter 4 earnings. The major financial institutions have fared well throughout the pandemic. Morgan Stanley shares have outperformed the sector because the bank is less exposed to unemployment risks and small business closure.

Trading revenues have surged on the back of strong volatility. Morgan Stanley reported a 32 percent increase in trading revenue. However, CEO James Gorman told analysts that the bank doesn't expect this massive growth trend to continue. “There’s a lot of market activity, I think, in the reasonable near term,” he said. “Whether it is at the level of 2020, I mean, you’d have to bet against that just on pure odds.”

Morgan Stanley was also active in the acquisition space last year. To capitalize on the massive surge in retail investing, the bank acquired E*Trade Financial Corp., which closed during the fourth quarter. “Fourth quarter typically you see a seasonal slowdown,” Chief Financial Officer Jonathan Pruzan said in an interview. “We did not see that this year.”

As other financial institutions weather decreased demand for credit, Morgan Stanley was able to boost loans and lending commitments by 11 percent to $289 billion outstanding. Gorman also claimed that Morgan Stanley was at an inflection point. The bank plans to aggressively gain market share, expand its client base, and return excess capital in the form of share buybacks.

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