Morgan Stanley’s profit has risen 14 per cent thanks to a recovery in investment banking as the firm joined fellow Wall Street giants that have benefited from higher levels of dealmaking and capital markets activity.
The bank on Tuesday reported a net income of $3.4bn (£2.73bn), or $2.02 per diluted share, in the first three months of 2024, up from $3bn (£2.41bn), or $1.70 per share, during the same period last year. Analysts had expected earnings of $1.66 per share.
Morgan Stanley’s net revenue rose to $15.14bn (£12.2bn) during the first quarter from $14.5bn (£11.64bn) a year before. Analysts had expected a figure of $14.41bn (£11.57bn).
These results cover the first quarter under new chief executive Ted Pick, whose responsibilities include shoring up Morgan Stanley’s investment bank, which has lagged behind its US rivals in recent times.
US regulators are also investigating whether the bank has sufficiently screened clients for its wealth management business.
Dealmaking and capital markets activity is recovering from a two-year slump triggered by economic uncertainty and higher interest rates.
As a result, Morgan Stanley and the likes of JPMorgan Chase, Citigroup, Goldman Sachs and Bank of America have topped expectations for revenue and profit this quarter.
Morgan Stanley’s investment banking fees rose 16 per cent year-on-year to $1.45bn (£1.16bn), although this was the smallest increase of its domestic peers.
A more than doubling of the bank’s equity underwriting value to $430m (£345m) was offset by 28 per cent drop in advisory fees due to fewer completed M&A transactions.
Morgan Stanley has diversified its business model to focus on wealth management and be less reliant on investment banking, which can be a volatile revenue stream. Wealth management revenue rose to $6.88bn (£5.52bn) last quarter from $6.56bn (£5.27bn) the year before.
Pick said on Tuesday: “In the first quarter of 2024 Morgan Stanley generated net revenues of $15bn and earnings of $2.02 per share for a 20 per cent return on tangible equity.
“As a result of strong net new asset growth, the firm has reached $7 trillion of client assets across Wealth and Investment Management. Institutional Securities also saw strength across the markets and underwriting businesses. The Morgan Stanley Integrated Firm model is delivering durable results.”
