Morgan Stanley rounded out big bank earnings on Thursday, after the rest of the street turned in decent numbers (sans Wells Fargo, as usual), highlighted by a big rebound in trading, where FICC results have been off the charts thanks in no small part to an easy comp versus 2018’s harrowing final quarter.
In the third quarter, Morgan was a FICC standout, as sales and trading revenue jumped 21%. Based on the blockbuster bond trading results posted by its peers in Q4, an encore seemed likely.
In the fourth quarter, FICC revenue was $1.27 billion for Morgan. That’s a mile ahead of estimates. The street was looking for just $944.4 million. The gains reflect “improvement across all businesses with particular strength in credit products”, the bank said.
In equities – where Morgan dominates – sales and trading revenues were $1.92 billion. That’s just shy of the $1.94 billion consensus expected. Morgan flags “declines in derivatives on lower volatility”.
All in all, sales and trading net revenues jumped 28% YoY.
Meanwhile, net interest income for the quarter was $1.43 billion, easily beating the $1.02 billion the market was hoping to see.
EPS was $1.30 and adjusted EPS $1.20. That latter figure is a big beat. Consensus was looking for $1.02. Net revenue jumped 27% YoY to $10.86 billion. That made a mockery of estimates. The range was $9.22 billion to $10.09 billion, with the median at $9.73 billion.
It was the fourth consecutive quarter of revenues in excess of $10 billion. The end result: record full-year revenues and net income.
IB looks to be a solid beat too. Investment banking revenue of $1.6 billion is well ahead of the $1.41 billion analysts expected. Morgan, like Goldman, notes a decrease in advisory revenues on lower levels of completed M&A, but touts gains in equity underwriting (IPOs, especially in Asia, and follow-on offerings) and fixed income underwriting, where revenues rose on year thanks to a jump in IG and junk bond fees.
In wealth management (obviously crucial for the firm), revenues rose 11% YoY to $4.58 billion. That’s a beat (the estimate was $4.34 billion). The pre-tax margin there was 27.2%.
Gorman is pretty happy with this. “We delivered strong quarterly earnings across all of our businesses”, he said Thursday. “Firmwide revenues were over $10 billion for the fourth consecutive quarter, resulting in record full year revenues and net income”.
The bank met all of its stated performance targets for 2019.