According to Bloomberg News, shares of Morgan Stanley escalated following the company’s rise in the target for profitability. It revealed that it is making up through surprise revenue from trading equity in the fourth quarter.
Revenues from equities trading advanced 13%, which was seen to be driven by a one-time $225 million in gains on one investment, as said by New York-based Morgan Stanley Wednesday as it released a statement. This compared with the analysts’ estimates for a bit of change compared to a year earlier. Revenue from fixed-income dropped 31%.
The results that were obtained managed to match the biggest competitors of Morgan Stanley as they reported a slowdown in their trading business. At the same time, bonuses for the star traders and bankers were found to weigh on expenses. At Morgan Stanley, costs related to non-interest surged by 19% for the year, including the expenses related to the integration of the recent acquisitions.
Bloomberg News also reports that in the investment bank division, non-interest expenditure escalated only by 9%, indicating that compensation increases for the bankers might prove to be less generous compared to the rival at Goldman Sachs Group Inc.
Morgan Stanley also increased its targets for the return on the tangible common equity, stating that it anticipates now that the metrics might reach more than 20% when seen over a more extended period, raising it from the earlier target of 17%. It is also anticipating an additional $500 million as net interest income from the company’s wealth management business in the current year, which is based on market anticipations for the interest rate hikes of the Federal Reserve.
Bank stocks are being punished by the investors this earning season, implying that those Wall Street engines that have been instrumental in driving the revenue to record highs are beginning to cool off. Morgan Stanley shares that were lost 8.3% in the last two trading seasons were seen to be up by 2.7% to $96.59 in New York at 9:42 am.
In comparison to an estimate of revenue from investment banking of $2.48 billion, it was found that there was a shortfall of $2.43 billion. The advisory fee revenue surged 30%, recording a figure of $1.07 billion.
The wealth management revenue was found to align with the estimates of $6.25 billion, which is a 10% gain for a business that, according to the bank, is betting that it might deliver a higher net interest income in the current year amidst the escalating rates.
Morgan Stanley’s more than half of the revenue is contributed by investment management and the business. It is less volatile than the institutional securities business that harbors dealmakers and traders. The inflows accounted for $438 billion for this year for its wealth unit. Bloomberg News also reports that equity underwriting revenue plunged 15% to $853 million.
