Morgan Stanley shares jump after massive beat on fourth-quarter profit

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Morgan Stanley shares popped after the firm exceeded analysts’ profit estimates and each of its three main businesses produced more revenue than expected. 

The bank said Thursday that fourth-quarter profit surged 46% to $2.24 billion, or $1.30 a share, compared with the 99 cent estimate of analysts surveyed by Refinitiv. Revenue climbed 27% to $10.86 billion, exceeding the $9.72 billion estimate by more than $1 billion.

Shares of the firm rose 2.7% in premarket trading. 

“We delivered strong quarterly earnings across all of our businesses,” CEO James Gorman said in the release. “Firmwide revenues were over $10 billion for the fourth consecutive quarter, resulting in record full year revenues and net income. This consistent performance met all of our stated performance targets.”

In a quarter in which competitors from J.P. Morgan Chase to Goldman Sachs posted huge rebounds to fixed income trading revenue, analysts wanted to see if Morgan Stanley would follow suit. 

It did: Bond trading helped power the firm’s institutional securities division to a 32% jump in revenue to $5.05 billion, compared to the $4.46 billion estimate. Fixed income trading produced $1.27 billion in revenue, compared with the $933.5 million estimate. Equity trading essentially matched expectations at $1.92 billion. 

At the firm’s massive wealth management division, revenue rose 11% to $4.58 billion, edging out the $4.39 billion estimate. 

But it was the firm’s smallest division, investment management, that exceeded expectations by the most, driving the company’s overall revenue beat. The business produced $1.36 billion in revenue, almost 100% more than a year earlier and exceeding the $783.2 million estimate by more than a half billion dollars. 

Gorman has tilted Morgan Stanley towards wealth management and overhauled its once-struggling bond trading division. But the trading and advisory operations are still a crucial part of the company’s business mix.

Last month, Morgan Stanley cut roughly 2% of its workforce due to an uncertain global economic outlook, a cull that hit technology and operations roles the hardest, people with knowledge of the matter said.

Morgan Stanley is the last of the six largest U.S. banks to report results.

Earlier this week, J.P. Morgan, Citigroup, and Bank of America posted profits that beat analysts’ expectations on surging bond-trading results. Results at Wells Fargo and Goldman Sachs were both marred by legal expenses tied to scandals: At Wells, legal charges were tied to its fake accounts issue, while Goldman neared a resolution to its 1MDB investigation.

Here’s what Wall Street expected:

Earnings: 99 cents a share, 24% higher than a year earlier, according to Refinitiv

Revenue: $9.72 billion, 14% higher than a year earlier

Wealth management: $4.39 billion, according to FactSet

Trading: Equities $1.93 billion, Fixed Income $933.5 million

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