Morgan Stanley on Wednesday posted profit and revenue that exceeded analysts' expectations on better-than-expected results in wealth management and fixed-income trading.
The bank said it generated $2.4 billion in first-quarter profit, or $1.39 per share, compared with the $1.17 estimate of analysts surveyed by Refinitiv. Morgan Stanley's revenues of $10.3 billion beat the $9.94 billion estimate. Shares advanced 1.9% in premarket trading.
"We delivered solid earnings despite a slow start to the year following the turbulent markets in the fourth quarter," CEO James Gorman said in the earnings release. "Even though risks to the global environment remain, markets have recovered and we are well positioned to serve our clients and invest in our businesses."
Under Gorman, Morgan Stanley has emphasized its wealth management division, a far steadier business than its trading operations. But Morgan Stanley still has a sizable Wall Street trading and advisory business, and that was expected to weigh on results as it did at rivals including Goldman Sachs. Morgan Stanley wasn't spared from the malaise that affected trading desks across Wall Street, but results weren't as bad as feared.
The bank posted $1.71 billion in bond trading revenue, $200 million more than analysts had expected, as gains in credit trading helped offset weak government bond and currencies results. Equities trading produced $2.02 billion in revenue, just under the estimate. Together, that made for a 15% decline in trading revenue.
Investment banking revenue dropped 24% to $1.15 billion, essentially matching estimates, on lower fees from mergers advice and stock and bond underwriting.
While the firm's Wall Street operations benefited from lowered expectations for the quarter, Morgan Stanley's wealth management division had a higher hurdle.
And it came through, producing $4.39 billion in revenue, exceeding the estimate by $200 million. The business offset the lower asset levels from December's stock market swoon with higher interest income through more lending to its wealthy clients.
In its smallest division, investment management, Morgan Stanley produced $804 million in revenue, about $115 million more than analysts had expected.
"We believe the bar for Morgan Stanley had been sufficiently lowered heading into results and would characterize the quarter as solid amidst a relatively challenging backdrop," JMP Securities analyst Devin Ryan said in a note. "Furthermore, we believe business momentum exiting the quarter across most areas is better today relative to where it started."
Last month, Gorman's second-in-command, Colm Kelleher, announced plans to retire in June. The move will leave the position of president at Morgan Stanley vacant, setting up a contest among executives who want to someday succeed Gorman.
Morgan Stanley was the last of the six largest U.S. banks to report first-quarter earnings. J.P. Morgan Chase and Bank of America posted record profits on the strength of their consumer-banking operations, while Wells Fargo and Citigroup posted mixed results.
Here's what Wall Street expected: