Morgan Stanley shares popped Thursday after the firm exceeded analysts' profit estimates and each of its three main businesses produced more revenue than expected.
The bank said 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 8% in midday trading, climbing higher after the bank disclosed new, more ambitious financial targets.
"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."
It did: Bond trading helped power the firm's institutional securities division to a 32% jump in revenue to $5.05 billion, versus the $4.46 billion estimate. Fixed income trading produced $1.27 billion in revenue, compared with the $933.5 million estimate. Equity trading revenue essentially matched expectations at $1.92 billion, as did investment banking at $1.58 billion.
At the firm's massive wealth management division, revenue rose 11% to $4.58 billion, edging out the $4.39 billion estimate as rising markets improved asset and transaction levels.
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. That appears to be driven by a single investment: Morgan Stanley cited $670 million in investment revenue (a 720% increase from a year earlier) on the carried interest from an IPO in Asia.
The quarter also included a $158 million tax benefit and severance costs of $172 million. 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.
In his decade atop Morgan Stanley, Gorman has tilted the bank toward wealth management and overhauled its once-struggling bond trading division. That has helped it steady results, and Thursday the bank issued new and higher financial targets for return on average tangible equity, wealth management margins and efficiency.
For instance, last year the bank targeted a return on average tangible equity of as high as 14.5%. The bank's "longer term aspirations" are now for ROTCE of 15% to 17%, the bank 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 for Morgan Stanley:
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