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New York banking powerhouse Morgan Stanley has posted its Q4 2022 financial report, which reveals mixed results.
Morgan Stanley (NYSE: MS) recently posted its Q4 2022 earnings report, surpassing consensus estimates. The New York-based banking giant received a significant boost in its latest quarterly bottom line from record wealth management revenue.
For Q4 2022, Morgan Stanley reported a revenue haul of $12.75 billion compared to the $12.64 billion Wall Street analysts expected. In addition, the leading bank’s earnings per share (EPS) for the period ended December 31st came in at $1.31 after adjustments. Furthermore, the company saw a record net revenue of $6.63 billion in the latest quarter from wealth management. This respected figure represented a 6% increase from the year-ago period and benefited from higher interest rate-induced net interest income. In addition, Morgan Stanley’s latest record wealth management earnings also came about as a result of organic bank lending growth.
Morgan Stanley shares rose more than 1% during premarket trading after its earnings report. The company’s stock is up approximately 8% since the start of the year, following a 13% drawdown last year.
Morgan Stanley Q4 2022 Headwinds
Morgan Stanley Chairman and chief executive James Gorman commented on the company’s latest financial report in a statement. According to Gorman, the investment management and financial services behemoth “reported solid fourth-quarter results amidst a difficult market environment.”
Indeed, it was not all rosy for Morgan Stanley during the fourth quarter of last year. Despite beating earnings estimates, the banking giant’s net income declined from $3.59 billion, or $2.01, to $2.11 billion, or $1.26 per share year-over-year (YoY). Furthermore, the Manhattan-situated financial powerhouse also suffered a significant downturn in investment banking activities. This contraction came amid a plunge in initial public offerings (IPOs) and debt and equity issuance.
According to Morgan Stanley’s investment management unit, there was a 15% YoY decline in fourth-quarter revenue. The bank says that investment management realized a gain of $1.46 billion amid the Federal Reserve’s aggressive rate hike policy. Meanwhile, Morgan Stanley’s assets under management (AUM) also contracted to $1.30 trillion from $1.57 trillion in 2022.
Morgan Stanley’s Q4 revenue from investment banking is $1.25 billion, representing a lofty 49% drawdown from the year-ago period. The bank also explained that the decline was due to the substantial downswing in global equity underwriting volumes. In addition, Morgan Stanley ascribed investment banking underperformance to lower merger and acquisition (M&A) performances.
In the latest period, Morgan Stanley set aside $85 million for credit losses. This sum compares unfavorably to the relatively minimal $5 million the bank earmarked for the exact cause in the year-ago period.
Last December, Morgan Stanley cut roughly 2% of its workforce, impacting around 1,600 people in an 81,567 headcount. The bank deemed this exercise necessary to cull underperformers. Commenting on the staff cuts at the time, Gorman explained that “some people are going to be let go.” According to the company CEO, “In most businesses, that’s what you do after many years of growth.”
Morgan Stanley claimed that the annual culling of the weakest workers had been put on hold during the pandemic.