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Morgan Stanley (MS) Q2 Earnings Beat on Robust IB & Trading
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Morgan Stanley’s (MS - Free Report) second-quarter 2024 earnings of $1.82 per share handily outpaced the Zacks Consensus Estimate of $1.65. The bottom line also compared favorably with $1.24 per share reported in the prior-year quarter.
Shares of the company plunged more than 3% in the pre-market trading on subdued wealth management performance.
Like Wall Street peers, Morgan Stanley’s investment banking (IB) business rebounded. Advisory fees surged 30% year over year. Further, underwriting fees witnessed solid momentum in the quarter. Specifically, equity underwriting income jumped 56% and fixed income underwriting income was up 71%. So, total IB fees (in the Institutional Securities division) grew 51% to $1.62 billion. We had projected it to be $1.24 billion.
The company also posted a solid trading performance. Equity trading revenues increased 18% year over year and fixed-income trading income was up 16%.
Lower provisions were another tailwind for Morgan Stanley.
However, despite a 24% increase in interest income, the company’s net interest income (NII) witnessed modest growth due to higher interest expenses. Also, an increase in total non-interest expenses was a headwind.
Further, weakness in the wealth management business was a drag.
Net income applicable to common shareholders (GAAP) was $2.94 billion, up 44% from the year-ago quarter. Our estimate for the metric was $2.26 billion.
Revenues Up, Expenses Rise
Quarterly net revenues were $15.02 billion, up 12% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $14.18 billion.
NII was $2.07 billion, up 3%. We had projected NII of $1.83 billion.
Total non-interest revenues of $12.95 billion increased 13%. Our estimate for the metric was $12.11 billion.
Total non-interest expenses were $10.87 billion, up 4%. Our estimate for the metric was $10.34 billion.
Provision for credit losses was $76 million, down 53% from the prior-year quarter.
Quarterly Segment Performance
Institutional Securities: Pre-tax income was $2.05 billion, jumping 109% from the prior-year quarter. Our estimate for the same was $1.5 billion.
Net revenues were $6.98 billion, up 23% year over year. The upside resulted from increased advisory fees, underwriting income and trading revenues. We had projected revenues of $6 billion.
Wealth Management: Pre-tax income totaled $1.82 billion, up 8% year over year. Our estimate for the metric was $1.89 billion.
Net revenues were $6.79 billion, up 2%, driven by higher asset management revenues and transactional revenues. We had projected revenues of $6.78 billion.
Total client assets were $5.69 trillion as of Jun 30, 2024, up 16% year over year. We had projected the metric to be $5.41 trillion.
Investment Management: Pre-tax income was $222 million, jumping 31% from the year-ago quarter. Our estimate for the same was $276. million.
Net revenues were $1.39 billion, up 8%. The improvement was largely attributable to a rise in asset management and related fees. We had projected revenues the same as the reported number.
As of Jun 30, 2024, total assets under management or supervision were $1.52 trillion, up 8% year over year. Our estimate for the metric was $1.5 trillion.
Capital Position Solid
As of Jun 30, 2024, the book value per share was $56.80, up from $55.24 in the corresponding period of 2023. The tangible book value per share was $42.30, up from $40.79 as of Jun 30, 2023.
Morgan Stanley’s Tier 1 capital ratio (advanced approach) was 17.1% compared with 17.8% in the year-ago quarter. The common equity Tier 1 capital ratio was 15.3%, down from 15.8% a year ago.
Share Repurchase Update
In the reported quarter, Morgan Stanley repurchased 8 million shares for $750 million.
Additionally, the company reauthorized a multi-year repurchase program of up to $20 billion of shares without any expiration date.
Dividend Hike
Concurrently, Morgan Stanley announced a quarterly cash dividend of 92.5 cents per share, marking an 8.8% hike from the prior payout. The dividend will be paid out on Aug 15 to shareholders on record as of Jul 31.
Our View
Elevated expenses due to investments in franchises will likely continue to hurt Morgan Stanley’s profits. The challenging operating backdrop makes us apprehensive. Yet, the company’s increased focus on the wealth management business will likely keep aiding revenues. Further, a solid rebound in the IB business will act as a tailwind.
The Goldman Sachs Group, Inc.’s (GS - Free Report) second-quarter 2024 earnings per share of $8.62 surpassed the Zacks Consensus Estimate of $8.52. This compares favorably with $3.08 reported in the year-earlier quarter.
Results benefited from the strength in Fixed Income, Currency and Commodities Client Execution financing revenues, IB and consumer banking business. Further, a decline in expenses and provisions acted as a tailwind for GS.
Citigroup Inc.’s (C - Free Report) second-quarter 2024 net income per share of $1.52 surpassed the Zacks Consensus Estimate of $1.40. The metric increased 14.3% from the year-ago quarter’s levels.
C witnessed a rise in total loans in the quarter. The company’s total revenues rose, driven by solid IB business performance. However, deposits declined on a year-over-year basis.
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Morgan Stanley (MS) Q2 Earnings Beat on Robust IB & Trading
Morgan Stanley’s (MS - Free Report) second-quarter 2024 earnings of $1.82 per share handily outpaced the Zacks Consensus Estimate of $1.65. The bottom line also compared favorably with $1.24 per share reported in the prior-year quarter.
Shares of the company plunged more than 3% in the pre-market trading on subdued wealth management performance.
Like Wall Street peers, Morgan Stanley’s investment banking (IB) business rebounded. Advisory fees surged 30% year over year. Further, underwriting fees witnessed solid momentum in the quarter. Specifically, equity underwriting income jumped 56% and fixed income underwriting income was up 71%. So, total IB fees (in the Institutional Securities division) grew 51% to $1.62 billion. We had projected it to be $1.24 billion.
The company also posted a solid trading performance. Equity trading revenues increased 18% year over year and fixed-income trading income was up 16%.
Lower provisions were another tailwind for Morgan Stanley.
However, despite a 24% increase in interest income, the company’s net interest income (NII) witnessed modest growth due to higher interest expenses. Also, an increase in total non-interest expenses was a headwind.
Further, weakness in the wealth management business was a drag.
Net income applicable to common shareholders (GAAP) was $2.94 billion, up 44% from the year-ago quarter. Our estimate for the metric was $2.26 billion.
Revenues Up, Expenses Rise
Quarterly net revenues were $15.02 billion, up 12% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $14.18 billion.
NII was $2.07 billion, up 3%. We had projected NII of $1.83 billion.
Total non-interest revenues of $12.95 billion increased 13%. Our estimate for the metric was $12.11 billion.
Total non-interest expenses were $10.87 billion, up 4%. Our estimate for the metric was $10.34 billion.
Provision for credit losses was $76 million, down 53% from the prior-year quarter.
Quarterly Segment Performance
Institutional Securities: Pre-tax income was $2.05 billion, jumping 109% from the prior-year quarter. Our estimate for the same was $1.5 billion.
Net revenues were $6.98 billion, up 23% year over year. The upside resulted from increased advisory fees, underwriting income and trading revenues. We had projected revenues of $6 billion.
Wealth Management: Pre-tax income totaled $1.82 billion, up 8% year over year. Our estimate for the metric was $1.89 billion.
Net revenues were $6.79 billion, up 2%, driven by higher asset management revenues and transactional revenues. We had projected revenues of $6.78 billion.
Total client assets were $5.69 trillion as of Jun 30, 2024, up 16% year over year. We had projected the metric to be $5.41 trillion.
Investment Management: Pre-tax income was $222 million, jumping 31% from the year-ago quarter. Our estimate for the same was $276. million.
Net revenues were $1.39 billion, up 8%. The improvement was largely attributable to a rise in asset management and related fees. We had projected revenues the same as the reported number.
As of Jun 30, 2024, total assets under management or supervision were $1.52 trillion, up 8% year over year. Our estimate for the metric was $1.5 trillion.
Capital Position Solid
As of Jun 30, 2024, the book value per share was $56.80, up from $55.24 in the corresponding period of 2023. The tangible book value per share was $42.30, up from $40.79 as of Jun 30, 2023.
Morgan Stanley’s Tier 1 capital ratio (advanced approach) was 17.1% compared with 17.8% in the year-ago quarter. The common equity Tier 1 capital ratio was 15.3%, down from 15.8% a year ago.
Share Repurchase Update
In the reported quarter, Morgan Stanley repurchased 8 million shares for $750 million.
Additionally, the company reauthorized a multi-year repurchase program of up to $20 billion of shares without any expiration date.
Dividend Hike
Concurrently, Morgan Stanley announced a quarterly cash dividend of 92.5 cents per share, marking an 8.8% hike from the prior payout. The dividend will be paid out on Aug 15 to shareholders on record as of Jul 31.
Our View
Elevated expenses due to investments in franchises will likely continue to hurt Morgan Stanley’s profits. The challenging operating backdrop makes us apprehensive. Yet, the company’s increased focus on the wealth management business will likely keep aiding revenues. Further, a solid rebound in the IB business will act as a tailwind.
Morgan Stanley Price, Consensus and EPS Surprise
Morgan Stanley price-consensus-eps-surprise-chart | Morgan Stanley Quote
Currently, Morgan Stanley carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
The Goldman Sachs Group, Inc.’s (GS - Free Report) second-quarter 2024 earnings per share of $8.62 surpassed the Zacks Consensus Estimate of $8.52. This compares favorably with $3.08 reported in the year-earlier quarter.
Results benefited from the strength in Fixed Income, Currency and Commodities Client Execution financing revenues, IB and consumer banking business. Further, a decline in expenses and provisions acted as a tailwind for GS.
Citigroup Inc.’s (C - Free Report) second-quarter 2024 net income per share of $1.52 surpassed the Zacks Consensus Estimate of $1.40. The metric increased 14.3% from the year-ago quarter’s levels.
C witnessed a rise in total loans in the quarter. The company’s total revenues rose, driven by solid IB business performance. However, deposits declined on a year-over-year basis.