Unlock the Editor’s Digest free of charge
Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.
Morgan Stanley’s earnings elevated greater than 40 per cent within the second quarter, however the financial institution reported a slowdown in development in its cornerstone wealth administration enterprise.
Morgan Stanley reported quarterly web revenue of $3.1bn, up from $2.2bn a 12 months earlier and forward of analysts’ estimates.
That leap was aided by an increase of simply over 50 per cent in funding banking charges from a 12 months in the past, to $1.6bn.
The return of funding banking enterprise has been a theme of massive financial institution outcomes up to now two quarters.
After two years during which traders held off dealmaking and preliminary public choices due to rising rates of interest, funding banking revenues jumped within the quarter by 50 per cent at JPMorgan and 21 per cent at rival Goldman Sachs.
Morgan Stanley’s chief govt Ted Choose advised analysts that barring a recession, “I believe you will note over the subsequent variety of quarters, and actually over the subsequent variety of years, a resumption of extra normalised M&A exercise”.
Morgan Stanley’s inventory was up greater than 2 per cent in morning buying and selling on Tuesday in New York.
The corporate’s $5.7tn wealth administration division fell wanting development estimates from analysts. The financial institution attracted web new property of solely $36.4bn, effectively under expectations for about $57.5bn and down from nearly $90bn a 12 months in the past.
Web new property in wealth administration have been the bottom since 2020 throughout the primary six months of the 12 months.
Morgan Stanley chief monetary officer Sharon Yeshaya blamed the slowdown partially on increased tax funds, with the US deadline to file in April.
“We consider each tax-related outflows and elevated spending, significantly amongst excessive web price shoppers, impacted flows this quarter,” she advised analysts.
Yeshaya stated rich shoppers had been spending lavishly within the quarter, at the same time as JPMorgan, Citigroup and Wells Fargo final week pointed to indicators of economic stress amongst lower-income shoppers.
Wealth administration has been an enormous driver of Morgan Stanley’s development lately, boosted by its 2020 buy of on-line buying and selling platform ETrade. However its growth has slowed extra just lately as shopper property have turn out to be harder to draw when rates of interest are increased.
Revenue margins in that enterprise have additionally shrunk, as wealth shoppers have been in a position to go away cash in money and different extra liquid merchandise that supply a better return in the next rate of interest setting however that are much less profitable for banks.
