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Morgan Stanley’s revenue beat fourth-quarter expectations on Tuesday, helped by a rebound in dealmaking activity, sending the shares of the investment bank up 1 per cent in premarket trading.
Several high-profile initial public offerings and merger announcements toward the end of last year sparked optimism about a nascent recovery in dealmaking in 2024.
“We begin 2024 with a clear and consistent business strategy and a unified leadership team,” CEO Ted Pick said in a statement. “We are focused on achieving our long-term financial goals and continuing to deliver for shareholders.”
Morgan Stanley is among the banking giants that are paying special fees to replenish a government deposit insurance fund that was drained by almost $16 billion after the collapse of two regional lenders last year.
It took a combined $535 million in charges, which included $286 million in special assessment fee to the regulator and $249 million in legal charges.
Morgan Stanley’s investment banking revenue rose 5 per cent in the fourth quarter from a year ago, outperforming the broader industry.
Net revenue came in at $12.9 billion compared with analysts’ expectations of $12.75 billion, according to LSEG data.
Its net income fell to $1.5 billion, or 85 cents per diluted share, in the three months ended Dec. 31, compared with $2.2 billion, or $1.26 per diluted share, a year ago.
The gain in investment banking driven by M&A advisory was “encouraging,” wrote Chris Kotowski, an analyst at brokerage Oppenheimer.
Morgan Stanley’s former CEO James Gorman, who became executive chairman at the start of the year, had turned the bank into a wealth management powerhouse that was less dependent on volatile revenue from trading and investment banking.
He set an ambitious target of reaching $10 trillion in assets under management.
The unit has been central to Morgan Stanley’s growth, but analysts have now begun to flag worries about a slowdown in new client assets, clouding the outlook for the business.
Net revenue in wealth management were flat at $6.65 billion compared to last year.
Morgan Stanley’s fixed income and equity net revenue were also flat in the fourth quarter.
For the full year, net revenue came in at $54.1 billion compared with $53.7 billion a year ago. Net income fell to $5.18 per diluted share versus $6.15 per diluted share, a year ago.
The results compare with fellow Wall Street giants that reported lower profit on Friday, clouded by special charges and job cuts.
Rival Goldman Sachs’ profit jumped 51 per cent in the fourth quarter as its equity traders capitalised on a nascent recovery in markets.
Earlier this month, Morgan Stanley agreed to pay $249.4 million to end years-long criminal and civil investigations into its handling of large stock trades for customers.