New York banking powerhouse Morgan Stanley has released its fourth quarter 2022 financial report, revealing mixed results.
Morgan Stanley (NYSE: MS) recently published its Q4 2022 Earnings Report, exceeding consensus estimates. The New York-based banking giant received a significant boost in its latest quarterly result thanks to record wealth management revenue.
For the fourth quarter of 2022, Morgan Stanley reported revenue collection of $12.75 billion compared to the $12.64 billion Wall Street analysts had expected. Additionally, the leading bank’s earnings per share (EPS) for the period ended December 31 was $1.31 after adjustments. In addition, the company posted a record net income of $6.63 billion in the last quarter from wealth management. This respected figure represented a 6% increase over the same period last year and benefited from higher interest rate-induced net interest income. In addition, Morgan Stanley’s latest record wealth management gains also came as a result of organic growth in bank loans.
Morgan Stanley shares rose more than 1% during premarket trading after its earnings report. Shares of the company have risen about 8% since the start of the year, after a 13% drop last year.
Morgan Stanley Q4 2022 Headwinds
Morgan Stanley Chairman and CEO James Gorman commented on the company’s latest financial report in a statement. According to Gorman, the investment management and financial services giant “reported strong fourth-quarter results amid a difficult market environment.”
In fact, not everything was rosy for Morgan Stanley during the fourth quarter of last year. Despite beating earnings estimates, the banking giant’s net income fell from $3.59 billion, or $2.01, to $2.11 billion, or $1.26 per share year-over-year (YoY). In addition, the Manhattan-based financial powerhouse also suffered a significant downturn in investment banking activities. This contraction came amid a drop in initial public offerings (IPOs) and the issuance of debt and shares.
According to Morgan Stanley’s investment management unit, there was a 15% year-over-year decline in fourth-quarter revenue. The bank says investment management made a $1.46 billion profit amid the Federal Reserve’s aggressive rate hikes. Meanwhile, Morgan Stanley’s assets under management (AUM) also contracted to $1.30 trillion from $1.57 trillion in 2022.
Morgan Stanley’s fourth-quarter revenue from investment banking is $1.25 billion, which is a significant 49% reduction from the same period last year. The bank also explained that the decline was due to the substantial decline in global share subscription volumes. In addition, Morgan Stanley attributed the underperformance of investment banking to lower performance from mergers and acquisitions (M&A).
In the last period, Morgan Stanley set aside $85 million for credit losses. This sum compares unfavorably with the relatively minimal $5 million the bank earmarked for the exact cause in the prior year period.
Downsizing
Last December, Morgan Stanley cut approximately 2% of its workforce, affecting some 1,600 people out of a workforce of 81,567. The bank felt this exercise was necessary to weed out underperformers. Commenting on the staff cuts at the time, Gorman explained that “some people are going to be laid off.” According to the company’s CEO, “In most businesses, that’s what you do after many years of growth.”
Morgan Stanley claimed that the annual cull of the weakest workers had been suspended during the pandemic.
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Tolu is a Lagos-based blockchain and cryptocurrency enthusiast. He likes to demystify the crypto stories down to the basics so that anyone anywhere can understand them without too much prior knowledge. When he’s not up to his neck in crypto-stories, Tolu likes music, loves to sing, and is an avid movie buff.
