Whatâs Going On Here?Morgan Stanley ended US banksâ reporting with a bang â and better-than-expected earnings â on Thursday. And no, it didnât look back. What Does This Mean?Morgan Stanleyâs fourth-quarter revenue was 27% higher than the same time last year, and the companyâs profit rose 46%. That wasnât just higher than investors had expected: it also capped off a record year for the bank.
As keen Finimizers mightâve expected, Morgan Stanleyâs bond trading revenue rose in lockstep with the likes of Goldman Sachs, and the companyâs wealth management segment â i.e. investing rich peopleâs money, which represents almost half the firmâs earnings â beat estimates too. But the star of the show was asset management, where quarterly revenue doubled versus a year ago. Why Should I Care?For markets: Frictionless markets.
Morgan Stanleyâs stock rose 6% on Thursday, probably thanks to those strong results and the increased profit margin itâs forecasting for its investment management businesses. The bank played a part, then, in pushing the US stock market to yet another record high on Thursday (tweet this). With lots of stockbrokers eliminating trade commissions late last year, thereâs less than ever stopping retail investors from taking part in the ongoing stock market rally. Maybe thatâs why investors in Charles Schwab shrugged off the brokerâs worse-than-expected quarterly update: its plan to take over rival TD Ameritrade could make it a go-to for investors everywhere.
Zooming in: The best of both worlds.
Morgan Stanleyâs currently poised between risky investment banking activities (like trading) and more stable businesses (like investment management). And by raising its profit margin forecasts for the latter segment, the bank might become a more attractive proposition still. Morgan Stanley will continue to benefit from trading windfalls as it did last quarter, but when that business slows (as it tends to), its predictable and highly profitable segments will keep earnings from falling too far. | 