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Wednesday, January 18, 2023

Morgan Stanley’s File Wealth Administration Income Buoys Agency in 2022


Morgan Stanley’s surprisingly sturdy This fall 2022 earnings have been largely helped by a file quarter (and yr) in its wealth administration division, with Chairman and CEO James Gorman anticipating the wealth and funding administration companies to turn out to be “an more and more bigger portion” of the agency’s pre-tax income. 

“The agency did what it was purported to do, with our extra steady wealth and funding administration companies offsetting declines in institutional securities,” Gorman stated throughout a name detailing the earnings outcomes.

In This fall, Morgan Stanley’s wealth administration arm noticed file income of $6.6 billion, an 8% soar from Q3 and a 6% enhance year-over-year. Whereas asset administration income decreased from This fall 2021 from roughly $3.7 to $3.34 billion resulting from market dips, and transactional revenues fell by 15% in the identical interval, web curiosity revenue stood at about $2.1 billion, up 7% from the earlier quarter and up 52% from This fall 2021.

For the total yr, Morgan Stanley famous wealth administration income stood at $24.4 billion, a 1% enhance from the prior yr (and a file for the agency), whereas pre-tax revenue jumped 7% from 2021 to $6.6 billion. 

Consumer property stood at $4.2 trillion, up 1% from the third quarter however down from the prior yr (with advisor-led property at roughly $3.4 trillion and fee-based property at $1.6 trillion, each 3% will increase from Q3). In complete, the total yr’s web new property stood round $311.3 billion, with $51.5 billion in web new property for This fall.

And wealth administration will solely develop as a core tenet of Morgan Stanley’s enterprise, in accordance with Gorman, with the CEO anticipating the wealth and funding administration property to probably develop to $10 trillion within the years forward. The agency as an entire delivered about $14 billion of pre-tax revenue in 2022, however with wealth and asset administration’s pre-tax income may develop to greater than $14 billion within the coming years.

“As you possibly can see, that exceeds the total agency at this time simply from the wealth and asset administration enterprise,” he stated.

Compensation bills barely decreased year-over-year from about $3.4 to $3.3 billion, “pushed by decrease compensable revenues,” however have been partially offset by extra bills primarily based on elevated headcount and bills resulting from specific deferred compensation plans (Morgan Stanley doesn’t launch data on advisor headcount). The merger of E*Commerce continued apace, with Chief Monetary Officer Sharon Yeshaya saying on the decision she anticipated “ultimate back-office integration” to conclude this yr.

With uncertainty surrounding market efficiency within the coming yr, Gorman stated he had “medium-term” confidence in his market outlook, and stated that he anticipated the Federal Reserve to achieve durations of zero charge will increase this yr (the Fed’s quarterly hikes decreased from 0.75 proportion factors to 0.50 factors, with hypothesis an extra drop to 0.25 bps is forthcoming).

“That’s the inflection level, and there’s some huge cash sitting round ready to be put to work,” Gorman stated.

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