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Morgan Stanley's profits rose 14 percent in the first quarter, helped by a recovery in its investment and commercial banking businesses and a better-than-expected performance from its juggernaut wealth management division.
Morgan Stanley said net income in the first three months of the year was $3.4 billion, up from $3 billion a year earlier, and comfortably exceeding analysts' estimates compiled by Bloomberg of $2.7 billion.
It was the first quarter under new CEO Ted Beck, and it highlighted the ability of Morgan Stanley's wealth management business to add new client assets at scale.
The division attracted billions of dollars more than investors expected this quarter. Net new wealth assets amounted to about $95 billion, far exceeding expectations of $62 billion.
“As a result of strong growth in net new assets, the firm has reached $7 trillion in client assets across wealth and investment management,” said Beck, who took over from longtime president James Gorman in January.
Morgan Stanley has set a long-term goal of amassing more than $10 trillion in client assets.
The bank's shares rose more than 2 percent in early trading.
Sharon Yeshaya, chief financial officer of Morgan Stanley, told the Financial Times that this quarter was “a proof point of what this business model can do in a relatively constructive environment.”
Profits at the wealth management division, which holds about $5.5 trillion in client assets and has been a driver of Morgan Stanley's growth in recent years, rose slightly in the first three months of the year. Analysts had expected it to decline.
Morgan Stanley said about half of the $95 billion in new assets came from its family office business, which serves ultra-wealthy clients.
The wealth business's pre-tax profit margin of 26 per cent still lags behind the long-term target of 30 per cent, which Morgan Stanley warned in January would miss in the near term. As interest rates rise, clients hold more of their wealth in cash, which is less profitable for banks like Morgan Stanley.
Morgan Stanley is also under investigation by several regulators over how its wealth management division handles potentially risky clients.
Revenue from equity trading — which analysts had expected to decline — instead rose 4 percent to $2.8 billion, although revenue from fixed income trading fell 4 percent.
Morgan Stanley's investment banking business reported a 16 percent increase in fees from a year earlier, benefiting from an improvement in mergers and debt and equity underwriting after nearly two years of lackluster activity.
But Morgan Stanley's recovery in investment banking has been less pronounced than in many of its rivals.
