Morgan Stanley shares fall despite first quarter earnings beat

The company’s first-quarter profit fell to $2.84bn, or $1.70 per share, from $3.54bn or $2.02 per share year-on-year.

That was, however, still above the $1.68 per share market participants had pencilled in.

Revenue for the first quarter came in at $14.52bn, which was down from $14.8bn in the same period a year ago, but still above market expectations for $13.97bn.

Despite a volatile market environment, the firm reported a return on tangible common equity (ROTCE) of 16.9%.

Its expense efficiency ratio was 72%, including integration-related expenses of $77m, while its standardised Common Equity Tier 1 (CET1) capital ratio was 15.1%.

Morgan Stanley said its institutional securities net revenues totalled $6.8bn, which it put down to a strong performance in equity and fixed income, despite a less favourable market environment compared to a year ago, as well as lower results in investment banking.

Wealth management attracted significant net new assets of $110bn during the quarter, while net revenues were $6.6bn, positively impacted by mark-to-market gains on investments associated with certain employee-deferred compensation plans compared to losses a year ago.

The business delivered a pre-tax margin of 26.1%, but its results reflected higher provisions for credit losses and expenses.

Investment management results reflected net revenues of $1.3bn on assets under management of $1.4trn, amid declines in asset values from a year ago.

“The firm delivered strong results, with a ROTCE of 17% in a very unusual environment, demonstrating the strength of our business model,” said chairman and chief executive officer James Gorman.

“The investments we have made in our wealth management business continue to bear fruit as we added a robust $110bn in net new assets this quarter.”

Gorman added that equity and fixed income revenues were “strong”, although investment banking activity continued to be constrained.

“We maintained our strong capital levels and remain well positioned to provide long-term value to our shareholders.”

At 0759 EDT (1259 BST), shares in Morgan Stanley were down 2.53% in pre-market trading on the NYSE, at $87.58.

Reporting by Josh White for Sharecast.com.