Morgan Stanley Books Archegos Loss, But Profit Hits New High -- Update
By Peter Rudegeair
Morgan Stanley said Friday that first-quarter profit more than
doubled from a year earlier, another Wall Street firm that reaped
big gains from the euphoric market conditions of early 2021.
The New York-based bank reported record quarterly profit of $4.1
billion, or $2.19 a share, on revenue of $15.7 billion. That beat
the consensus estimates of analysts polled by FactSet of per-share
earnings of $1.72 on revenue of $14.1 billion.
Record performance across many of its businesses was offset by
$911 million in losses Morgan Stanley booked related to the blowup
at Archegos Capital Management in March.
Still, Morgan Stanley rounded out an all-time great first
quarter from the nation's big banks. Asset prices rallied, millions
of investors traded stocks with abandon and scores of technology
and special-purpose acquisition companies listed their shares
publicly, creating an optimal environment for banks' Wall Street
divisions. On Wednesday, Morgan Stanley rival Goldman Sachs Group
Inc. reported record quarterly revenue and net income.
The same waves that lifted Goldman also lifted Morgan Stanley.
Stock- and bond-trading revenue rose 29% to $5.8 billion. Fees from
advising on deals and underwriting stock and bond offerings more
than doubled to $2.6 billion.
Morgan Stanley's E*Trade business also benefited from the burst
of trading activity among individual investors. The number of
retail-trading clients at Morgan Stanley increased 7% from the end
of 2020 to 7.2 million, and the average daily number of retail
trades the company handled for the quarter exceeded 1.6
Revenue at Morgan Stanley's wealth-management division, which
includes E*Trade, increased 47% to roughly $6 billion. Its profit
margin reached 27% before taxes, up slightly from the first quarter
The firm's return on tangible equity, a measure of how
profitably it puts shareholders' money to use, was 21% for the
Operating expenses increased 45% to $10.5 billion thanks in part
to a 59% increase in compensation and benefits. Morgan Stanley's
first-quarter compensation expense of $6.8 billion was 43% of
revenue, a similar ratio from a year earlier.
Unlike other banks that have reported weak demand for loans
among their consumer and commercial clients, Morgan Stanley boosted
lending by 15% to $303.4 billion outstanding.
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires
April 16, 2021 08:43 ET (12:43 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.