Morgan Stanley profits climb 9% on asset management business

NEW YORK (AP) — Investment bank Morgan Stanley said fourth-quarter profit rose 9% from a year ago, helped by a surge in fee income from its growing management business of assets and heritage. The investment banking division also boosted its results, as trading on Wall Street continued at a blistering pace.

The New York-based company said Wednesday it earned $3.7 billion in the quarter, or $2.01 per share, compared with earnings of $3.39 billion, or $1.81 per share, at the same period a year ago. The results exceeded analysts’ expectations.

Like nearly every other major bank that has released quarterly results so far, Morgan Stanley faced higher payroll and social charges in the quarter. The big banks are all competing for talent, especially young bankers who can lead the next generation of traders and traders, and the banks have been willing to pay handsomely for those employees.

In a call with investors on Tuesday, the CEO of Morgan Stanley’s main rival, Goldman Sachs, said “wage inflation is everywhere” and that he should continue to pay higher salaries to employees for keep in-house.

For the full year, Morgan Stanley set aside $24.6 billion to pay its well-paid employees, an 18% increase from the previous year.

Morgan had a performance similar to its competitors during the quarter. Investment banking revenue rose as companies looked to Wall Street to close deals and go public, while trading revenue was down, reflecting a calmer trading environment in recent months of 2021 versus 2020.

Morgan’s strong earnings growth came from its wealth and asset management business. Asset management generated $5.39 billion in revenue last quarter, up 37% from a year earlier. Morgan has made a few significant acquisitions in the wealth and asset management space over the past two years. The bank bought online brokerage firm E-Trade in 2020 and wealth management firm Eaton Vance in 2021.

The acquisitions brought hundreds of billions of dollars in new assets and customer wealth under the Morgan Stanley brand. Morgan CEO James Gorman decided several years ago to expand the bank’s business into more stable forms of income instead of focusing on trading and investment banking, which can be seasonal and affected by uncontrollable economic forces.

“Combined with Investment Management, we now have $6.5 trillion in client assets. We have a sustainable business model with scale, capital flexibility, momentum and growth,” Gorman said in a statement.

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