Financial Results

Wealth Revenues Rise At Morgan Stanley

Editorial Staff October 19, 2022

Wealth Revenues Rise At Morgan Stanley

While some of the results showed improvements, the firm – like its peers – could not withstand the impact of falling equity markets over the course of the reporting period compared with the previous year.

Morgan Stanley has reported a rise in wealth management net revenues, rising to $6.1 billion in the third quarter of this year, up from $5.9 billion a year ago. 

Pre-tax income in this segment of the US firm stood at $1.6 billion, up from $1.5 billion a year ago. The pre-tax margin was 26.9 per cent in the current quarter, or 28.4 per cent excluding the impact of integration-related expenses.

Results reflect higher net interest income on higher interest rates. The business added $65 billion in net new assets, bringing total net new assets year-to-date to $260 billion, Morgan Stanley said last week. It joined a range of US financial institutions reporting quarterly figures.

The firm said that total costs in its wealth business stood at $4.46 billion, rising from $4.405 billion a year before. Compensation costs rose a touch to $3.171 billion from $3.159 billion. Non-compensation expenses rose to $1.289 billion from $1.246 billion. With compensation costs, the impact of higher headcount was offset by lower compensable revenues and a decline related to certain deferred compensation plans linked to investment performance.

Non-compensation expenses increased from a year ago primarily driven by investments in technology as well as higher marketing and business development costs. 

“Firm performance was resilient and balanced in an uncertain and difficult environment, delivering a 15 per cent return on tangible common equity. Wealth management added an additional $65 billion in net new assets and produced a pre-tax margin of 28 per cent, excluding integration-related expenses, demonstrating scale and stability despite declining asset values,” James P Gorman, chief executive and chairman, said. “While investment banking and investment management were impacted by the market environment, fixed income and equity navigated challenging markets well. We continue to maintain our strong capital position while repurchasing $2.6 billion of shares and distributing a healthy dividend.”

Group results
Morgan Stanley reported that its pre-tax income fell to $3.388 billion from $4.874 billion; net revenues slid to $12.986 billion in Q3 2022 from $14.753 billion. Fee-based client assets dipped to $1.628 trillion at the end of September, down from $1.752 trillion a year ago. Fee-based asset flows slumped to $16.7 billion from $70.6 billion.

The Standardized Common Equity Tier 1 capital ratio – a common measure of a firm’s capital buffer – was 14.8 per cent, 150 basis points above the updated standardized approach CET1 requirement that began on October 1, 2022. 

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