Reports

Morgan Stanley's Earnings, Wealth Assets Rise

Tom Burroughes, Group Editor, January 22, 2021

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The group has made two big acquisitions in recent years - E*TRADE and Eaton Vance - with the former deal affecting Morgan Stanley's 2020 results.

Morgan Stanley’s acquisition last year of discount E*TRADE, one of the largest such wealth management deals in years, helped propel its earnings for 2020 as reported by the US firm this week. 

The New York-listed group earlier this week reported net revenues of $13.6 billion for the fourth quarter ended December 31, 2020 compared with $10.9 billion a year ago. Net income applicable to Morgan Stanley was $3.4 billion, or $1.81 per diluted share, compared with $2.2 billion, or $1.30 per diluted share, for the same period a year ago. 

The organization said the E*TRADE transaction affected comparisons of current year results to prior periods in its wealth segment. That deal was completed at the start of October. In the same month, Morgan Stanley announced that it was buying the asset manager, Eaton Vance. The transactions have consolidated the firm’s presence in the discount brokerage and asset management space, where scale is crucial in a low-margin business which is also subject to ferocious competitive pressures.

Full-year net revenues were a record $48.2 billion compared with $41.4 billion a year ago. Net income applicable to Morgan Stanley for the current year was $11.0 billion, or $6.46 per diluted share, compared with $9.0 billion, or $5.19 per diluted share, a year ago.

“Our unique business model continues to serve us well as we further execute on our long-term strategy with the acquisitions of E*TRADE and Eaton Vance. We enter 2021 with significant momentum, and I am very confident in our competitive position and our opportunities for continued growth,” James P Gorman, chairman and chief executive, said.

In the fourth quarter, net revenues stood at $5.681 billion, up from $4.582 billion; for the full year, net revenues rose to $19.96 billion from $17.737 billion. Fee-based client assets stood at $1.472 trillion at the end of December 2020, up from $1.267 trillion a year before. There were $66.1 in net new assets, rising from $27.1 billion a year before. Total costs rose to $4.611 billion in Q4 2020, up from $3.419 billion a year ago. The E*TRADE purchase and internet-linked costs, rises in the fair value of deferred compensation plans, and other factors, helped push up expenses.

Morgan Stanley’s acquisition of E*TRADE – an all-stock transaction valued at about $13 billion - followed Charles Schwab’s TD Ameritrade transaction a year earlier. 

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