Morgan Stanley Reports Blowout Quarter Cementing The Bank's Best Year In History

Concluding the big banks flurry of Q4 updates, this morning Morgan Stanley reported results for the final quarter of 2020 and it will probably not be a big surprise that, like Goldman yesterday, they were stellar.

Morgan Stanley reported a Net Income of $3.39BN, up 50% from $2.24BN a year ago resulting in adjusted EPS of 1.92 (the company used a 23% effective tax rate vs 15.7% a year ago) smashing estimates of 1.27, on blowout revenue of 13.6BN, up 26% Y/Y and more than $2BN above the consensus estimate of 11.54BN.

The impressive quarter was driven by stellar results in the bank's core Institutional Securities (i.e., sales & trading and ibanking) division, which smashed expectations:

  • Equities sales & trading revenue $2.50 billion, +30% y/y, estimate $2.15 billion
  • FICC sales & trading revenue $1.66 billion, +31% y/y, estimate $1.51 billion
  • Institutional Investment Banking revenue $2.30 billion, estimate $1.64 billion, as equity underwriting more than doubled from a year earlier.

Some more details:

Investment Banking revenues up 46% from a year ago:

- Advisory revenues increased from a year ago "driven by higher M&A completed transactions."

- Equity underwriting revenues increased from a year ago "driven by higher revenues on IPOs, blocks and follow-on offerings."

- Fixed income underwriting revenues decreased from a year ago "as lower volumes contributed to a decline in bond revenues, partially offset by higher event-driven activity."

Sales and Trading net revenues up 32% from a year ago:

- Equity sales and trading net revenues increased from a year ago "reflecting strong performance across products and geographies driven by increased client activity, with particular strength in derivatives."

- Fixed Income Sales and trading net revenues increased from a year ago "reflecting strong performance across businesses, benefitting from strong client engagement and market volatility, with notable strength in foreign exchange and credit products."

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