Morgan Stanley Reports Record Earnings, Stock Slides On Surprising $911MM Archegos Loss

The firm’s stock traders also did better than expected, bringing in $2.875 billion, which is above the $2.597 billion analysts in a Bloomberg survey were calling for.

One potential sour spot for Morgan Stanley was M&A., with the firm’s revenue from advising corporations on deals rising to $480 million, but that’s actually less than the $580 million consensus estimate.

Meanwhile, wealth management’s $6 billion revenue was way up from $4.1 billion a year ago. According to MS, asset management revenues were up, “reflecting higher asset levels and record fee-based flows,” while transactional revenues were up 40% (“excluding the impact of mark-to-market gains on investments” from deferred-comp plans.) The results also reflect “incremental revenues” from E*Trade “and strong client activity.” The pre-tax income of $1.6 billion “resulted in a reported pre-tax margin of 26.9%” Morgan Stanley said that the comparison of the new results to earlier periods is “impacted by the acquisition of E*Trade.”

Commenting on the results, CEO James Gorman said that “the Firm delivered record results. The integrated Investment Bank continues to thrive. We closed the acquisition of Eaton Vance which takes Investment Management to over $1.4 trillion of assets. Wealth Management brought in record flows of $105 billion. The Firm is very well positioned for growth in the years ahead.”

And while the rest of the results were virtually pristine, the Archegos disclosure left Morgan Stanley as the only major US bank to be nursing losses from the implosion of Bill Hwang’s family office. Morgan Stanley was one of the early backers of Archegos despite the legal taint tied to Hwang and served as underwriter of the ViacomCBS $3.1BN stock offering in late March that started the crash.

MS stock initially dipped following news of the Archegos hit but has since rebounded modestly from the lows.

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