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Portfolio > Economy & Markets > Fixed Income

Morgan Stanley Q4 Earnings Disappoint in 'Difficult Environment'

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Morgan Stanley’s fourth-quarter results fell short of expectations, one day after rival Bank of America topped earnings estimates.

Adjusted net income at Morgan Stanley in the quarter was $1.5 billion, or $0.80 per share, versus $643 million, or $0.26 per share, a year ago. As the stock markets hit volatility, revenue fell in all four business units and weakened to $8.5 billion from $9.5 billion a year earlier.  

For the full year, though, sales rose to $40.1 billion from $37.9 billion in 2017, and net income improved to $8.7 billion from $6.1 billion.

“In 2018 we achieved record revenues and earnings, and growth across each of our business segments — despite a challenging fourth quarter,” according to Chairman and CEO James Gorman. “While the global environment remains uncertain, our franchise is strong and we are well positioned to pursue growth opportunities and serve our clients.”

Wealth Management

In the latest quarter, the unit’s net income soared 144% from a year earlier to $769 million. Pretax income, however, weakened to $1.01 billion from $1.15 billion, and the group had a pretax margin of 24.4% in the latest quarter.

Revenue in Q4 dropped 6% to $4.1 billion, mainly due to losses on investments tied to some employee deferred compensation plans, according to the bank.

These recent results “reflect the difficult environment, seasonality and certain compensation-related items,” Morgan Stanley said in its earnings report.

Bank of America’s wealth business, which includes Merrill Lynch, had a 43% year-over-year jump in profits to $1.1 billion in the latest quarter. Its pretax margin was 29% in Q4’18 vs. 26% in Q4’17. Revenue was roughly $5 billion, up from $4.7 billion a year ago.

Advisor Headcount

Morgan Stanley’s advisor headcount rose by nearly 40 from the prior quarter to 15,694 as of Dec. 31, though that figure is down by about 20 from a year earlier.

Lending from other bank units and broker-dealer margin activities were $83 billion in the fourth quarter vs. $80 billion a year ago.

Total client assets were $2.3 trillion in the fourth quarter, with fee-based assets at $1.0 trillion. Fee-based asset flows during the quarter were $16.2 billion. Average fees and commissions per advisor were $1.1 million.

For the full year, net revenues for 2018 were $17.2 billion, up 2% from $16.8 billion in 2017. The 2018 pretax margin was 26.2% compared with 25.5% a year ago, and net income improved 49% year over year to $3.5 billion.

In December, Morgan Stanley said it was working with the Yext Knowledge Engine platform to improve its advisors’ websites and boost its prospecting success.

The technology works with CRM and facilitates “conversational AI via voice assistants and chatbots to provide direct, accurate answers” about Morgan Stanley advisors, according to a press release.  

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