Morgan Stanley reported a stronger-than-expected first quarter, as the investment bank’s wealth management unit reported record profits and revenue over the past year.
Morgan Stanley’s CEO James Gorman called the results “our strongest quarter in many years,” citing improved performance across most areas of the firm. Overall, the Wall Street firm reported net income of $2.31 billion, up 39 percent from the $1.4 billion reported a year ago. The reported profits of $1.14 per diluted share beat analysts predictions by $0.36, according to Seeking Alpha.
Revenues for the investment bank also beat analysts expectations, hitting $9.9 billion in the first quarter compared to $9.0 billion in revenues reported a year prior.
Morgan Stanley’s wealth management unit hit several record highs in the quarter, including for net income, revenue and pre-tax margin. The unit earned a record high of $855 million in pre-tax income, up from the $686 million reported in January 2014. Revenue also rose 5 percent in the first quarter, climbing to a record $3.8 billion.
Wealth management also reported a record pre-tax profit margin of 22 percent, compared to 19 percent reported a year ago and in the fourth quarter. The quarter’s results are in line with the firm’s previously stated goals of hitting a 22 to 25 percent profit margin in the wealth management business.
The firm reported record high overall client assets of $2.047 trillion, up slightly from last quarter’s $2.03 trillion. Fee-based asset flows were down for the first quarter at $13.3 billion, compared to the $19 billion reported a year ago and $20 billion last quarter. Client assets in fee-based accounts increased 11 percent over the past year to $803 billion.
The record-breaking quarter came amid a loss of 161 advisors. Morgan Stanley’s now 15,915 advisors earned annualized revenues of $959,000 each and had about $129 million in assets under management per advisor.
Morgan Stanley’s outgoing chief financial officer Ruth Porat sounded off on the regulatory environment the investment bank has experienced over the last several years, calling for a “time out” to digest and assess which regulatory changes are working out and which are not.
Additionally, she said she did not expect the Department of Labor's fiduciary proposal to have a meaningful impact on business, although added that the firm could see changes in activity and higher compliance costs related to the rulemaking. Morgan Stanley plans to comment on the proposal during the ongoing 75-day window.