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Morgan Stanley Books Archegos Loss, But Profit Hits New High -- Update

04/16/2021 | 06:43am EDT

By Peter Rudegeair

Morgan Stanley said Friday that first-quarter profit more than doubled from a year earlier, another Wall Street firm that reaped big gains from the euphoric market conditions of early 2021.

The New York-based bank reported record quarterly profit of $4.1 billion, or $2.19 a share, on revenue of $15.7 billion. That beat the consensus estimates of analysts polled by FactSet of per-share earnings of $1.72 on revenue of $14.1 billion.

Record performance across many of its businesses was offset by $911 million in losses Morgan Stanley booked related to the blowup at Archegos Capital Management in March.

Still, Morgan Stanley rounded out an all-time great first quarter from the nation's big banks. Asset prices rallied, millions of investors traded stocks with abandon and scores of technology and special-purpose acquisition companies listed their shares publicly, creating an optimal environment for banks' Wall Street divisions. On Wednesday, Morgan Stanley rival Goldman Sachs Group Inc. reported record quarterly revenue and net income.

The same waves that lifted Goldman also lifted Morgan Stanley. Stock- and bond-trading revenue rose 29% to $5.8 billion. Fees from advising on deals and underwriting stock and bond offerings more than doubled to $2.6 billion.

Morgan Stanley's E*Trade business also benefited from the burst of trading activity among individual investors. The number of retail-trading clients at Morgan Stanley increased 7% from the end of 2020 to 7.2 million, and the average daily number of retail trades the company handled for the quarter exceeded 1.6 million.

Revenue at Morgan Stanley's wealth-management division, which includes E*Trade, increased 47% to roughly $6 billion. Its profit margin reached 27% before taxes, up slightly from the first quarter of 2020.

The firm's return on tangible equity, a measure of how profitably it puts shareholders' money to use, was 21% for the quarter.

Operating expenses increased 45% to $10.5 billion thanks in part to a 59% increase in compensation and benefits. Morgan Stanley's first-quarter compensation expense of $6.8 billion was 43% of revenue, a similar ratio from a year earlier.

Unlike other banks that have reported weak demand for loans among their consumer and commercial clients, Morgan Stanley boosted lending by 15% to $303.4 billion outstanding.

Write to Peter Rudegeair at Peter.Rudegeair@wsj.com

(END) Dow Jones Newswires

04-16-21 0843ET

Stocks mentioned in the article
ChangeLast1st jan.
MORGAN STANLEY 2.75% 86.83 Delayed Quote.20.59%
THE GOLDMAN SACHS GROUP, INC. 2.33% 365.97 Delayed Quote.35.61%
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Sales 2021 55 888 M - -
Net income 2021 12 391 M - -
Net Debt 2021 119 B - -
P/E ratio 2021 12,3x
Yield 2021 1,75%
Capitalization 157 B 157 B -
EV / Sales 2021 4,94x
EV / Sales 2022 4,97x
Nbr of Employees 71 000
Free-Float 70,2%
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Last Close Price 84,51 $
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James Patrick Gorman Chairman & Chief Executive Officer
Jonathan M. Pruzan Chief Financial Officer & Executive Vice President
Robert P. Rooney Head-Technology, Operations & Firm Resilience
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Aadhar Vice President-Technology
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