Morgan Stanley revenue surges, flags almost $1 billion Archegos loss By Reuters
© Reuters. FILE PHOTO: FILE PHOTO: Morgan Stanley London headquarters at Canary Wharf monetary centre
By Elizabeth Dilts Marshall and Noor Zainab Hussain
(Reuters) -Morgan Stanley reported a 150% bounce in first-quarter revenue on Friday that sailed previous Wall Avenue expectations, whereas disclosing an virtually $1 billion loss from the collapse of personal fund Archegos.
The Wall Avenue powerhouse stated in an announcement that the one-off losses have been associated to a credit score occasion and subsequent losses from “a single prime brokerage shopper” that it recognized as Archegos on a name with analysts.
Morgan Stanley (NYSE:) was one in every of six banks that had publicity to Archegos Capital Administration, a household workplace fund that defaulted on margin calls late final month and triggered a firesale of shares throughout Wall Avenue.
“It’s not a monetary occasion within the grand scheme of issues, however it’s going to possible increase issues,” Oppenheimer analyst Chris Kotowski wrote in a be aware to shoppers.
Morgan Stanley’s shares have been down greater than 1% in premarket buying and selling.
Regardless of the one-time loss, total outcomes comfortably beat expectations, wrapping up a strong quarter for Wall Avenue’s greatest banks that benefited largely from reserve releases, document capital markets exercise and a surge in buying and selling volumes within the first quarter of 2021.
A growth in international dealmaking additionally boosted funding banking beneficial properties.
The spike in buying and selling, pushed partially by a Reddit-fueled buying and selling frenzy in “meme” shares like GameStop Corp (NYSE:), drove a 66% bounce in income at Morgan Stanley’s institutional securities enterprise.
In contrast to rivals reminiscent of JPMorgan Chase & Co (NYSE:) and Financial institution of America (NYSE:), each Morgan Stanley and Goldman Sachs Group Inc (NYSE:), lack massive client lending models, which has restricted their publicity to mortgage defaults amid the pandemic and allowed them to concentrate on their core twin strengths in funding banking and buying and selling.
Morgan Stanley stated internet revenue relevant to shareholders rose to $3.98 billion, or $2.19 per share, within the quarter ended March 31, from $1.59 billion, or $1.01 per share, a yr in the past.
Analysts have been searching for a revenue of $1.70 per share, based on IBES knowledge from Refinitiv.
Internet income jumped 61% to $15.72 billion.
Like larger rival Goldman Sachs, Morgan Stanley benefited from an unprecedented growth in dealmaking by means of particular objective acquisition corporations (SPACs).
International funding banking charges hit an all-time document of $39.4 billion through the March quarter, based on knowledge from Refinitiv.
Morgan Stanley conceded the second place within the league tables to JPMorgan Chase through the quarter, based on Refinitiv, however nonetheless raked in strong funding banking charges — the league tables rank monetary companies companies on the quantity of M&A charges they generate.
Funding banking income at Morgan Stanley greater than doubled to $2.6 billion, pushed largely by the amount of SPAC offers.
Morgan Stanley additionally generated document underwriting income from quite a few high-profile IPOs of corporations reminiscent of Affirm Holdings and AppLovin Corp.
Indicators of restoration within the U.S. financial system, as seen by means of bettering readings in inflation and employment knowledge, additionally pointed to higher prospects for capital markets this yr. An ongoing vaccination program has brewed optimism.
With the Fed indicating that rates of interest will keep close to document lows in the interim, Morgan Stanley and different funding homes stand to achieve from the elevated ranges of liquidity within the financial system.