Summary

Brief Company Overview

Morgan Stanley (NYSE:MS) is a global financial services firm established in 1935 in the US by J.P. Morgan & Co. partners as a response to the Glass-Steagall Act, which required the splitting of American commercial and investment banking businesses. The firm advises, originates, trades, manages and distributes capital for governments, institutions and individuals. The company was originally incorporated as a Delaware corporation in 1981 and the predecessors of the company can be traced back to 1924.¹ During the first year of its operation, Morgan Stanley grabs 24% of market share in underwriting business by handling $1.1 billion in public offerings and private placements. 

Morgan Stanley currently employs more than 75,000 employees around the globe in offices in 41 countries as of December 31, 2021. The company has its presence in the Americas, Asia-Pacific, Europe, Middle East & Africa, and Japan. The company has three reportable business segments - Institutional Securities, Wealth Management, and Investment Management. 

Recently, Morgan Stanley has completed acquiring E*Trade in October 2020 for $13.00 billion. On March 1, 2021, the company has completed acquisition of Eaton Vance Corp.² 

James Patrick Gorman is the Chairman & CEO of Morgan Stanley. The company has released its 2022 financial results reporting $53.7 billion in revenue, earnings per share (EPS) $6.15 and return on total capital employed 15.3%. 

Financial Highlights

Q4'22 Highlights

Morgan Stanley has reported net revenues of $12.7 billion for the fourth quarter ended December 31, 2022 compared with $14.5 billion a year ago. Net income applicable to Morgan Stanley was $2.2 billion, or $1.26 per diluted share, compared with $3.7 billion, or $2.01 per diluted share, for the same period a year ago. The fourth quarter of 2022 was impacted by severance costs of $133 million associated with a December employee action, partially offset by a net discrete tax benefit of $89 million. 

In the institutional Securities segment, the company has reported net revenue of $4.8 billion in the fourth quarter of 2022, down from $6.7 billion a year earlier. Pre-tax income was $748 million compared with $3.0 billion a year ago. Investment banking revenues, under this segment, has went down by 49% Quarter-to-Quarter in the past year; equity net revenues down by 24%; and fixed income net revenues up by 15%. 

In the Wealth Management segment, the company reported net revenues for the current quarter of $6.6 billion compared with $6.3 billion a year ago. Pre-tax income of $1.8 billion. The revenue in this segment is up by 6%. 

In the Investment Management segment, the company reported net revenues of $1.5 billion compared with $1.8 billion a year ago, down by 17% quarter-to-quarter. Pre-tax income was $214 million compared with $508 million a year ago. 

Annual Performance Highlights

For the year ended December 31, 2022, Morgan Stanley has reported full year net revenues of $53.7 billion and net income of $11.0 billion compared to $51.71 billion in net revenue and $15.12 billion in net income a year earlier. 

The Institutional Securities segment reported full year net revenues of $24.4 billion reflecting lower activity in Investment Banking driven by the uncertain macroeconomic environment, partially offset by strong performance in Fixed Income. Net revenues from this segment a year earlier was $29.8 billion. Reported Pre-tax income is $6.7 billion this year compared with $11.8 billion in the prior year. Investment banking revenues are down by 49% during the year; equity net revenues are down by 6%; fixed income net revenues are up by 20% compared to the previous year. Other revenues in the current year were driven by mark-to-market losses on corporate loans held for sale and loan hedges of $876 million. These losses were substantially offset by net interest income and fees of $701 million.

The Wealth Management segment reported net revenues of $24.4 billion compared with $24.2 billion in the prior year. Reported pre-tax income is $6.6 billion compared to $6.1 billion a year earlier. The business added net new assets of $311 billion, representing a full year 6% annualized growth rate from beginning period assets. 

Investment Management reported net revenues of $5.4 billion compared with $6.2 billion in the prior year, a decrease of 14% over the year. Pre-tax income was $807 million compared with $1.7 billion in the prior year.

The company has reported $6.23 in earnings per share (EPS) during the year ended December 31, 2022, which was $8.16 a year earlier. Return on average common equity is 11.2% this year, compared to 15.0% a year earlier. 

The current TTM dividend payout for Morgan Stanley (MS) as of February 10, 2023 is $3.10.³

Business Overview

Morgan Stanley is an investment management and financial services firm with its presence all over the world. The company was established in 1935 as an effort to separate investment banking business from normal commercial banking business after the Glass-Steagall Act was enacted in 1933 followed by the great depression. The formation of the company was executed by the partners of then J.P. Morgan & Co. With the reputation and business dynamics of J.P. Morgan, Morgan Stanley was able to grab a 24% market share in the first year of its operation. 

The company has three reportable segments - Institutional Securities, Wealth Management, and Investment Management. Substantially all of the operating revenues and operating expenses of the company are directly attributable to those business segments. 

1. ^ See SEC Filing 10-K, https://www.morganstanley.com/content/dam/msdotcom/en/about-us-ir/shareholder/4q2022.pdf
2. ^ https://tracxn.com/d/acquisitions/acquisitionsbyMorgan-Stanley#
3. ^ https://www.macrotrends.net/stocks/charts/MS/morgan-stanley/dividend-yield-history