Monday, 25 September, 2017

Morgan Stanley caps surge by U.S. banks

The corporate logo of financial firm Morgan Stanley Asian stocks slip on UK surprise election, weak earnings
Edmund Wade | 20 April, 2017, 00:09

The investment bank run by James Gorman said its quarterly profits jumped 74 percent, topping analysts' estimates, as revenue from bond trading almost doubled following interest rate hikes by the Federal Reserve.

Technology and consulting company IBM slumped after it reported $18.16 billion in revenue in the first quarter, and according to FactSet, that was more than $200 million below analysts' estimates. Deutsche Bank AG raised shares of Morgan Stanley from a "hold" rating to a "buy" rating and raised their price objective for the stock from $42.49 to $47.00 in a research report on Wednesday, March 29th. Performance was particularly good in the Americas region, helped by the Federal Reserve's decision to raise interest rates in March. "We're prepared if it does go into effect". But investors have been wondering when wage growth will pick up for more people.

The Standard & Poor's 500 index gained 2 points, or 0.1 percent, to 2,344 as of 1:55 p.m.

US stocks are rebounding Wednesday as strong results from Morgan Stanley and rising bond yields send banks and other financial companies higher.

Since the start of the New Year, Morgan Stanley (NYSE:MS) shares have seen a move of -1.35%. Gorman outlined a plan in 2012 to severely cut back on the business, which has since gone through several staff reductions and reduced risk-weighted assets by hundreds of billions of dollars. Morgan Stanley has a dividend payout ratio of 23.7% indicating that its dividend is sufficiently covered by earnings.

Morgan Stanley said in January that fixed income sales and trading revenues had increased post restructuring.

Eventually, the bank began rebuilding parts of the business, particularly those that had attractive returns under tougher capital requirements enforced after the financial crisis. Bank of America Corp., by contrast, posted stronger trading revenue that helped fuel a 40 percent surge in first-quarter profit. We're generating "significantly more revenues than before we had that restructuring", he said.

The company reported an impressive total revenue of 37.95 Billion in the last fiscal year.

In wealth management, Morgan Stanley had net revenues of $4.1 billion compared with $3.7 billion in the same period a year earlier.

James Gorman is rubbing Goldman Sachs' nose in it. Morgan Stanley's chief executive didn't just hit his return target with a $1.8 billion first-quarter earnings showing. Plus, it would potentially extend the periods during which the bank could seek approval to increase their shareholder payouts, removing at least one method of improving profitability. Morgan Stanley's results echoed those reported by peers, with the exception of Goldman Sachs.

Bond trading remained strong across Wall Street during the quarter as investors shuffled their positions around US interest rate hikes.

Today, however, Morgan Stanley (MS) is bucking that trend by not only reporting earnings that topped the Street consensus but climbing on the news.

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