Morgan Stanley investment banking slump overshadows wealth management growth

Despite reductions in revenues overall, the bank also reported positive earnings in fixed income, with revenues up 15% to $1.4 billion in Q4 compared with 2021.

Morgan Stanley’s investment banking arm saw revenues plummet by nearly 50%, overshadowing growth in wealth management revenues for the fourth quarter.

Full year revenues were down 10% to $53.7 billion in comparison with 2021 on the back of a slump in investment banking also echoed in the results of fellow Wall Street banks Citi and Goldman Sachs released in the last week.

Investment banking revenues at Morgan Stanley dropped from $2.4 billion in Q4 2021 to $1.3 billion last quarter, reflecting lower activity driven by the uncertain macroeconomic environment.

Equity revenues were down 24% to $2.2 billion in the fourth quarter. Morgan Stanley attributed this to markdowns on certain strategic investments versus a significant mark-to-market gain in the prior year and lower prime brokerage results due to a decline in average client balances.

The bank also reported positive earnings in fixed income, with revenues up 15% to $1.4 billion in Q4 compared with 2021.

The decline in investment banking overshadowed a positive quarter for Morgan Stanley’s wealth management business which reported net revenues up 6% to $6.6 billion. However, investment management saw declines in net revenues by 17%, with the bank reporting net revenues of $1.5 billion.

Morgan Stanley reported a net revenue of $12.7 billion, a decrease by 12.4% compared to the net revenue of $14.5 billion achieved in the same time period a year ago.

The bank reported a net income applicable to Morgan Stanley of $2.2 billion, down 41% compared to $3.7 achieved in Q4 2021.

Morgan Stanley’s fourth quarter was impacted by severance costs of $133 million associated with a December employee action, which was partially offset a net discrete tax benefit of $89 million.

“Wealth management provided stability with record revenues and over $310 billion in net new assets, investment management benefited from diversification, and within institutional securities our equity and fixed income revenues were strong, offset by investment banking,” said James P. Gorman, chairman and chief executive of Morgan Stanley.

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