Investors on Wall Street were bullish on Morgan Stanley after the investment banking giant reported first-quarter profits that blew away analyst forecasts on Tuesday — the first full quarter under newly installed CEO Ted Pick.
Shares of Morgan Stanley gained 2.5% on the New York Stock Exchange after the bank reported a 16% jump in revenue compared to the first quarter of last year.
Morgan Stanley’s fixed-income underwriting also performed well thanks to higher bond issuance — rising $556 million compared to $407 million from the previous first quarter.
The bank reported that equity underwriting revenue more than doubled to $430 million from $202 million a year ago.
The decline in mergers and acquisitions resulted in a drop in revenue for its advisory unit — $461 million compared to $638 million year-over-year.
Pick told investors on Tuesday he expects mergers and acquisitions to rebound.
“We saw building momentum in investment banking, both in our M&A and underwriting pipelines across corporate and financial sponsor clients,” Pick said.
He added that he anticipates a “multi-year M&A cycle” to begin now and last 3 to 5 years.
Pick predicted that instability overseas — fueled primarily by the wars in Ukraine and Gaza — as well as the continued strength of the US economy could present an opportunity for Morgan Stanley to capitalize on.
“The fact that the U.S. economy continues to grow, that China is weaker, the parts of Europe are weaker highlights the fact that people want to get even more exposure to the US”, the CEO told investors.
He also cited the need of financial sponsors to make deals, sell private companies and return money to investors.
Morgan Stanley has built its wealth business into a powerhouse that generates more stable revenue and helps smooth out revenue from more volatile businesses such as trading and investment banking.
“We have strong backlogs and momentum in every part of the firm,” Pick said after his first quarter at the helm.
“While the pipelines are healthy, there remains a backdrop of economic and geopolitical uncertainty.”
New assets climbed to $95 billion, with around half of those coming from family offices. Wealth management revenue rose to $6.9 billion from $6.6 billion a year ago.
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