Wall Street investors became bullish on Morgan Stanley after the investment banking giant reported first-quarter profit on Tuesday that blew away analysts’ expectations. This was the first quarter under new CEO Ted Pick.
Morgan Stanley shares rose 2.5% on the New York Stock Exchange after the bank reported a 16% increase in revenue compared to the first quarter of last year.
Morgan Stanley’s debt underwriting business also did well, thanks to increased corporate bond issuance, increasing $556 million from $407 million in the previous quarter.
The bank reported that equity underwriting income more than doubled to $430 million from $202 million in the year-ago period.
Advisory revenue decreased $461 million from $638 million in the prior year period due to lower mergers and acquisitions.
Pick told investors Tuesday that he expects mergers and acquisitions to pick up.
“We’re seeing increased momentum in investment banking, both in our M&A and in our underwriting pipeline across our corporate and financial sponsor clients,” Pick said.
He added that he expects a “multi-year M&A cycle” to begin now and last three to five years.
Pick predicted that overseas instability, primarily caused by the wars in Ukraine and Gaza, and continued strength in the U.S. economy could create opportunities for Morgan Stanley.
“The fact that the U.S. economy continues to grow, China is weakening, and parts of Europe are weakening means that people are becoming more exposed to the U.S.,” the CEO told investors. “It highlights the fact that we are thinking about it.”
He also cited the need for financial sponsors to make deals, sell private companies and return capital to investors.
Morgan Stanley has helped build its wealth business into a stronger company with more stable returns, smoothing out returns from more volatile businesses such as trading and investment banking.
“We have a strong backlog and momentum across all parts of our company,” Pick said after his first quarter.
“The pipeline is healthy, but against a backdrop of economic and geopolitical uncertainty.”
New assets rose to $95 billion, about half of which came from family offices. Wealth management revenue increased to $6.9 billion from $6.6 billion in the year-ago period.
with post wire
