Morgan Stanley has recorded a $911m hit from the blow-up last month of Archegos, Bill Hwang’s family office, which has caused billions of dollars of losses across global investment banks.
The hit was a blemish on the Wall Street bank’s record set of first-quarter results, which were driven by a surge in dealmaking, trading and wealth management income.
The results statement recorded a $644m credit loss and $267m of trading losses relating to “a single prime brokerage client”, which a Morgan Stanley spokesperson later confirmed was Archegos.
Rivals such as Nomura and Credit Suisse fared worse from the collapse — the Swiss bank lost at least $4.7bn and the Japanese about $2bn — but Goldman Sachs escaped largely unscathed.
Morgan Stanley posted overall net income of $4.1bn in the fourth quarter, versus $1.7bn a year earlier, according to a filing on Friday. That translated into earnings per share of $2.19, beating analysts’ expectations for $1.72 a share, according to FactSet.
Net revenues increased 60 per cent to $15.7bn off the back of a broad surge across its three divisions. Investment banking rose 128 per cent, largely due to an initial public offering and Spac boom in equity underwriting. Fixed income revenue was 44 per cent higher.
The four other major Wall Street banks also reported a blowout quarter in investment banking. Goldman saw a 73 per cent increase in that business and on average those that had already reported saw revenue climb 59 per cent.
Elsewhere, Morgan Stanley’s wealth and investment management were up 47 per cent and 90 per cent respectively.
We “delivered record results,” said chief executive officer James Gorman. “The integrated investment bank continues to thrive . . . [and] wealth management brought in record flows of $105bn. The firm is very well positioned for growth.”
Gorman has been acquisitive in recent years. Early in 2020 he negotiated the $13bn acquisition of online brokerage ETrade and its 5m customers. That was followed by a $7bn deal to buy investment manager Eaton Vance, beating out rival JPMorgan and almost doubling its assets under management to $1.2tn.
Morgan Stanley’s first quarter follows a buoyant 2020 which saw profit surge to a record high, a jarring contrast with the havoc caused by the coronavirus pandemic.
The stock has more than doubled from its pandemic low a year ago and is up 18 per cent this year, outpacing the 11 per cent rise in the S&P 500.
Additional reporting by Laura Noonan