June 21, 2024

Morgan Stanley rides wealth management boom again as investment bank lags

Morgan Stanley was boosted by its wealth management unit as the ongoing deal drought has taken its toll on Wall Street’s dealmakers.

The lender’s wealth management business added net new assets of $282bn in 2023, growing 7%, according to results published on 16 January. Investment banking revenue, meanwhile, tanked from 13% to $4.6bn as deal activity has remained in the doldrums.

The bank has been one of the few to have successfully won wealth management business from high-net-worth clients, proving a less volatile source of fees than investment banking.

Investment banking revenue was down 13% over the year as M&A led a decline in fees.

However, compensation costs in Morgan Stanley’s institutional securities unit, which houses its investment bank, still rose from $1.6bn in the final quarter of 2022 to $1.7bn in the same period last year because of an increase in bonus accruals during Q4.

Investment banking revenues of $1.25bn in the final quarter were ahead of analyst expectations.

Morgan Stanley cut around 3,400 jobs in June amid a dearth in deals in its deepest reductions since the 2008 financial crisis. It follows rivals including Goldman Sachs and Citigroup, which were also forced to make painful cuts as an M&A drought stretched into its second year. Goldman has tried and failed to push into wealth management for the mass affluent, rolling back on acquisitions this year.

While Goldman is set to increase bonuses for some dealmakers, Morgan Stanley is starting to cut back. The Wall Street bank reduced bonuses by 10 to 15% compared with a year earlier for investment bankers, Financial News reported, announcing them to staff on 10 January.

READ Can Morgan Stanley’s new boss live up to Gorman’s promise?

Investment banking fees dropped 15% last year to $67.1bn globally, according to data provider Dealogic. Morgan Stanley retained its fourth place finish in the revenue league tables, with 5.4% of the market. Bank of America’s fees dropped 2% in 2023, while JPMorgan was down 4% and Citigroup’s dealmaking team fell by 11%.

In October, Morgan Stanley named Ted Pick as its new chief executive, taking over from James Gorman, who had held the post since 2010. Pick was previously the head of its institutional securities unit, winning a three-horse race to take the top job, which he started on 1 January.

To contact the authors of this story with feedback or news, email Paul Clarke and Justin Cash

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