Morgan Stanley posts profit surge despite COVID-19 fallout

By: Thornton M.

Morgan Stanley is the latest Wall Street megabank to post a quarter of monster profits despite continued economic wreckage across the US from the coronavirus.

The financial giant on Wednesday posted a 51-percent surge in earnings, driven by its potent investment banking, trading and wealth management businesses that rode a surging stock market, even as the pandemic spurred more unemployment and business closings nationwide.

Chief Executive James Gorman’s team posted earnings of $1.81 per share for the final quarter of 2020, easily beating the Wall Street estimate of $1.27. The firm pulled in revenue of $13.6 billion, smashing the $11.54 billion estimate, and boosted its profit to $3.4 billion.

“I am extremely proud of how our employees came together to support each other and our communities and deliver for our clients in an incredibly challenging year,” said Gorman, who last April revealed he had personally weathered a bout with COVID-19 at the outset of the pandemic.

“We enter 2021 with significant momentum, and I am very confident in our competitive position and our opportunities for continued growth.”

Morgan Stanley’s revenue growth in 2020 across business lines was massive as investment banking hauled in almost $1.5 billion than it did in 2019 thanks to a wildly frothy IPO market and the firms trading desk generated $5.1 billion more thanks to an unprecedented market rebound fueled by the Federal Reserve.

And the firm’s suddenly dominant wealth management division grew almost $1.3 billion in 2020 after Gorman’s $13 billion acquisition of E*Trade closed in October.

Morgan Stanley’s earnings beat comes after expectations were ratcheted up in the wake of strong quarters from JPMorgan Chase and Goldman Sachs, with the latter more than doubling its profits.

On a call with analysts Wednesday morning, Gorman said his bank’s strong results “serve as evidence that Morgan Stanley has reached an inflection point,” adding, “The next decade will be characterized by growth.”

In addition to E*Trade, Morgan Stanley has also announced in October that it will acquire Boston-based fund manager Eaton Vance for $7 billion, further bolstering a wealth management division that Gorman believes will be best in class for the foreseeable future and will generate a profit margin of 30 percent.