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Morgan Stanley Chief Executive James Corman predicted the Wall Street bank would triple its assets under management to $20tn, while a serious push into wealth management failed to offset sluggish trading activity in the second quarter.
Corman, who plans to step down as CEO by the middle of next year, has led the expansion of Morgan Stanley’s stable businesses, such as wealth and asset management.
Despite that push, Morgan Stanley’s earnings were subject to market volatility, with a sharp decline in fixed-income trading revenue weighing on Morgan Stanley’s profits in the second quarter. Net income fell 13 per cent year-on-year to $2.2bn, according to analysts’ estimates.
However, Corman said on Tuesday that the bank’s wealth management business had become an “unstoppable force”, along with its asset management division, which is targeting $10tn in assets under management and will eventually reach $20tn. .
“I know people will call me crazy, and I know it’s the end of my tenure and I have to do things like this. But if you do 5 percent [compounding] In 14 years, you end up with $20 tn,” Gorman told analysts.
“It seems like a long way off. But I started this job 14 years ago and the $6.3tn we have today is much, much less. So it’s possible,” he said.
Morgan Stanley shares were trading up more than 6 percent in morning trading in New York.
With Corman stepping down as chief executive, Morgan Stanley is expected to choose his successor from a trio of Ted Pick, Andy Saperstein and Dan Simkowitz.
The bank’s wealth management arm, run by Saperstein, reported revenue of $6.7bn in the quarter, up 16 per cent from a year earlier and ahead of estimates of $6.5bn. The business took in $89.5bn in net new assets, more than analysts had expected of $60.3bn.
UBS analysts described asset inflows as “very strong”.
Morgan Stanley’s corporate bonds division, which Big runs and includes investment banking and trading, posted net income of $5.65bn, down 8 per cent from a year earlier and slightly beating analysts’ expectations of $5.5bn.
Investment banking revenues were less than $1.1 billion, ahead of estimates of $1bn, and ended amid a slump in contracts that saw more than a year of revenue declines. Fixed income trading fell 31 per cent to $1.7bn, in contrast to 12 months ago when business picked up as central banks raised interest rates.
Equity trading revenue fell 14 per cent year-on-year to $2.5bn. Debate over the debt ceiling in the US also created “unnecessary” uncertainty in markets in April and May, Gorman told analysts.
Rival Bank of America on Tuesday reported a 7 percent rise in investment fees, while its adjusted earnings from sales and trading rose 10 percent from a year ago.
JPMorgan Chase last week reported a 6 percent drop in investment banking fees, while Citigroup reported a 31 percent drop in fees. JP Morgan’s trading revenue fell 10 percent and Citi’s trading revenue fell 13 percent.
As Goldman Sachs reports its results on Wednesday, analysts are in for a weak quarter.
