Left Menu
Development News Edition

UPDATE 3-Morgan Stanley shares soar after Gorman boosts performance targets

Reuters | Washington DC | Updated: 16-01-2020 19:34 IST | Created: 16-01-2020 19:29 IST
UPDATE 3-Morgan Stanley shares soar after Gorman boosts performance targets
Representative image Image Credit: Flickr

Morgan Stanley lifted its performance goals on Thursday after beating Wall Street estimates by a wide margin, the latest sign that Chief Executive James Gorman's strategic vision for the bank is bearing fruit. Morgan Stanley set the bar higher for expense controls, returns on equity and wealth management profits over the next two years and beyond, according to a presentation on its website.

Its shares soared 5.7% in premarket trading. The bank is now targeting an efficiency ratio of 70-72% over the next two years and under 70% for the long term. That metric, which measures costs relative to revenue, is watched closely by investors.

Morgan Stanley has been meeting its prior goal of 73% or less. Keeping costs under control will help hit another higher goal for returns on equity, which measures how profitably a bank uses shareholder funds.

Morgan Stanley now aims to produce returns on equity of 13-15% through 2022, and 15-17% after that. It has been meeting the prior goal of 10-13%. Finally, the bank is now targeting a 28-30% pre-tax profit margin in its wealth unit over the next two years, and 30% or more after that. It has comfortably been meeting its previous margin goal of 26-28%.

"The company's 'strategic update' ... will ultimately drive performance of the day," KBW analyst Brian Kleinhanzl said in a note to clients. Morgan Stanley announced the new targets after reporting a fourth-quarter profit beat that showed most of its businesses flourishing.

Bond trading, underwriting, and investment management each produced much higher revenue, with M&A advisory being the only area to report a meaningful decline. Analysts have been asking Gorman when he would upgrade his previous goals for some time since the bank was routinely meeting them.

For the full year, its efficiency ratio was 73%, its return-on-equity was 11.7% and its wealth business generated a pre-tax margin of 27.2%. For the fourth quarter, Morgan Stanley's profit jumped 46%, to $2.09 billion, or $1.30 per share, from $1.36 billion, or 80 cents per share, a year ago. (https://reut.rs/37b9508)

Analysts had expected a profit of 99 cents per share, according to IBES data from Refinitiv. The bank's net revenue rose 27% to $10.9 billion.

Sales and trading revenue rose 28% to $3.19 billion. Bond trading sales more than doubled to $1.27 billion, while equities trading declined slightly. Revenue from investment banking, which includes advising on deals and helping corporations raise money, rose 11.2%, buoyed by higher bond and equity underwriting.

Investment management revenue nearly doubled to $1.36 billion, with overall net revenue rising by 27% to $10.86 billion. The bank also reported $172 million in severance costs after slashing its global workforce by 2%. The expense was in line with analyst expectations.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)


TRENDING

OPINION / BLOG / INTERVIEW

China: A savior for emerging markets or a poison pill?

... ...

Future of Urban Planning: Artificial Intelligence guiding the way

Advances in emerging technologies like Artificial Intelligence and Machine Learning can help us understand our cities better and derive useful insights from real-time data collected through automated models....

Videos

Latest News

French COVID-19 intensive care numbers down first time in two weeks

The number of people in intensive care units with coronavirus infection in France fell by 16 to 2,896, the first fall in two weeks after having risen by about 20 per day since mid-January.The French health ministry also reported 23,924 new ...

Sweden prepares ban on entry from Norway over new COVID strain

Sweden plans to introduce a temporary ban on entry from Norway, it said on Saturday, due to the spread of a new mutated form of the coronavirus in the neighbouring country. Norways capital Oslo and nine nearby municipalities earlier in the ...

Drugs worth Rs 25 lakh seized in Odisha

Around 250 gm of brownsugar was seized in Odishas Balasore district on Saturday,police said.Acting on a tip-off, police raised a location inJhadeswarpur area in Jaleswar town and found the drugs worthRs 25 lakh buried in the ground, a polic...

SDMC new initiative: Bring plastic waste, get food

The civic body in south Delhi has taken a new green initiative, according to which a person who brings one kg of plastic waste will get a free meal at a restaurant, officials said on Saturday.The South Delhi Municipal Corporation SDMC has t...

Give Feedback