(Bloomberg) — Morgan Stanley traders offered first-quarter earnings that beat expectations, as its wealth management controller also got back on track — both handing a key win for its new chief Ted Pick. .
Revenue from the trading business came in at $5.33 billion, beating previous analysts' estimates and trailing Goldman Sachs Group Inc.'s trader revenue.
The property unit generated $6.88 billion in revenue, beating analysts' expectations. Net new assets at the division, a key metric tracked by Morgan Stanley watchers, were $95 billion, higher than the previous two quarters combined and above what the bank needs to meet the target it has been seeking to raise the business.
Choose, who took steering in January, is facing the challenge of convincing investors that he can advance the pace of growth set by his predecessor, revive fortunes at the investment bank he oversaw and accelerate the expansion of his wealth management giant. As the money management business has grown steadily, executives are eager to capitalize on a reopening of the capital markets that could bring more deals, trades and capital raising businesses.
The bank's shares have been the worst performer among the biggest US banks so far this year, after outperforming rivals for much of the past decade. Profits for the quarter came in at $3.4 billion on $15.1 billion in revenue.
“As a result of strong growth in net new assets, the firm has reached $7 trillion in client assets in wealth and investment management,” Pick said in a statement.
The company's revenue rose by more than 4% even as the increase in expenses was limited to just over 2%. Return on equity increased to 14.5%.
The bank's shares rose about 3.7% to $90.21 at 8:58 a.m. in early New York trading. Shares of Morgan Stanley are down 6.7% so far this year, dragging gains across the banking sector, especially among its larger peers.
Shares took a dive last week following a report in the Wall Street Journal that a cadre of US regulators are looking into the firm's efforts to prevent possible money laundering by wealthy clients. Investors have also scrutinized its ability to meet its ambitious target of attracting new assets to its wealth unit and delivering promising pre-tax margins of up to 30%.
“It was an excellent quarter all around,” Oppenheimer analyst Chris Kotowski wrote in a note. “However, we would expect that last week's news reports of regulatory investigations into MS's AML processes may be an overshoot on the Q&A earnings call.”
Read more: Morgan Stanley's Ted Pick will succeed James Gorman as CEO
Morgan Stanley's fixed-income trading business posted $2.49 billion in revenue, compared with estimates of $2.33 billion. In equities, revenue totaled $2.84 billion. In that business, the New York-based firm has lost the crown to Goldman Sachs Group Inc., whose shares totaled $3.31 billion in the same period.
Fees from advisory on the deals came in at $461 million, compared to estimates of $510 million. Capital underwriting revenue rose to $430 million as the return of public listings and secondary offerings raised bankers' hopes for a reopening of those markets.
Despite advisory revenue falling behind its main rivals, Morgan Stanley Chief Financial Officer Sharon Yeshaya pointed to the bank's prominent position in recently announced deals.
“Backlogs are growing and we're seeing sponsor activity pick up,” she said. “We are in a great position.”