Morgan Stanley Tops Q4 Earnings Forecast With Solid Wealth Management Gains, Performance Target Boost

Morgan Stanley rode solid gains in its wealth management business to a much better-than-expected fourth quarter bottom line, sending shares higer in pre-market trading.

Morgan Stanley MS posted stronger-than-expected fourth quarter earnings Thursday thanks in part to solid gains from its wealth management business.

Shares in the bank surged, however, after CEO James Gorman boosted performance targets for the current year, touting an efficiency ratio -- which tracks costs at against revenues -- that will fall under 70% over the long term. The bank also sees equity returns in the region of 13% to 15% through 2022, a figure it sees rising to 15% to 17% thereafter.

Morgan Stanley said earnings for the three months ending in December came in at $1.30 per share, up from 80 cents over the same period last year and well ahead of the Street consensus forecast of $1.00. Group revenues, the bank said, rose 21.5% to $10.39 billion, again topping analysts' estimates of a $9.737 billion tally.

Equity trading revenues were flat to last year at $1.9 billion, but fixed income revenues rose to $1.3 billion. Wealth management revenues rose 11% to $4.6 billion while investment management notched $1.4 billion, both figures coming in firmly ahead of analysts' forecasts. 

"We delivered strong quarterly earnings across all of our businesses. Firmwide revenues were over $10 billion for the fourth consecutive quarter, resulting in record full year revenues and net income," said Gorman. "This consistent performance met all of our stated performance targets.” 

Morgan Stanley shares were marked 6.6% higher in early trading following the earnings release and target update to change hands at $56.42 each, a move that would extend the stock's six-month gain to around 27%.

Overall quarterly sales and trading revenue surged 28.4% to $3.194 billion, Morgan Stanley said, with $2.31 billion of that total coming from the bank's trading division. 

Non-compensation expenses were essentially flat to last year at $2.9 billion, while compensation fees were sharply higher, rising 38% to $5.23 billion.