Morgan Stanley shares slide as pre-tax income impacted by $535m in charges

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Morgan Stanley shares slide as pre-tax income impacted by $535m in charges
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(Updated - January 16, 2024 9:42 AM EST)

Morgan Stanley (MS) shares fell more than 3% on Tuesday after reporting its latest quarterly results, topping revenue expectations.

The bank reported Q4 EPS of $0.85, while revenue for the quarter came in at $12.9 billion, above the $12.7 billion reported a year ago and the consensus estimate of $12.79 billion.

Morgan Stanley's pre-tax income for the fourth quarter included $535 million of charges, with $286 million related to an FDIC special assessment and a $249 million legal charge related to a "specific matter".

In addition, full-year net revenues were $54.1 billion compared with $53.7 billion a year ago.

For the full year, the bank's wealth management division delivered revenues of $26.3 billion and added net new assets of $282 billion. Furthermore, its investment management division reported full-year revenues of $5.4 billion, while assets under management increased to $1.5 trillion.

“In 2023, the Firm reported a solid ROTCE against a mixed market backdrop and a number of headwinds," said Ted Pick, Morgan Stanley's CEO. "We begin 2024 with a clear and consistent business strategy and a unified leadership team. We are focused on achieving our long-term financial goals and continuing to deliver for shareholders.”

Reacting to the report, analysts at Goldman Sachs said the results were largely in line with expectations. However, they noted that trading revenue was worse than expected, 6% below the Street and 3% above 4Q19 levels, on sequentially lower FICC and lower Equities.

"We expect investor focus on: 1) GWM trends, in terms of net flows vs. margin sustainability; 2) timing capital markets normalization, given the strong investment banking results but weaker trading; 3) updated targets, with long-term guidance largely unchanged," the analysts wrote, maintaining a Buy rating and $105 price target on the stock.

Meanwhile, analysts at Jefferies maintained a Buy rating and $107 price target on MS, stating that excluding the legal charge, the bank's EPS was closer to $0.98. "NNA equaled +4% annualized growth and deposit levels increased +$2B q/q," they noted.

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