Morgan Stanley's wealth-management unit is a key growth area, analysts say

By Steve Gelsi

Jefferies analyst Daniel Fannon praises bank's 'large wealth management opportunity'

Morgan Stanley's wealth-management unit stands out as the "primary engine of growth" for the investment bank, analysts at Jefferies said in a research note.

Morgan Stanley (MS) will focus on the roughly 18 million accounts in its ecosystem as key to growth in its business providing financial services to wealthy clients, analysts said.

"We continue to view Morgan Stanley's growth opportunity within wealth management as differentiated vs peers," Jefferies analyst Daniel Fannon said in a Monday research note.

Morgan Stanley plans to focus on clients within the workplace channel with the financial services resources as a "large net new asset opportunity," he said.

"An acceleration in the migration to fee-based advice is also key to getting to wealth management margin targets," he said.

Morgan Stanley expects to add $1 billion in net new assets every three years with a margin target of greater than 30%, analysts noted.

The bank's institutional securities group (ISG) has had a good start to the year with strong activity so far in the first quarter.

Bright spots in that business include debt capital markets and equity capital markets, which have picked up.

"The ease of execution has increased, which has kick-started new issuance activity despite higher interest rates," Fannon said.

Uncertainty on the macroeconomic front and client repositioning remain positive factors, analysts said.

"Market share gains in areas such as financing (both equity and debt) are a priority, as Morgan Stanley looks to increase the contribution from more durable revenue streams," Fannon said.

In the face of "anemic" organic growth in its investment management unit, Morgan Stanley is moving to integrate the business more broadly across the firm, and wealth management.

Morgan Stanley's stock rose 4% on Monday as one of the leaders among S&P 500 SPX stocks on the heels of the Jefferies note.

Prior to Tuesday's moves, Morgan Stanley's stock was down by 3.4% so far in 2024, compared to a 7.6% gain by the S&P 500.

Also read: Wall Street's biggest banks are beating investment-banking revenue estimates

-Steve Gelsi

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03-05-24 0928ET

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