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Morgan Stanley MS

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Morningstar’s Analysis

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1-Star Price

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5-Star Price

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Economic Moat

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Capital Allocation

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Morgan Stanley Reports Record Results Despite $911 Million Archegos Loss

Michael Wong, CFA, CPA Sector Director

Analyst Note

| Michael Wong, CFA, CPA |

Morgan Stanley had strong revenue and earnings in the first quarter, despite hundreds of millions of dollars in losses related to Archegos Capital. Morgan Stanley reported net income to common shareholders of $4 billion, or $2.19 per diluted share, on a record $15.7 billion of net revenue. Pre-provision net revenue increased 61% from the previous year and 16% from the previous quarter. While part of the increase from the previous year is due to Morgan Stanley’s acquisition of online brokerage E-Trade that closed in October 2020 and asset manager Eaton Vance that closed in March 2021, most is due to the exceptional performance in the company’s institutional securities business. The company was able to report these strong results and had an annualized return on tangible equity of 21.1%, despite booking $911 million of losses related to Archegos Capital. We don’t anticipate making a material change to our $70 fair value estimate for narrow-moat Morgan Stanley and assess shares as fairly valued.

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Company Profile

Business Description

Morgan Stanley is a global investment bank whose history, through its legacy firms, can be traced back to 1924. The company has institutional securities, wealth management, and asset management segments. The company had about $4 trillion of client assets as well as nearly 70,000 employees at the end of 2020. Approximately 40% of the company's net revenue is from its institutional securities business, with the other half coming from wealth and asset management. The company derives about 30% of its total revenue outside the Americas.

Contact
1585 Broadway
New York, NY, 10036
T +1 212 761-4000
Sector Financial Services
Industry Capital Markets
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 71,000

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