Morgan Stanley closes the balance sheet season of major US banks in the first quarter of 2021 with further exploits: profits more than doubled to 4.1 billion dollars, equal to 2.19 dollars per share above the 1.72 dollars forecast, driven by trading , investment banking and asset management. And revenue which, with a surge of 61%, reached 15.7 billion against the 14.1 expected. However, Morgan’s quarter was tainted by the crisis of the Archegos Capital fund, the large family office: it reported losses of 911 million dollars related to its exposure to the group and its bets.
Brillano investment banking e trading
Trading, stocks and bonds, generated revenue of $ 5.8 billion, up 29 percent. Investment banking operations, from IPOs and placements to mergers and acquisitions, including the SPAC boom, more than doubled to 2.6 billion.The bank also reported growth among retail clients, thanks to the takeover of E * Trade, up 7% from the end of 2020 to 7.2 million. The division of wealth management, asset management and which includes E * Trade itself, overall reported a 47% surge in revenue to almost 6 billion.
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The crisis of Archegos
But the Archegos saga burns. Morgan was the only major American bank to suffer from losses related to the collapse of the fund. Due to the exposure, Morgan’s equity trading activities have given away the leadership to rival Goldman Sachs and JP Morgan. Equity trading brought in 2.88 billion dollars, an increase of 17%, against the more than three billion of the two competitors. Other financial giants, who supported the collapsed family office in its operations, suffered from the sell-off of securities it had bet on to face margin calls: Credit Suisse lost $ 4.7 billion and Nomura perhaps two billion. Morgan, who was the fund’s main prime broker ahead of Credit Suisse, according to rumors reported in recent days by Cnbc would have tried to limit his exposure in the hours before the collapse by selling stocks linked to Archegos for almost 5 billion to a series of hedge funds .
CEO Gorman, “complex event”
Morgan chief executive James Gorman admitted that the Archegos case was a “very complex event” but he was satisfied with how his company handled it, with a “cauterization” strategy. He also added that he will look more closely at the finances and transparency of some family offices in the future. Archegos was a family office created by manager Bill Hwang, formerly Tiger Asia Management and in the past also in the storm for insider trading and scam, which effectively acted as an aggressive hedge.
Strength points
Among the strengths, in greater detail, Morgan’s quarterly financial statements highlighted multiple figures. Fixed income revenues of 2.97 billion, up 44%; investment banking generated € 2.61 billion with a fourfold underwriting of securities, driven by surges in technological IPOs and operations connected to the SPACs. Wealth management had soaring revenues to 5.96 billion from 5.68 billion.