Morgan Stanley Profits Drop Despite Strong Wealth Results

Morgan Stanley’s investment bank and its giant wealth unit surpassed analysts’ expectations in the first quarter even as profits fell from a year earlier, dragged down by a drop-off in deal-making and a jump in loan-loss provisions.

Net income slid 20% from a year earlier to $2.84 billion amid a slowdown in the trading and banking businesses. The firm’s investment bank was able to stave off a steeper drop as the two key divisions edged past analysts’ expectations, propelled by its fixed-income traders and merger-advisory fees.

Still, the company’s provisions for credit losses quadrupled to $234 million from a year earlier, primarily related to commercial real estate and deterioration in the macroeconomic outlook.

The firm’s wealth business recorded $6.56 billion in revenue, higher than estimated and up 11% from a year earlier. Morgan Stanley now oversees $4.6 trillion in that unit after adding $110 billion in net new assets.

“About $20 billion came from events associated with March,” Chief Financial Officer Sharon Yeshaya said of the net new assets added to the wealth-management business. She attributed the vast chunk of the new assets to the bank’s investments paying off. “The durability of our business model is being shown through our results.”

It has already laid out a target of attracting $1 trillion in net new assets every three years for the wealth business.