Morgan Stanley is facing scrutiny about how thoroughly it vets prospective clients and their sources of wealth, but so far it's not impacting the investment bank's ability to attract and retain customers, executives said Thursday.
Nine months after the Wall Street Journal reported the
Client assets rose to $7.9 trillion as of Dec. 31, from $6.6 trillion in the year-ago period and are edging closer to the firm's goal of more than $10 trillion.
One of the key points of concern, according to media reports, has been Morgan Stanley's anti-money-laundering controls, including those used to vet international clients who want to engage with the firm's wealth management business. Investments to improve processes and systems are being made firmwide, not just in wealth management, and have been for years as the company looks to improve its technology to better understand client data, Yeshaya said.
"What we've been actively pursuing is making sure that across the firm, not just specific to wealth, we can service and look … at all of our clients," Yeshaya said. "You can see that very well in terms of our ability to actually continue to attract assets. We'll be making all of the necessary investments to continue to be world-class, both across people and our technology."
Yeshaya's comments echoed those made previously by Ted Pick, who completed his first year as CEO on Jan. 1. Pick is also now the chairman of Morgan Stanley, succeeding James Gorman, the firm's former CEO who left the board of directors as expected at the end of 2024.
The wealth management business, which has been central to Morgan Stanley's business model since the 2008 financial crisis, recorded net revenues of $28.4 billion for all of 2024. That represents about 46% of the firm's full-year net revenues of $61.8 billion.
Acquisitions have helped grow the unit. In 2020, Morgan Stanley
Today, the wealth management segment has more than 19 million relationships, and it's added net new assets of more than $250 billion in each of the past two years, Pick said on the call.
Overall, Morgan Stanley reported a solid fourth quarter. Net revenues were $16.2 billion for the three-month period ended Dec. 31, reflecting a 26% year-over-year increase. Net income more than doubled from the year-ago quarter, at $3.7 billion, and earnings per share were $2.22.
Analysts polled by S&P Capital IQ had predicted an EPS of $1.69.
Bank of America, Citigroup, Wells Fargo and Goldman Sachs have also withdrawn from the Net-Zero Banking Alliance in the past month, as President-elect Donald Trump prepares to take office.
Expenses of $11.2 billion rose 4% year over year. Occupancy and equipment costs were flat compared with the same quarter in 2023, in part because of office consolidation in the prior year.
The financial targets that Pick
For 2024, the efficiency ratio was 71%, an improvement from 2023 when it was 77%. Meanwhile, the firm's ROTCE, which is a key profitability metric, came in at 18.8% for 2024, up from 12.8% the prior year.
Analysts were largely upbeat about the results. Saul Martinez, an analyst at HSBC, wrote Thursday in a research note that he "continue[s] to see positive earnings momentum, good fee-based net flows in wealth management and leverage to an [investment banking] recovery cycle."
However, Morgan Stanley could see some pressure to do even better.
"Given the strength of the shares in recent months, we believe that expectations have risen and the shares offer a balanced risk-to-reward profile," Martinez said.
Morgan Stanley's stock has risen nearly 60% in the past year, topping the performance of the KBW Nasdaq Bank Index, which has gained 45.6% during the same time frame. As of mid-afternoon Thursday, Morgan Stanley's shares were up about 2.5%.
