Fourth-Quarter Revenue Likely Sank at Morgan Stanley

Firm's fourth-quarter results likely will reflect 2022's financial markets turmoil

Person standing in front of building with the Morgan Stanley logo.

Spencer Platt / Getty Images

Key Takeaways

  • Morgan Stanley's overall revenue likely fell 14% in the fourth quarter, shrinking profits considerably.
  • Downturns in asset/wealth management and investment banking, accounting for the majority of Morgan Stanley's business, continued during the quarter.
  • Prospects for more M&A deals may improve in 2023.

Revenue and profits at banking giant Morgan Stanley (MS) likely fell in the fourth quarter, reflecting last year's market turmoil that hit its asset management business and dampened mergers and acquisitions (M&A) activity that fed its investment banking business.

Morgan Stanley, scheduled to release its fourth-quarter financial results Tuesday, likely recorded a 14% revenue decline to $12.5 billion, according to estimates from Visible Alpha. Profits are expected to fall 39% to $2.3 billion, or $1.28 per share,

Morgan Stanley Key Stats
   Q4 2022 (Est)  Q4 2021  Q4 2020
Adjusted EPS ($) $1.28 2.01 1.92
Revenue ($B) $12.5 14.5 13.6
 Investment Banking Revenue ($B) 1.3 2.6 2.4

Source: Visible Alpha

The firm's results should reinforce the mixed challenges banks and the rest of the U.S. financial sector have faced as the Federal Reserve has raised interest rates to fight inflation.

Monetary policy tightening sent stock and bond markets reeling last year while raising recession concerns. Morgan Stanley's shares have reflected the broader economic uncertainty. They've fallen 7.5% in the past year, with the S&P 500 falling 14%.

1-year trailing total return for Morgan Stanley and the S&P 500


JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo all released their fourth-quarter earnings results Friday, the first large U.S. banks to do so. As expected, recession concerns caused them to increase the assets they set aside to cover potential loan losses. But rising net interest income in their retail banking units, aided by rising interest rates, helped cushion the negative impacts of that increased expense and lower investment banking revenue from reduced M&A activity.

Morgan Stanley, however, relies less on interest income and more on its asset and wealth management businesses, for which it receives percentage-based fees based on the total amount it manages—amounts that fell in 2022 as U.S. stocks and bonds sank.

That segment typically accounts for about a third of Morgan Stanley's revenue, and Visible Alpha estimates sales in that unit fell 16% in the fourth quarter.

Investment Banking Tanks

Suffering far more: the firm's investment banking business, which makes up about a fifth of its revenue. Visible Alpha projects a 49% decline in sales for that unit, mirroring a malaise that slashed global investment banking revenue by half during the quarter, according to data from Dealogic.

How long the malaise persists remains unclear, but PwC in its recent "US Deals 2023 Outlook" said it sees some improvement possible from last year, during which just 97 initial public offerings got completed in the first three quarters of the year, an 87% decrease from the prior year.

"The pool of potential IPOs is significant and contains good opportunities," PwC's report states. "More than 650 potential unicorns may be looking for an exit, creating significant opportunities for investors and for corporates that could acquire VC-backed companies."

Financial firms might need that boost as the year-over-year benefits of rising interest rates in boosting net income eventually dissipate, even though those benefits will continue into this year, said R. Scott Siefers, an analyst with Piper Sandler.

"We seem to be nearing the end of this just explosive expansion in (net interest) margins and almost straight up move in (net interest income)," Siefers said. "Investors will focus much less on (banks) fourth-quarter actual results than they will on the outlook."

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Reuters. "Bank Earnings: Big banks stockpile funds for possible recession, show resilience."

  2. PwC. "US Deals 2023 Outlook."

  3. SPGlobal. "Markets look for hard landing for banks in Q4'22 reports"

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.