Morgan Stanley's performance echoes the "trading frenzy": Q4 investment banking business surges, net profit doubles.

Morgan Stanley (MS.US) announced its financial performance for the fourth quarter. Revenue for the fourth quarter increased by 25.7% year-on-year to $16.2 billion, exceeding market expectations. Net profit more than doubled, reaching $3.72 billion. Diluted earnings per share were $2.22, much higher than the $0.85 in the same period last year, and also higher than market expectations. Morgan Stanley's profit in the fourth quarter saw a significant increase, mainly driven by trading and stock sales, with the company's revenue hitting a new annual high. In 2024, Morgan Stanley achieved a record $61.8 billion in net revenue. Trading activities were particularly busy in various regions, especially in Asia and the Americas, with annual stock trading revenue increasing by 22%, reaching a historic high. This was mainly due to Morgan Stanley's fourth-quarter trading business exceeding analysts' expectations. Like other Wall Street competitors, due to fluctuations brought on by the U.S. election and economic data in the last few months of 2024, their year-end performance was strong. The stock business was the biggest winner in Morgan Stanley's performance, with revenue in this quarter increasing by 51% year-on-year to $3.33 billion, reaching an all-time high for the year. Meanwhile, fixed income business increased by 42% year-on-year to $1.93 billion. Morgan Stanley Chief Financial Officer Sharon Yeshaya said in an interview, "What we saw in the quarter was, post-election, there was a lot of activity around clients seeking to re-risk, primarily driven by increased appetite for risk in the equities business." Yeshaya was referring to the increase in bulk brokerage business. Morgan Stanley CEO Ted Pick has been at the helm of the company for a year now, taking over from James Gorman, who led the company for over a decade. Gorman led a strategic shift towards wealth management, which Pick says he plans to continue implementing. While revenue in the wealth business exceeded expectations, net asset additions were slightly lower than expected. The net assets in the wealth division surged by $56.5 billion, bringing the total assets for the year to $252 billion, but still below the level needed to achieve Morgan Stanley's goal of $1 trillion every three years. At the same time, investment banking business also profited from the rise in the stock market, which encouraged initial public offerings (IPOs) and subsequent stock offerings, while the lower cost of borrowing prompted companies to issue bonds. Investment banking expenses at Morgan Stanley increased by 25% to $1.64 billion this quarter, with advisory fees rising to $779 million, stock underwriting fees nearly doubling to $455 million, and bond underwriting fees reaching $407 million. Pick had previously stated that the business was at the forefront of multi-year recovery after experiencing a slowdown related to high interest rates. Wall Street was boosted by last year's economic rebound. Increasing confidence stimulated companies to issue stocks and bonds. Companies also completed transactions, raising M&A activity from a ten-year low in 2023. Data from Dealogic shows global investment banking revenue increased by 26% in 2024, reaching $8.68 billion, with North American business growing by 33% year-on-year. Bankers expect that in 2025, transactions will be much busier, buoyed by hopes of lower corporate taxes, relaxed regulations, and Trump's pro-business stance. Before the announcement of its fourth-quarter performance, JPMorgan Chase (JPM.US) and Goldman Sachs Group, Inc. (GS.US) also reflected this trend in their performances. JPMorgan Chase's stock and fixed income trading divisions achieved their best-ever performance in the fourth quarter, while Goldman Sachs Group, Inc.'s stock trading business set a record for annual performance. Bank of America Corp. (BAC.US) exceeded expectations with its fourth-quarter earnings earlier on Thursday, as investment banking expenses reached their highest level in three years, and net interest income was above expectations. Wells Fargo & Company (WFC.US) saw a significant year-on-year increase of 59% in investment banking revenue in the fourth quarter. Morgan Stanley's performance undoubtedly solidified the recovery on Wall Street. The revival of trading and M&A markets boosted the performance of all major U.S. banks and made traders optimistic about the upcoming Trump era in 2025. The performances announced on Thursday by Morgan Stanley and Bank of America further proved that the two-year trading drought ended in 2024, as trading significantly surged with the increased volatility around the U.S. presidential election.