Morgan Stanley sets US$12 billion profit goal for wealth unit

MORGAN Stanley is betting its wealth-management juggernaut is only just getting started, as it outlined a plan to nearly double profit from the business in coming years.

The bank’s new long-term goal of more than US$12 billion in pre-tax earnings will come from a mix of asset growth, more lending and expanding markets, said co-president Andy Saperstein.

“Over the past decade, we have completely transformed the business,” he said on Wednesday (May 31) at a conference hosted by AllianceBernstein Holding. “It’s only gotten us to the starting line. We are poised for a period of accelerating growth.”

Saperstein gave a much gloomier forecast for the bank’s sales and trading and investment banking operations. The bank began eliminating about 3,000 jobs this month amid a slowdown in dealmaking. The stock fell 2.2 per cent to US$81.55 at 3.23 pm in New York, extending this year’s decline to 4.1 per cent.

Saperstein, 56, is one of three men in the running to replace chief executive officer James Gorman, who earlier this month outlined his plan to step down within a year. Gorman is in his 14th year atop the New York-based bank after having climbed to the CEO spot in 2010.

Saperstein runs the firm’s US$4.6 trillion wealth management business, which has seen significant growth in the past 10 years and posted US$6.6 billion in pre-tax profit last year. The business has targeted bringing in US$1 trillion in net new assets every three years.

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Analysts estimate the firm will post US$10.8 billion in 2023 profit, down from US$11.4 billion in 2022. Investment banking fees are expected to slip below last year’s US$5.24 billion, which was half what the bank posted in 2021 amid a dealmaking frenzy.

Saperstein’s upbeat outlook for the wealth unit contrasted with his take on the state of play in the investment bank.

“Sales and trading (are) softer this quarter,” he said. “Results will be notably down year over year.”

The executive also said investment banking is “very challenged. As an industry, we have been in a sustained trough since last year”. BLOOMBERG