Finance

Morgan Stanley saw stronger-than-expected revenue from equity and fixed-income trading amid volatile markets, helping it to top estimates in the quarter.
Equity trading revenue came in at $3.2 billion, higher than an expectation of $2.7 billion, according to StreetAccount.
Fixed income revenue totaled $2.9 billion, topping estimates of $2.2 billion.
While Morgan Stanley’s headline numbers exceeded expectations, the bank still experienced a slowdown in some parts of the business compared with a year ago.

A screen displays the trading information for Morgan Stanley on the floor of the New York Stock Exchange (NYSE), January 19, 2022.
Brendan McDermid | Reuters

Morgan Stanley on Thursday reported first-quarter earnings that surpassed Wall Street expectations, thanks to the bank’s solid revenue gains from trading.
Shares of the New York-based bank rose 0.8% on Thursday.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: $2.02 vs. $1.68 expected
Revenue: $14.8 billion vs. $14.2 billion expected

The bank saw stronger-than-expected revenue from equity and fixed-income trading amid volatile markets and higher completed M&A transactions.
Morgan Stanley’s equity trading revenue came in at $3.2 billion, higher than an expectation of $2.7 billion, according to StreetAccount. Fixed-income revenue totaled $2.9 billion for the quarter, topping an estimate of $2.2 billion from StreetAccount.
“The Firm delivered a strong ROTCE [return on average tangible common shareholder’s equity] of 20% in the face of market volatility and economic uncertainty, demonstrating the resilience of our global diversified business,” Chairman and CEO James Gorman said in a statement.
“Institutional Securities navigated volatility on behalf of clients extraordinarily well, Wealth Management’s margin proved resilient and the business added $142 billion net new assets in the quarter, and Investment Management benefited from its diversification,” Gorman said. “The quarter’s results affirm our sustainable business model is well positioned to drive growth over the long term.”

While Morgan Stanley’s headline numbers exceeded expectations, the bank still experienced a slowdown in some parts of the business compared with a year ago. Net income of $3.7 billion, or $2.02 per share, was nearly 8% lower than the $4.1 billion, or $2.19 per share, it reported a year ago.
Wall Street banks are grappling with a sudden slowdown in mergers-related advisory fees and a sharp drop in IPO activity in the first quarter, a reversal of the boom that fueled last year’s strong results. The change was triggered by stock market declines and Russia’s invasion of Ukraine, forces that made markets less hospitable for deals and public listings.
The source of the other half of Morgan Stanley’s revenue, the bank’s giant wealth management and investment management divisions, didn’t hold up as well.
Its revenue from wealth management totaled $5.9 billion, flat from a year ago and missing an estimate of $6.2 billion, according to StreetAccount.
Morgan Stanley’s investment banking revenue also disappointed, coming in at $1.6 billion, marking a 37% decrease from a year ago and lower than a $1.8 billion estimate per StreetAccount. The slowdown was due to a significant decrease in equity underwriting revenues, the bank said.
Read the full earnings release here.
— CNBC’s Hugh Son contributed reporting.

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National security advisor Jake Sullivan said Thursday that the Biden administration is focused on ensuring Russia does not evade punishing global sanctions.
Sullivan said the U.S. is concerned that China could use its economic relationship with Russia to blunt economic penalties.
Sullivan said he expects the White House to announce “in the next week or two” enforcement actions against those helping Russia to dampen the impact of sanctions.

Jake Sullivan, White House national security adviser, speaks during an interview at an Economic Club of Washington event in Washington, D.C., U.S., on Thursday, April 14, 2022.
Al Drago | Bloomberg | Getty Images

WASHINGTON — National security advisor Jake Sullivan said Thursday that the Biden administration is focused on ensuring Russia isn’t able to evade punishing global sanctions for its war in Ukraine.
Sullivan, speaking before The Economic Club of Washington, D.C., said the administration is now focusing on enforcing the sanctions already levied against Russia, its officials and elites.

“I mean what we have done is unprecedented in terms of a major economy to take this set of steps across financial sanctions, investment bans, the export controls,” Sullivan said when asked whether the U.S. has exhausted the penalties it can impose against Russia. “But where our focus will be in the course of the coming days is on evasion,” he added.
“As Russia tries to adjust to the fact that it’s under this massive economic pressure, what steps can they try to evade our sanctions and how do we crack down on that?”
President Joe Biden’s top national security advisor added that he expects the White House to announce “in the next week or two” certain targets that are trying to facilitate Russia’s sanction evasion.
In the weeks since Russia’s invasion of its ex-Soviet neighbor, Washington and its allies have imposed rounds of coordinated sanctions vaulting Russia past Iran and North Korea as the world’s most-sanctioned country.
Sullivan reiterated that the U.S. has deep concerns about China’s alignment with Russia and the possibility that the world’s second-largest economy may attempt to help Moscow blunt sanctions.

Sullivan said that the U.S. has not yet observed Beijing providing military assistance to the Kremlin for its fight in Ukraine.
“It’s something that we constantly monitor and of course we don’t have complete visibility all the time,” Sullivan said. “Russia and China have an economic relationship, and there is continuing economic intercourse between Russia and China. But have we seen a systematic effort to undermine, weaken or defy sanctions at this point? We have not.”

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Health savings accounts are a tax-advantaged way for households with high-deductible health insurance plans to save for future medical expenses.
Black and Hispanic savers, women and low-income individuals are using HSAs in a way that may reinforce and exacerbate existing health inequities, according to the Employee Benefit Research Institute.

The Good Brigade | Digitalvision | Getty Images

A popular way to save for out-of-pocket medical expenses might be contributing to health-care inequality, new research suggests.
Health savings accounts are tax-advantaged accounts available to Americans with high-deductible health insurance policies. Federal law established them in 2003. Since then, HSAs have grown quickly as employers have adopted high-deductible plans for their workforces to save money.

HSAs offer a three-tiered break on income taxes: contributions are tax-free, as are investment earnings and withdrawals for eligible medical expenses.

More from Your Money Your Future:

Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

When used optimally, they’re among the most efficient ways to save and build wealth, according to financial advisors.
However, Black and Hispanic savers, women and low-income individuals aren’t using the accounts as effectively as others, such as men, higher earners, and white and Asian savers, according a new report published by the Employee Benefit Research Institute.
The former groups tend to contribute less money to HSAs, have smaller balances and invest these funds less often — dynamics that may reinforce and exacerbate health inequities already present along racial, gender and income lines, according to the report.

“Racially based, ethnicity-based and income-based discrepancies in the usage of HSAs are troublesome,” according to the report, which was authored by Jake Spiegel, a research associate at the institute.

“To the extent that those enrolled [in high-deductible health plans] do not also enroll in HSAs, do not take full advantage of the tax benefits HSAs offer or do not save a sufficient amount, they may find it more difficult to pay for medical expenses, and may delay necessary care or forgo it altogether,” he wrote. “Delaying or forgoing care has deleterious effects on health.”

Disparities

About 58% of private-sector workers are enrolled in a high-deductible health insurance plan, according to EBRI. These plans generally carry a lower monthly premium but higher out-of-pocket expenses. Total HSA assets eclipsed $100 billion in January, according to Devenir, a consulting firm.
White accountholders have an average HSA balance of $5,004, while Black and Hispanic savers have $3,438 and $3,737, respectively.
That difference isn’t due to length of account ownership; each has had their HSA for roughly the same amount of time (three years, on average), according to EBRI.

Racially based, ethnicity-based and income-based discrepancies in the usage of HSAs are troublesome.

Jake Spiegel
research associate at the Employee Benefit Research Institute

Instead, it’s largely due to contributions: White savers contribute $1,806 to their accounts on average each year, a sum that eclipses that of Black and Hispanic savers by $494 and $412, respectively.
White and Asian savers also take larger and more frequent distributions from their accounts than Black and Hispanic savers, which suggests they’re spending more money on health care, the report found.
The report didn’t elaborate on broader socioeconomic factors at play. But the data reflect broader wealth and income disparities among Americans.

Whites held 84% of the $142 trillion in U.S. wealth at the end of 2021, according to the Federal Reserve. By comparison, Blacks held 4% and Hispanics 2.5%.
The average Black and Hispanic saver may have less means to contribute money to an HSA each year or to use other funds for out-of-pocket medical costs (thereby deferring HSA withdrawals and building savings for future years).
The EBRI report is based on data for more than 11 million accounts. It uses ZIP codes (those that are disproportionately white, Black, nonwhite Hispanic, or Asian) as a proxy for income, race and ethnicity. More

Ripple’s fight against a lawsuit from the Securities and Exchange Commission has gone “exceedingly well,” CEO Brad Garlinghouse said.
The SEC alleges Ripple conducted an illegal securities offering through sales of XRP, the world’s sixth-biggest cryptocurrency.
Ripple argues XRP should be treated as a virtual currency rather than an investment contract like a stock.

PARIS — Ripple CEO Brad Garlinghouse is confident the company will come out well as its lengthy court battle with the U.S. Securities and Exchange Commission nears a conclusion.
The San Francisco-based start-up is fighting the SEC over allegations that Ripple, Garlinghouse and executive chairman Chris Larsen engaged in an illegal securities offering through sales of XRP, a cryptocurrency the company both uses commercially and is closely associated with.

Ripple has disputed the SEC’s findings, arguing XRP should be treated as a virtual currency rather than an investment contract like a stock.
“The lawsuit has gone exceedingly well, and much better than I could have hoped when it began about 15 months ago,” Garlinghouse said at a CNBC-hosted fireside chat at the Paris Blockchain Week Summit Thursday. “But the wheels of justice move slowly.”
The SEC was not immediately available for comment when contacted by CNBC.
Earlier this week, a judge ruled the SEC cannot edit the contents of emails purporting to show there were conflicts of interest regarding how the watchdog dealt with XRP and other tokens, like ether.

Ripple is “already operating in the worst case scenario,” having  sold “zero” enterprise contracts to financial institutions in the U.S last year. “We’re having record growth,” he said. “It’s just outside the United States.”

Founded in 2012, Ripple touts itself as a blockchain-based alternative to SWIFT, the global interbank messaging system that enables trillions of dollars in payments every day. The company sells its software to banks and fintech companies.
Ripple also uses XRP, the sixth-largest cryptocurrency by market value, to facilitate cross-border transactions. The company owns a majority of the 100 billion XRP tokens in circulation, which it periodically releases from an escrow account to keep prices stable.

Brad Garlinghouse, chief executive officer of Ripple Labs Inc., speaks during a panel discussion at the Singapore FinTech Festival in Singapore, on Monday, Nov. 12, 2018.
Wei Leng Tay | Bloomberg | Getty Images

Garlinghouse said there’s a lot at stake if his company does not win the lawsuit.
“This case is important, not just for Ripple; it’s important for the entire crypto industry in the United States,” he said. “It would really be negative for crypto in the United States.”
If Ripple loses, most tokens trading on platforms in the U.S. would be deemed securities, Garlinghouse said, meaning those platforms would have to register with the SEC as broker dealers. “That’s cost, that’s friction.”
“If you determine XRP as a security of Ripple, we have to know every person that owns XRP,” he said. “That’s an SEC requirement. You have to know all of your shareholders. It’s not possible.”

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Check out the companies making headlines before the bell:
Twitter (TWTR) – Twitter surged 8.2% in premarket trading after Tesla (TSLA) CEO Elon Musk – currently Twitter’s second-largest shareholder – offered to take the company private for $54.20 per share in cash. The proposed deal would value Twitter at more than $43 billion.

Goldman Sachs (GS) – Goldman shares rose 2.2% premarket after the investment bank reported better-than-expected first-quarter profit and revenue. Goldman noted that a “rapidly evolving market environment” had a significant impact on client activity during the quarter.
Morgan Stanley (MS) – Morgan Stanley earned $2.02 per share for the first quarter, beating the $1.68 consensus estimate, with revenue coming in above estimates as well. The bank said the upbeat results came despite market volatility and economic uncertainty, and the stock rose 2.3% premarket.
Wells Fargo (WFC) – Wells Fargo reported adjusted quarterly earnings of 88 cents per share, 8 cents above estimates, but revenue was slightly below analyst projections. The bank said it would be helped by rising interest rates, but that aggressive Fed actions and the Ukraine war add to downside economic growth risks. The stock fell 3.2% premarket.
UnitedHealth Group (UNH) – The health insurer reported an adjusted quarterly profit of $5.49 per share, 11 cents above estimates, with revenue also topping Wall Street forecasts. Results were helped by growth in the company’s Medicare Advantage business, and it also raised its full-year outlook.
Rite Aid (RAD) – The drug store operator lost an adjusted $1.63 per share for its latest quarter, larger than the 57 cent loss expected by Wall Street analysts, although revenue exceeded estimates. Rite Aid also projected a fiscal 2023 loss that is smaller than analysts had been anticipating, as well as detailing a cost reduction program. Shares rose as much as 5.5% in premarket trading before retreating.

UPS (UPS) – UPS rose 1% after Loop Capital upgraded it to “buy” from “hold,” saying the call was largely based on an attractive valuation for the delivery service’s stock.
Western Digital (WDC), Seagate Technology (STX) – Susquehanna Financial downgraded both hard disk drive makers, moving Western Digital to “neutral” from “positive” and Seagate to “negative” from “neutral,” on expectations of weaker demand in 2023. Western Digital fell 3% in premarket trading while Seagate lost 3.3%.
Rent The Runway (RENT) – The fashion rental company’s stock was volatile in premarket trading after it reported a smaller-than-expected loss, as well as revenue and profit margins that exceeded Street forecasts. The stock had initially dipped in off-hours trading as investors focused on a lighter-than-expected forecast for the current quarter, then moved higher before losing its gains again.
Correction: Elon Musk is Twitter’s second-largest shareholder, with a 9.13% stake. Vanguard is the largest stakeholder with 10.29%.

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Here’s are the numbers: Earnings of $10.76 per share, vs. $8.89 estimate, according to Refinitiv.
Revenue: $12.93 billion, vs. $11.83 billion estimate.
“The rapidly evolving market environment had a significant effect on client activity as risk intermediation came to the fore,” CEO David Solomon said.

David M. Solomon, Chairman and CEO of Goldman Sachs, speaks during the Milken Institute’s 22nd annual Global Conference in Beverly Hills, April 29, 2019
Mike Blake | Reuters

Goldman Sachs posted first-quarter results that blew past expectations as its traders navigated a surge in market volatility sparked by the war in Ukraine.
Here’s are the numbers:

Earnings: $10.76 per share, vs. $8.89 estimate, according to Refinitiv
Revenue: $12.93 billion, vs. $11.83 billion estimate.

The bank said Thursday that profit fell 42% to $3.94 billion, or $10.76 per share, from a year earlier on lower investment banking fees. While revenue sagged 27% to $12.93 billion, that was a full $1 billion more than analysts had expected for the quarter.
Goldman shares climbed almost 2% in premarket trading.
“It was a turbulent quarter dominated by the devastating invasion of Ukraine,” CEO David Solomon said in the release. “The rapidly evolving market environment had a significant effect on client activity as risk intermediation came to the fore and equity issuance came to a near standstill. Despite the environment, our results in the quarter show we continued to effectively support our clients.”
Goldman Sachs, a top global investment bank, seems to have exceeded other Wall Street firms in benefiting from the sudden market upheaval caused by the Ukraine conflict. JPMorgan Chase, Morgan Stanley and Citigroup all posted results that topped expectations thanks to better-than-expected trading, but the magnitude of Goldman’s beat was larger than some of the rivals.
Goldman’s fixed income desk produced $4.72 billion in first-quarter revenue, nearly $1.7 billion more than analysts surveyed by StreetAccount expected, thanks to strong activity in currencies and commodities, the bank said. Equities desks produced $3.15 billion in revenue, about $570 million more than expected.

Goldman Sachs has been one of the big beneficiaries of a torrid two years of Wall Street deals activity, putting up record revenue figures and blowing past performance targets.
The results showed the bank’s trading side stepped in to make up for a slowdown in mergers, IPOs and debt issuance slowed in the first quarter.
Goldman Sachs is the world’s biggest mergers advisor by revenue and is the most Wall Street-dependent firm among the six biggest U.S. banks. One of Solomon’s biggest priorities has been to diversify the firm’s revenue streams, boosting consumer banking, wealth and asset management operations.
Analysts will be keen to ask Solomon how the deals pipeline looks for the remainder of 2022, and if mergers and IPOs are being killed, or merely pushed back into future quarters.
Another area of concern for the bank is trading, where spikes in volatility and market dislocations caused by the Ukraine war may have benefited some traders, while leaving others holding losses. It remains to be seen whether the quarter’s tumult led to the type of volatility that encouraged clients to trade, or it left them on the sidelines.
In February, Solomon increased the bank’s guidance for returns and targets in wealth and asset management divisions after handily exceeding goals set in early 2020.
Goldman shares have fallen 15.8% this year through Thursday, compared with the 10.5% decline of the KBW Bank Index.
On Wednesday, JPMorgan said first-quarter profit slumped 42% as it posted losses tied to Russia sanctions and set aside money for future loan losses.
This story is developing. Please check back for updates.

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Citigroup topped expectations for first-quarter profit and revenue on better-than-expected trading results as Wall Street benefited from surging volatility tied to the Ukraine war.
Earnings fell 46% to $4.3 billion, or $2.02 a share, because of higher expenses and credit costs and lower revenues.
Revenue slipped 2% to $19.2 billion, which was $1 billion more than analysts surveyed by Refintiv expected.

Jane Fraser, incoming CEO of Citigroup.

Citigroup topped expectations for first-quarter profit and revenue on better-than-expected trading results as Wall Street benefited from surging volatility tied to the Ukraine war.
Shares rose 1.6% in premarket trading on the results.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: $2.02 vs $1.55 expected
Revenue: $19.19 billion vs $18.15 billion expected

The bank said Thursday that earnings fell 46% to $4.3 billion, or $2.02 a share, on higher expenses and credit costs and lower revenue. While companywide revenue slipped 2% to $19.19 billion, that was a full $1 billion more than analysts surveyed by Refintiv expected.
“In markets, our traders navigated the environment quite well, aided by our mix, with strong gains in [foreign exchange] and commodities,” CEO Jane Fraser said in the release. “However, the current macro backdrop impacted investment banking as we saw a contraction in capital market activity.”
Citigroup results tracked those of JPMorgan Chase, Goldman Sachs and Morgan Stanley, all rivals in the Wall Street arena of fixed income and equities trading. Each of the firms topped lowered expectations for trading results in the quarter, after the Ukraine conflict set off upheaval in markets around the world. Before this week, it was unclear if that would benefit or hurt investment banks.
Citigroup, the most-global of big U.S. banks with operations in more than 100 countries, likely has the most significant exposure to the Ukraine conflict. Analysts will be keen to understand the various impacts of the war on the firm, including on its planned sale of a Russian consumer banking unit.

On Thursday, Citigroup said it set aside $1.9 billion for potential loan losses tied to Russia and the war in Ukraine.
Last month, Fraser gave analysts a new set of financial targets, including a medium-term goal for returns on tangible common equity, a key banking industry metric, of about 11% to 12%. The event was a chance for the bank to reset expectations after years of underperforming peers including JPMorgan Chase and Bank of America. In the latest period, Citigroup’s RoTCE was 10.5%.
Like the rest of the industry, Citigroup is expected to experience a slowdown in investment banking revenue, somewhat offset by a benefit from rising interest rates.
Revenue at its institutional clients group fell 2% to $11.16 billion. The segment includes both its trading and its investment banking operations.
Investment banking revenue fell 32% to $1.7 billion from the prior year. The decline in banking revenue was only partially offset by an increase in services revenue, which rose 15% to $3.4 billion.
Revenue fell 1% to $5.91 billion at its personal banking and wealth business, hurt by a decline at its branded cards business and lower mortgage originations.
Despite already trading at the lowest valuation among peers, Citigroup shares have lost 17% this year, compared with the 10.5% drop of the KBW Bank Index.
On Wednesday, JPMorgan said first-quarter profit slumped 42% as it posted losses tied to Russia sanctions and set aside money for future loan losses. After the report, its shares fell and hit a 52-week intraday low.
Read the full press release here.

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Here are the numbers: earnings of 88 cents a share, higher than the 80 cents a share estimate from Refinitiv.
Revenue: $17.59 billion vs. $17.8 billion estimate.
Wells Fargo reported home lending fell 33% from the year prior as mortgage rates have climbed.

Wells Fargo signage on May 5th, 2021 in New York City.
Bill Tompkins | Michael Ochs Archives | Getty Images

Wells Fargo on Thursday reported lower-than-expected first-quarter revenue amid a drop in mortgage lending, but beat earnings expectations as the bank decreased its credit reserves.
Shares fell more than 3% in premarket trading.

Here are the numbers:

Earnings: 88 cents a share, higher than the 80 cents a share estimate from Refinitiv.
Revenue: $17.59 billion vs. $17.8 billion estimate.

Wells Fargo reported home lending fell 33% from the year prior as mortgage rates have climbed, dampening demand. The Federal Reserve is hiking interest rates to fight inflation.
“Our internal indicators continue to point towards the strength of our customers’ financial position, but the Federal Reserve has made it clear that it will take actions necessary to reduce inflation and this will certainly reduce economic growth,” CEO Charlie Scharf said in a statement.
Mortgage banking income totaled $693 million in the first quarter, down from $1.3 billion a year ago, Wells Fargo reported. Analysts surveyed by Street account expected $880 million in mortgage banking income.
Wells Fargo’s first-quarter results also come as Russia’s invasion of Ukraine has injected volatility into financial markets and has raised concerns about global economic growth.

“In addition, the war in Ukraine adds additional risk to the downside,” Scharf added.
The bank’s first-quarter results were helped by a decrease of $1.1 billion in the first quarter in allowances for credit losses. The reduction added 21 cents of profit per share, Wells Fargo said.The bank in its press release cited “reduced uncertainty around the economic impact of the COVID-19 pandemic on our loan portfolios, as well as a decrease in net charge-offs.”
That contrasts the moves of rivals like JPMorgan Chase. JPMorgan on Wednesday said it took a $902 million charge for building reserves for anticipated credit losses.
However, Wells Fargo warned more loan losses could be on the horizon.
“While we will likely see an increase in credit losses from historical lows, we should be a net beneficiary as we will benefit from rising rates, we have a strong capital position, and our lower expense base creates greater margins from which to invest,” Scharf said.
Unlike big bank peers with its sizeable Wall Street divisions, Wells Fargo is more focused on U.S. retail and commercial banking customers. Wall Street analysts expect Wells Fargo to be among the biggest beneficiaries of rising interest rates and a rebound in loan growth, forces that should boost the interest income it collects.
Average loans totaled $898 billion, up 3% from the year prior and about 3% from the fourth quarter, Wells Fargo reported.
Wells Fargo posted a net interest income of $9.2 billion, roughly in line with the StreetAccount consensus estimate and about 5% higher than the year prior. Net interest income is the revenue from the bank’s interest-bearing assets like loans and mortgages, minus what the bank pays out on deposits like savings accounts.
Shares of Wells Fargo are up about 1% this year, the best showing among the six biggest U.S. banks, most of which have posted double-digit declines. For instance, JPMorgan shares have declined more than 19% this year.
Led by Scharf since October 2019, Wells Fargo is still operating under a series of consent orders tied to its 2016 fake accounts scandal, including one from the Fed that caps its asset growth. Analysts will be keen to hear from Scharf about any progress being made to resolve those orders.
Rival banks Goldman Sachs, Citigroup and Morgan Stanley also reported quarterly results Thursday.
(Correction: An earlier version of the story incorrectly stated the bank had set aside more money for credit losses in the first quarter. The bank decreased its allowance for credit losses by $1.1 billion in the quarter.)

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