Morgan Stanley: US structured products sales up 60% in 2019

Morgan Stanley posted full year net revenues at a record US$41.4 billion compared with US$40.1 billion in 2018.

Net revenues for the institutional securities business in Q4, at US$5.1 billion, were up 34% from the same quarter last year. Sales and trading net revenues were up 28% year-on-year with equity sales and trading net revenues, at US$1.9 billion, in line with Q4 2018, reflecting ‘continued strength’ in prime brokerage and ‘solid’ results in cash equities, partially offset by declines in derivatives on lower volatility.

Fixed income sales and trading revenues increased from US$564m last year to US$1.3 billion in Q4 2019, reflecting ‘improvement’ across all businesses with particular strength in credit products while investment revenues also increased from a year ago, driven by mark-to-market net gains on holdings of publicly traded investments compared with net losses in the prior year.

Sales and trading net revenues for full year 2019, at US$13.7 billion were in line with 2018 (US$13.8 billion).

Morgan Stanley was the fourth biggest issuer of structured products in the US in the fourth quarter with a 10% share of the market, behind JP Morgan, Barclays and Goldman Sachs only.

The bank accumulated sales of US$1.9 billion from 541 products between October 1 and December 31 2019, a 43% increase by sales volume compared to the US$1.3 billion collected from 390 products in the same period in 2018. For full year 2019, Morgan Stanley sold 1,955 products worth US6.3 billion in the US (FY2018: US$3.9 billion from 1,083 products).

The bulk of the sales volumes (US$1.7 billion) was acquired from equity-linked structures with products linked to a single index and index basket achieving sales of US$637m and US$639m, respectively. The 42 products tied to a single share collected US$338m while the 31 products linked to a share basket sold US$78m.

The bank’s best-selling product in the quarter were the cash-settled notes (61769HE43) which sold US$69m. The five-year registered note pays a fixed coupon of 0.25% per year regardless of the performance of the underlying share of Microsoft, while at maturity the minimum capital return is 100%.

Other markets were Morgan Stanley was active in the quarter included, among others, Japan (US$502m from six products), Brazil (US$78m from 24 products), France (US24.3m from 11 products) and the UK (US$23m from nine products).

In Germany it was behind the issuance of more than 40,000 leverage and flow certificates listed on the exchanges of Frankfurt and Stuttgart while in Hong Kong SAR the bank launched 71 warrants and 195 callable bull bear certificates.

‘We delivered strong quarterly earnings across all of our businesses,’ said James P. Gorman (pictured), chairman and chief executive officer, commenting on the results. ‘Firmwide revenues were over $10 billion for the fourth consecutive quarter, resulting in record full year revenues and net income. This consistent performance met all of our stated performance targets.’

Click the link to read Morgan Stanley fourth quarter and full year 2019 results and the strategic update.