Structured product performance boosts Morgan Stanley’s top line

The US investment bank was the main structured products issuer in its domestic market in Q4 2021, while also making the top 10 in Japan, Taiwan, and the UK.

Morgan Stanley has reported net revenues of US$14.5 billion for the fourth quarter of 2021 compared with US$13.6 billion a year ago.

Net revenues for full year 2021 were a record US$59.8 billion, up 23% year-on-year (FY2020: US$48.8 billion). Net income, at US$15 billion – also a record – was up 37%.

The bank, led by chairman and chief executive officer James Gorman (pictured), saw client assets in wealth management grow by nearly US$1 trillion to US$4.9 trillion in 2021, with US$438 billion in net new assets. Combined with investment management, it now has US$6.5 trillion in client assets.

Morgan Stanley was the number one issuer of structured products in the US with a 14% share of the market during the final quarter of 2021. The bank collected US$3.4 billion from 857 products sold between 1 October and 31 December, an increase of 26% by sales volume compared to the prior year period (Q4 2020: US$2.7 billion from 643 products).

Full year sales stood at US$12.8 billion from 3,088 products – the equivalent of a 12.71% share of the US market, and just fractions behind market leader Goldman Sachs (12.74%).

Worst-of baskets, predominately linked to indices, dominated underlyings, achieving sales of US$1.8 billion from 554 products in Q4. They included the Trigger Callable Contingent Yield Notes (61773N148), the bank’s best-selling product of the quarter (US$73m), which was distributed via UBS and tied to a basket comprising the Russell 2000, Nasdaq 100, and DJ Industrial Average Index.

Outside the US, the bank was an active provider in Taiwan, where it issued 552 private placements in the quarter (Q4 2020: 739). These products were almost exclusively linked to share baskets (544) and distributed via local banks and security houses such as Yuanta, Bank Sinopac and Fubon Securities.

Other markets included the UK, which saw 18 kick-out plans worth an estimated US$50m that were marketed via Walker Crips, Meteo (six each), Mariana (four) and Causeway Securities (two). Of these, 16 were linked to the FTSE 100, either as a single index or as part of a basket, with the remaining to structures tied to the FTSE Custom 100 Synthetic 3.5% Fixed Dividend Index.

In Japan, nine products (US$116m) were distributed via Mitsubishi UFJ Morgan Stanley Securities, Morgan Stanley MUFG Securities, and SBI Securities, respectively, while in Finland the bank sold two products that were available via Alexandria.

Morgan Stanley also introduced several thousands of products via trading on the secondary market. In Germany it issued some 39,932 listed turbo certificates that can be traded on the exchange of Stuttgart (Q4 2020: 50,876 products). A further 2,511 discount certificates were also targeted at the German investor while 274 call warrants were listed in Hong Kong SAR.

The institutional securities business reported net revenues of US$6.7 billion, slightly down on the previous year (Q4 2020: US$7 billion).

Equity net revenues, at US$2.9 billion, increased by 13% year-on-year (YoY), driven by higher prime brokerage revenues because of higher client balances, and also included a significant mark-to-market gain of US$225m on a strategic investment, which was partially offset by declines in cash equities and derivatives.

Fixed income revenues were down 31% driven by a challenging trading environment in rates and lower volumes and tighter bid-offer spreads in credit.

Click the link to read the full fourth quarter and full year 2021 earnings results and the strategic update.