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Morgan Stanley projects higher operational targets after posting record earnings

Morgan Stanley outlined a new series of growth targets Jan. 16 after reporting record earnings results for the fourth quarter of 2019.

In the coming two years, the investment banking giant expects pretax margins in its wealth management business to be between 28% and 30%, with a longer-range target of more than 30%, according to an investor presentation released with its earnings. The firm's efficiency ratio, which it defines as total noninterest expenses as a percentage of net revenues, is projected to range from 70% to 72% in the coming years. Morgan Stanley is forecasting that it can lower that measure to less than 70% in the long term. Return on tangible common equity at the company is estimated to be between 13% and 15% in the next couple of years before climbing to 15% to 17% in the bigger picture.

"We have meaningfully and with intent transformed this business into what it is today," Chairman and CEO James Gorman said Jan. 16 during an earnings call with analysts. "Given our established track record, our competitive positioning and our continued investment into our business, we're confident in our ability to achieve each of these objectives."

The new objectives outlined on the call came on the heels of an earnings report that Morgan Stanley said included new records for revenues and net income on an annual basis.

In 2019, the company posted net revenues of $41.42 billion versus $40.11 billion a year ago. Net income applicable to Morgan Stanley totaled $9.04 billion in 2019, whereas the company reported $8.75 billion in 2018.

Morgan Stanley's quarterly results were heavily influenced by a 125.7% year-over-year spike in fixed-income sales and trading net revenues. Keefe Bruyette & Woods analyst Brian Kleinhanzl wrote in a Jan. 16 research report that he was expecting an increase of more than 80% year over year in that business.

Shares in the company's stock jumped after the market's open Jan. 16, rising 6.69% to $56.48 as of 10:23 a.m. ET.