The Archegos hit leaves Morgan Stanley as the only major U.S. bank to be nursing losses from the flameout of Bill Hwang's family office. The New York-based bank was one of the early backers of Archegos despite the legal taint tied to Mr. Hwang, who was previously accused of insider trading and in 2012 pleaded guilty to wire fraud on behalf of his predecessor hedge fund, Tiger Asia Management.
"This is not going to be well received given peer performance on this matter," Susan Roth Katzke, an analyst at Credit Suisse Group, said in a note to clients.
Shares of the company, which had gained 18% this year through Thursday, rose 0.1% to $80.93 at 9:30 a.m. in New York.
The Archegos collapse rattled investment banks across continents, with Credit Suisse emerging as the worst hit with almost $5 billion in losses from its exposure to the family office.
In the wake of Archegos, Morgan Stanley's equity traders gave up their No. 1 spot, falling behind Goldman Sachs Group and J.P. Morgan Chase, which posted big trading wins earlier this week off a wild quarter for markets.
Equities-trading revenue at Morgan Stanley nevertheless rose 17% to $2.88 billion, compared with the $2.6 billion average estimate of analysts surveyed by Bloomberg. Goldman Sachs and J.P. Morgan have been clawing away at Morgan Stanley's lead in that business, but until now the firm has managed to stay ahead of the pack. Both rivals posted equities revenue in excess of $3 billion for the quarter.
Morgan Stanley Investment Management, meanwhile, posted record assets under management for the quarter following the closing of its acquisition of Eaton Vance Corp. on March 1.
AUM increased 82% as a result of the acqusition to $1.419 trillion as of March 31, up from $781 billion as of Dec. 31. By asset class, liquidity and overlay services rose 49% to $429 billion as of March 31, up from $288 billion as of Dec. 31; alternatives and solutions AUM rose to $418 billion in AUM, up 173% from $153 billion a quarter earlier; equity AUM rose 53% to $371 billion from $242 billionl and fixed income AUM rose 105% to $201 billion from $98 billion.
MSIM's net revenues rose 19% to $1.314 billion from $1.1 billion a quarter earlier, and net income applicable to Morgan Stanley was $275 million in the first qyarter, up 74% from $158 million in the fourth quarter.