Investment bank Morgan Stanley (MS), which is actively developing the asset management segment, reported for the fourth quarter an increase in diluted earnings per share by 11% YoY, to $2.01, despite the fact that the consensus laid the result at only $1.91. The bank's net profit increased by 9.2% YoY, to $3.69 billion, due to the fact that its revenues increased faster than expenses. Operating costs increased by 5% YoY, to $9.6 billion, and net revenue rose by 6.8% YoY, to $14.52 billion, slightly short of consensus at $14.56 billion. The volume of reserves for expected credit losses decreased by 79% QoQ, to $5 million. This indicates an improvement in the forecasts of the financial institution regarding the prospects of the economy.
Net revenue grew due to an increase in net interest income by 16.4% YoY, to $1.4 billion. Morgan Stanley has stepped up the development of the lending segment and continues to increase assets in the loan portfolio, the volume of which as of the end of the fourth quarter increased by 24% YoY, and its share in total assets at the end of 2021 was 16.89%. The expected increase in interest rates this year will further increase Morgan Stanley's interest income.
Income from asset management increased by 24% YoY, to $3.7 billion, which was facilitated by the takeover of the E*TRADE financial Corporation, which provided an influx of new assets under management in the amount of $127 billion. Revenue from wealth management increased by 10.3% YoY to $6.35 billion, and net profit increased by 34% YoY to $1.1 billion.
Investment management revenues for the quarter rose by 59% YoY and 21% QoQ to $1.75 billion due to an increase in the volume of assets under management from $781 million to $1.6 trillion. Revenue from the business direction increased by 160% YoY, to $411 million. Revenues from institutional securities decreased by 4% YoY and by 11% QoQ to $6.7 billion, segment net profit decreased by 8% YoY to $2.2 billion.
Morgan Stanley's results look strong compared to those of other banks specializing in lending. The stock of the basic equity of the first level (CET1) of the corporation is 16.0% with a median indicator for the sector of 11.7%. This gives reason to count on stable dividends and continued repurchase of shares. The Bank has the ability to cover potential credit losses and expand its business.
The basic target for MS shares is $106, at the moment they are undervalued by the market. In the case of a bearish trend in the market, the quote may drop to $93, and in the case of a bullish scenario, it can reach $116. The financial sector's securities will be characterized by increased volatility this year.