Good morning. US bank Morgan Stanley lifted a crucial profitability target as the Wall Street company seeks to expand its business beyond investment banking and trading and increase the assets in its wealth management arm to $10tn.
The bank gave the update on Wednesday as it reported a 10 per cent rise in profits for the last three months of 2021. It told investors it would aim for a return on tangible common equity (ROTCE), a key measure of profitability, over the “longer term” of at least 20 per cent. This is up from a target of at least 17 per cent previously.
The company delivered an ROTCE of 20 per cent in 2021, which James Gorman, Morgan Stanley’s chief executive, called “an unbelievably good year” as banks across Wall Street benefited from record dealmaking and elevated trading activity. “If we were really operating with a permanent 20 per cent-plus ROTCE, the stock would be much higher than it is now,” he said in a call with analysts. “I don’t think you’re gonna find another bank in the world that’s putting out a 20 per cent-plus ROTCE goal.”
By comparison, rival JPMorgan Chase reported a ROTCE of 23 per cent in 2021. It has a “medium-term” ROTCE target for upwards of 17 per cent but warned last week it would probably miss this goal in 2022 and possibly in 2023.
Thanks for reading FirstFT Asia. Here’s the rest of today’s news — Angelica.
Five more stories in the news
1. ByteDance disbands investment team amid China’s Big Tech clampdown The TikTok developer said it had reviewed and taken stock of its various business lines at the start of the year and decided to strengthen its focus and “cut down investing with low synergies”. The reorganisation comes as Beijing tightens antitrust enforcement.
2. French president floats EU security pact with Russia France’s Emmanuel Macron called on EU states to “conduct their own dialogue” with Moscow rather than support diplomatic efforts led by the US and Nato, breaking the united front of western solidarity in the first public display of dissent between Nato members.
3. Luckin Coffee plots relisting Once touted as the biggest challenger to Starbucks’ dominance in China, Luckin Coffee is exploring plans to relist its shares in the US, nearly two years after an accounting scandal in which the Chinese coffee chain fabricated more than $300m of sales, said two people familiar with the matter.
4. New York attorney-general claims ‘significant evidence’ of Trump fraud Donald Trump and the Trump Organization fraudulently misrepresented the value of their assets to banks, insurers and financial institutions, according to a court filing that seeks to compel the former president and two of his children, Donald Jr and Ivanka, to testify under oath.
5. EU should ban energy-intensive mode of crypto mining, regulator says A top financial regulator has renewed calls for an EU-wide “ban” on the main form of bitcoin mining and sounded the alarm over the rising proportion of renewable energy devoted to minting cryptocurrencies.
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The FT View: Tightening promotion rules for high-risk investments yet failing to improve the self-certification regime gives room for spivs to exploit and the vulnerable to fall through.
Coronavirus digest
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Bill Gates has issued a warning of pandemics far worse than Covid-19 as he called on governments to contribute billions of dollars to prepare for the next global outbreak.
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Cathay Pacific is offering bonuses of up to HK$29,000 (US$3,700) to provide an incentive to pilots to fly into Hong Kong and stay in hotel quarantine for weeks as a survey shows US companies are struggling to fill senior roles in the city.
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A fourth Covid booster shot is ineffective in blocking Omicron infections despite boosting antibodies, an Israeli hospital study showed.
The day ahead
CPI data Japan is to release the country’s consumer price index after the central bank revised its inflation projection for the first time since 2014.
Earnings Netflix will report earnings today after it arguably had its strongest-ever slate of original content Q4 with the Squid Game craze, but analysts suspect the streaming pioneer may have still struggled to reach its subscriber goal.
Doomsday The Bulletin of the Atomic Scientists will announce the location of the minute hand on the Doomsday Clock that records the perceived threat of global apocalypse.
What else we’re reading and watching
A year on, we haven’t absorbed the lessons of the GameStop saga Last year’s influx of new-wave investors exposed the degree to which finances are being reshaped by digitisation and highlighted populist anger, writes Gillian Tett. As the stock market hits new highs, it may be a signal the bubble is ready to burst, but what would happen to smaller investors?
Microsoft’s $75bn bet on Activision sets off next era of consumer technology Analysts are calling the defining deal a catalyst for “the new content war”. It is also likely to provoke intense scrutiny from antitrust regulators around the world, for whom any move by the biggest US tech companies to buy their way to the top of important new markets has become a worry.
How to get a pay rise in 2022 As the cost of living spirals, earning more is probably top of your financial to-do list for 2022. FT money and career experts discuss the dos and don’ts, offer practical tips and reveal the moment when employees have the most leverage to ask for a raise in this 30-minute session.
Blackstone’s new real estate play Rent-to-buy companies are hot property in Silicon Valley and on Wall Street. By far the biggest is Home Partners of America, which Blackstone bought last year for $6bn. Home Partners presents itself in altruistic terms as a new path for ordinary Americans to become homeowners. Yet a Financial Times investigation suggests a more complicated reality.
Boris Johnson’s fall would not change the Conservative agenda If the UK prime minister is toppled by the so-called “partygate scandal”, the next leader is still going to be a Conservative. While Johnson’s lockdown breaches and failings may leave him terminally discredited, few in his party are questioning the manifesto on which he won, Robert Shrimsley writes.
Travel
Insomniac and FT columnist Lucy Kellaway took a trip to the Cliveden House hotel to try out a cannabidiol oil massage called the OTO Sleep Experience. During her stay, she’s delighted by the light switches and cheese soufflé. The Tibetan bowls and CBD? They were simply not enough to remedy a sleepless night.
