Morgan Stanley Posts Biggest Fourth-Quarter Profit Since Crisis -- 2nd Update
17 January 2017 - 11:55PM
Dow Jones News
By Liz Hoffman
Morgan Stanley said its quarterly earnings climbed 83% and beat
analyst expectations as the bank logged its strongest
fourth-quarter profit since the financial crisis.
Shares climbed 1.6% premarket.
The New York-based firm reported a profit of $1.67 billion, or
81 cents a share, in a quarter that included a surge of
postelection trading activity.
That compares with the $908 million, or 39 cents a share, it
reported in the same period a year earlier.
It is the bank's highest profit in any fourth quarter since
2006. Morgan Stanley has tended to struggle toward year-end and has
lost money two of the past five fourth quarters, in part due to
legal set-asides that are now largely behind it.
Revenue grew 17% to $9.02 billion from $7.74 billion a year
earlier. Analysts polled by Thomson Reuters had expected 65 cents a
share on revenue of $8.47 billion in the fourth quarter.
The firm's return on equity, a closely watched measure of
profitability, improved to 8% for the year from 7.5% in 2015, with
accounting adjustments, still falling short of the 10% target laid
out by Chief Executive James Gorman.
Morgan Stanley faced high expectations following fairly strong
earnings from rivals J.P. Morgan Chase & Co. and Bank of
America Corp. last week. A flurry of postelection stock trading
boded well for Morgan Stanley, Wall Street's leading
equities-trading house.
Revenue in that division, which trades stocks and stock-linked
instruments, rose to $1.95 billion from $1.82 billion a year ago,
while debt-trading revenue -- a weaker spot for Morgan Stanley --
nearly tripled to $1.47 billion from $550 million a year earlier.
Total sales and trading revenue grew to $3.19 billion from $2.37
billion in the year-earlier period.
Investment-banking revenue, which includes merger advisory and
underwriting fees, rose to $1.27 billion from $1.21 billion in the
fourth quarter of 2015.
In wealth management, where Mr. Gorman has steered Morgan
Stanley in search of stabler profits and less regulatory scrutiny,
revenue rose 6.4% to $3.99 billion from $3.75 billion a year
earlier. The unit's profit margin was 22%, down from 23% last
quarter and within the range Mr. Gorman has targeted.
It is part of his plan, now a few years under way, to move
Morgan Stanley away from volatile trading and into more-stable
areas like wealth management, where fees don't swing as much with
the market. The firm has recently taken steps to bolster the
division, like offering higher-yielding savings accounts to lure
deposits and encouraging its brokers to offer their clients
mortgages to boost revenue.
The bank's shares have gained 28% since the election, which sent
financial stocks soaring on investor hopes of higher interest rates
and lighter regulation.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
January 17, 2017 07:40 ET (12:40 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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