MS Morgan Stanley

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)

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