MS Morgan Stanley

By Liz Hoffman 

Morgan Stanley said its quarterly earnings rose 70%, riding a big boost in its trading and underwriting businesses to become the last of the big Wall Street banks to post strong numbers.

Shares climbed 2% premarket as earnings and revenue beat Wall Street estimates.

The New York-based firm reported a profit of $1.93 billion, or $1 a share. That compares with the $1.13 billion, or 55 cents a share, it reported in the first quarter of 2016, which was a dismal one for big banks.

Revenue grew 25% to $9.75 billion from $7.79 billion a year ago. Analysts polled by Thomson Reuters had expected 88 cents a share on revenue of $9.27 billion.

The firm's return on equity, a closely watched measure of profitability, was 10.7% in the quarter, clearing for the first time -- at least on a quarterly basis -- the 10% target laid out by Chief Executive James Gorman.

Few firms on Wall Street benefit more from the rising interest rates and rising stock market combination than Morgan Stanley, whose wealth management division manages trillions of dollars of client money across stocks, bonds and other assets.

Still, the past few months have been challenging in other Morgan Stanley core businesses. Stock-trading, where it is Wall Street's leader, has grappled with lower commissions and more money moving to passive managers that trade less often.

Revenue in that division fell 1.9% to $2.02 billion, while debt-trading revenue -- where Morgan Stanley is historically weaker, though improving in recent quarters -- nearly doubled to $1.71 billion. Total sales and trading revenue was $3.5 billion, up 30% from the first quarter of 2016, which was a notably weak one for Wall Street trading desks.

Investment banking revenue, which include merger advisory and underwriting fees, rose 43% to $1.42 billion. That compares with $990 million in 2016, a rare sub-$1 billion first quarter for the division, which typically ranks second in IPOs and deal making.

Triple-digit gains in underwriting more than offset a 16% decline in M&A fees.

In wealth management, revenue rose 11% to $4.06 billion from $3.67 billion last year. The unit's profit margin was 24%, up from 22% last quarter and within the range Mr. Gorman has targeted.

The shift toward managing the portfolios of millions of Americans is part of his plan, now a few years under way, to move Morgan Stanley away from volatile trading and into businesses whose fees don't swing around as much with the market.

The firm has been growing brokerage revenue by offering higher-yielding savings accounts to lure deposits and pushing mortgages and other loans to boost revenue.

Morgan Stanley's shares are down 2.5% this year, having given up about half of their postelection gains.

Write to Liz Hoffman at liz.hoffman@wsj.com

(END) Dow Jones Newswires

April 19, 2017 07:36 ET (11:36 GMT)

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