By Peter Rudegeair
Morgan Stanley's first-quarter profit rose 59% as the bank, like
its peers, benefited from a stronger environment for deals and
trading.
Results beat Wall Street estimates, pushing share up 1.6% to
$37.33 premarket.
The New York-based bank posted a first-quarter profit of $2.39
billion, compared with $1.51 billion in the same period of 2014. On
a per-share basis, Morgan Stanley's profit was 85 cents when
stripping out accounting adjustments. Analysts polled by Thomson
Reuters had expected earnings of 78 cents a share.
Revenue rose to $9.91 billion, or $9.78 billion excluding
accounting adjustments. Analysts had projected $9.17 billion.
"This was our strongest quarter in many years with improved
performance across most areas of the firm," Chief Executive James
Gorman said in a news release.
Mr. Gorman has sought to reorient the bank away from
unpredictable businesses such as bond trading to more consistent
ones like wealth management. He appeared to achieve success in
2014, though it was offset somewhat by a $2.6 billion settlement
announced in February that resolved a U.S. Department of Justice
investigation into mortgage bonds it sold in the run-up to the
financial crisis.
The bank is also in discussions with New York's attorney general
over a potential $500 million settlement over similar
mortgage-related issues, The Wall Street Journal reported
Sunday.
Trading revenue was $4.08 billion in the quarter, up 26% from
$3.24 billion in the same period a year ago. At rival Goldman Sachs
Group Inc., first-quarter trading revenue rose 23%.
Within trading, revenue from bonds, foreign-exchange and
commodities climbed 16% to $2 billion and revenue from equities
increased 31% to $2.29 billion.
Revenue from investment banking totaled $1.17 billion in the
first quarter, a 3.3% increase from $1.14 billion in the first
quarter of 2014. Fees from advising on deals rose 40% to $471
million while fees from underwriting debt fell 19% to $395
million.
Revenue in Morgan Stanley's wealth-management arm rose to a
record $3.83 billion from $3.61 billion last year.
Investment-management revenue fell 11% to $669 million. The wealth
unit, which has grown in importance at the firm since the financial
crisis, also hit records for pre-tax profit, which rose to $855
million, and profit margin, which hit 22%.
Morgan Stanley's firm-wide expenses rose to $7.05 billion from
$6.62 billion in the first quarter last year. Compensation and
benefits expense were $4.52 billion, up 5.1% from $4.31 billion a
year ago.
Return on equity, a commonly used measure of bank profitability,
rose to 13.5% from 8.5% in the first quarter a year ago, excluding
an accounting adjustment. Morgan Stanley executives have pledged to
lift return on equity above 10%.
Shares of Morgan Stanley have fallen 5.3% since the start of
2015 compared with a 2.1% fall in the KBW index of bank stocks over
the same period.
Write to Peter Rudegeair at peter.rudegeair@wsj.com
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