By Peter Rudegeair
Morgan Stanley's first-quarter profit rose as the bank, like its
peers, benefited from a stronger environment for deals and
trading.
Results beat Wall Street estimates, pushing share up 2.5% to
$37.65 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 on
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%.
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 were $471 million
compared with $336 million a year ago.
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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