Morgan Stanley reported a 60 percent jump in quarterly profit Monday, as revenue from trading stocks and bonds lifted the investment bank’s results.
BOTTOM LINE: First-quarter net income rose to $2.31 billion from $1.45 billion a year earlier, the New York bank said. On a per-share basis, Morgan Stanley’s earnings worked out to $1.18. Excluding a one-time tax benefit, the bank earned 89 cents per share, easily beating analysts’ average forecast of 78 cents, according to the data provider FactSet.
TOP LINE: Revenue for the quarter rose to $9.91 billion from $9 billion the year before. That’s much better than the $9.19 billion analysts had expected, according to FactSet.
REACTION: On Monday, Morgan Stanley shares rose 21 cents to $36.96.
The shares had surged 19 percent over the past year, outperforming the broader market: The Standard & Poor’s 500 index had gained 12 percent over the same stretch.
TRADING UP: The biggest boost to the bank’s revenues came from trading. Morgan Stanley said sales and trading of stocks brought in $2.29 billion, up 31 percent over the same quarter of last year. Trading of bonds, currencies and commodities rose 16 percent to $2 billion. It was a similar story for other banks in the first quarter, which often benefit from swings in financial markets.
MAKEOVER: In the years after the financial crisis, Morgan Stanley has shifted from relying on trading bonds and currencies toward more stable businesses, such as managing money for wealthy clients. As a result, the bank doesn’t need to risk as much of its own capital to drive profits. In the first quarter, revenue from wealth management totaled $3.83 billion, up 6 percent, with more assets from clients, $2 trillion, than ever before. “We did not dial up risk to generate these earnings,” Gorman said in a conference call with analysts.
HANGOVER: Like many other banks, Morgan Stanley is still wrestling with the legacy of the financial crisis. In February, it agreed to pay $2.6 billion to the federal government to settle allegations over its role in the housing bubble. Last month, Morgan Stanley disclosed in a regulatory filing that it expects to be sued by New York Attorney General Eric Schneiderman over bonds backed by subprime mortgages. Ruth Porat, the bank’s chief financial officer, said legal expenses added to the bank’s costs in the quarter.
NEW MOUNTAIN VIEW: On the conference call to discuss the results, financial analysts wished Porat well in her new job. Google has hired Porat, one of the most high-profile women on Wall Street, to be its chief financial officer starting in May. Her pay package at Google could top $70 million.