Morgan Stanley Posts Quarterly Profit As Costs Plunge


Morgan Stanley reported a fourth-quarter profit, compared with a year-earlier loss, as its legal costs plunged and compensation expenses fell.

Shares of the Wall Street bank, which took $2.9 billion in crisis-related legal costs in the year-earlier quarter, rose 3 percent in premarket trading on Tuesday.

Morgan Stanley’s total non-interest expenses fell 41 percent as the bank slashed headcount in its trading business. Compensation costs fell 28.5 percent.

“We enter 2016 with a continued focus on managing expenses across the firm and driving up returns for our shareholders,” Chief Executive James Gorman said in a statement.

Worries about slowing growth in China, slumping oil prices and uncertainty about the timing and pace of U.S. interest rate increases have hit trading, forcing big U.S. banks to cut costs.

Lower costs and much smaller legal bills helped Citigroup Inc and JPMorgan Chase & Co report a rise in quarterly profit last week.

Morgan Stanley’s adjusted net revenue fell 4.3 percent to $7.86 billion as revenue declined in every major business but one.

The bank’s trading revenue rose nearly 1 percent to $1.47 billion as a 11.7 percent rise in revenue from equity sales and trading more than made up for an 8.2 percent decline in revenue from fixed income and commodities trading.

The firm has been moving key executives, including Ted Pick and Sam Kellie-Smith, to its fixed income division from its successful equities business.

Revenue from wealth management slipped 1.4 percent to $3.75 billion. As its trading business suffers, the bank has been focusing on its less volatile wealth management unit, which accounted for nearly half of its revenue in 2015.

“I think what we have is a temporary pressure on the core businesses … We should see some rebound as we go into the first half of 2016,” Viking Sparks analyst Marty Mosby said.

Morgan Stanley reported earnings of $753 million, or 39 cents per share, applicable to common shareholders for the quarter ended Dec. 31 compared with a loss of $1.75 billion, or 91 cents per share, a year earlier.

Excluding an accounting adjustment, the bank earned 43 cents per share.

Analysts on average had expected a profit of 33 cents per share and revenue of $7.59 billion, according to Thomson Reuters I/B/E/S.

Morgan Stanley reported return-on-equity of 8.5 percent for 2015, missing Gorman’s target of 10 percent.

The bank’s shares were trading at $26.75 before the bell. The stock slumped 18 percent last year, the steepest fall among big U.S. banks.