DealBook: Morgan Stanley Posts $2.15 Billion Profit

Mary Altaffer/Associated PressJames P. Gorman, Morgan Stanley’s chief executive, said the firm “effectively navigated turbulent markets” in the quarter.

Morgan Stanley, buoyed by solid performances in its core divisions and a huge one-time accounting gain, announced third-quarter earnings of $2.15 billion, compared with a loss of $91 million a year ago.

The company’s profit of $1.16 a share handily beat analyst predictions of 30 cents a share, according to Thomson Reuters. In contrast, Goldman Sachs, weighed down by losses on its investments in its own account, reported a loss of $428 million on Tuesday, compared with a $1.7 billion profit a year ago.

Excluding the accounting gain Morgan Stanley notched earnings of three cents a share. Analysts had been forecasting an 11 cent loss.

James P. Gorman, Morgan Stanley’s chief executive, said the firm “effectively navigated turbulent markets” in the quarter.

Morgan Stanley Smith Barney, the firm’s global wealth management division, continued to be a steady performer, posting net revenue of $3.26 billion this quarter, compared with $3.1 billion in the year-ago period. Still, the business got hit by the market turmoil, even as the firm logged record inflows. The division had $1.6 trillion assets under management in the quarter, down from $1.7 trillion in the previous quarter.

Institutional securities, bolstered by a $3.4 billion gain on the value of Morgan Stanley’s debt, had its third-quarter revenue increase 122 percent percent, to $6.45 billion. Asset management reported revenue of $215 million for the period, down 73 percent from the previous year on losses in firm investments.

Morgan Stanley achieved a strong return on equity, something that many firms have found to do this difficult environment. Return on equity from continuing operation, a key measure of profitability, was 14.5 percent, compared with 9 percent in the second quarter. Return on equity measures the amount of money that a company delivers on each share, and is a closely watched ratio among investors.

The firm declared a five cent quarterly dividend for its shareholders. It will be paid on November 15 to shareholders who had stock on October 31.

So far this year, Morgan Stanley has set aside $12.69 billion to cover compensation and benefits, up 6 percent percent from year-ago levels. The firm had 62,648 employees on the payroll at the end of the third quarter, down slightly from the 62,964 employees in the previous quarter.

The firm’s third-quarter results come during a tough time for financial stocks, which have struggled amid regulatory uncertainty and a weak global economy. Shares of Morgan Stanley have fallen 38.9 percent this year, to $16.63 a share.

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