DealBook: Morgan Stanley Swings to a Profit, Beating Estimates

Stan Honda/Agence France-Presse — Getty ImagesThe headquarters of Morgan Stanley in New York.

7:51 a.m. | Updated

Morgan Stanley on Thursday reported adjusted earnings for the first quarter that beat analyst estimates, driven by solid results in its wealth management division.

Including charges, the firm had a first-quarter profit of $1 billion, or 50 cents a share. That compares with a loss of $79 million in the year-ago period. The results, however, were affected by one-time accounting charges related to the firm’s credit spreads.

Excluding those charges, the firm had a profit of $1.2 billion, or 61 cents a share, which was down from $1.4 billion reported in the first quarter of 2012. The results did beat the profit estimate of 57 cents a share of analysts polled by Thomson Reuters.

Morgan Stanley’s adjusted revenue came in at $8.5 billion in the first quarter, down from $8.9 billion in year-ago period. Analysts had been forecasting revenue of $8.35 billion.

“Morgan Stanley demonstrated solid momentum across the firm this quarter, consistent with the strategic objectives we laid out at the beginning of the year,” Morgan Stanley’s chief executive, James P. Gorman, said in a release.

The results reflected the strides Morgan Stanley has made in building its wealth management unit, which has been a big focus for the firm since the financial crisis as the firm has pushed into less riskier lines of business. The division posted pretax income from continuing operations of $597 million, up 48 percent when compared with $403 million in the first quarter of last year. One number that investors had been watching is this division’s pretax profit margin, which came in at 17 percent, higher than where some analysts had projected. Net revenue for the first quarter in wealth management was $3.5 billion compared with $3.3 billion a year ago.

At the same time, the firm posted lower revenue in its institutional securities business, which includes fixed income and banking. The firm has been working to cut back its fixed income operation, in part because that is where much of the risk at the firm is imbedded and since the financial crisis some banks have been looking to downsize this part of the firm and shed risk.

Excluding the charges related to the firm’s credit spreads, known as DVA, net revenue for the current quarter in institutional securities was $4.4 billion, compared with $5.1 billion a year ago.

The firm’s stock was down about 2 percent in premarket trading, to about $21 a share.

Article source: http://dealbook.nytimes.com/2013/04/18/morgan-stanley-swings-to-a-profit-beating-estimates/?partner=rss&emc=rss