Morgan Stanley swings to profit

Morgan Stanley swings to profit
By Alan Rappeport in New York
Copyright The Financial Times Limited 2010
Published: April 21 2010 14:24 | Last updated: April 21 2010 14:24
http://www.ft.com/cms/s/0/25072fa4-4d3b-11df-baf3-00144feab49a.html


Morgan Stanley said on Wednesday that it swung to a profit in the first three months of the year, as stronger trading revenues lifted the US bank’s earnings.

Net income from continuing operations at Morgan Stanley rose to $1.8bn, or 99 cents a share, in the first quarter, compared with a loss of $17m, or 57 cents, in the same quarter a year ago. The results topped analysts’ expectations that it would produce earnings of 57 cents a share in the first quarter.

“Our intense focus on disciplined execution across Morgan Stanley’s global franchise helped the firm deliver improved results this quarter, though we still have a great deal of work to do,” James Gorman, Morgan Stanley’s chief executive, said in a statement.

Mr Gorman took the helm of Morgan Stanley at the beginning of this year, replacing John Mack.

Revenues at Morgan Stanley were also on the rise, surging by more than 200 per cent to $9.1bn. That was fuelled by a big jump in sales and trading revenues, which rose from $1.4bn last year to $4.1bn in this year’s first quarter.

The bank also said it was seeing the benefits of its Smith Barney joint venture, the biggest US brokerage, which reached its highest level of assets since 2008.

Compensation expenses at Morgan Stanley were up in the first quarter, rising to $4.4bn from $2bn in the same quarter of last year. Much of the rise was due to the Smith Barney venture, however, while pay as a proportion of total revenues fell to 49 per cent from 68 per cent last year.

In spite of its strong earnings, Morgan Stanley still faces challenges, particularly related to its real estate investments.

Last week, it warned investors that its $8.8bn property fund could face losses of $5.4bn thanks to writedowns on a range of global investments made at the height of the real estate boom. Earlier this month the bank said that it would sell its majority stake in a troubled Atlantic City casino project, potentially saddling it with a $1bn loss.

Morgan Stanley’s results followed similarly strong quarterly earnings from JPMorgan, Bank of America, Citigroup and Goldman Sachs.

Shares of Morgan Stanley rose by 2.96 per cent to $31.35 in pre-market trading in New York.