Morgan Stanley 4Q Profit Jumps on Strong Investment Banking

Morgan Stanley (NYSE: MS) said that its earnings rose 60 percent in the last quarter of 2010 on strong investment banking results.


The second-largest U.S. investment bank grossed $ 600 million or 41 cents a share after paying preferred stock dividends. In the same period in 2009, its profit was $ 376 million, or 29 cents a share.


It posted stronger-than-expected quarterly revenue which increased 14 percent to $ 7.8 billion. Retail brokerage profit also jumped.


During the financial crisis, Morgan Stanley was on the brink of failure. The New York bank had to struggle to find its footing following the financial crisis. Thus, good results in the last three months of 2010 marked a turnaround for the bank.


In 2009, it began reducing its reliance on trading and risk-taking for profit. At that time, the bank lagged well behind Goldman Sachs Group Inc.


Goldman Sachs posted weak investment banking results Wednesday. Its revenue dropped 12 percent from debt underwriting.


On the other hand, Morgan Stanley’s revenue rose 15 percent thanks to issuing more junk bonds. Revenue from advising companies on deals shed 9 percent to $ 484 million while revenue from stock underwriting added 5 percent to $ 661 million.


Morgan Stanley’s chief financial offer Ruth Porat said that the bank’s clients had more confidence in the economic recovery. Retail clients’ tentative return in the summer led to a big increase in assets.


The investment’s payrolls also increased, compared to one year ago. It increased the amount of deferred compensation which was up 20 percent from 40 percent in 2009.


Morgan Stanley operates in three business segments namely Institutional Securities, Asset Management, and Global Wealth Management Group. Revenues at Morgan Stanley’s Smith Barney brokerage rose 0.3 billion from $ 3.1 billion in 2009.


At that year, the bank acquired Smith Barney from Citigroup. In April 2010, part of Morgan Stanley Smith Barney was reported to launch a new web-based broker workstation called 3D.


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