Fixed-income trade helps double Morgan's earnings
Morgan Stanley, in its first profit report under chief executive officer James Gorman, posted earnings that beat analysts' estimates as fixed-income trading revenue more than doubled from a year earlier.
First-quarter net income was $1.78bn (€1.33bn), or 99 cents a share, compared with a loss of $177m, or 57 cents, in the first quarter of 2009, the New York-based company said yesterday in a statement.
Earnings from continuing operations were $1.03 a share, including a 21-cent tax benefit, compared with the 57-cent average estimate of 24 analysts surveyed by Bloomberg.
Mr Gorman, who succeeded John Mack in January, said in a letter to shareholders last week he was "not satisfied" with the company's performance in 2009 and the firm had hired more than 350 employees as part of a "revitalisation" of the sales and trading business.
Morgan Stanley's fixed-income results, the best since the third quarter of 2008, follow record revenue from debt trading reported earlier this month by Bank of America, JPMorgan Chase and Goldman Sachs Group.
"This was really surprising," Thomas Brown, CEO of hedge fund Second Curve Capital LLC in New York, said. "Given the previous four quarters, where they really looked like the weak sister, this quarter they really stepped out. These were great numbers."
Revenue from fixed-income sales and trading jumped to $2.7bn in the quarter from $1.29bn a year earlier.
That beat estimates for $1.95bn from Howard Chen at Credit Suisse Group AG and $2.04bn from Keith Horowitz at Citigroup.
"The fixed-income franchise is coming back for Morgan Stanley," Jason Tyler, senior vice president at Ariel Investment LLC, said. "The history of this organisation is that it's very strong on the fixed-income side."
Goldman Sachs reported fixed-income revenue of $7.39bn on Tuesday. Bank of America and JPMorgan, the two biggest US banks by assets, both beat analysts' earnings estimates last week as they posted fixed-income revenue of $5.52bn and $5.46bn respectively. (Bloomberg)