Wall Street giant's income beats analysts' predictions
WALL Street giant Morgan Stanley, owner of the world's largest brokerage, reported first-quarter earnings that beat analysts' estimates as trading revenue more than doubled from the fourth quarter.
Net income fell 45pc to $968m (€664m), or 50c a share, from $1.78bn, or 99c, a year earlier, the company said. Earnings from continuing operations, excluding a 26c loss tied to a Japanese joint venture and a 30c tax gain, were 46c a share. Analysts had expected 40c per share.
Chief executive James Gorman is working to convince investors that the firm can rebuild fixed-income trading.
Revenue from that business rebounded from the final three months of 2010, and declined 35pc from the year-earlier period, when Wall Street posted the best fixed-income quarter since the financial crisis. The firm's equity-trading revenue last quarter jumped to the highest since 2008.
"We think Morgan's investment bank posted solid results, with clear improvement in trading, particularly in equities," Glenn Schorr, an analyst at Nomura, said. Mitsubishi UFJ (MUFG) Morgan Stanley Securities, which is 40pc owned by Stanley, said it will cut jobs and raise capital after posting a loss of $1.8bn last year that was fuelled by wrong-way bets on fixed-income products.
"While the loss at our joint venture with MUFG is disappointing, we remain strongly committed to the Japanese market and our strategic partners at MUFG," Gorman said. "This loss does not impact the progress we are making in pursuing our own strategic priorities."
Morgan Stanley's shares rose 72c, or 2.8pc, in New York Stock Exchange composite trading. The stock was down 4.3pc this year through Wednesday, after falling 8.1pc in 2010. That made it the third-worst performer in the S&P 500 over 16 months.
The firm is the third of the big Wall Street houses to report first-quarter earnings. Goldman Sachs fell 1.3pc on Tuesday after first-quarter profit declined 21pc and analysts said the bank relied on unpredictable investment gains to beat estimates. JPMorgan Chase exceeded estimates last week as investment-banking revenue jumped 33pc from the fourth quarter.
Revenue dropped to $7.64bn from $9.07bn a year earlier. Book value per share fell to $31.45 from $31.49 at the end of December. The firm's return on equity from continuing operations, a measure of how well it reinvests earnings, was 6.2pc. (Bloomberg)