(Adds details, CFO comment, updates share price)
By Lauren Tara LaCapra and Anil D'Silva
April 17 Morgan Stanley reported a 55
percent jump in first-quarter earnings as higher revenue from
its institutional securities business augmented another strong
quarter from wealth management, sending shares in the Wall
Street bank higher.
The sixth-largest U.S. bank by assets reported net income
applicable to the company of $1.45 billion, or 74 cents per
share, compared with $936 million, or 48 cents per share, a year
Morgan Stanley's shares rose 2.8 percent to $30.74 in
pre-market trading on Thursday.
Although volumes were lower across most fixed-income
businesses, Morgan Stanley said revenue from fixed-income and
commodities sales and trading rose to $1.7 billion, a 13 percent
increase from a year earlier.
Chief Financial Officer Ruth Porat attributed this growth to
"commodities, credit and mortgage".
The increase in fixed-income and commodities sales and
trading revenue contrasted with declines in the equivalent units
of JPMorgan Chase & Co, Citigroup Inc and Bank of
America Corp, which reported results this week and last.
Goldman Sachs Group Inc, which has more exposure to
fixed-income trading than its peers, reported an 11 percent drop
in first-quarter profit, though it beat market
The fixed-income trading business across Wall Street has
been hurt by new capital rules, a reduction in risk-taking by
clients and by changes to the way derivatives are traded.
In response, banks have cut fixed-income trading staff and
tried to automate more activity. Many analysts expect client
trading volumes to rise again eventually, but the profitability
of the business over the long term remains in doubt.
Porat told Reuters that Morgan Stanley reduced its
fixed-income risk-weighted assets by 5 percent in the first
The bank had $199 billion of those assets according to Basel
3 capital measurements as of March 31, down from $210 billion in
the prior quarter, Porat said in an interview.
Morgan Stanley is working toward a goal of having less than
$180 billion of risk-weighted fixed-income assets by 2015 in
order to free up capital.
Morgan Stanley's decision to dive deeper into the
wealth-management business has also helped to shield it from the
decline in fixed-income trading revenue that has been happening
across Wall Street for the past five years.
The bank said its wealth management division's pre-tax
profit margin was 19 percent in the quarter ended March 31, up
from 17 percent in the same quarter a year earlier.
Wealth management revenue rose 4 percent to $3.62 billion
and the division's earnings were up 65 percent to $423 million.
A year ago, Morgan Stanley did not yet have full ownership
of its wealth-management business, the product of a complicated
acquisition of the Smith Barney brokerage from Citigroup after
combining part of its own brokerage business with Smith Barney
in a joint venture.
Morgan Stanley finished its buyout of the business in July,
and therefore no longer has to share earnings with Citigroup.
Costs related to the acquisition have also declined.
Also on Thursday, Morgan Stanley reiterated its plan to buy
back up to another $1 billion of shares and double its dividend
The bank said debt underwriting revenue rose 18 percent to
$485 million, reflecting an increase in loan fees.
Equity underwriting rose 11 percent to $315 million as a
slew of companies filed for initial public offerings. Advisory
revenue rose 34 percent $336 million compared with a year ago.
Overall, first-quarter net income from continuing operations
applicable to the company rose 49 percent to $1.47 billion.
(Editing by Robin Paxton)