April 22, 2010 3:00 am
Morgan Stanley opened the James Gorman era with quarterly results that beat analysts' expectations and began to erase doubts that the bank would regain its footing in crucial trading businesses.
Mr Gorman, who succeeded John Mack as chief executive in January, had billed 2010 as the "year of execution", when Morgan Stanley would begin to close the gap with its peers and reap the benefits of investments in businesses ranging from fixed-income trading to wealth management.
"While we've made clear progress, we still have much work to do to reach our long-term goals," Mr Gorman said.
Net income totalled $1.4bn (£908m), or 99 cents a share, in the first quarter. The bank recorded a $382m gain from a tax benefit. A year earlier losses were $578m, or 57 cents. Revenue more than tripled, to $9.08bn.
Shares closed up 4 per cent to $31.68. They have risen more than 7 per cent this year.
The bank's results mirrored strong quarters by rivals Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup. But while the profits left many investors bullish about the industry's outlook, much of Wall Street remained engrossed by Goldman's legal fight with the top US securities regulator.
The Securities & Exchange Commission charged Goldman with fraud on Friday, alleging it misled investors in a collateralised debt obligation it created. Goldman denied the allegations.
Ruth Porat, Morgan Stanley's chief financial officer, said her bank had not been warned by the SEC that it might draw a similar complaint.
"Given the uniqueness of the events on Friday, I just want to confirm we have not received a Wells notice in connection with our CDO business."
The institutional securities arm, which includes trading and investment banking, earned $1.7m during the first quarter as revenue jumped to $5.3bn.
Advisory revenue slipped 20 per cent to $327m. Underwriting revenue rose 40 per cent to $560m, paced by a pick-up in equity issues. Equity trading climbed 49 per cent, to $1.4bn.
While fixed-income trading results also improved, with revenue rising to $2.7bn, the bank continued to trail its peers. In the same period, Goldman's debt-trading arm generated $7.4bn in revenue. Ms Porat said the bank's efforts to bolster its fixed- income trading desks, including 400 new hires, was a "multi-quarter build" that would continue to pay dividends.
The wealth management arm, which includes its Morgan Stanley Smith Barney joint venture, doubled its profits to $278m, on $3.1bn in revenue. Asset management earned $173m.
US versus Goldman, Page 22
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