Morgan Stanley profit beats estimates, shares rise

Morgan Stanley profit beats estimates, shares rise

New York: Morgan Stanley posted better-than-expected first-quarter profit on Wednesday on strong fixed income trading results, sending its shares up.

Net income for the New York-based bank was $1.4 billion, or 99 cents per share, versus a loss of $578 million, or 57 cents per share, a year earlier.

Excluding items, it earned 78 cents a share while analysts on average expected a profit of 57 cents per share, according to a survey of analysts by Thomson Reuters I/B/E/S.

Net revenue was $9.1 billion.

Its shares gained 1.5% to $30.90 in pre-market trading.

Morgan Stanley, which reported a yearly loss for 2009, is looking for a rebound year in 2010 under the leadership of new chief executive James Gorman. Gorman shuffled his leadership team as he took the helm of the firm at the start of the year.

Morgan Stanley has lagged behind chief rival Goldman Sachs Group Inc in its recovery from the financial crisis. Goldman used out-sized trading profits to drive a record profit in 2009.

Morgan Stanley, though, scaled back risk on its trading desks after the financial crisis and missed out on the windfall trading profits. The firm hired hundreds of traders and salespeople in the second half of 2009 as it joined in the rebound..

Morgan Stanley’s fixed income sales and trading revenues more than doubled to to $2.7 billion from $1.2 billion a year ago.

Even though Morgan Stanley’s results in 2009 disappointed, the firm set aside 62% of net revenues for compensation -- a ratio Gorman has promised to reduce.

In the first quarter, Morgan Stanley set aside $2.2 billion for compensation, or 41 percent of revenues compared to 65% a year ago.

Morgan Stanley is also in the process of integrating Morgan Stanley Smith Barney, the largest retail brokerage.

Morgan Stanley Smith Barney reported net new assets of $5.8 billion, compared to a loss $4.6 billion in the fourth quarter of 2009.

Shares of Morgan Stanley closed at $30.45 on Tuesday, up 3.01%.

Morgan Stanley’s shares trade at about 1.1 times their book value, or their value based on the company’s assets minus liabilities. That level is below Goldman’s ratio of 1.3.