Not even Morgan Stanley‘s growing wealth management operations could prevent a decline in fourth-quarter earnings.
The firm’s results were dragged down by a $1.1 billion pretax loss at its institutional securities business, a unit that has struggled over the past year. The bank also blamed rising litigation costs, disclosing that it had set aside $1.2 billion to handle legal bills related to mortgage-backed securities and the credit crisis.
Including certain charges related to its debt, Morgan Stanley reported fourth-quarter profits of $192 million, or 7 cents a share, a steep drop from $661 million, or 33 cents, in the year-ago period.
Excluding those charges, the firm had a profit of 20 cents a share. If the impact of litigation costs is added and a tax benefit is subtracted, Morgan Stanley reported core earnings of 50 cents a share â€" which would exceed Wall Street’s estimate of 45 cents a share, according to a survey of analysts by Thomson Reuters.
Morgan Stanley’s revenue rose to $8.2 billion in the fourth quarter, from $7.5 billion in the year-ago period, when the debt-related charges are excluded.
“Our fourth-quarter results demonstrated the consistency embedded in our business model, as revenues increased year-over-year in all three of our business segments,†James P. Gorman, the bank’s chief executive, said in a statement. “Importantly, we are continuing to address many of the legal issues from the financial crisis.â€
The firm also announced it would pay a dividend of 5 cents per share. And Morgan Stanley set aside $4 billion for compensation in the fourth quarter, an increase from $3.6 billion in the same period last year.
Morgan Stanley is the last of the big Wall Street banks to report quarterly earnings, and results have generally been solid if marred by declines in trading. On Thursday, Goldman Sachs and Citigroup were both stung by drops in fixed income.
For its part, Morgan Stanley has sought to shift away from its riskier trading business and toward the relatively more stable wealth management business.
So far, wealth management has been a bright spot. As well, the unit, led by Morgan Stanley’s co-president, Gregory J. Fleming, reported net revenue of $3.7 billion and a pretax margin of 19 percent, compared with $3.5 billion and 17 percent in the year-ago period.
Asset management, the firm’s other main division, posted fee revenue of $2 billion, a 7 percent increase from the same period last year.
Overall, the firm’s return on equity from continuing operations for the quarter, excluding the debt charges, was 2.4 percent.
