Morgan Stanley's first-quarter profit fell less than many analysts had forecast thanks to stronger-than-expected fixed-income trading results. The bank's shares rose 3.5 percent, even as the bank posted a nearly 50 percent decline in earnings. Revenue in bond trading, long a troubled business for the bank, fell 35 percent from the same quarter last year, which was an unusually strong quarter across Wall Street.
"Morgan Stanley definitely still has a lot of work to do on revamping the fixed income trading desk. But this quarter is a testament to the progress they've made," said Shannon Stemm, a stock analyst at brokerage Edward Jones. The bond trading business generated big losses for the bank during the financial crisis, and then lagged rivals during a recovery in 2009.
Chief Executive James Gorman is pushing the division to gain market share and improve its performance. In an interview with Reuters Thursday morning, Chief Financial Officer Ruth Porat said the division performed well in trading currencies and interest rate products like government debt, two key areas for Morgan Stanley's turnaround effort.
Overall, Morgan Stanley posted quarterly net income for shareholders of $736 million, or 50 cents a share, down from $1.41 billion, or 99 cents a share, a year earlier. Revenue fell 16 percent to $7.6 billion. Some businesses performed well. The wealth management group, a joint venture with Citigroup Inc, posted income for Morgan Stanley of $183 million, up 85 percent. The group reported 7 percent growth in client assets.
The bank's quarterly results included several special items, including an after-tax loss of 26 cents a share from its stake in a Japanese securities joint venture, and a gain of 30 cents a share linked to selling its stake in a stalled casino project in Atlantic City, New Jersey. It was not immediately clear how the bank's bottom line compared to the average Wall Street forecast, given the special items and the fact that not all analysts included the Japanese joint venture losses in their forecasts.
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