Morgan Stanley's profit doubles on bond-trading surge

Tue Jan 17, 2017 4:25pm EST
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By Olivia Oran and Sruthi Shankar

(Reuters) - Morgan Stanley's profit doubled in the fourth quarter as trading activity surged across Wall Street, and the bank said it was on track to reach a number of financial goals set out by Chief Executive James Gorman.

In announcing earnings on Tuesday, Morgan Stanley detailed huge gains in bond trading, an area where it has long struggled. The bank also reported stronger revenue in equities trading, where Morgan Stanley is typically a leader, and said it was close to hitting targets for cost-cutting, wealth management profits and returns on shareholder equity.

"There is certainly more reason to be optimistic as we enter 2017 than there was at the beginning of 2016," Gorman said on a conference call with analysts.

Morgan Stanley's trading results echoed those of JPMorgan Chase & Co and Bank of America Corp last week, driven by Donald Trump's surprise election victory on Nov. 8 and U.S. Federal Reserve's decision to boost a key interest rate target in mid-December.

Overall, Morgan Stanley's profit soared to $1.5 billion in the fourth quarter from $753 million a year earlier. Earnings per share increased to 81 cents from 39 cents, easily beating expectations.

Analysts on average had forecast a profit of 65 cents per share, according to Thomson Reuters I/B/E/S. Net revenue jumped 17 percent to $9 billion, beating the average estimate $8.5 billion.

Bond trading revenue rose to $1.5 billion in the quarter from $550 million last year, the second-highest level since the first quarter of 2015 in what is typically a slow period for the business.

The bond trading bump came after a 25 percent reduction in staff, and helped Morgan Stanley exceed Gorman's $1 billion-per-quarter bond-trading revenue benchmark for the full year.   Continued...

The corporate logo of financial firm Morgan Stanley is pictured on the company's world headquarters in New York, New York January 20, 2015.    REUTERS/Mike Segar/File Photo