Morgan Stanley’s profit and revenue climb in Q1
CEOpushes shift to stock trading, advising clients
NEW YORK — Morgan Stanley reported profit that beat analysts’ estimates and the highest adjusted revenue in more than five years as equity trading and brokerage revenue jumped.
First- quarter net income rose 59 percent to $ 2.39 billion, or $ 1.18 a share, from $ 1.51 billion, or 74 cents a share, a year earlier, the New York- based company said Monday. Profit was 85 cents a share excluding an accounting gain and a tax benefit, topping the 78- cent average estimate of 24 analysts surveyed by Bloomberg.
CEO James Gorman has won support from investors for his strategy of shrinking the fixed- income unit and relying more on trading stocks and advising wealthy individuals on their investments. Return on equity for the first quarter was 10.1 percent excluding the adjustments, helping Gorman with his goal of increasing annual ROE above 5 percent for the first time since 2010, the year he took over.
“It was a pretty strong beat considering most of it came through higher revenue,” Shannon Stemm, an analyst at Edward Jones in St. Louis, said in a phone interview. “It was good to see them hit their returnonequity target of above 10 percent for the first time in a while.”
Revenue excluding accounting adjustments known as DVA rose to $ 9.78 billion from $ 8.87 billion a year earlier. Book value per share climbed to $ 33.80 from $ 33.25 at the end of December.
Morgan Stanley shares, which fell 5.3 percent this year this year through Friday, advanced 0.6 percent to $ 36.96 Monday. The stock more than doubled in
1 the past 2 ⁄ years, including
2 a 24 percent jump in 2014 that led the biggest U. S. investment banks for a second straight year.
The investment- banking and trading division, led by Colm Kelleher, 57, generated $ 5.46 billion in the first quarter, up 17 percent.
In equities trading, headed by Ted Pick, Morgan Stanley’s revenue rose 33 percent from a year earlier Morgan Stanley first- quarter profit rose 59 percent to $ 2.39 billion, or $ 1.18 a share, from $ 1.51 billion, or 74 cents a share, a year earlier, the NewYork- based firm said Monday.
“The big theme across products has been the increase in investor interest outside the U. S., in particular U. S. investors focused on opportunities in Europe and Asia.” — Ruth Porat, chief financial officer, Morgan Stanley
to $ 2.27 billion, excluding DVA. That compared with $ 1.15 billion at Bank of America and $ 2.34 billion at Goldman Sachs. Brian Kleinhanzl, an analyst at Keefe, Bruyette & Woods, estimated equities revenue of about $ 1.79 billion, while Barclays’s Jason Goldberg predicted $ 1.85 billion.
“The big theme across products has been the increase in investor interest outside the U. S., in particular U. S. investors focused on opportunities in Europe and Asia,” Chief Financial Officer Ruth Porat said in an interview.
Monday’s earnings announcement will be the last for Porat, who’s leaving to take the same role at Google. Morgan Stanley named Jonathan Pruzan as her successor last month.
Revenue from fixed- income sales and trading, run by Michael Heaney and Robert Rooney with commodity trading co- heads Nancy King and Peter Sherk, climbed 15 percent to $ 1.9 billion, excluding DVA. That topped estimates of $ 1.74 billion from Kleinhanzl and $ 1.65 billion from Goldberg.
Fixed- income revenue climbed even as the riskweighted assets in the business, which determine how much capital it requires, dropped to $ 174 billion, Porat said on a conference call with analysts. That’s below the bank’s year- end target of $ 180 billion.