Morgan Stanley said its fourth-quarter profit rose 14%, excluding a tax charge, as its retail brokers and investment bankers compensated for lower trading revenue.
Morgan Stanley, the last of the big Wall Street firms to give its quarterly numbers, earned 84 cents a share, excluding the charge. Analysts had expected earnings of 77 cents a share.
Including the tax charge, which was lower than Morgan Stanley had indicated, the firm earned $686 million, or 29 cents per share.
Revenue rose to $9.5 billion from $9.02 billion in the year-ago quarter. Full-year 2017 revenue of $37.9 billion was up 10% from 2016, surpassing gains of between 2% and 5% at its five largest peers.
In fixed-income trading, a former problem division that Morgan Stanley sharply cut two years ago in an effort to improve profitability and focus, revenue was down 45%, failing for the first time in nearly two years to clear a $1 billion bar set by Chief Executive James Gorman.
Morgan Stanley held its ground in stock-trading, where it is Wall Street's market share leader. Revenues there rose 2%.
Morgan Stanley's closest rival, Goldman Sachs Group Inc., on Wednesday reported a 50% decline in fixed-income revenues, offset by strength in investment banking.
The two firms have similar footprints in terms of their core Wall Street businesses. Morgan Stanley is historically stronger in stock-trading and IPOs, Goldman in bond-trading and mergers.
Morgan Stanley's X-Factor, though, is increasingly its giant retail brokerage, which oversees $2.4 trillion for some 3.5 million American households.
Revenue in that business rose 10% to $4.4 billion. The division's profit margin, once in the high single digits before Mr. Gorman embarked on a multiyear turnaround that included the purchase of Smith Barney, ticked up a percentage point to 26%.
This business gets a growing chunk of its revenue from steady fees. These are assessed as a percentage of client portfolios whose value has marched higher with the stock market rather than those that charge commissions, which have dwindled as investors favor passive indexing strategies.
Assets in accounts on which Morgan Stanley earns management fees hit $1.05 billion, a record percentage of total client assets.
Morgan Stanley's return on equity, a key measure of how profitably it invests shareholders' money, stood at 8.6% in the quarter and 9.4% for the year, excluding the impact of the tax hit. Mr. Gorman has targeted a minimum of 9% by the end of the year.
Write to Liz Hoffman at email@example.com
(END) Dow Jones Newswires
January 18, 2018 07:54 ET (12:54 GMT)