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 a one-time charge of $990 million related to the new tax law, which has hit each of the big banks to varying degrees. 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 revenue of $37.9 billion was 10% higher from 2016, the biggest such jump among large banks. Revenue rose between 2% and 5% at the firm's five peers.
Shares of Morgan Stanley, up 29% over the past year, rose 1.5% to $56.15 in premarket trading.
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.
"Very, very quiet," finance chief Jonathan Pruzan said of the quarter. Few catalysts spurred clients to make bets on the direction of markets, which translates into lower revenue for Wall Street securities operations.
Goldman Sachs Group Inc. on Wednesday reported a 50% decline in fixed-income revenues. Other large banks reported smaller double-digit declines in the business, which includes commodities, currencies and credit.
Morgan Stanley held its ground in stock-trading, where it is Wall Street's market share leader. Revenues rose 2%.
One area of weakness: Merger advisory revenues were down 6%, widening the deficit between it and rival Goldman, which on Wednesday posted a 9% rise in that business to cement its role as Wall Street's top M&A shop. More than $1.1 billion in trailing-year revenue now separates them, the widest gap in two years.
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%.
Mr. Pruzan said broker attrition and hiring, which are both expensive, have fallen. Morgan Stanley and rivals including Bank of America Corp.'s Merill Lynch unit and UBS Group AG have effectively called a truce on a yearslong poaching war, which has ruffled some brokers but is likely to reduce costs.
Morgan Stanley's wealth management 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 trillion, 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, within Mr. Gorman's goal of 9% to 11% this year.
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(END) Dow Jones Newswires
January 18, 2018 08:42 ET (13:42 GMT)