Morgan Stanley brokerage adjusted profit margin rises, revs up


Morgan Stanley's wealth management business showed improvement in the third quarter with a stronger profit margin, excluding one-time costs from brokerage integration and raising its stake in a unit owned jointly with Citigroup.

The adjusted pretax profit margin for the brokerage rose to 13 percent from 11 percent a year earlier, edging closer to the company's "mid-teen" target, which Morgan Stanley said it expects to reach by mid-2013.

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The bank finished its three-year integration of Citi's Smith Barney and Morgan Stanley's wealth unit on July 8, bringing the two units onto a fully merged technology platform. Also, Morgan Stanley purchased an additional 14 percent of Morgan Stanley Smith Barney in September, increasing its stake to 65 percent, and plans to eventually buy the rest.

The brokerage unit incurred one-time costs of $193 million from the integration and stake purchase in the third quarter.

Revenue for the wealth business rose 3 percent to $3.3 billion, while total client assets increased 14 percent to $1.77 trillion as markets improved.

Average productivity for advisers climbed 9 percent to annual revenue of $790,000 per adviser at the end of the third-quarter.

Brokerage profit, however, dropped 32 percent to $151 million.

Broker departures hit Morgan Stanley's adviser force, which shrank by 105 advisers from the end of the second quarter to 16,829 advisers at the end of the third quarter. Headcount was down by 832 from a year earlier.

So far this year, at least 192 veteran advisers who managed about $25.5 billion in client assets have left Morgan Stanley Wealth Management, according to Reuters calculations. Reuters tracks the movement of individual advisers and teams that manage $100 million or more in client assets, which typically translates to $1 million or more in annual revenue production. (Reporting By Ashley Lau in New York; editing by John Wallace)