Morgan Stanley's (MS) fourth-quarter profit plunged 70% as strong performance in the firm's wealth management business was offset by weak fixed income trading results and large legal costs.
Morgan Stanley reported a profit of $181 million, compared with a year-earlier profit of $594 million. The quarter included a pre-tax legal expense of $1.2 billion, or 40 cents a share. Stripping out the legal expense and other items, per-share earnings were 50 cents and revenue rose 9.7% to $8.2 billion. Analysts polled by Thomson Reuters most recently expected per-share earnings of 45 cents, on revenue of $8.01 billion, both excluding accounting impacts.
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The results capped a year in which Morgan Stanley Chief Executive James Gorman gained momentum that had eluded him since taking over the corner office from former chief John Mack in 2010. The firm finished 2013 with four straight quarters of profits, the first time it ended a year like that under Mr. Gorman.
Mr. Gorman has been pushing to transform the New York investment bank into a less risky, more diversified firm. Morgan Stanley, which nearly collapsed with some of its Wall Street brethren during the financial crisis, has made its way back from the brink by bolstering its wealth-management business and steering clear of the riskier trades that landed the firm in trouble in the first place.
On Friday, the bank reported its wealth management revenue rose 12% from a year earlier, however fixed income trading revenue--adjusted for accounting impacts--fell 14% from the year earlier, mainly reflecting weakness in interest rate products.
Recently, Alliance Bernstein analyst Brad Hintz noted tthe investment bank's 2009 wealth management initiative appears to be nearing completion, providing a tailwind for the wealth management segment.
"Effectively, the new Morgan Stanley has arrived with leading positions in investment banking and institutional equity trading, complemented by a wealth management business that in time will represent half the firm," Mr. Hintz said.