Morgan Stanley's 4Q Earnings Beat Estimates

Morgan Stanley reported a fourth-quarter profit, compared with a year-earlier loss, as its legal costs plunged and compensation expenses fell.

The Wall Street bank's shares rose about 3.5 percent to $26.85 in premarket trading on Tuesday.

Morgan Stanley's total non-interest costs fell 41 percent in the quarter as the bank slashed headcount in its trading business.

"We enter 2016 with a continued focus on managing expenses across the firm and driving up returns for our shareholders," Chief Executive James Gorman said in a statement.

Compensation costs fell 28.5 percent to $3.65 billion, including $155 million in severance charges.

The bank had taken $2.9 billion in after-tax legal costs and a charge of $781 million related to compensation adjustments in the year-earlier quarter.

Cost cuts and much smaller legal bills helped Citigroup Inc and JPMorgan Chase & Co report a rise in quarterly profit last week.

Morgan Stanley's trading revenue rose nearly 1 percent to $1.47 billion.

The bank reported earnings of $753 million, or 39 cents per share, applicable to common shareholders for the quarter ended Dec. 31 compared with a loss of $1.75 billion, or 91 cents per share, a year earlier.

Excluding an accounting adjustment, the bank earned 43 cents per share.

Analysts on average had estimated earnings of 33 cents per share, according to Thomson Reuters I/B/E/S.

(Reporting by Richa Naidu and Sudarshan Varadhan; additional reporting by Olivia Oran; Editing by Kirti Pandey)