Morgan Stanley's fourth-quarter shareholder profit surged 60 percent as rising fees from retail brokerage helped offset the weak fixed-income trading results that have marred earnings across Wall Street.
Adjusted profit fell well short of analysts' average forecast, but revenue exceeded expectations, and the bank's shares rose 2.3 percent to $28.38 in early trading.
The results, while mixed, indicate Morgan Stanley's strategy of diversifying its businesses to reduce reliance on traditional investment banking operations may be paying off.
Revenue from asset management jumped 68 percent, and from retail brokerage rose 7 percent. The company has focused on improving revenue in these two areas even as rival Goldman Sachs Group Inc has focused more on traditional investment banking.
(Morgan Stanley is) starting to look a little clever with these more stable revenue businesses, said Adrian Cronje, chief investment officer at Atlanta-based Balentine, a wealth management firm.
Still, excluding gains from the sale of its investment in China International Capital Corp, Morgan Stanley's earnings missed analysts' expectations.
The second-largest U.S. investment bank said fourth-quarter shareholder profit was $600 million, or 41 cents a share, compared with $376 million, or 29 cents a share, a year earlier.
Adjusted earnings were 26 cents a share, below analysts' average forecast of 35 cents, according to Thomson Reuters I/B/E/S.
Revenue was $7.81 billion, topping the average forecast of $7.35 billion.
The Morgan Stanley results are a mixed bag. There's some good news, but trading revenue is down. That's been a problem across Wall Street, said David Carter, chief investment officer at Lenox Advisors in New York.
Morgan Stanley suffered from the same trading malaise that hit JPMorgan Chase & Co, Goldman Sachs Group Inc and Citigroup Inc. Morgan Stanley's trading revenue fell 38 percent, and it lost money in fixed-income trading.
This market was a tough market, Ruth Porat, chief financial officer, told Reuters in an interview.
The bank is still trying to boost its fixed-income trading business, which is small compared to many of its rivals. The bank earlier this month said Jack DiMaio, global head of interest-rate, currency and commodity trading, was leaving, and that chief risk officer Kenneth deRegt was becoming global head of fixed income sales and trading.
Morgan Stanley hopes trading volumes will improve as the global economy improves, and hopes it can boost market share, Porat said.
Morgan Stanley Smith Barney, the bank's retail brokerage joint venture with Citigroup, generated income for Morgan Stanley of $166 million, up from $29 million a year earlier. Morgan Stanley holds a 51 percent stake in the joint venture.
(Additional reporting by Ryan Vlastelica in New York and Joe Rauch in Charlotte, N.C.; editing by John Wallace)