Morgan Stanley said fourth-quarter shareholder profit surged 60 percent as rising fees from retail brokerage offset the weak fixed-income trading results that have marred its competitors' earnings.

The results indicate Morgan Stanley's strategy of diversifying its businesses to reduce its reliance on traditional investment banking operations may be paying off.

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.

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, in the same quarter in 2009.

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; editing by John Wallace)