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 bank 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.

Morgan Stanley shares were up about 1 percent in premarket trading.

Earnings were boosted by a 68 percent jump in revenue at its asset management unit.

They're 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 Morgan Stanley's investment in China International Capital Corp, the bank's earnings missed analysts' expectations of 35 cents a share.

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.

TRADING

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.

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.

The bank earlier this month reorganized its management team, making changes in its retail brokerage unit and replacing Jack DiMaio, global head of fixed income sales and trading, with chief risk officer Kenneth deRegt.

(Additional reporting by Ryan Vlastelica in New York and Joe Rauch in Charlotte, N.C.; editing by John Wallace)