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Morgan Stanley Q4 profit misses on weak trading revenue; shares fall

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Morgan Stanley (NYSE:MS), owner of the world’s largest brokerage, reported a fourth-quarter profit that fell short of analyst estimates on lower revenue from its division that trades bonds, currencies and commodities. Shares dropped.

Net income rose to $1.04 billion, or $0.47 per share, in the October-to-December quarter, from $84 million, or $0.02 per share, a year earlier, the New York-based company said in a statement today.

Removing one-time items, earnings were $0.40 per share, compared with the $0.48 average estimate of 12 analysts surveyed by Capital IQ.

Total revenue fell 1 percent to $7.76 billion, missing Wall Street’s consensus of $8.08 billion.

Revenue from fixed-income, currencies and commodities trading, or FICC, dropped 14 percent to $599 million, stripping out some charges, the lowest quarterly amount since the financial crisis.

Morgan Stanley joined Goldman Sachs (NYSE:GS), Citigroup (NYSE:C), Bank of America (NYSE:BAC) and J.P. Morgan Chase (NYSE:JPM) in posting lower-than-expected revenue from FICC, a key business for big banks that has seen difficult trading conditions, walloping profits across Wall Street.

“We finished 2014 in substantially better shape than we entered the year,” Morgan Stanley’s chief executive, James P. Gorman, said in the statement. “We delivered strong results across several of our businesses, although overall performance was affected by the choppy market conditions of the fourth quarter.”

Shares retreated 2.1 percent to $34.15 at 8:38 a.m. in New York. The stock had lost 10 percent since the beginning of the year through yesterday.

Revenue from equities trading, an important profit driver for Morgan Stanley, rose to $1.63 billion from $1.5 billion a year earlier, but came in lower than what rival Goldman reported on January 16.

The firm’s more stable wealth management business turned in stronger results. Revenue in that division rose 2.4 percent from a year earlier to $3.8 billion.

But the wealth management unit’s pre-tax profit margin, a closely watched efficiency metric, was 19 percent in the fourth quarter, flat with a year earlier.

The firm reported higher compensation costs in the division, which helped drive the margin lower. Morgan Stanley officials had previously said they are targeting a pre-tax profit margin of 22 percent to 25 percent by the end of 2015.

Earlier this month, the firm fired a broker accused of stealing data, including account numbers, for as many as 350,000 wealth-management clients. In the third quarter, the bank took a $50 million charge to cover losses for clients to whom it failed to send mutual-fund prospectuses.

For the past two years, Morgan Stanley has been in the process of selling businesses that own and operate physical commodity assets, like oil terminals and pipelines, under pressure from regulators and lawmakers.

The bank's legal expenses were $284 million, down from $1.4 billion a year earlier.

Quick facts: Morgan Stanley

Price: 48.99 USD

NYSE:MS
Market: NYSE
Market Cap: $79.28 billion
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