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Morgan Stanley Q4 net drops 70%; results beat, shares gain

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Morgan Stanley (NYSE:MS), owner of the world’s largest brokerage, reported a 70 percent drop in fourth-quarter profit as it was hit by $1.2 billion in litigation bills. However, adjusted earnings topped analysts' expectations; shares rose in premarket trading.

Net income dropped to $181 million, or 7 cents a share, in the three months ended Dec. 31, from $594 million, or 29 cents a share, in the year-earlier period, the New York-based company said in a statement today. Removing items that included the legal expenses, per-share profit was 50 cents.

Revenue increased 9 percent to $8.2 billion from $7.5 billion.

Analysts had predicted per-share earnings of 44 cents on revenue of $8.02 billion.

Morgan Stanley shares advanced 1.4 percent to $32.40 at 8:31 a.m. in New York. The stock had rallied approximately 59 percent over the past twelve months through yesterday.

“We are continuing to address many of the legal issues from the financial crisis,” Chief Executive Officer James Gorman said in the statement. “We look forward to further progress on our strategic goals as we move into 2014 with strength and momentum.” 

Gorman, who took over at the end of 2009, is working on transforming the investment bank into a less risky, more diversified firm.  

Revenue from Morgan Stanley's wealth management business grew 12.2 percent to $3.73 billion in the fourth quarter.

Asset management, the firm’s other main division, posted fee revenue of $2 billion, a 7 percent increase from the same period last year.

Overall, the firm’s return on equity from continuing operations for the quarter, excluding the debt charges, was 2.4 percent.

Revenue from fixed-income trading skidded 14.4 percent to $694 million.

Morgan Stanley also reported its compensation and benefits expense increased 10 percent to $3.99 billion. Overall Morgan Stanley's noninterest expense rose 29 percent to $7.9 billion.

Morgan Stanley's institutional-securities business, which includes investment banking and sales and trading results, generated adjusted revenue of $3.7 billion, up from $3.6 billion a year earlier.

Advisory revenue inched down to $451 million in the fourth quarter, from $454 million a year earlier.

Yesterday, Goldman Sachs Group Inc. (NYSE:GS), the fifth-biggest U.S. bank by assets, reported a 19 percent drop in fourth-quarter net income on lower revenue from fixed income, currencies and commodities trading fell. But results beat analysts' estimates.

Also yesterday, Citigroup Inc. (NYSE:C), the third-largest U.S. bank, reported fourth-quarter profit that trailed analysts' expectations on weak bond trading.

On Jan. 15, Bank of America Corp. (NYSE:BAC), the second-biggest U.S. bank, reported profit quadrupled in the fourth quarter, helped by a sharp decline in provisions to cover bad loans. 

On Jan. 14, JPMorgan Chase & Co. (NYSE:JPM), the biggest U.S. bank, said fourth-quarter profit declined 7 percent to $5.28 billion on costs from legal settlements. Wells Fargo & Co. (NYSE:WFC), the biggest home lender, said net income rose 10 percent to $5.61 billion, setting a record for the quarter and the year. 

Quick facts: Morgan Stanley

Price: 48.925 USD

NYSE:MS
Market: NYSE
Market Cap: $79.19 billion
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