Morgan Stanley earnings beat view
Morgan Stanley (MS.N: Quote, Profile, Research) on Wednesday said first-quarter earnings fell amid write-downs in mortgages and loans, yet resilient trading results helped the second-largest U.S. investment bank exceed lowered expectations by a wide margin.
The results offer a big boost to Chief Executive John Mack, trying to help the bank recover from $9.4 billion in mortgage trading losses last year that eroded earnings and dented his reputation. It also delivers another jolt of good news to a market that had been prepared for bigger write-downs and signs that Wall Street firms were facing liquidity problems.
Morgan’s income from continuing operations fell by about a third to $1.55 billion, or $1.45 a share, in the quarter ended February 29, from $2.31 billion, or $2.17, in the year-earlier period. Quarterly revenue fell 17 percent to $8.3 billion.
Analysts on average expected Morgan Stanley to earn $1.03 a share in the quarter on $7.3 billion of revenue, according to Reuters Estimates.
Trading results fell compared with last year’s idyllic market conditions. Yet the firm’s investment banking and trading division had its third-best quarter ever, generating revenue of $6.2 billion.
Fixed-income trading revenue posted its second-best quarter ever at $2.9 billion, while equity trading revenue surged by half payday loans. Investment banking revenue rose 6 percent to $1.6 billion.
Wall Street banks have tumbled this year amid a worsening debt market, culminating in a Federal Reserve intervention last week and a nearly insolvent Bear Stearns (BSC.N: Quote, Profile, Research) announcing a shotgun wedding with JPMorgan Chase (JPM.N: Quote, Profile, Research) for just $2 a share.
Better-than-expected results from Goldman Sachs (GS.N: Quote, Profile, Research) and Lehman Brothers (LEH.N: Quote, Profile, Research) spurred a rally in financial shares on Tuesday and helped ease worries about additional bank failures. Morgan Stanley shares, down 42 percent this year, surged 19 percent on Tuesday and were up in pre-market trade on Wednesday.