MS Morgan Stanley

By Liz Hoffman 

Morgan Stanley said its first-quarter profit rose 40%, following other big Wall Street banks that got a boost from lower taxes and more-active markets.

Morgan Stanley reported Wednesday quarterly profits of $2.58 billion, or $1.45 a share, on revenue of $11.08 billion. Both were higher than a year ago and surpassed the average analyst estimates of $1.25 a share in earnings and $10.36 billion in revenue, according to Thomson Reuters. The firm's per-share earnings were its highest since 2008.

Under Chief Executive James Gorman, Morgan Stanley is in the late innings of a revamp designed to make its revenue more predictable and decrease risk. It has doubled down on fee-based services like wealth-management and eased its reliance on trading commissions and principal investment gains.

The firm in January set out new financial targets, most of which appear easily in reach, especially given the impact of the tax cuts.

Shares touched a 10-year high of nearly $59 in mid-March before sliding amid stock-market turmoil and fears of an escalating trade war. They remain up 1.5% this year, before Wednesday, and rose 1.9% in premarket trading following the bank's results.

Quarterly expectations had been relatively high, given results at rivals including JPMorgan Chase & Co. and Goldman Sachs Group Inc., which reported earnings Tuesday. Wall Street trading desks hummed as markets gyrated, while rising interest rates boosted the value of everything from adjustable mortgages to big corporate loans.

The market's wild ride in the first quarter aided Morgan Stanley's stock-trading, the biggest on Wall Street by annual revenues. Revenue was up 27%, in line with gains reported by others.

Morgan Stanley's fixed-income revenue rose 9% to $1.8 billion, its best quarterly tally in three years. The firm said currencies and commodities trading were stronger, while loans, bonds and interest-rate products were weaker, echoing comments by rivals including Goldman.

Wealth management revenue increased 8% as client assets tailed off slightly from the fourth quarter, to $2.37 billion. Profit margins stayed steady at 26% after last year hitting Mr. Gorman's goal of 25%. They have more than tripled in recent years as the firm has pushed mortgages and other loans, and ridden a bull market to higher management fees.

Revenue from advising on corporate mergers rose 16% to $574 million, while underwriting revenue gained 2%. Morgan Stanley missed the biggest underwriting prizes of the quarter -- that went to Goldman on Dropbox Inc.'s initial public offering, and Bank of America on real-estate investment trust Americold -- but it pocketed more than $9 million for leading the IPO of home-security firm ADT Inc., according to filings.

Asset management, a small but high-return business, reported an 18% rise in revenue. Mr. Gorman has made growing that unit a priority.

Write to Liz Hoffman at liz.hoffman@wsj.com

(END) Dow Jones Newswires

April 18, 2018 07:42 ET (11:42 GMT)

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