Morgan Stanley Returns to Q4 Profit

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US banking giant Morgan Stanley report strong growth in profits.

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Morgan Stanley has called a strong rise in profits a “pivot point” and a sign that the bank is making “meaningful progress”.

The bank reported a net profit of $481m between October and December 2012, a result of a 37% increase in revenue to $7.5bn. Following the announcement Morgan Stanley shares quickly rose and subsequently closed 7.86% up at 22.38 USD, a twelve month high.

In a statement the bank said they had strong progress from the same quarter in 2011, with Institutional Securities reporting a “pre-tax gain from continuing operations of $57 million compared with a pre-taxloss of $772 million in the fourth quarter of last year”.

Commenting on the profit James Gorman, Morgan Stanley’s chairman and chief executive, said following “a year of significant challenges, Morgan Stanley has reached a pivot point” and that the bank had “demonstrated meaningful progress in our wealth management joint venture, reaching the highest pre-tax margin since the inception of the joint venture”.

Mr Gorman further argued that the firm “is now poised to reach the returns of which it is capable on behalf of our shareholders” and that they are “ahead of our risk weighted asset reduction targets for Fixed Income and Commodities, while continuing to focus on our strengths within business and strategic linkages across the Firm and investing for the evolving regulatory environment”.

As part of the profit announcement the bank also stated that it was changing the process by which it awards bonuses. Instead of being awarded as a lump sum in the early months of a new calendar year, before any taxes changes at the start of a new financial year, bonuses will now be paid out in four separate instalments spread over a period of up to four years.

In 2013 the total amount of bonuses paid will fall to $1.5bn, from the $1.6bn worth awarded the previous year.

The news comes soon after two other US banks, Goldman Sachs and JP Morgan , announced significant rises in investment banking profits during the same period.

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