Futures edge higher after Morgan Stanley results

Futures edge higher after Morgan Stanley results

Lindsey Duncan
January 19, 2018

After several paltry years of returns outside management's preferred range of 9 percent to 11 percent, Morgan Stanley delivered ROE of 9.4 percent, excluding the impact of changes to tax legislation.

But Morgan Stanley's net $1.2 billion loss on the new tax law - primarily from deferred tax assets that declined in value - came in below the $1.25 billion that analysts projected and well below its Wall Street counterparts.

Charges taken for the tax overhaul have crimped results for most big Wall Street banks.

Like most other big US banks, Morgan Stanley took a fourth-quarter charge due to a USA tax overhaul signed into law in December, but analysts have been looking past those one-time hits to focus on the long-term benefits of lower tax rates.

James Gorman's bank reported its best-ever quarter for its core business, wealth management, buoyed by a huge client base investing in stock markets that just doesn't seem to ever go down. Analysts had been looking for earnings of 64 cents per share on $9.2 billion in revenue.

Total revenue rose 5 percent to $9.5 billion from $9.02 billion in the year-ago quarter.

Shares of the sixth-largest US bank Thursday rose 1.3 percent to $55.35 in pre-market trade.

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Shares in Morgan Stanley rose by 0.6 per cent to $55.65 shortly after the opening bell in NY this morning, valuing the bank at $100 billion.

Excluding the tax charge and other items, adjusted profit was $1.68 billion, or 84 cents per share.

Trading revenue, which is traditionally Morgan Stanley's biggest source of income, fell 19.5 percent to $2.25 billion.

Beyond wealth management, Morgan Stanley also reached Gorman's annual goals for return on equity and average quarterly bond trading revenue. Asset management revenues rose to $2.5 billion from $2.2 billion in the year-ago quarter.

Excluding the tax charge, its return on equity was 9.4 percent a year ago.

Morgan Stanley's institutional securities revenues fell to $4.5 billion from $4.6 billion in the year-ago quarter.

S. bank rose almost 2 percent to $56.40 in pre-market trade. Asset management revenues increased to $572 million from $512 million in the year-ago quarter.