Morgan Stanley on Monday reported a first-quarter profit that beat Wall Street estimates as the firm cut costs and as revenue from trading stocks and bonds declined less than some analysts predicted.
Net income fell 53 percent to $1.13 billion, or 55 cents a share, from $2.39 billion, or $1.18 a share, a year earlier, the New York-based company said in a statement. Profit surpassed the 47-cent average estimate of 22 analysts surveyed by Bloomberg.
While Chief Executive Officer James Gorman has been shrinking the firm's fixed-income trading division to emphasize the less-volatile wealth-management business, Morgan Stanley is still exposed to slumping markets that hurt results across Wall Street.
The firm follows JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. in lowering expenses to compensate for falling revenue. Goldman Sachs Group Inc., which reports results today, is embarking on its biggest cost-cutting push in years, people with knowledge of the effort said last week.
Revenue fell 21 percent to $7.79 billion, compared with the $7.76 billion estimate of 18 analysts surveyed by Bloomberg. Noninterest expenses fell 14 percent to $6.05 billion, below the $6.42 billion estimate. Compensation expenses dropped 19 percent to $3.68 billion, and noncompensation costs declined 6.2 percent to $2.37 billion.
"The first quarter was characterized by challenging market conditions and muted client activity," Gorman said in the statement. "While we see some signs of market recovery, global uncertainties continue to weigh on investor activity."
Morgan Stanley shares, which fell 19 percent this year through Friday, advanced 3.1 percent to $26.55 at 7:36 a.m. in New York.
The firm generated $873 million in first-quarter fixed-income revenue, 54 percent less than a year earlier and the weakest start to a year since Gorman took over in 2010.
Equities-trading revenue declined 9.3 percent to $2.06 billion from $2.27 billion, compared with the $1.93 billion estimate of Citigroup Inc. analyst Keith Horowitz and $1.95 billion estimate of Credit Suisse Group AG's Susan Roth Katzke.
Advisory revenue climbed 25 percent to $591 million from a year earlier on higher completed merger business, according to the statement.
"Our equity franchise continues to do extremely well," Chief Financial Officer Jonathan Pruzan said in an interview. In fixed income "we have more work to do, but it was a pretty decent quarter," he said.
Wealth-management revenue dropped 4 percent to $3.67 billion, compared with the $3.73 billion estimate of Wells Fargo & Co. analyst Matthew Burnell.
Business on 04/19/2016