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VOL. 41 | NO. 15 | Friday, April 14, 2017

Morgan Stanley posts strong 1Q profit, helped by trading

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NEW YORK (AP) — Wealth management and investment banking firm Morgan Stanley saw profits rise 74 percent in the first quarter, helped by the firm's well-regarded trading desks.

Morgan Stanley's wealth management arm, a part of the firm's business that management has been focusing much of its energy on, also grew profits in the quarter.

The New York-based bank said Wednesday that it earned $1.93 billion in the first quarter, or $1.00 a share, compared with $1.13 billion, or 55 cents per share, in the same period a year earlier. The results topped analysts' expectations, who were looking for Morgan to report 89 cents per share, according to FactSet.

After Goldman Sachs reported a disappointing first-quarter profit on Tuesday, largely due to the bank having a lackluster quarter in trading, there were concerns that Morgan Stanley might be in a similar position. That was not to be the case.

Morgan Stanley's institutional securities division, which includes its investment bank and trading operations, had net revenues of $5.15 billion compared with $3.71 billion a year earlier. While stock sales and trading revenues were down slightly from a year earlier, typically a spot that Morgan outperforms, the firm made up for it in its fixed income department. Bond sales and trading revenues were $1.7 billion versus $873 million a year earlier.

Notably, the firm reported that its annualized average return on common equity, a metric used by investment banks to measure how well the bank is performing with the assets it has, was 10.7 percent in the quarter -- the first time it had crossed the 10 percent threshold. Morgan Stanley's top management had made it a high priority for the company to have a return on equity above 10 percent.

"We reported one of our strongest quarters in recent years. All of our businesses performed well in improved market conditions," Morgan Stanley Chairman and CEO James Gorman said in a statement.

In wealth management, Morgan Stanley had net revenues of $4.1 billion compared with $3.7 billion in the same period a year earlier. The business grew assets under management to $2.19 trillion from $1.999 trillion a year earlier, despite cutting back on retail locations and slightly reducing the number of wealth managers.

Morgan Stanley shares rose 2 percent in premarket trading to $42.05.