Jan. 17 - Morgan Stanley managed to sharply grow its wealth management income as it tries to transform itself into a less risky bank but profits were slammed by a large legal bill and weak fixed income trading. Fred Katayama reports.
Morgan Stanley's quarterly income tumbled 70 percent as it joined other banks in setting aside money for litigation expenses related to mortgage-backed securities. Also driving profit down: lower revenues in bond trading - which also dogged results at Goldman Sachs and Citigroup - and a loss in its institutional securities business. CEO James Gorman has been trying to transform the brokerage into a less risky bank by growing its wealth management business and moving away from trading. While he has had less success with trading, he managed to significantly expand wealth management's income and profit margin, and he forecast significantly higher margins by the end of 2015. He sounded bullish about the company's prospects, saying the bank is moving into 2014 "with strength and momentum." UBS analyst Brennan Hawken likes what he sees, saying, "We believe better than expected results out of Morgan Stanley's wealth management business could lead to solid upside, and the stock remains attractive even after the recent run." Morgan Stanley added to last year's roughly 60 percent gain, rising in early trade.