Morgan Stanley sees profits jump

US Wall Street firm Morgan Stanley has reported a 60% jump in fourth-quarter profit, as expected by markets.

The US’s second-largest investment bank announced a net profit of $600m (£375m) for the last three months of 2010, up from a $376m profit a year earlier.

The firm followed rivals Goldman Sachs and Citigroup in reporting poor client activity at its investment bank unit.

But this was more than offset by strong performances by its wealth management and asset management business lines.

Total net revenues for the quarter rose 14% on a year ago to $7.8bn.

“High expectations were baked into the results, they were expected to be good so the market is not showing much reaction to them,” said Nick Serff, market analyst at City Index.

More than half of the revenue figure came from the firm’s two divisions responsible for looking after money for wealthy clients, and for large companies and institutions.

In contrast, the banking group’s “Institutional Securities” division – which provides financial advice to companies, and carries out sales and trading in global capital markets – underperformed.

The poor showing followed the pattern seen at rival firms, dragged down in particular by a dismal business levels in “fixed income” – bonds, credit derivatives and other debt products.

However, the firm was able to boast that bankers providing advice on mergers and acquisitions, as well as those arranging stock market flotations and trading in shares, put in a much stronger showing than their competitors did.

“It’s been a running theme for these banks for several quarters now,” says Richard Bove, bank analyst at Rochdale Securities.

“Is the industry undergoing a structural change with reduced trading, or is this just a function of inactivity and people unwilling to trade, given the current market?”

“These companies are looking at markets that have lost, in some cases, two-thirds of their activity since the crisis, and it looks like its not coming back anytime soon,” he noted. “It will take a few years for these banks to adjust.”

This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.