Morgan Stanley shares ended 0.89% higher in Thursday´s New York trading session after the group beat fourth-quarter earnings and revenue expectations.
As with rival Goldman Sachs, which reported its results on Wednesday, Morgan Stanley was hurt by a drop in trading revenues from the fixed income segment amid low volatility.
Nevertheless, in Morgan Stanley´s case it was able to report strong results from its wealth management arm.
Wealth management boost
While low volatility, amid strong growth and subdued inflation, has hurt trading operations, the reverse appears to be true for businesses catering for long-term investors, such as wealth management.
In a similar vein, companies such as US investment manager Blackrock have also been reporting strong results as global equity markets reach new highs and client inflows remain strong.
Morgan Stanley reported overall earnings per share of 84 cents versus analysts´ forecasts of 77 cents.
Group revenue came in at $9.5bn compared with market expectations of $9.2bn.
The wealth management division, a particular bright spot, saw revenues rise to $4.41bn versus forecasts for $4.32bn.
Morgan Stanley´s investment banking fixed income, commodities and currencies trading arm saw overall revenues fall to $808m versus market forecasts of $1.05bn.
Equities trading, meanwhile, was broadly in line with expectations, at $1.9bn.
US tax impact
In common with the reports of other US financial groups, Morgan Stanley reported a $990m one-off hit from US tax reforms. Though this was relatively small compared to the $4.6bn charge booked by Goldman.
In common with rivals, Morgan Stanley points to the longer-term benefits it should reap from a lower effective tax rate as result of the move to cut the top rate of US corporate tax from 35% to 21%.
“Over the course of the full year we achieved the strategic objectives outlined two years ago. In 2017, pre-tax earnings grew by 18%, driven by a 10% increase in revenues, with growth across all our business segments. This, coupled with strong expense discipline demonstrates the firm’s operating leverage. We enter 2018 with strong momentum aided by rising interest rates, tax reform and an evolving regulatory framework,” said Morgan Stanley chief executive James P. Gorman.