Morgan Stanley profit tops expectations

Morgan Stanley reported a fourth-quarter profit, compared with a year-earlier loss, as its legal costs plunged and compensation expenses fell.

Shares of Morgan Stanley rose in premarket trading immediately following the report. (Get the latest quote here.)

The Wall Street bank reported earnings of $753 million, or 39 cents per share, applicable to common shareholders compared with a loss of $1.75 billion, or 91 cents per share, a year earlier. Excluding an accounting adjustment, the bank earned 43 cents per share.

Revenue for the quarter came in at $7.7 billion.

Wall Street forecast Morgan Stanley would deliver 33 cents a share in adjusted earnings and revenue of $7.59 billion, according to a consensus estimate from Thomson Reuters.

Morgan Stanley's total non-interest costs fell 41 percent in the quarter as the bank slashed headcount in its trading business.

"We enter 2016 with a continued focus on managing expenses across the firm and driving up returns for our shareholders," Chief Executive James Gorman said in a statement.

Compensation costs fell 28.5 percent to $3.65 billion, including $155 million in severance charges.

The bank had taken $2.9 billion in after-tax legal costs and a charge of $781 million related to compensation adjustments in the year-earlier quarter.

Morgan Stanley's trading revenue rose nearly 1 percent to $1.47 billion.

Last week, JPMorgan Chase, Citigroup and Wells Fargo topped earnings estimates, but their stock prices dropped.

Reuters contributed to this report.