Earnings

Morgan Stanley has glass 'half full' attitude as profit propels past forecasts

Morgan Stanley reports solid earnings
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Morgan Stanley reports solid earnings

Morgan Stanley management struck a positive tone Tuesday after the investment bank reported fourth quarter earnings that handily beat market expectations.

CFO Jon Pruzan told CNBC there is much more optimism for the bank than this time last year. People have a "half full" rather than a "half empty" mindset, he said, adding that the rising spread between long-term bond yields and shorter-term yields is good news for Morgan Stanley, and that tax reform will also be a positive.

A surge in sales and trading revenue helped Morgan Stanley's earnings surpass forecasts.

Net revenue from bond sales and trading jumped by triple digits to $1.5 billion, up from $550 million a year ago. Total sales and trading net revenue rose 39 percent from the same quarter a year ago, to $3.2 billion.

The bank posted a profit of 81 cents a share on revenue of $9.02 billion.

Morgan Stanley was expected to post a profit of 65 cents a share on revenue of $8.47 billion, according to the consensus of analysts polled by Reuters.

"We reported solid results in sales and trading and advisory, and record revenues in wealth management, while managing expenses prudently," Chairman and CEO James P. Gorman said in a release. "We are optimistic about opportunities in 2017 and beyond and remain focused on serving our clients and achieving our strategic objectives."

Shares of the bank were down slightly just ahead of the opening bell after rising more than 1.5 percent following the earnings report. Shares of other major banks such as Goldman Sachs and JPMorgan Chase were also slightly lower in premarket trade.

Advisory revenues rose nearly 22 percent to $628 million on increased completed mergers and acquisitions, Morgan Stanley said in a release.

Wealth management pretax income from continuing operations was $891 million, up from $768 million a year ago. Asset management fee revenues rose more than 4.5 percent to $2.2 billion, while net interest income jumped 26 percent, "principally driven by higher deposit and loan balances."

The return on average common equity was 8 percent for the full year ended 2016.

The bank's board of directors declared a 20 cent quarterly dividend per share, payable on Feb. 15, to common shareholders of record on Jan. 31.

Last Thursday, Reuters reported that Morgan Stanley laid off several senior investment bankers and cut bonuses by about 15 percent because of a decline in revenue stemming from dealmaking and capital-raising across Wall Street.

Pruzan told CNBC that recent staff changes were not "cuts" and were part of a normal process of personnel management.

The financial sector is up 17 percent since the presidential election, making it the best performer in the . Morgan Stanley shares are up more than 28 percent over that time.

Financials will continue to outpace: Expert
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Financials will continue to outpace: Expert

— CNBC's Wilfred Frost contributed to this report.