Morgan Stanley on Wednesday reported first-quarter earnings that fell less than analysts estimated as record equity sales and trading offset write-downs from the collapse of the subprime mortgage market.
The New York-based firm said it earned $1.53 billion after preferred dividends, or $1.45 a share, down 42 percent from $2.66 billion, or $2.51 a share, in the year-ago period. Revenue fell 17 percent, to $8.3 billion. The latest result beat estimates by 42 cents a share, according to Thomson Financial.
Profit and return on equity exceeded results reported Tuesday by Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. as equity sales and trading revenue surged 51 percent, to $3.3 billion. The results might ease investors’ concern that access to capital is dwindling after Bear Stearns Cos. agreed to a takeover by JPMorgan Chase & Co. for a fraction of its market value.
“We had to come out of this week in regard to investment banks in general with more answers than questions,” said Douglas Ciocca, a portfolio manager at Renaissance Financial Corp. in Leawood, Kan. “We’re certainly headed in the right direction.”
Return on equity, a measure of how effectively the firm reinvests earnings, dropped to 19.7 percent from 30.9 percent a year earlier. That compares with 15 percent at Goldman and 8.6 percent at Lehman.
Revenue at its fixed-income sales and trading group dropped 15 percent, to $2.9 billion, still its second-highest ever, after total asset write-downs of $2.3 billion linked to the collapse of the subprime mortgage market and leveraged loans.
Kelleher said the firm’s liquidity reserve is about $77 billion, up from $71 billion at the end of the quarter and an average of $49 billion in 2007.
Shares of Morgan Stanley added 59 cents, to $43.45, on the New York Stock Exchange.
Other earnings news
Nike Inc. said third-quarter net income rose 32 percent on higher sales in China and Europe.
The Beaverton, Ore.-based company reported net income of $463.8 million, or 92 cents a share, easily surpassing estimates of 79 cents a share. A year ago, Nike earned $350.8 million, or 68 cents a share. Revenue rose 16 percent, to $4.54 billion.
Sales in China, the world’s fastest-growing major economy, surged as consumers there bought shoes and athletic gear ahead of this summer’s Olympic Games in Beijing. Nike bought Umbro PLC, which makes the shirts for England’s soccer team.
The report came out after the close of trading.
