* Excluding DVA item, company earns 71 cents per share
* Stronger wealth management, cost-cutting help results
April 19 (Reuters) – Morgan Stanley lost money during
the first quarter because an accounting rule cost the bank $2
billion, but excluding that special item its earnings rose on
much stronger trading revenue.
The Wall Street investment bank reported a loss of $119
million, or 6 cents per share, compared with a profit of $736
million, or 50 cents per share, in the year-ago quarter.
Excluding the special accounting item, known as debt
valuation adjustment (DVA) — which requires companies to
reflect changes to their own debt values, leading to charges
when values rise and gains when values decline — Morgan Stanley
earned $1.4 billion, or 71 cents per share.
Net revenue totaled $6.9 billion. Excluding DVA, revenue was
$8.9 billion, up from $7.8 billion a year earlier.
“The revenue is a good solid number,” said Wojtek Zarzycki,
chief investment officer of Optimal Investing in Toronto. “It is
a pleasant surprise here.”
Morgan Stanley shares were up 89 cents at $18.55 in
premarket trading.
Morgan Stanley’s trading business was particularly strong on
both a year-over-year and quarterly basis. Competitors including
Goldman Sachs Group Inc reported weaker trading results
compared with the first quarter of 2011, citing caution among
clients amid global economic uncertainty.
In a statement, Morgan Stanley Chief Executive James Gorman
said the sales and trading operation “showed broad-based gains
across products and regions.” He cited better operating
performance in the bank’s joint trading venture in Japan.
Excluding DVA, Morgan Stanley’s trading revenue rose 33
percent to $5 billion. Pre-tax income from trading, excluding
DVA, more than doubled, to $1.67 billion from $621 million.
The investment bank also showed progress in its
wealth-management business, which investors and analysts have
been watching closely because the integration of its Morgan
Stanley Smith Barney joint venture with Citigroup Inc has
been slower than expected.
Morgan Stanley’s global wealth management business, which
includes the joint venture, reported net revenue of $3.4
billion, with a pretax profit margin of 11 percent, up slightly
from a year ago and from the previous quarter. The business
reported more client assets in fee-based accounts and more
revenue and assets per financial adviser.
