2016 not so bad for Morgan Stanley: Bank's fourth quarter results sail past expectations

Hayley Kirton
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Morgan Stanley Reports 55 Percent Increase in Quarterly Profits
Fixed income helped to boost the banking giants bottom line (Source: Getty)

Morgan Stanley has given Wall Street something to smile about, reporting better than expected results, with profits and revenues booming in its fourth quarter thanks to a boost in bond trading.

The figures

The US banking giant announced net revenue of $9bn (£7.4bn) for the fourth quarter of 2016, up 17 per cent from $7.7bn for the same period a year ago, and net income applicable to the bank of $1.7bn, up 83 per cent from $908m. The bank also reported earnings per share of $0.81.

As for the full-year, the bank reported net revenues of $34.6bn, down two per cent from $35.2bn the year before, and net income of $6bn, down two per cent from $6.1bn the year before. Earnings per share for the full-year were $2.92.

A poll of analysts by Yahoo Finance had predicted full-year revenue of $34.1bn and earnings per share of $2.76. For the fourth quarter, the banks was expected to pull in $8.5bn in revenue and $0.65 in earnings per share.

Shares are up 1.4 per cent at $44.28 in pre-market trading.

Why it's important

In particular, Morgan Stanley's revenues in its fixed income sales and trading soared to $1.5bn in its fourth quarter of the year, almost triple the $550m it reported in the same business stream a year ago, as the market for bonds became a busy one around the US election.

Banks have been having a tough time as of late. Revenues have been squeezed by central banks favouring rock bottom interest rates over recent years, while costs have been pushed up by increasing amounts of red tape.

However, Morgan Stanley has joined JP Morgan, which reported its fourth-quarter results on Friday, in showing the banks are back in action with better figures than analysts had them pegged for. Lots of eyes will likely now be on Goldman Sachs when it reports tomorrow.

What Morgan Stanley said

"Our quarterly results reflect consistent strong performance, while our annual results show meaningful earnings growth over 2015," said James Gorman, chairman and chief executive. "We reported solid results in sales & trading and advisory, and record revenues in wealth management, while managing expenses prudently.

"We are optimistic about opportunities in 2017 and beyond and remain focused on serving our clients and achieving our strategic objectives."

In short

It's starting to look like 2016 was a good year for the US banking giants, as fixed income trading boomed thanks to a certain event last November.

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