Morgan Stanley saved from trading revenue toils by wealth management

Jasper Jolly
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Morgan Stanley Reports Q4 Loss Due To $9.4 Billion Writedown
Bond traders have struggled, but less volatile wealth management has been lucrative (Source: Getty)

Morgan Stanley today announced higher profits than expected even as its investment bank and wealth management businesses made up for a massive slump in revenues in its trading arm – as it emerged the bank has started clearing bitcoin derivatives for clients.

The US bank made total profits of $1.7bn (£1.2bn) in the final quarter of 2017, excluding a one-off $1bn hit caused by US President Donald Trump’s tax changes.

Chief executive James Gorman has devoted more resources towards wealth management as a source of less volatile profits, a strategy which has paid dividends during a period in which bond trading desks across the world have struggled with historically low volatility.

Read more: Morgan Stanley steals crown after working on the highest value of UK deals

While trading revenues slumped by 46 per cent year-on-year to $808m, wealth management revenues increased by 26 per cent during the same period for the US’s sixth-largest bank by assets.

Equity underwriting revenues of $416m, up from $225 million in the prior year, were another bright spot, as Morgan Stanley’s top-ranked global position in initial public offerings (IPOs) delivered.

Shares in the bank were mostly flat as earnings per share adjusting for the tax effect came in at $0.84, well above the consensus expectations of $0.77.

Axel Pierron, managing director of management consultancy Opimas, said: “Morgan Stanley management is proving its ability to adapt the bank’s business model to evolving market conditions by scaling back where needed and investing in market growth opportunity."

Read more: Morgan Stanley holds up in "subdued trading environment"

James Gorman, chairman and chief executive, said the bank had achieved strategic objectives set out two years ago.

He said: “We enter 2018 with strong momentum aided by rising interest rates, tax reform and an evolving regulatory framework.”

Meanwhile, it emerged separately that Morgan Stanley has started clearing bitcoin derivatives for its core institutional clients. Goldman Sachs is the only other big investment bank which has publicly said it will clear the cryptocurrency futures.

Read more: Wall Street giants Goldman and Morgan give investors welcome surprise

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