Diversified financial services provider Morgan Stanley (MS) delivered better than expected fourth quarter results. After Goldman Sachs (GS) and US Bancorp. (USB) reporting better than expected results on January 18, Morgan Stanley followed it thereby boosting sentiments on banking stocks.
The markets were pining for positive clues from the financial institutions especially on the backdrop of credit crisis in the Euro Zone. In fact, the markets were concerned about banking space after the industry bore the brunt in 2008-2009 financial turmoil. The industry has been trying to come out the imbroglio.
The negative sentiments on the financial sector was started off by JPMorgan Chase (JPM) on January 13 and Citigroup's (C) lower than expected results on January 17 only inflicted further wounds. But the latest results from other banking companies not only nullified those negative sentiments but also reversed the trend.
The New York-based Morgan Stanley suffered a net loss from continuing operations of $275 million or 14 cents loss per share compared to net earnings of $600 million or 44 cents a share in the year-ago quarter. The results of 2011 fourth quarter included a loss of $1.7 billion or 59 cents a share with regard to a settlement with MBIA Inc. (MBI).
Revenues dropped 26.2 percent to $5.71 billion from $7.74 billion in the previous year quarter. Revenues were hurt by 42 percent fall in Institutional Securities to $2.07 billion from $3.57 billion in the year earlier quarter. The division deals with trading of currencies and provides other services such as packaging securities.
Investment banking revenues dropped 40.3 percent to $1.05 billion from $1.76 billion, whereas trading revenues surprisingly rose 13.5 percent to $969 million from $854 million in the year-ago quarter, thus beating the heat in the market.
Street analysts were expecting the company to suffer a loss of 57 cents a share on revenues of $5.57 billion for the fourth quarter.
Commenting on the results, the company's chairman and CEO James Gorman said, "For the past year, Morgan Stanley has made enormous progress by addressing a number of outstanding strategic and legacy issues. These included the conversion of MUFG's preferred investment into common stock and the settlement with MBIA. Importantly, we also achieved market share gains across our institutional businesses, as well as significant net flows into our Global Wealth Management and Asset Management platforms. We ended the year in better shape than where we started and we are well positioned to deliver improved returns to shareholders in 2012 and beyond."
The company delivered yet another better than quarterly results in a challenging market conditions. The uncertainty in financial market is likely to continue in the face of continued conflicting reports from the Euro Zone. Morgan Stanley could continue to surprise the industry by posting better results going by the progress made in resolving outstanding issues. This should allow the management to focus on its improving operational efficiency for better return to shareholders.