NEW YORK — Morgan Stanley said Wednesday it earned $617 million during the last three months of 2009 on profits from its investment banking and retail brokerage businesses.
The results gave Morgan Stanley its second straight profitable quarter following a year of losses. The bank earned 29 cents a share on $6.8 billion in revenue. That was less than analysts' expectations of 36 cents on $7.8 billion in revenue, according to Thomson Reuters.
Investment banking, which makes up the bulk of Morgan Stanley's business, has been one of the few healthy segments in the struggling financial industry. JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. were able to use investment banking profits to offset losses from failed loans in recent quarters.
However, investors have faulted Morgan Stanley for not profiting enough from investment banking and the stock market's big 2009 rally. The company has lagged industry leader Goldman Sachs Group Inc., which reports its fourth-quarter results on Thursday.
Investors were disappointed again Wednesday with the company's fourth-quarter results and sent its stock down 40 cents or 1.28 percent to $30.76.
Analysts at Barclays Capital said in a research note that Morgan Stanley's fixed income and stock trading fell short of expectations.
Colm Kelleher, Morgan Stanley's chief financial officer, said the bank was seeking to hire more traders and salespeople to boost its securities and investment banking businesses. He rejected the notion that the bank had been overly conservative, saying the company would take "appropriate risks" when warranted "rather than just betting at a casino table."
"We're not afraid of risk. We just want to take the right kind of risk," Kelleher told The Associated Press in an interview.
Morgan Stanley said its fourth-quarter revenue was hurt by an accounting charge resulting from the continuing improvement of credit markets. On a positive note, the bank said the Morgan Stanley Smith Barney joint venture more than doubled the revenues from its global wealth management operations to $3.1 billion.
"While the environment remains extremely fluid, we are confident the steps we have taken this year will ensure that Morgan Stanley remains well positioned," said CEO James Gorman, who replaced John Mack earlier this month. Mack remains chairman.
The bank reported its 2009 compensation expenses, including salaries and bonuses, rose 30 percent to $14.4 billion from $11.1 billion in 2008. Citing the government's bailout of the banking industry, Morgan said Mack won't receive a bonus for 2009, while any bonus received by Gorman will be in deferred stock instead of cash.
Other employees are also receiving more deferred compensation in an effort to more closely align pay with long-term performance, Kelleher said.
"Clearly, we had to balance paying judiciously with the interest of our shareholders and the viability of the company," he said.
Revenue from Morgan Stanley's institutional securities business, which includes trading of stocks and fixed-income assets, reached $3.2 billion in the quarter. That compares with $13.8 billion in negative revenue the same quarter a year ago; negative revenue reflects the impact of accounting charges. Meanwhile, revenue from underwriting securities nearly quadrupled from a year ago to $950 million.