Despite more than doubling compensation after acquiring Smith Barney from Citigroup, Morgan Stanley announced Wednesday that earnings swung back to a profit in the first quarter.
The New York-based company reported a profit of $1.85 billion, or 99 cents a share, after reporting a loss of $17 million, or 57 cents a share, a year earlier. As a result of its Morgan Stanley Smith Barney joint venture, revenue more than tripled to $9.08 billion from a year earlier.
Analysts had expected earnings of 57 cents on $7.94 billion of revenue, according to Thomson Reuters.
Compensation rose 123% to $4.4 billion as Morgan Stanley picked up nearly 10,000 financial advisors after acquiring Smith Barney from Citigroup [C].
Goldman Sachs [GS] reported Tuesday that its compensation increased 17% from a year earlier to $5.5 billion from a year earlier.
Analysts said that Morgan Stanley [MS] beat estimates because of a surge in sales and trading. The investment bank reported that sales and trading net revenue rose 51.9% to $4.1 billion.
Fixed income sales contributed $2.7 billion in net revenue and equity sales and trading contributed $1.4 billion.
Morgan Stanley’s global wealth management group increased its pre-tax income from continuing operations 133.6% to $278 million as net revenue rose 138.5% to $3.1 billion. The surge was a result of the closing of its Morgan Stanley Smith Barney transaction.
As of March 31, it had $1.6 trillion in total client assets. Client assets in fee-based accounts were $413 billion and represented 26% of total client assets. It generated $5.8 billion in net new assets for the quarter.
“Our intense focus on disciplined execution across Morgan Stanley’s global franchise helped the firm deliver improved results this quarter, though we still have a great deal of work to do,” James P. Gorman, Morgan Stanley’s chief executive officer, said in a statement.