Morgan Stanley reported strong revenue growth for the fourth quarter led by record earnings for the firms wealth management division -- a sign of how far the firm has come since acquiring Smith Barney.
Revenue for Morgan Stanleys wealth management unit rose to $3.7 billion for the fourth quarter from $3.3 billion for the same period a year ago. Net income for the unit rose to $476 million for the fourth quarter from $370 for the year-ago period.
The wealth management group, in terms of its contribution to the bottom line, has increased by a multiple over the past couple years, says Michael Wong, an analyst at Morningstar.
For the fourth quarter of 2013 the companys overall revenue grew to $7.8 billion, up from $6.9 billion for the same period a year ago. Meanwhile Morgan Stanleys net income fell to $181 million for the fourth quarter of 2013 from $594 million for the fourth quarter of 2012. This was largely due to the $1.2 billion set aside in legal reserves in the fourth quarter for expenses related to litigation and investigations surrounding mortgage-backed securities and the credit crisis.
The wealth management unit, led by Greg Fleming, saw a growth in total client assets -- led primarily by ultra-wealthy customers -- to $1.9 billion for the fourth quarter of 2013 from $1.6 billion for the same period of 2012. Client assets of $10 million or more rose to $678 billion for the fourth quarter of 2013 from $538 billion for the fourth quarter of 2012. This exceeded the growth of client assets of $1-$10 million, which increased to $776 billion for the fourth quarter of last year from $699 billion for the year-ago period.
Assets for clients with less than $100,000 actually fell to $41 billion for fourth quarter from $45 billion for the same quarter a year ago.
Assets per advisor rose to $116 million from $104 million for the same quarter a year ago. At the same time the number of representatives employed by the unit increased slightly to 16,456 at the end of the 2013 from 16,352 at the end of 2012.
These figures are below their 2010 level, when the number of advisors topped 18,000. Morgan Stanley cut staff and locations in order to better control costs, Wong says. Those efforts have paid off as the companys stock rose 60% in 2013, outperforming the S&P 500 which increased 26% for the same period.
Definitely Morgan Stanley has exceeded market expectations this past year, says Wong.
Morgan Stanley also reported that its diluted earnings-per-share declined to $0.7 for the fourth quarter of 2013 from $0.29 diluted earnings-per-share for the same period a year ago.
Last year Morgan Stanley initiated its first share buy-back program since 2008. CEO James Gorman said in a conference call with investors that the company would increase its buyback program and dividend payments to shareholders this year.
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