Morgan Stanley earnings fall — thanks to legal bills

January 17, 2014

Morgan Stanley reported earnings this morning, announcing that its quarterly profit fell to $192 million ( 7 cents per share) in the fourth quarter from $661 million (33 cents per share) in the same period of the previous year. The drop was largely due to some $1.2 billion in legal bills.

Here’s how Morgan Stanley’s quarter stacked up against rival bank Goldman Sachs:

Here is more detail about the bank’s earnings from Reuters:

Excluding items such as $1.2 billion in legal expenses, the bank earned 50 cents per share, according to Thomson Reuters I/B/E/S, beating the average analyst estimate of 45 cents.

Morgan Stanley shares, which have risen 56 percent in the past year, were up about 1 percent before the opening bell.

Morgan Stanley, which has been working to reduce its risk-weighted assets to below $200 billion by 2016, said it would now aim to reach that target by 2015.

The bank plans to reduce its risky holdings largely by shedding fixed-income assets that tie up too much capital under new banking regulations.

Chief Executive James Gorman has also been shifting the bank’s focus to less-risky products that can be traded electronically and cleared through exchanges.

Revenue from Morgan Stanley’s wealth management business, which has become increasingly important as the bank moves away from risky trading, rose 12.2 percent from a year earlier to $3.73 billion, accounting for 47.6 percent of total revenue.

The profit margin in that business was 20 percent, excluding an impairment charge. Gorman had set a target of at least 20 percent.

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