Morgan Stanley swings to fourth quarter profit

Morgan Stanley swung to a profit in the fourth quarter as the company took steps to restructure its struggling Fixed Income business.

The group achieved net income of $908m (£635.96m) in the three months ended 31 December 2015, compared with net losses of $1.6bn the same quarter a year earlier.

Earnings per share excluding so-called debt valuation adjustments came in at 43 cents, ahead of the 32 cents which analysts had been anticipating.

Net revenue fell to $7.7bn from $7.8bn the prior year as a strong performance in Equity sales and trading, and solid results in Investment Banking, were offset by a weakness in Fixed Income and Commodities sales and trading.

Expenses during the quarter were less than the previous year. Compensation expenses came to $3.7bn, compared to $5.1bn a year ago, while the non-compensation expense fell to $2.6bn from $5.6bn.

In an effort to address issues at its debt, currency and commodities unit, Morgan Stanley also overhauled the company’s management team and cut 1,200 jobs.

“A strong overall performance in the first half of the year was impacted by difficult market conditions in the second half that dampened trading activity,” said chairman and chief executive James Gorman.

“In the fourth quarter we took action to meaningfully restructure our Fixed Income business on a capital and expense basis. We enter 2016 with a continued focus on managing expenses across the Firm and driving up returns for our shareholders.”

Shares fell 4.42% to $25.95 on the New York Stock Exchange at 1225 GMT.