Morgan Stanley profit jumps 60% on trading revenue

Wall Street investment bank Morgan Stanley reported a much stronger-than-expected rise in first-quarter profit, boosted by higher revenue from trading bonds and equities. The bank’s trading business, like those of its main rivals, got a boost in the quarter after the Swiss central bank scrapped a cap on the franc, the European Central Bank announced its quantitative easing program and the US Federal Reserve took steps toward tightening monetary policy. Global stocks have also generally performed strongly since the start of the year. Morgan Stanley capped a mostly strong quarter for the big US banks with its 60% rise in net profit, followed by Goldman Sachs Group Inc, whose profit jumped 41%.Net income applicable to Morgan Stanley’s common shareholders rose to $2.31bn, or $1.18 per share, in the quarter, from $1.45bn, or 74¢ per share, a year earlier. Excluding items, the bank reported earnings of $1.14 per share. Adjusted earnings according to calculations by Thomson Reuters I/B/E/S worked out to 85¢ per share. On that basis, analysts had expected per-share earnings of 78¢. Net revenue excluding items rose 10.3% to $9.78bn, beating the average estimate of $9.17bn. Adjusted revenue from equities sales and trading rose by a third to $2.27bn — a strong performance, but not enough to beat Goldman Sachs Group Inc, which reported revenue of $2.32bn. Morgan Stanley, the last big US bank to report for the quarter, is focusing less on bond markets and more on managing money for the rich as a way to free up capital and comply with stricter regulatory requirements since the financial crisis. Revenue in the bank’s wealth management business rose 6.2% to $3.83bn, accounting for 39% of total revenue. Excluding special items, revenue from trading fixed-income securities, currencies and commodities (FICC) rose 15% to $1.90bn. The wealth unit’s contribution to revenue jumped to nearly 45% last year from less than 20% in 2006. In the same period, FICC revenue fell to about 12% of revenue from more than a third. The bank’s adjusted average return-on-equity was 10.1% in the quarter, above the 10% Gorman has set as a minimum as the bank focuses more on returns than revenue. Royal Caribbean Royal Caribbean Cruises Ltd cut its adjusted profit forecast for the year, citing a jump in fuel prices since January and a strong dollar. Shares of the world’s second-largest cruise operator by revenue, which also reported lower-than-expected quarterly revenue, fell 7.6% in premarket trading. The company said yesterday that it now expects adjusted profit of $4.45-$4.65 per share for the year ending December, lower than its January forecast of $4.65-$4.85. The forecast includes a 36 cents per share impact from a strong dollar and a rise in fuel prices, the company said. Royal Caribbean said it now expects fuel expenses of $834mn based on current prices, up from its previous forecast of $806mn. Brent crude, the global benchmark for crude oil prices, has risen 36% from mid-January to close at $63.45 per barrel on Friday. The company’s first-quarter revenue missed analysts’ estimates as a strong dollar crimped onboard purchases by customers from outside the US. The dollar gained nearly 9% against a basket of major currencies in the first quarter after rising 13% in 2014. Royal Caribbean’s net yield in the first quarter ended March 31 was down 5.4% on a reported basis. Lower cruise operating expenses boosted the company’s net income to $45.2mn, or 20 cents per share, from $26.5mn, or 12 cents per share, a year earlier. Revenue fell 3.7% to $1.82bn. Analysts on average expected a profit of 13 cents per share on revenue of $1.86bn, according to Thomson Reuters I/B/E/S.Halliburton Halliburton Co warned of pricing pressure for its oilfield services in North America, its largest market, and challenges in its international operations, as an extended slump in oil prices continues to force drillers to slash spending. The company posted a better-than-expected quarterly profit yesterday, helped by higher revenue and operating income from Latin America, the Middle East and Asia. However, revenue and profit from all other regions fell due to the global slump in oil prices, which have nearly halved since peaking last June. North America, which accounted for more than half the company’s first-quarter revenue, “experienced an unprecedented decline in drilling activity,” chief executive Dave Lesar said in a statement, adding that “Industry prospects will continue to be challenged in the coming quarters.” The average US rig count has fallen about 40% since June and was at 1,110 in March, according to Baker Hughes Inc’s closely watched survey. Halliburton agreed to buy Baker Hughes for $35bn last November, a deal aimed at helping both companies weather the slump in oil and resist pressure from oil producers to slash prices. Halliburton said earlier this month that it would sell three businesses to help get regulatory clearance for the deal. The merger is expected to generate annual savings of about $2bn. Together, Halliburton and Baker Hughes are also cutting more than 13,000 jobs to rein in costs. Industry leader Schlumberger Ltd, which is shedding about 15% of its workforce, or 20,000 jobs, also reported a better-than-expected profit last week. Excluding $1.21bn in charges related to asset writedowns and other items, Halliburton earned 49¢ per share, above the average analyst estimate of 37 cents, according to Thomson Reuters I/B/E/S. The charges led the company to a quarterly loss compared with a year-earlier profit. Analysts covering the stock have cut their first-quarter earnings estimate for Halliburton by over a third in the past month. Revenue fell 4% to $7.05bn in the quarter ended March 31, but beat analysts’ average expectation of $6.96bn. Revenue from Middle East and Asia rose more than 13%, while revenue from Latin America rose 10.5%.