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Morgan Stanley swings to profit as firm expands wealth management

January 18, 2013|By Andrew Tangel
  • Outside Morgan Stanley headquarters in midtown Manhattan, New York.
Outside Morgan Stanley headquarters in midtown Manhattan, New York. (Stan Honda / Getty )

Morgan Stanley's big push into wealth management seems to be paying off.

The New York investment bank, which has been cutting costs as it has struggled to boost earnings, returned to profitability in the fourth quarter.

Morgan Stanley reported $507 million in profit, compared to a loss of $250 million the same period in 2011. Profits from its wealth management and institutional securities divisions surged.

Morgan Stanley's profit beat Wall Street estimates, and its stock surged in pre-market trading on Wall Street. Its shares added $1.37, or 7%, to $22.12 before the opening bell Friday, following a 1% gain the previous day.

The boost in profits came as the firm reportedly plans to cut 1,600 employees, joining its Wall Street peers in mass layoffs.

Morgan Stanley is trimming its ranks by 360 employees at five sites in New York, according to an official notice filed this week with the state's Department of Labor.

"After a year of significant challenges, Morgan Stanley has reached a pivot point," James Gorman, the bank's chairman and chief executive, said in a statement. After improving results across various divisions, he added: "Our firm is now poised to reach the returns of which it is capable on behalf of our shareholders."

Morgan's results followed disappointing fourth-quarter results reported Thursday by investment banking laggards Citigroup Inc. and Bank of America Corp. Wells Fargo & Co., JPMorgan Chase & Co. and Goldman Sachs Group Inc. have meanwhile reported surges in profits late last year.

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