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Brokerage pays off for Morgan Stanley

Brokerage pays off for Morgan Stanley
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Morgan Stanley posted stronger-than-expected fourth quarter revenue as its brokerage profit jumped.

The results validate the bank’s strategy of reducing its reliance on the investment banking businesses that have not performed well across Wall Street.

In 2009, after the financial crisis brought the bank to the brink of failure, Morgan Stanley began reducing its reliance on trading and risk-taking for profit.

It began concentrating instead on areas like wealth management, where revenue is more stable. As part of that move, it bought a controlling stake in Citigroup’s retail brokerage business, now a joint venture known as Morgan Stanley Smith Barney.

Those moves seem to be paying off for Chief Executive James Gorman, who was originally hired by Morgan Stanley to oversee the bank’s retail brokerage business.

Investors shrugged off the fact that the US bank’s fourth-quarter profit fell short of forecasts and did not punish its shares as they had done with Goldman Sachs and Citigroup.

Net income rose to $836 million compared with $617 million for the same period a year earlier.

Still, excluding $668 million of pretax gains from the sale of its investment in China International Capital Corp, Morgan Stanley’s earnings missed analysts’ expectations.

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