Wall Street bullish on profit slide

INVESTORS took Morgan Stanley's 48 per cent decline in first-quarter profits in their stride yesterday as figures from the US bank beat many analysts' expectations.

The bank's shares rose in early US trading, despite it reporting quarterly net income of $736 million (440m), or 50 cents a share, down from $1.41 billion, or 99 cents a share, a year earlier.

Profits were hit by a $655m loss from its Japanese joint venture, Mitsubishi UFJ Morgan Stanley Securities. The venture was part of a $9bn emergency investment that Morgan Stanley received from Mitsubishi at the height of the financial crisis in 2008.

But the bank made a gain equivalent to 30 cents a share from selling its stake in a stalled casino project in Atlantic City, New Jersey.

Overall revenue fell 16 per cent to $7.6bn, driven by another poor performance from the bank's bond trading division.

The bond trading business generated big losses for the bank during the financial crisis, and then lagged rivals during a recovery in 2009, but was measured against an unusually strong quarter last year.

Some parts of the business performed well. The wealth management division - a joint venture with Citigroup - generated income for Morgan Stanley of $183m, up 85 per cent.

Most Wall Street banks have reported weaker fixed-income revenue after a strong quarter a year earlier. Goldman Sachs posted a 28 per cent decline for its fixed income customer trading, while JPMorgan Chase saw income fall just 4 per cent.