At the end of the bank's earning season last Friday, Morgan Stanley stood tall among its competitors. The firm was able to expand its wealth management business while cutting down on fixed income trading. Wealth management revenues increased by 9% to $3.8 billion. However, its adjusted return on equity slipped to 9%, below the 10% threshold set by chief executive James Gorman. It's net income rose by nearly 93% over the past year to $1.7 billion. Morgan's EPS beat analysts' expectations, delivering $0.65 per share versus an estimate of $0.54 per share. In addition, despite a smaller fixed-income trading division, revenues in that sector still rose to $997 million on the back of a stronger dollar in the foreign exchange market. This increase was second to only that of Goldman Sachs. Also, Morgan Stanley's work on the $25 billion dollar Alibaba IPO helped it to top the list of underwriters for the first three quarters of 2014.
Personally, I see the future as bright for Morgan Stanley. Not only have they had success this past year, they are in the process of establishing a different albeit safer position to other banks. Morgan Stanley's now believes that selling bonds and stocks to regular Americans is a safer and possibly more profitable venture than trading. It is interesting to see a major firm take this route, as trading has usually been the main driver of profits. I believe that the restructuring of their business model will pay off in the long run.