Morgan Stanley (MS), which reported a fourth-quarter drop in net income on Friday, has outlined aggressive plans to boost its wealth-management results — namely a profit margin target of 22% to 25% by year-end 2015.
In the fourth quarter, the company had net revenues of $7.8 billion vs. $7 billion a year ago. The wealth management unit produced $3.73 billion in revenue in the quarter, up from $3.33 billion a year earlier.
Net income overall fell to $133 million, or $0.07 per share, from $568 million, or $0.29, in the year-ago quarter. Excluding one-time items such as $1.2 billion in funds that had to be set aside for potential legal expenses, the bank earned $0.50 per share, beating estimates.
"Our fourth-quarter results demonstrated the consistency embedded in our business model, as revenues increased year-over-year in all three of our business segments," said Chairman & CEO James Gorman, in a statement. "We look forward to further progress on our strategic goals as we move into 2014 with strength and momentum."
Morgan Stanley's wealth management results for the latest period included a pretax margin of 19%, or 20% excluding a charge.
Rival Bank of America-Merrill Lynch (BAC), though, is already ahead of Gorman's 2015 target. Its wealth management unit had a profit margin of 26.6% in the fourth quarter.
Morgan Stanley has had to fund costly IT and other projects to integrate the Smith Barney franchise. It also had to buy Citigroup's share of the venture.
The unit's 2013 margin was 18% vs. 10% in 2011 and 7% in 2009. Gorman sees the unit improving its results via cost discipline and revenue growth.
