During the past year, Morgan Stanley (NYSE: MS) went from near-death to profitability. Yes, Wall Street can be extremely resilient.
In its latest quarterly report, Morgan Stanley posted a profit of $757 million, or $0.38 per share. This was far below the company's results in the same period a year ago, which came to $7.7 billion, or $6.97 per share (keep in mind there was a large one-time gain for this quarter).
In a way, Morgan Stanley is playing catch-up -- especially against arch rival Goldman Sachs (NYSE: GS). In other words, the firm has significantly ramped up its risk appetite for trading. Unwise? Perhaps so. But such activities are much easier to pull off when the markets are bullish and the economy is coming back.
Another key growth driver has been investment banking. In fact, according to Bloomberg.com, Morgan Stanley is the top adviser for M&A for this year (which hasn't happened since 2000). True, fee volumes are still down. But this is likely to change going in 2010.
Morgan has also been working on building its extensive wealth management business. Of course, the firm has a joint venture with Smith Barney, which will provide lots of scale. Plus, the wealth management business can be fairly stable.
However, there are still lurking problems, such as Morgan Stanley's asset management business. The division has lagged significantly over the past year. But, Morgan Stanley is taking action, such as by unloading its mutual fund business to Invesco.
In early trading Wednesday, the shares of Morgan Stanley were up 7% to $34.52.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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