QUOTE OF THE DAY “I think the investment in our infrastructure and the condition of our infrastructure paid huge dividends for us, and maybe we had a little luck as well.” Jack Koraleski, Union Pacific chief executive officer Article, 1DMorgan Stanley’s earnings grow 18%
Morgan Stanley’s efforts to re-establish itself as a Wall Street powerhouse since the financial crisis gained some ground Thursday, when the bank reported that first-quarter earnings rose 18 percent from the period a year earlier.
The increase was driven in part by a surprisingly strong performance in the bank’s fixed-income division, which trades bonds, derivatives and commodities. Fixed-income trading has long been a major source of revenue for Wall Street firms, and most of Morgan Stanley’s rivals have so far reported declines in this business in the first quarter, including Goldman Sachs, which also reported its earnings Thursday.
On an adjusted basis, Morgan Stanley said net income from continuing operations increased to $1.39 billion from $1.18 billion in the first quarter of 2013. Adjusted revenue rose to $8.8 billion from $8.48 billion.
The first-quarter earnings exceeded the $1.22 billion that analysts expected Morgan Stanley to make in the period. Likewise, first-quarter revenue was above the $8.57 billion that analysts were forecasting.
“We continue to execute on our multiyear strategy to deliver consistent returns for our shareholders through revenue growth and strong expense discipline,” James Gorman, Morgan Stanley’s chief executive, said in a statement.
30-year mortgage rate falls to 4.27%
WASHINGTON - Average U.S. rates on fixed mortgages fell this week for the second straight week as the spring home-buying season begins.
Mortgage buyer Freddie Mac said Thursday that the average rate for the 30-year loan fell to 4.27 percent from 4.34 percent last week. The average for the 15-year mortgage eased to 3.33 percent from 3.38 percent.
Mortgage rates have risen about a full percentage point since hitting record lows about a year ago.
Many analysts have been expecting an improving economy to lift the housing market, which has been recovering over the past two years. But housing has struggled to maintain momentum. Rising home prices and higher mortgage rates have held back some potential home buyers. Others have had trouble qualifying for mortgages.
To calculate average mortgage rates, Freddie Mac, the Federal Home Loan Mortgage Corp., surveys lenders across the country between Monday and Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for a 30-year mortgage was unchanged at 0.7 point. The fee for a 15-year loan remained at 0.6 point.
Goldman income falls 10% in 1st quarter
Goldman Sachs Group Inc., the Wall Street bank with the highest return on equity in 2013, reported earnings that topped analysts’ estimates.
First-quarter net income fell 10 percent to $2.03 billion, or $4.02 a share, from $2.26 billion, or $4.29, a year earlier, the New York-based company said Thursday in a statement. That beat the $3.49 average estimate of 25 analysts in a Bloomberg survey.
Chief Executive Officer Lloyd Blankfein, 59, is facing a slump in fixed-income trading, which fell for the fourth time in the past five quarters, as he seeks to increase return on equity. A jump in mergers and initial public offerings in the quarter suggests investment banking may be picking up.
Revenue declined 8 percent to $9.33 billion. Compensation, the firm’s biggest expense, fell to $4.01 billion, or 43 percent of revenue, the same ratio as a year earlier.
Revenue from the bank’s bond trading business fell 11 percent to $2.85 billion. Goldman, like other big Wall Street banks including JPMorgan and Citigroup, has seen bond trading slump in the first quarter. The business is “operating in a challenging environment and levels of activity generally remained low,” Goldman said in its earnings release.
Goldman Sachs shares climbed 22 cents to close Thursday at $157.44.
Mattel posts loss on worker reductions
Mattel Inc., the world’s largest toy-maker, posted an unexpected first-quarter loss after taking a charge to cover the costs of workforce reductions.
The net loss was $11.2 million, or 3 cents a share, the El Segundo, Calif.-based company said Thursday in a statement, missing the average analyst estimate for earnings of 7 cents a share. The results included “an incremental severance expense” of $16 million, which cut operating income to $6.2 million.
Mattel had a lackluster Christmas, with sales sinking 6.3 percent - the biggest quarterly drop since 2009. The maker of Barbie dolls and Fisher-Price in February agreed to buy Mega Brands Inc. for $460 million as it seeks to increase sales through expansion.
“For the first quarter, revenues were consistent with our expectations as we worked through inventories in a challenging retail environment,” Chairman and Chief Executive Officer Bryan Stockton said in the statement. “In addition, we managed costs and streamlined our workforce.”
Shares of Mattel fell 41 cents to close Thursday at $37.47.
- Bloomberg News
Michaels: Breach may affect 2.6 million
NEW YORK - Michaels Stores Inc. said Thursday that about 2.6 million cards, or about 7 percent of all debit and credit cards used at its namesake stores, may have been affected in a security breach.
The nation’s largest arts and crafts chain said its subsidiary Aaron Brothers was also attacked, with about 400,000 cards potentially affected.
Irving, Texas-based Michaels said that it has contained the breach, which began last year. It has received “limited” reports of fraud from banks and the payment card brands that are potentially connected to the breach.
The compromised data includes customer information such as payment card numbers and expiration dates. But there’s no evidence that other personal information such as names, addresses or personal identification numbers were at risk, Michaels said.
Michaels said that it was offering free identity protection, credit monitoring and fraud assistance services to affected Michaels and Aaron Brothers customers in the U.S.
for 12 months.
- The Associated Press
Business, Pages 26 on 04/18/2014