Morgan Stanley Q3 casts doubt on low-risk strategy

New York

MORGAN Stanley's latest quarterly earnings cast doubt on chief executive James Gorman's low-risk strategy. The bank earned US$740 million in the three months to September, after stripping out accounting gains on its own liabilities. That equates to an annualised return on equity of just 3.9 per cent, the worst of any big US bank for the period.

Wealth management is at least running relatively smoothly. Pre-tax income increased to US$824 million, 3 per cent over last year's third quarter, even though the top line fell almost 6 per cent to US$3.6 billion. The operation now accounts for almost half the company's revenue and requires far less capital than much of the investment banking unit.