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Morgan Stanley's profit surges, stock soars

Published on NewsOK Modified: January 18, 2013 at 5:07 pm •  Published: January 18, 2013

"For the 80-plus percent of people who are not getting deferred, you've got a big chunk of people who say, "OK, there are no deferrals,'" Porat said, describing employees' reaction to the bonus structure. "And for the more senior levels, the view is, 'Look, this does increase the alignment of interest.'"

CEO James Gorman said in a statement that the bank had "reached a pivot point" after a challenging year. That included being criticized for its handling of Facebook's glitch-plagued stock market debut, and getting its credit rating cut by the ratings agency Moody's. Gorman said the bank is now "poised to reach the returns of which it is capable" for shareholders.

The fourth quarter was dominated by worried about the "fiscal cliff," a package of automatic tax increases and government spending cuts that would have taken effect if lawmakers in Washington hadn't hammered out a last-minute budget agreement. As the cliff approached, Gorman encouraged employees to contact their members of Congress and urge them to reach an agreement.

Porat said Friday that the response had been overwhelming, and she calculated that it had reached almost all members of Congress. The cliff's approach had unnerved many investors. "We heard from so many clients who said, 'We'd like this to be resolved,'" she said.

The bank is still under pressure to cut jobs and expenses as a way to boost earnings. Over the year, it shed nearly 4,500 jobs, or 7 percent of its workforce. Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase also trimmed jobs over the year.

For the quarter, Morgan Stanley earned $867 million after stripping out an accounting charge related to changes in the value of the bank's own debt. That compares with a loss of $374 million in the same period a year ago.

The loss last year was related to a settlement Morgan Stanley made with the financial insurance company MBIA, which had accused the bank of misleading it about the quality of certain securities for which it bought insurance.

On a per-share basis, Morgan Stanley's earnings were equivalent to 45 cents, versus a loss of 20 cents per share a year ago. Revenue jumped 37 percent, to $7.5 billion from $5.5 billion.

Morgan Stanley's stock rose $1.63 to close at $22.38 Friday, a gain of nearly 8 percent.