Morgan Stanley Group Says 4th-Quarter Profit Off 79%

Morgan Stanley Group Inc.’s fourth-quarter profit plunged nearly 79% amid weaker revenue from its investment banking and bond trading businesses, the Wall Street firm said Tuesday.

Morgan Stanley said it earned $39 million, or 29 cents a share, for the three months ended Jan. 31. That includes a $78-million pretax charge for costs connected with the firm’s move to new headquarters. For the year-earlier period, Morgan Stanley earned $181 million, or $2.18 a share.

Fourth-quarter revenue last year, after interest expenses, fell to $790 million from $925 million.

The per-share profit was far below analysts’ expectations of about 94 cents, according to Zacks Investment Research.

But Morgan Stanley also announced that it is repurchasing $150 million in common shares and increasing its regular quarterly dividend by 2 cents to 32 cents a share. The firm’s stock price rose $1.25 to $67.375 on Tuesday on the New York Stock Exchange.

Morgan Stanley, like other major Wall Street firms, was hit hard by the 1994 bond market slump that drove interest rates sharply higher and discouraged investment in fixed-income securities.

As a result, Morgan Stanley revenue was dragged down by a decline in underwriting of new securities, particularly bonds, and a drop in trading volume. Partly offsetting the revenue decline were increased activity in mergers and acquisitions, asset management and other investment businesses.

The lower results also reflect a decision by Morgan Stanley to continue an aggressive expansion into new global investment businesses despite the domestic market slump, Chairman Richard Fisher and President John Mack said in a statement.

For the year, Morgan Stanley said, profit dropped 50% to $395 million, or $4.18 a share. That was down from $786 million, or $9.59 a share, in the year-earlier period.

Revenue in 1994, after interest expenses, fell to $3.5 billion from $4.16 billion.