Morgan Stanley, Lehman Post Strong Gains

Two major Wall Street firms reported better-than-expected quarterly results, in a sign that brokerages are recovering from the market turmoil that ravaged their profits in the third quarter. Morgan Stanley Dean Witter & Co. reported a 51% increase in fourth-quarter profit to a record $1.2 billion, helped by asset sales, low compensation costs and a strong showing of key businesses. Morgan Stanley, the second-largest U.S. brokerage, also reported record operating profit of $879 million, or $1.49 a share, in the quarter ended Nov. 30. The operating results, which exceeded Wall Street estimates by 53%, exclude a $345-million net gain on the sale of the firm’s global custody business and an undisclosed amount of credit card loans. Separately, investment bank Lehman Bros. Holdings Inc. posted a 60% drop in quarterly profit to $74 million, or 51 cents a share, because of slack debt trading and underwriting revenue. But the results exceeded Wall Street expectations, which had been ratcheted down after the summer’s financial turmoil, by a whopping 143%. In New York Stock Exchange trading, Morgan Stanley shares rose $3.50 to close at $84.19, and Lehman shares rose 50 cents to close at $54.13.