Accounting changes hit US bank's profit hopes

The New York-based bank, whose shares slipped nearly one per cent, reported a quarterly net income of $413m (253.7m), or 29 cents a share, compared with a loss of $10.5bn, or $11.35 a share, in the same quarter last year.

The results fell short of analysts' expectations, who on average expected a profit of 36 cents a share, according to Thomson Reuters I/B/E/S.

Morgan Stanley's investment banking business improved. Its underwriting revenues were $950m compared with $245m a year earlier as the firm's mergers and acquisitions business was top-ranked.

Morgan Stanley paid $3.7bn in compensation expenses in the fourth quarter, boosting its total for the year to $14.4bn in 2009, or 62 per cent of revenue.

Earlier this month, Morgan Stanley promoted James Gorman to chief executive officer, replacing John Mack, who retained his role as chairman.

Mr Gorman installed his own leadership team last month, hiring Greg Fleming, a former Merrill Lynch president and chief operating officer, to run Morgan Stanley's investment management group, a business that has struggled.

Shares in Morgan Stanley were down 27 cents at $30.85 in premarket trading.