08Morgan Stanley and Bank of America profit as legal bills fade


This is a The Telegraph article.


The US investment banks have bounced back to bumper profits after putting crisis-era litigation costs behind them.

Bank of America’s profits more than tripled in 2015 to the highest level in nearly a decade as legal bills fell.

The US-based lender made a $15.9bn (£11.2bn) profit in 2015, up from $4.8bn in the previous year, despite a 2pc fall in revenue to $82.5bn, thanks largely to lower lawyers fees and fewer fines.

2014 was a tough year for American banks, as misconduct costs – such as the £2.7bn foreign exchange manipulation fine levied on seven banks in the UK and America – hit profits.

Those costs were not repeated in 2015, and legal expenses at Bank of America fell to $500m, allowing it to retain more of its profit.

In the final three months of the year, Bank of America made a $3.3bn profit, up 9pc on the same period of 2014.

Several divisions at the bank performed well, including bond trading, which bounced back from a weak performance a year earlier. Sales in fixed income, currencies and commodities trading increased 20pc. This contributed to the 31pc rise in sales in Bank of America’s global markets division in the final quarter of the year.

However, fees the lender generates from its investment banking operations slid from $700m to $500m.

Bank of America’s consumer banking revenues edged up by $33m to $7.8bn, and lower costs helped push the division’s profits up 9pc to $1.8bn.

Meanwhile, profits at rival investment bank Morgan Stanley almost doubled in 2015.

The US giant made $6.1bn last year, up from $3.5bn in 2014.

Sales rose by 2.6pc to $35.2bn, while litigation costs of $3.1bn in 2014 fell away almost completely in 2015.

Morgan Stanley’s wealth management division generated $3.3bn in revenue, up 12pc on the year before, while its institutional securities arm made a $4.7bn profit, compared with a loss of $58m in 2014.

However, the bank’s bond and commodities trading operations disappointed, with revenues down 17pc to $500m in the final quarter of the year.

“A strong overall performance in the first half of the year was impacted by difficult market conditions in the second half that dampened trading activity,” said chief executive and chairman James Gorman.

“In the fourth quarter we took action to meaningfully restructure our fixed income business on a capital and expense basis. We enter 2016 with a continued focus on managing expenses across the firm and driving up returns for our shareholders.”

Analyst Steven Chubak at Nomura said the plans are “positive” and should yield $1bn of annual cost savings. He has maintained a buy rating on the stock.

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