Morgan Stanley flies high on wealth management

Morgan Stanley has floated its way to the top.

James Gorman’s bank reported its best-ever quarter for its core business, wealth management, buoyed by a huge client base investing in stock markets that just doesn’t seem to ever go down.

Morgan Stanley reported $4.4 billion in revenue from wealth management during the fourth quarter — about half of all the money it brought in that period — and up 10 percent from the same time the year before.

The bank’s total profits were $686 million, which was impacted by expected one-time costs stemming from changes to the tax bill, which has distorted earnings at all major banks. Without that, the bank would have made $1.67 billion in profit — 8.6 percent better than last year.

The report came the day after investors drove up Morgan Stanley’s market cap above $99.4 billion, higher than its traditional rival, Goldman Sachs — a symbolic changing of the guard as Wall Street continues to struggle making money in trading.

Wealth management was also buoyed by $41.2 billion in securities-based and other loans, the most ever, a risky form of debt that has exploded as the stock market has risen.

Brokers and financial experts have warned that a sharp turn in markets could accelerate a downturn, by forcing investors to sell more of their holdings to pay back the loans.

Last year, the bank settled with Massachusetts for $1 million over sales contests pushing the loans.

Gorman, during a conference call, went out of his way to woo investors by suggesting that extra anticipated savings from its lowered tax bill would be going to shareholders.

“We think we’re overcapitalized by several billion dollars,” Gorman said. “We believe in being very shareholder friendly.”