What insiders are saying about Morgan Stanley's $9.9 billion quarter

James gorman walks morgan stanleyreutersMorgan Stanley CEO James Gorman (L) is seen leaving after a meeting with lawyer Davis Polk in New York January 13, 2011.

Morgan Stanley posted huge quarterly earnings this morning, solidly beating expectations.

We called and emailed a bunch of Wall Street bankers and analysts to hear what they made of the news.

The overall take is that Morgan Stanley is turning into the New York Yankees of the banking industry. Not in the good way. It’s workforce is ageing and getting more expensive.

Meanwhile, the firm is still lagging a big competitor — Goldman Sachs — and it aims to keep growing revenue in an increasingly crowded sub-sector of finance.

Here are some details:

  • Morgan Stanley has been cutting costs for five years and its starting to hurt, two analysts say. “They had to downsize so much, they don’t have the young people.”
  • The first quarter’s solid numbers weren’t built on the right business, said one analyst. “It was all trading — I wasn’t super excited with what I saw outside of trading…Their banking [revenues] were disappointing compared to Goldman Sachs.”
  • Morgan Stanley is growing revenue in a crowded space: asset management and private wealth management. “Every major bank in the US” wants to be in that business said one analyst.
  • A banker at a smaller firm that competes with Morgan Stanley over wealth management clients looked at today’s earnings and shrugged: “They’re competing with smaller firms that are more nimble.”

There are certainly silver linings in Monday’s news

  • “In the second half, investment banking [revenue] may pick up meaningfully,” one analyst said.
  • “Trading will continue to generate this high level” of revenue, into the foreseeable future, said another analyst.
  • Plus, Wall Street pros are touting Morgan Stanley for having successfully invested in its technology
  • “Goldman Sachs, them, UBS… they’re the three big dogs executing trade flow… They could spin off that business.”

We’re looking for more dealmakers and Wall Street pros to read into the first quarter’s earnings for other trends. Please reach out to Business Insider at [email protected]

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