Morgan Stanley is reaping the rewards of its expansion into asset management. It is a lesson for the world's wealth manager from Switzerland.

Morgan Stanley saw its profits slump by more than 40 percent at the end of the year as it suffered from the slump in investment banking, where IPOs, mergers, and acquisitions, often failed to materialize in the difficult market environment.

Encouragingly, record revenues from its asset management unit helped to partially offset the declines.

Outperforming Goldman Sachs

Morgan Stanley posted a net income of $2.2 billion in the fourth quarter, beating analysts' estimates. Rival Goldman Sachs fell short of forecasts with $1.3 billion, which CEO David Solomon said was a disappointing performance.

The results revealed the benefits of Morgan Stanley's expansion into wealth management under CEO James Gorman. The push into more stable businesses was rewarded on the stock market, where Morgan Stanley shares jumped nearly 6 percent after the results were released.

Expanding Not Saving

After cutting 1,800 jobs in December, Morgan Stanley plans no further layoffs. Instead, the bank is preparing for further expansion, Gorman told the «Financial Times» (behind paywall).

The bank is holding capital beyond regulatory requirements to make further investments when the right opportunity arises, Gorman revealed.

Advantage over UBS

Morgan Stanley's price-to-book ratio, a bank's share price compared to the value of its assets, is currently about 1.7, according to Morningstar. At Goldman Sachs, whose results were received less graciously on the stock market with a slide of around 6 percent, the ratio is just over one.

Such values must make UBS's Colm Kelleher green with envy. For some time, the Chairman of the world's largest asset manager has been harping on the valuation of UBS shares. He regularly laments that UBS, currently trading at 1 times book, deserves a higher valuation if measured with the same yardstick as Morgan Stanley.

Finger Pointing

That Morgan Stanley is successfully cultivating the US wealth management market should serve as a model for UBS, and Kelleher has taken note. He is unmistakably looking to the US for the bank's growth and further internationalizing the investor base with a preference for the US.

Morgan Stanley raised the bar again with its latest quarterly figures. Kelleher, who spent his entire career at Morgan Stanley before joining UBS, is certainly well-placed to draw lessons, perhaps like no other.