Morgan Stanley, the US investment bank, logged net revenues at its global wealth management arm of $1.6 billion in the three months to the end of February 2008, a rise of six per cent on the same period a year ago.

However, the New York-based bank said in a results statement that its separate asset management division, suffered contrasting fortunes, suffering heavy losses stemming from the credit crunch.

The wealth management division attracted net new assets of $11 billion, the second highest figure on record and Morgan Stanley’s eighth consecutive quarter of client inflows, the bank said. Inflows drove client assets under management to $722 billion, a rise of five per cent over the year. Client assets in fee-based accounts stood at $185 billion, an eight per cent drop from a year ago. These assets account for 26 per cent of total assets.

Morgan Stanley’s wealth unit employed 8,456 global representatives at quarter-end, achieving average annualized revenue per global representative of $761,000.

Although revenues and profits rose, the wealth division's asset growth lags behind some of Morgan Stanley's peers and is less than a fifth of the 26 per cent surge in client assets in the year to the end of 2007 that was reported earlier this month by HSBC’s private banking division, for example. Switzerland’s UBS, meanwhile, saw its wealth management assets rise by 14 per cent in 2007 from a year before. The HSBC and UBS figures do not, of course, capture the sharp falls in stock markets since the turn of this year.

Morgan Stanley’s rise in wealth management revenue reflects higher net interest revenue in bank deposits and stronger transactional revenues. The unit made a pre-tax profit of $254 million, a rise of 12 per cent from a year before. The pre-tax margin rose to 16 per cent from 15 per cent. The quarter’s average return on common equity was 42 per cent, up from 32 per cent.

The bank’s asset management division was hit by the credit crunch and property market losses, suffering a 60 per cent fall to $161 million, it said, contrasting with a strong performance in the three months to the end of February 2007, when it made a profit of $379 million.

Assets held by this division rose by 11 per cent on the past 12 months to $577 billion, with client appetite for alternative assets like hedge funds and institutional money market funds driving much of the growth, the bank said.

Morgan Stanley said losses in its asset management arm stemmed partly from the impact of a $187 million loss connected to securities issued by structured investment vehicles. SIVs and other off-balance sheet funds have been hit badly by the global credit crunch and the spike in inter-bank borrowing costs.

Across the banking group as a whole, Morgan Stanley said its income from continuing operations fell 33 per cent in the latest three-month period to $1.55 billion, or $1.45 per diluted share, from $2.314 billion, or $2.17 per diluted share. Net revenues fell by 17 per cent to $8.3 billion.