Morgan Stanley's bank deposits grew and lending soared in the fourth quarter as the firm and its rivals make a bigger push to cross-sell such products to wealth management clients.

Deposits climbed 9% from a year earlier to $149 billion, while loans in the wealth management division surged 31% to nearly $50 billion, the company reported Tuesday.

Lending and banking services remain a key growth opportunity for the wealth management business, CEO James Gorman told analysts.

"We remain substantively underpenetrated [with clients] relative to our peers," Gorman said on a conference call.

Overall, profits for Morgan Stanley's wealth management business fell to $480 million from $509 million for the prior quarter, buffeted by difficult markets during the fourth quarter.

The firm reported on Tuesday that its closely watched pretax margin fell to 20% for the quarter, down from 23% from the prior quarter but up from 19% for the year-earlier period.

Gorman, speaking to analysts, said the firm aims to achieve a profit margin for the unit of 23% to 25%, and he unveiled plans to streamline costs across the company.

Gorman said the firm can achieve that ratio for the wealth management unit through greater expense discipline as well as additional growth of its lending business and digital opportunities. (He did not elaborate on the latter, but rival brokerage firms, such as LPL Financial and Bank of America Merrill Lynch, have been making moves to introduce automated financial advice services, known as robo-advisers.)

In its earnings report, the firm said that total noninterest expenses fell 3% year over year to $2.983 billion. However, that figure was up 6% from the prior quarter.

The firm's results come a week after Greg Fleming, president of Morgan Stanley Wealth Management, quit. A person familiar with the matter said that Fleming, 52, left after it was clear that Gorman, 57, would be staying on for a number of years.

Last week Gorman appointed Colm Kelleher, 58, president of Morgan Stanley, and named Shelley O'Connor and Andy Saperstein co-heads of wealth management.

On a call with analysts, Gorman thanked Fleming for his work at the firm, where he had been employed for the past six years.

"Our bench in wealth management is particularly strong. Andy and Shelley both have deep experience. Colm will help oversee wealth management, and it is of course a business that I have deep experience in. I look forward to stability with this team. Our entire focus is now on results," Gorman said.

Morgan also said that adviser head count rose 1% from the prior quarter to 15,889. Productivity increased to $947,000 per adviser from $944,000 for the year-earlier period.

Client assets fell 2% to almost $2 trillion. Similarly, Merrill Lynch reported on Tuesday that client balances at the firm dropped to $1.985 trillion. At the start of 2015, both wire houses had reported more than $2 trillion in client assets.

Morgan Stanley reported fee-based asset flows of $11.4 billion, up from $7.7 billion for the prior quarter, but down from $20.8 billion for the year-ago period.

Fee-based assets as a percentage of total client assets remained stable from the prior quarter at 40%.

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