Morgan Stanley just became the latest bank to announce a major tax hit to Q4 earnings, while beating on both the top-line and adjusted EPS (net of tax charge), even as debt and trading revenues tumbled, offset by rising investment banking fees.

In 4Q, Morgan Stanley recorded a net discrete tax provision of $990MM, including $1.2BN provision due to tax law, primarily from remeasuring deferred tax assets (DTA), partially offset by $168MM benefit for remeasuring reserves and related interest relating to status of multi-year IRS tax examinations.

Tax charge aside, James Gorman's bank announced that in Q4 it made $9.5BN in revenue, up from $9.02BN a year ago and above the $9.24BN expected, earning $686 million, or $0.29 GAAP EPS, a number which however rose to $0.84 when adding back the $1 billion tax provision, above the consensus estimate of $0.77. Full year 2017 revenue was $37.9BN, up 10% from the previous year.

Just like Goldman, the bank reported strong Investment banking revenue, which rose to $1.55BN, up 12% from a year ago and beating estimates of $1.3BN. However, and just like Goldman again, the problem was the company's FICC, or mostly fixed-income trading, a former problem division that Morgan Stanley sharply cut two years ago in an effort to improve profitability and focus, where revenue tumbled 45%, failing for the first time in nearly two years to clear a $1 billion bar set by CEO James Gorman: FICC was only $808MM, below the $1.03BN estimate, and down from $1.5BN a year ago. By comparison, Goldman was down 50% in FICC, plunging to the lowest level since the financial crisis.

Overall trading revenue was $2.246BN, a sharp 19% lower than the $2.789 reported one year ago this time.

Unlike Goldman, however, and some of its peers, Morgan Stanley held its ground in stock-trading, where it remains Wall Street’s market share leader: equities sales & trading revenue dipped to $1.92b, however above the ext. $1.89b

Also unlike Goldman, which remains reliant on trading, Morgan Stanley’s key contributor remains its giant retail brokerage, which oversees $2.4 trillion for some 3.5 million American households. Revenue in that business rose 10% to $4.4 billion. As the WSJ notes, the division’s profit margin, once in the high single digits before Mr. Gorman embarked on a multiyear turnaround that included the purchase of Smith Barney, ticked up a percentage point to 26%.

Just like a hedge fund, the business gets a growing chunk of its revenue from steady fees. These are assessed as a percentage of client portfolios whose value has marched higher with the stock market rather than those that charge commissions, which have dwindled as investors favor passive indexing strategies.

And here, Morgan Stanley is quietly becoming the world's largest discount hedge fund: assets in accounts on which Morgan Stanley earns management fees hit $1.05 billion, a record percentage of total client assets.

The market clearly liked the results, and MS shares are up 2% pre-mkt, outperforming other banks with pre-mkt gains, including JPM +0.2%, C +0.3%, BAC +0.4%, GS +0.1%