Net income from continuing operations applicable to the company fell to $192 million, or 7 cents per share, in the fourth quarter from $661 million, or 33 cents per share, in the same quarter of 2012, the bank said on Friday.
Excluding items that included the legal expenses, the bank earned 50 cents per share, according to Thomson Reuters I/B/E/S, beating the average analyst estimate of 45 cents per share.
Net revenue from continuing operations rose 12.5 percent to $7.83 billion.
Morgan Stanley shares, which have risen 56 percent in past 12 months, were up 2.3 percent at $32.75 before the opening bell.
"Importantly, we are continuing to address many of the legal issues from the financial crisis," Chief Executive James Gorman said in a statement.
Revenue from Morgan Stanley's wealth management business, which has become increasingly important as the bank moves away from risky trading activities, rose 12.2 percent from a year earlier to $3.73 billion.
The profit margin in the business was 20 percent, excluding an impairment charge, the highest since Gorman became CEO in 2010. Gorman has pledged to deliver returns of at least 20 percent.
However, the business has been underperforming major rivals on that measure. Bank of America Corp's wealth business, for example, delivered a pretax margin of 26.6 percent in the latest quarter.
Morgan Stanley bought Citigroup Inc's last remaining interest in the business in July and the unit's deposits are gradually being transferred.
Revenue from fixed-income trading fell 14.4 percent to $694 million. The bond market began to soften in the middle of the year as investors braced for the Federal Reserve to start scaling back its bond-buying stimulus and longer-term yields rose.
Goldman Sachs Group Inc and Citigroup also reported weaker results from fixed-income trading in the latest quarter, while JPMorgan Chase & Co and Bank of America Corp produced higher revenue.