The good times continue for the largest financial-services firms, and Morgan Stanley (NYSE:MS) has been no exception, quickly returning to form as a profitable powerhouse in the industry. The company announced its full-year earnings yesterday -- along with its decision to jettison a sizeable division.

For the year, Morgan reported that net revenue (total revenue minus interest expense and provisions for loan losses) grew 26% to $33.9 billion. Diluted earnings grew an impressive 55% to $7.07, driving return on average common equity to 23.5%, up almost 6% from last year, and finally above the peer group average of just more than 21%.

As was the case during the third quarter, every division reported solid results, and the core M&A pipeline remains strong, according to management. The only sore spot continued to be Asset Management. Here's a rundown of each key area for the year.

Institutional Securities (IS)
IS consists of the flagship investment-banking, trading, and sales businesses, and it accounts for the bulk of total company revenue. Major competitors include Goldman Sachs (NYSE:GS), Lehman Brothers (NYSE:LEH), and Merrill Lynch (NYSE:MER). Net revenue for the year grew 38% to $21.6 billion, and pre-tax income advanced 72% to $8.22 billion. Investment banking grew 24%, accounting for 15% of total net revenue. Trading grew an astounding 59%, to comprise 35% of total net revenue.

Global Wealth Management (GWM)
GWM includes the management of brokerage assets and related investment advisory services. Morgan's aforementioned rivals, aside from Goldman, also have brokerage divisions. For the year, net revenue grew 10% to $5.5 billion, but pre-tax income fell 13% to $509 million. The group managed total assets of $686 billion, a 10% increase from last year, making Morgan one of the largest brokers in the country.

Asset Management (AM)
AM makes up about 10% of total company revenue, and includes portfolio-management functions for high-net-worth individuals and fund assets. Net revenue fell 5% for the year, to $2.8 billion, and pre-tax income fell 29% to $1 billion. The weakness was attributed to lower fees and private equity investment revenue. However, total assets under management (AUM) grew 11% to $478 billion. The above peers also compete in this space, as do other pure asset managers such as Legg Mason (NYSE:LM).

Discover reported net revenue of $4.3 billion, with 50 million cardmembers; it currently accounts for about 13% of total company revenue. Discover is an appealing business as one of four primary credit card companies; the others are rivals MasterCard (NYSE:MA), Visa, and American Express (NYSE:AXP).

Investors have questioned for some time why the company continued to hold on to Discover, since it has little overlap with the other units. Until current CEO John Mack joined last June, Discover actually provided some stability as the other core segments temporarily faltered. But now that the other divisions have recovered, management finally announced plans to spin off Discover to shareholders. The spinoff is scheduled for the third quarter of 2007, after which Morgan plans to maintain its current dividend payout.

Spinoffs can prove to be lucrative investment opportunities, because newly independent companies are better able to focus on their own core business and avoid the complexities of being part of a larger entity. Discover was never a primary focus of Morgan Stanley, and it even diverted capital from credit cards to other divisions when times were rough. Now that most segments are performing well, the timing was right for a parting of ways. In any case, both firms will be worth keeping an eye on as key players in their respective industries.

For related Foolishness:

Foolanthropy is celebrating its 10th year! To learn more about our five Foolish charities or to make a donation, visit .

MasterCard is a Motley Fool Inside Value pick. For more bargain-priced investments to recharge your portfolio, try Fool value guru Philip Durell's newsletter service free for 30 days.

Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy .