Morgan Stanley profit jumps 87% as trading activity rebounds

[London] Morgan Stanley reported an 87 per cent rise in third-quarter earnings as the Wall Street bank's trading and wealth management businesses benefited from increased client activity.

Net income attributable to common shareholders rose to US$1.65 billion, or 84 cents per share, in the three months ended Sept 30 from US$880 million, or 45 cents per share, a year earlier.

Analysts on average had expected earnings of 54 cents per share, according to Thomson Reuters I/B/E/S. It was not immediately clear whether the reported figure was comparable.

Morgan Stanley's shares rose 5.7 per cent to US$34.40 in premarket trading on Friday.

The stable fee income Morgan Stanley receives for advising individuals on their finances is becoming more important to the bank as it reduces its exposure to the volatile trading business and is required to comply with tighter capital regulations.

But it was a surge in revenue from the trading of bonds, currencies and commodities that was mainly responsible for the surge in earnings and revenue in the latest quarter.

Bond trading revenue, excluding accounting adjustments, rose 19.4 per cent to US$997 million after a sudden increase in market volatility last month that also boosted its Wall Street rivals.

Wealth management revenue rose 9 per cent to US$3.79 billion. The wealth management business generated 42.5 per cent of total revenue in the quarter, while the bank's traditional trading and investment banking business accounted for 50.7 per cent.

After a long period of sluggish activity, the bond market was jolted to life in September by upbeat US economic data, stimulus steps taken in Europe, and the shock exit of trading superstar Bill Gross from bond trading giant Pimco.

The growth achieved by Morgan Stanley paled against that of close rival Goldman Sachs Group Inc, however. Goldman reported a 53 per cent jump in revenue, excluding accounting adjustments, from trading bonds, currencies and commodities.

Like several other big banks, Morgan Stanley has been shrinking its bond trading business, giving Goldman an opportunity to take market share. "We are well positioned to create superior returns for our shareholders, particularly as the US economy continues to strengthen," Chief Executive and Chairman James Gorman said in a statement.

Total revenue rose 12 per cent to US$8.91 billion. REUTERS