* Adjusted profit 50 cents/share vs Street view 40 cents
* Equities trading revenue rises 31 percent to $1.7 bln
* FICC revenue falls 44 percent to $835 mln
* Shares up 1.6 percent in early trading
By Lauren Tara LaCapra
Oct 18 (Reuters) - Morgan Stanley posted a
higher-than-expected quarterly profit on Friday as stock trading
revenue jumped 31 percent, a surprisingly strong performance in
a quarter when most rivals posted smaller gains or even declines
in that business.
The rise in stock trading revenue offset most of the decline
in fixed-income, currency, and commodity trading, where revenue
fell 44 percent. Morgan Stanley has had difficulty with
fixed-income trading for years, but in the third quarter weak
market conditions also shook most of the bank's competitors.
Equity trading has been more of a bright spot for Morgan
Stanley. The bank has invested heavily in the business, hiring
specialty sales staff to help institutional clients pick stocks
and formulate complex trades.
Overall, the second-largest U.S. investment bank posted
third-quarter net income of $888 million, compared with a loss
of $1.01 billion a year earlier. On a per-share basis after
preferred stock dividends, the bank earned 44 cents from
continuing operations, compared with a loss of 55 cents in the
same quarter last year. The year-earlier figures included a
charge of $2.3 billion to reflect a rise in the value of Morgan
Excluding one-time items, Morgan Stanley earned 50 cents per
share in the latest quarter, beating analysts' average estimate
by 10 cents, according to Thomson Reuters I/B/E/S.
Overall revenue rose to $7.93 billion from $5.28 billion,
driven by equities trading and the company's fast-growing wealth
Morgan Stanley shares rose 1.6 percent to $29.40 in early
Adjusted revenue from equities trading rose 31 percent to
$1.7 billion, while revenue from fixed income, currency and
commodities trading fell 44 percent to $835 million.
Trading activity in the bond market slowed markedly during
the third quarter as investors braced for the Federal Reserve to
start winding down its bond-buying stimulus program. When the
Fed decided to instead hold off on tapering, investors decided
they could hold onto their bonds for a little longer instead of
Bond trading results for Morgan Stanley and Goldman Sachs
Group Inc, the top U.S. investment bank, were worse than
commercial banks'. Goldman posted a 47 percent drop in
bond-trading revenue, excluding an accounting charge. Bank of
America Corp and Citigroup Inc reported declines
of 20 percent and 26 percent, respectively.
Revenue in Morgan Stanley's wealth management business
increased 8 percent to $3.48 billion, while the business's
pretax profit margin edged up to 19 percent, getting closer to
Chief Executive James Gorman's target of a minimum 20 percent.
Morgan Stanley completed its acquisition of brokerage Smith
Barney from Citigroup in June. It now collects all of the
earnings from the former joint venture but must wait until 2015
to accrue all of Smith Barney's client deposits.