Morgan Stanley reported adjusted earnings for the third quarter on Friday that handily beat analyst estimates, helped by strong results in its stock trading unit.
The bank’s income from continuing operations, excluding certain charges, was $1 billion, or 50 cents a share, for the quarter. This beat estimates of analysts polled by Thomson Reuters, which estimated a per-share profit of 40 cents.
Including charges and gains from discontinued operations, Morgan Stanley had a profit of $906 million, or 45 cents share, in its latest quarter. Last year’s results were dragged down by an accounting charge, which pushed the firm to a $1 billion, or 55 cents a share, loss.
Excluding one-time items, Morgan Stanley’s adjusted revenue came in at $8.1 billion in the third quarter, up from $5.29 billion over the same period last year. That also beat analysts’ expectations of revenue of $7.6 billion for the quarter.
Morgan Stanley was the last of the Wall Street banks to report earnings. Like its peers, Morgan Stanley’s revenue was also squeezed by a shift in the interest-rate environment.
Banks with large fixed income businesses like Goldman Sachs and Citigroup reported that their revenues fall drastically.
The stronger overall results are in stark contrast to last year, when the bank faced several challenges after Moody’s downgraded the firm’s ratings by two notches. Under the leadership of Mr. Gorman, the bank has changed tack to focus on less risky areas of the business. This has meant a strong push into wealth management services.
“Our results point to the increased consistency, strength and balance we are deriving from our business model,†Morgan Stanley’s chief executive, James P. Gorman, said in a statement.
On Friday the bank’s results showed solid gains in the bank’s equity trading business and steady growth in investment management.
Morgan Stanley Smith Barney, the company’s global wealth management division, posted net revenue of $3.5 billion in the year-ago period, slightly from the $3.2 billion over the same period last year.
Institutional securities, Morgan Stanley’s division which includes the company’s investment bank and its stock and bond trading, had revenues of $3.9 billion excluding certain charges, up from $3.7 billion a year earlier. This part of the business includes the company’s investment bank, and its stock and bond trading.
Fixed income and commodities revenue, however, was down as expected. The unit’s revenue was $835 million excluding charges, compared with $1.2 billion in the second quarter. Some analysts were expecting the bank’s fixed-income revenues to fall by as much as $500 million in the quarter.
Trading in bonds was tepid this quarter as clients held their positions amid wider economic uncertainty and ahead of a closely watched announcement by Ben S. Bernanke, the Federal Reserve chairman. The Fed’s decision not to scale back its $85 billion-a- month bond-buying program raised new questions about how strong the economic recovery in the United States has been.
The slowdown in bond trading has been a theme across Wall Street in the third quarter. Last week JPMorgan reported a 7.7 percent fall in its fixed-income trading from a year earlier. On Tuesday, Citigroup reported a 26 percent drop in trading revenue from a year earlier.
Investment management reported revenue of $828 million, compared with $631 million for the same period last year, driven by what the bank said was “favorable market conditions.â€
