A surge in trading revenue pumped up Morgan Stanley's quarterly profit 60 percent. Fred Katayama reports.
A surge in trading revenue helped pump up Morgan Stanley's quarterly profit 60 percent. The equity trading business proved especially strong, but so, too was fixed income. This, in spite of CEO Jim Gorman's moves to orient the company away from unpredictable revenue sources like bond trading toward more stable sources like wealth management. Serving the rich paid off, too. Profit shot up at its wealth management unit, which makes up nearly 40 percent of overall revenue. And a fertile environment for deal making fattened revenue from advisory fees, although a drop in underwriting revenue took some of the shine off investment banking results. Gorman called the quarter one of the strongest in many years. The last of the big investment banks to report, Morgan's strong trading results echoed those of JPMorgan Chase and Goldman Sachs. The Swiss central bank's move in January to scrap its cap on its currency helped boost foreign exchange trading revenue for the quarter. Morgan Stanley's shares shot higher in early trading, shaving part of its 5 percent loss this year. UBS analyst Brennan Hawken said, "We believe consensus estimates for Morgan Stanley are still too low, and results out of wealth management are likely to drive most of the improvement in both earnings and returns." Separately, the Wall Street Journal reports that Morgan Stanley is in talks to pay $500 million to settle the New York Attorney General's probe into the mortgage bonds it sold ahead of the financial crisis.