Morgan Stanley Earnings Swing Investment Bank Back to Profit

Morgan Stanley (MS) swung to a first-quarter profit of $1.4 billion to easily top Wall Street estimates, helped by a threefold jump in revenue and a rebound in its asset-management business, the investment bank said Wednesday morning.

The "white-shoe firm" is the latest in a string of banks to eclipse analysts' estimates on the strength of proprietary trading, especially from fixed-income securities. The results come a day after embattled chief rival Goldman Sachs (GS) said it earned $3.5 billion in the first quarter, and a day before President Barack Obama travels to New York City for a speech that will be part of his push for sweeping financial regulatory reforms.

For the three months that ended March 31, New York-based Morgan Stanley recorded net income of $1.4 billion, or 99 cents a share, compared with a year-ago loss of $578 million, or 57 cents a share. Analysts, on average, had forecast earnings of 57 cents a share, according to data from Thomson Reuters.

Revenue for the period soared to $9.1 billion from $2.9 billion in 2009's first quarter. Analysts were looking for revenue of $7.9 billion. Sales and trading revenues were the standouts, jumping to $4.1 billion from $1.4 billion in last year's period. Improvement in the investment bank's debt-related credit spreads and higher results in fixed income drove the gains, Morgan Stanley said. Its asset-management business also swung to a profit from a loss.

A Cloud Over the Robust Results

"Our intense focus on disciplined execution across Morgan Stanley's global franchise helped the firm deliver improved results this quarter, though we still have a great deal of work to do," new Chief Executive James Gorman said in a press release. "Looking ahead, I remain confident that Morgan Stanley has the right mix of businesses and talent to continue serving our clients in a first-class way and deliver strong, sustainable earnings over time."

Goldman Sachs, JPMorgan Chase (JPM), Bank of America (BAC) and Citigroup (C) have all exceeded Wall Street estimates this earnings season, helped by brisker business in securities underwriting, sales and trading. But the results have been largely overshadowed by the Securities and Exchange Commission's civil fraud charges against Goldman Sachs.

Morgan Stanley's compensation expenses rose to $4.4 billion from $2 billion in last year's first quarter, the firm said. Total capital as of the quarter's end stood at $212.1 billion, including common equity of $38.7 billion. Total assets were $820 billion, a 31% increase over last year's first quarter.