Morgan Stanley reported sharply lower quarterly earnings on Wednesday after absorbing $2.3 billion of write-downs, but resilient trading results helped the No 2 US investment bank beat Wall Street's reduced expectations by a wide margin.
By several measures, Morgan had the best quarter among the big Wall Street banks, generating more profit than arch-rival Goldman Sachs, suffering the smallest year-over-year profit drop and posting a 20 percent return on equity.
The results give a boost to Chief Executive John Mack, trying to rally a bank that recorded $9.4 billion in mortgage trading losses last year and steer it through the most difficult market environment in decades. Morgan's income from continuing operations fell 42 percent to $1.55 billion, or $1.45 a share, in the fiscal first quarter ended February 29, from $2.31 billion, or $2.17 a share, a year earlier. Revenue fell 17 percent to $8.3 billion.
The results trounced the analysts' average forecast of $1.03 a share on revenue of $7.3 billion, according to Reuters Estimates. Morgan shares, which jumped 19 percent Tuesday, rose 7 percent to $45.88 in morning New York Stock Exchange trade Wednesday.
Morgan's investment banking and trading division produced its third-best quarter ever, although revenue fell 14 percent to $6.2 billion from last year's boom-time results. Fixed-income trading posted its second-best quarter ever at $2.9 billion of revenue, down 15 percent from a year ago, on record results in the trading of interest rates, credit and currencies and a second-best effort in commodities.
Morgan also reported $1.1 billion of net losses from marking down leveraged loans, whose value has beeen hurt by the credit crunch Elsewhere at the company, equity trading revenue surged 50 percent to $3.3 billion in the first quarter, fuelled by volatile stock markets and derivatives.
Morgan's net income last year was $2.67 billion, including results from two businesses the bank has since spun-off or sold: US credit card company Discover Financial and British brokerage Quilter. Its head count fell by 1,206, or 2 percent, to 47,050 during the first quarter.
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