Morgan Stanley’s third-quarter results surged from a year ago, boosted by a huge accounting gain, higher revenue in equities trading and more fees from advisory work within investment banking.
Net revenue at the investment bank, Wall Street’s second-largest after Goldman Sachs Group Inc., jumped 46 percent to $9.9 billion, marking the second straight quarter it has reported higher quarterly revenue than Goldman Sachs Group Inc., which had a tough quarter.
Goldman reported net revenue of $3.59 billion in the third quarter.
Morgan Stanley was the latest firm to benefit from declines in the value of its own debt as it booked a $3.4 billion revenue boost from a debt-valuation adjustment during the period, easily topping similar accounting measures at its peers.
Banks can book gains if the value of their debt declines, making it less expensive, in theory, to buy it back. The process works in reverse, leading to losses, when the value of debt rises.
Excluding that adjustment, the firm still posted a two-cent-per share profit, topping many analysts’ expectations for a core loss.
In late morning, shares of Morgan Stanley were up 59 cents, or 3.6 percent, at $17.22. The stock was down 39 percent year-to-date as of Tuesday’s close.
In recent weeks, Morgan Stanley stock has been punished more than other financial firms as investors worried about how much it could lose if European nations default on their debt.
In an interview, Chief Financial Officer Ruth Porat sought to allay those worries, saying the firm’s net exposure to troubled European debt was $2.1 billion as of the end of September, adding the positions were “well managed.”
For the second straight quarter, Morgan Stanley’s performance was again driven by improvements in its trading business, an area where it previously trailed many rivals. Excluding the debt adjustment, the firm’s revenue from equity sales and trading climbed by 18 percent to $1.3 billion. Revenue from trading fixed-income securities, currencies and commodities fell by nearly one-fifth to $1.1 billion, though the drop was less than at some peers.
Overall, Morgan Stanley reported a profit of $2.15 billion, compared with a loss of $91 million a year earlier, including the results of operations that have been discontinued. Income from continuing operations came in at $2.2 billion, compared with a year-earlier profit of $131 million. Earnings from continuing operations came in at $1.14 a share, compared with 5 cents a share a year earlier.
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