Morgan Stanley beats estimates as trading revenue jumps
By Anil D'Silva and Richa Naidu
(Reuters) - Morgan Stanley (MS.N: Quote) reported a stronger-than-expected second-quarter profit as its bond and equities trading businesses handily outperformed those of its Wall Street rivals.
The results capped a robust quarter for big U.S. banks - Goldman Sachs Group Inc (GS.N: Quote) excepted - although many relied more on cost cuts and lower legal expenses than Morgan Stanley, which achieved strong results in most of its businesses.
"The quarter (for Morgan Stanley) looked really good, uncomplicated and straightforward across all the board, which is what really stood out," said Marian Kessler, co-portfolio manager of the Becker Value Equity Fund in Portland, Oregon, which manages about $3.3 billion in assets.
Morgan Stanley Chief Executive James Gorman has been focusing on equities trading and - particularly - wealth management as profit drivers for the No. 6 U.S. bank by assets as stricter regulations and capital requirements make it more difficult to trade bonds.
Revenue in the bank's equities trading business jumped 27 percent to $2.27 billion on an adjusted basis, beating arch rival Goldman, which reported revenue of $2 billion. Goldman had come out on top in the two preceding quarters.
Strength in equities trading was driven by derivatives and prime brokerage, which offers services to hedge funds and other professional investors, Chief Financial Officer Jonathan Pruzan said on a conference call.
Pruzan, who replaced Ruth Porat in March after she left for a similar role at Google Inc (GOOGL.O: Quote), also said the bank had received "positive feedback" from clients on a Moody's upgrade of the bank's credit ratings in May.
Moody's said the upgrade - the only two-notch increase among the 13 global banks it assessed - was based on the bank's increased business diversification, prospects for improved profitability and lower earnings volatility. Continued...