Morgan Stanley profit jumps 87 percent

Morgan Stanley beats Street on top and bottom line in Q3
Morgan Stanley beats Street on top and bottom line in Q3   

Morgan Stanley reported an 87 percent rise in third-quarter earnings as the Wall Street bank's trading and wealth management businesses benefited from increased client activity.

Net income attributable to common shareholders rose to $1.65 billion, or 84 cents per share, in the three months ended Sept.30 from $880 million, or 45 cents per share, a year earlier.

Analysts on average had expected earnings of 54 cents per share, according to Thomson Reuters I/B/E/S. It was not immediately clear whether the reported figure was comparable.

Following the report, Morgan Stanley's shares rose in premarket trade. (Track its shares here.)

Revenue increased to $8.9 billion from $8.1 billion a year ago.

Analysts expected third-quarter earnings of 54 cents a share on revenue of $8.17 billion, according to a consensus estimate from Thomson Reuters.

The sixth biggest U.S. bank by assets, Morgan Stanley has acted contrary to most of its rivals by building its private equity businesses using structures subject to the Volcker rule. As the regulation limits the amount a bank and its employees can contribute, profit-sharing is restricted.

But sources familiar with the bank's strategy said putting less capital into private equity funds makes sense as under CEO James Gorman, 56, fees from managing clients' wealth has replaced businesses like bond trading and principal investing as the prime supplier of profits, with less risk.

The firm closed a $1.7 billion Asia-focused private equity fund in July and has been raising several billion for a few global funds, sources said.

In September, Morgan Stanley agreed to pay $95 million to resolve a lawsuit that said the bank misled investors in mortgage-backed securities prior to the 2008 financial crisis.

Morgan Stanley is the latest bank to report earnings this week. So far, it's been a mixed bag with JPMorgan Chase missing earnings estimates, Wells Fargo reporting in line and Citigroup topping earnings estimates.

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Reuters contributed to this report.