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Morgan Stanley posts big profit; market cheers

CNBC With Reuters
Thursday, 18 Jul 2013 | 8:19 AM ET
Adam Jeffery | CNBC

Equity sales, underwriting and wealth management helped power Morgan Stanley to a 42 percent surge in second-quarter profit, the firm announced on Thursday, continuing a streak of better-than-expected results from Wall Street investment banks.

In the wake of the strong quarter, the world's largest brokerage also announced a $500 million stock buyback, which may help boost its stock price.

The firm also announced that it had completed the purchase of its remaining 35 percent stake in the Morgan Stanley- Smith Barney joint venture, but the acquisition was a modest drag on its bottom line.

Earnings excluding items rose to 45 cents per share from 29 cents per share in the year-earlier period, with revenue improving to $8.3 billion from $6.95 billion a year ago. Revenue from fixed income and commodities surged by 50 percent during the quarter, to $1.15 billion.

Analysts had expected the company to report a profit of 43 cents per share on $7.89 billion in revenue, according to a consensus estimate from Thomson Reuters.

Morgan's results extended the banner week enjoyed by Wall Street — which began with Goldman Sachs and carried over to J.P. Morgan Chase and Bank of America — during what some analysts feared would be a bleak quarter. In response, the bank's shares jumped by more than 3 percent before the opening bell.

Rising revenues also created a jump in compensation costs, which rose to $4.1 billion from $3.6 billion. The jump came despite the bank announcing earlier this year that it would set aside nearly $2 billion for investment-banking and trading employees, 14 percent less than 2012.

Reuters contributed to this report.

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