Revenue climbed 29% from the year-ago period to $11 billion. Equity sales and trading revenue was up 36% from the same quarter a year ago, while fixed-income sales and trading revenue rose 31%.
Analysts surveyed by Thomson Financial predicted a quarterly profit of $1.88 a share on revenues of $9.4 billion.
"This was an astounding trading quarter. They must have been beautifully positioned for the subprime meltdown and long volatility when equity markets tumbled," said Sanford Bernstein brokerage analyst Brad Hintz. "What's interesting is that the two firms that performed the best, Goldman Sachs and Morgan Stanley, have the most diverse trading businesses."
Morgan's results showed that its trading desk continues to place bigger bets under Chief Executive John Mack, with the average daily value-at-risk rising by half to $90 million from the previous quarter. Yet trading revenue rose at an even faster pace, Hintz observed.
Like Goldmanlast week, Morgan Stanley turned in a strong quarter despite worries among investors that stock market turbulence in late February and problems in the subprime mortgage sector would hurt banking and trading results.
The company's brokerage arm boosted revenue by 18% to $1.5 billion, while asset management, which made a series of acquisitions last year, generated $905 million in revenue, up 28%.
One business that suffered, though, was the Discover credit card and payments division, where pretax income fell 22% to $372 million while revenue fell 6% to $1.03 billion from last year. Discover is scheduled to be spun off as an independent company in the third quarter.
The quarter provides further evidence that Wall Street earnings continue to defy gravity, despite hand-wringing about mortgage market woes and slowing economic growth.