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Morgan Stanley Out-Goldmans Goldman 

This is the quarter that Morgan Stanley has been waiting for—except ,of course, for the $1.7 billion charge they took for a stock conversation that swung them to a loss.

Morgan Stanley
Gregory Bull
Morgan Stanley

But fixed-income revenue of more than $2 billion this quarter—a performance that beat Goldman Sachs' $1.6 billion by a handy margin—has investors overjoyed. With an hour left to go in the trading day Thursday, Morgan shares were up more than 12 percent, at roughly $24.

Part of the credit, said Morgan executives in calls with investors, goes to fixed-income chief Ken DeRegt, who finally appears to be turning the business around after years of management stumbles and an embarrassing multi-billion dollar loss four years ago.

Morgan raised its value at risk (the amount of capital it could lose on a given day) a little bit to respond to what they called increased client traction and activity, said Chief Financial Officer Ruth Porat, and the firm saw solid results in rates-trading and credit, among other areas.

But part of Morgan's relative success is also due to an accounting change at Goldman.

Since late last year, Goldman has been stripping out key parts of its fixed-income business, including its special situations group, into a newly-formed investing and lending unit.

It's a move that has slashed revenues in the stand alone fixed income, currency and commodities division, which combined with an underperformance this spring, led to a year-over-year 53 percent drop this past quarter.

Despite that, this quarter remains a win for Morgan. Adding Goldman's FICC revenues to the debt-related portion of its investing and lending revenues that were reported earlier this week makes for a total of about $1.8 billion—still a few hundred million shy of where Morgan finished.

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