Better trading bond performance boosts earnings at Morgan Stanley

Fri, Oct 19, 2012, 01:00

MORGAN STANLEY yesterday reported better-than-expected adjusted earnings for the third quarter as it boosted revenue from trading bonds, long a sore spot for the investment bank.

Income from continuing operations totalled $561 million (€426 million) compared with $64 million a year earlier.

Overall, the financial services group lost money in the third quarter due to a $2.3 billion accounting charge to reflect an increase in the value of the bank’s debt. Including that charge, Morgan Stanley lost $1 billion in the quarter.

Morgan Stanley shares rose nearly 2 per cent in pre-market trading after the results were reported.

The main driver of the higher adjusted earnings was the improvement in its institutional securities business, which includes trading and investment banking.

Pre-tax income in that business, excluding debt valuation adjustments, was $345 million, compared with $37 million a year ago.

Last year the bank set a target of raising its share of Wall Street’s bond trading revenue pie by 2 percentage points. At the time, analysts said its share was 6 per cent.

Progress has been halting, but yesterday Morgan Stanley said bond-trading revenue in the third quarter climbed 33 per cent from a year earlier to $1.5 billion, excluding the impact of changes in value of the bank’s debt. – (Reuters)