Morgan Stanley reported an 87 per cent rise in third-quarter earnings as the Wall Street bank's trading, investment banking and wealth management businesses benefited from increased client activity and a hot equity market.

Recent results show that even though Morgan Stanley has been focusing on its wealth management business since the financial crisis, its traditional investment banking operation can still have a big impact on its earnings, reported the Gulf Daily News, our sister publication.

Morgan Stanley, which worked on Alibaba Group's record $25 billion initial public (IPO) offering, topped the list of IPO underwriters globally in the first nine months of 2014, the busiest period for stock offerings since 2007. The bank's equity underwriting revenue almost doubled to $464 million.

Overall institutional securities revenue, which encompasses trading and investment banking, jumped 22 per cent to $4.52 billion.

The bank's bond operation got a boost last month when upbeat US economic data, stimulus steps in Europe, and the shock exit of trading superstar Bill Gross from bond trading giant Pimco gave what had been a listless market a shot in the arm.

Excluding accounting adjustments, bond trading revenue jumped 19.4 per cent to $997 million. However, that paled against the 53 per cent growth achieved by arch-rival Goldman Sachs Group.

Like several other big banks, Morgan Stanley has been shrinking its presence in the bond market as tougher capital requirements against risky trading take hold. That has given Goldman an opportunity to grab market share.

Wealth management revenue rose 9 per cent to $3.79 billion, but accounted for 42.5 per cent of Morgan Stanley's total revenue, compared with 50.7 per cent for the bank's trading and investment banking business.

The business achieved a pretax profit margin of 22 per cent, above chief executive James Gorman's minimum target of 20 per cent and the 21 per cent reported for the second quarter.

Even with the strong results in the quarter, the bank's adjusted return-on-equity slipped to 9 per cent, below both the 10 per cent minimum Gorman wants to achieve and the 10.7 per cent return in the second quarter.

Gorman said, on a conference call with analysts, that the bank was looking for ways to improve earnings and return-on-equity beyond previously announced plans.

However, chief financial officer Ruth Porat said that choppy markets have been a challenge so far in the fourth quarter, and that 'structural headwinds' in certain commodity markets were hurting revenue.

Net income attributable to common shareholders rose to $1.65 billion, or 84 cents per share, Morgan Stanley said.

On an adjusted basis, the bank earned 65 cents per share, according to Thomson Reuters I/B/E/S. On this basis, analysts had expected earnings of 54 cents per share.

Net revenue, excluding adjustments, rose 7 per cent to $8.69 billion, beating the average estimate of $8.17 billion. – TradeArabia News Service