Wall Street Earnings ,Morgan Stanley’s Profit Surges in Quarter

Morgan Stanley, at the end of a week that was buffeted by market tumult, reported third-quarter results on Friday that glided past Wall Street’s expectations.

The Wall Street firm, using generally accepted accounting principles, reported earnings of $1.7 billion, or 84 cents a share, compared with $889 million, or 44 cents a share, in the quarter a year earlier.

But Morgan Stanley and stock analysts track a measure of earnings that strips out certain financial adjustments. Factoring in these changes, which included a tax benefit this quarter, Morgan Stanley made 65 cents a share. That was well above the 54 cents a share that analysts had expected, according to a survey by Thomson Reuters, and even higher than the adjusted 50 cents a share the bank made in the third quarter of 2013.

Morgan Stanley’s third-quarter adjusted revenue came in at $8.7 billion, a 7.4 percent jump from $8.1 billion in the quarter a year earlier, and considerably higher than the $8.17 billion that analysts had expected.

Shares of Morgan Stanley were up nearly 2 percent in afternoon trading.

Morgan Stanley, which once focused heavily on trading and arranging and underwriting deals, has tried in recent years to bolster less volatile revenue streams, through a push into wealth management.

Wealth management produced revenue of $3.79 billion and pretax income of $836 million, compared with $3.48 billion of revenue and $668 million of pretax income in the same period a year earlier.

Still, institutional securities, the unit that does the trading and investment banking, brought in more money than the unit encompassing wealth management.

In the third quarter, institutional securities had adjusted revenue of $4.3 billion and pretax income of $1.01 billion, compared with $3.88 billion and $567 million a year earlier.

Increased mergers and acquisitions activity drove advisory revenue to $392 million in the third quarter, from $275 million a year earlier. The revenue from trading in bonds and other products totaled $997 million in the third quarter, nearly a 20 percent increase from $835 million in 2013’s third quarter, when much of Wall Street was affected by lower trading activity. Stock trading revenue was $1.78 billion in the third quarter, up slightly from $1.71 billion a year earlier.

“We are well positioned to create superior returns for our shareholders, particularly as the U.S. economy continues to strengthen,” said James P. Gorman, Morgan Stanley’s chief executive, in a statement. Mr. Gorman has spearheaded Morgan Stanley’s transformation since the financial crisis, when clients fled the firm.

In recent years, there has been something of a contest between Goldman Sachs and Morgan Stanley to show which firm has the appropriate business model for the post-crisis era. On a closely watched measure of profitability, however, Goldman Sachs, which reported earnings on Thursday, is ahead. In the third quarter, Goldman Sachs’s earnings were equivalent to 11.8 percent of its equity capital, versus an adjusted 9 percent for Morgan Stanley. In addition, Morgan Stanley’s adjusted return on equity fell from 10.7 percent in the second quarter of this year.

James Gorman of Morgan Stanley, Going Against Type

By NELSON D. SCHWARTZ

Forgoing Wall Street flash, Morgan Stanley’s chief executive is finding safer ways for the firm to make money.

Correction: October 17, 2014
An earlier version of this article misstated Morgan Stanley's revenue from trading in bonds and other products. It was $997 million in the third quarter, not $997 billion.