Morgan Stanley profit rises as all main businesses grow

REUTERS - Morgan Stanley reported a stronger-than-expected adjusted quarterly profit as revenue grew in all of its major businesses, particularly trading and underwriting.

Net income attributable to common shareholders rose to $802 million, or 41 cents per share, in the second quarter from $564 million, or 29 cents per share, a year earlier, the Wall Street bank said on Thursday.

Excluding special items, Morgan Stanley earned 45 cents per share, beating the average analyst estimate of 43 cents, according to Thomson Reuters I/B/E/S.

Morgan Stanley's shares were up 5 percent at $27.90 before the bell.

The results include a gain related to changes in the value of the bank's own debt, largely offset by a charge related to its purchase of the rest of the wealth-management unit it owned with Citigroup Inc .

Morgan Stanley is the last of the big five Wall Street banks to report second-quarter earnings.

Like Goldman Sachs Group Inc , JPMorgan Chase & Co , Bank of America Corp and Citigroup, the bank easily beat analysts' profit expectations, thanks largely to strength in trading and underwriting early in the quarter before interest rates spiked.

Revenue from fixed income and commodities trading rose 50 percent to $1.15 billion.

The bank had set a quarterly revenue benchmark for fixed income and commodities trading revenue of $1.5 billion, saying this was necessary to meet its cost of capital following a disappointing first-quarter.

As with its rivals, underwriting was a bright spot.

Debt underwriting revenue rose about 24 percent to $418 million, while equity underwriting revenue increased about 16 percent to $327 million.

Advisory revenue rose about 27 percent to $333 million, despite weak M&A activity.

Wealth management revenue rose 10 percent to $3.53 billion, representing a profit margin of 18.5 percent.

Chief Executive James Gorman is targeting a profit margin of at least 20 percent for the wealth management business by 2015, and has said the margin could rise above 23 percent if interest rates rise and market conditions improve.

(Reporting by Lauren Tara LaCapra in New York and Tanya Agrawal in Bangalore; Editing by Ted Kerr)