Morgan Stanley shares rise on trading increase

Shares of Morgan Stanley climbed Friday as third-quarter earnings almost doubled and this year’s trading revenue rose at the fastest pace on Wall Street.

Shares of the bank jumped 69 cents, or 2.1 percent, to close Friday at $33.22 in New York. Third-quarter net income increased to $1.71 billion, or 84 cents a share, from $906 million, or 45 cents, a year earlier, the New Yorkbased bank said Friday in a statement.

Chief Executive Officer James Gorman, 56, has sought to increase returns from fixed- income trad- ing even while shrinking staff and capital allotted to the unit. Revenue from the business in the first nine months climbed 5 percent, breaking a four-year streak of declines for that period. Stock and bond trading revenue increased 3.8 percent for the first nine months of 2014, the biggest gain among the top six Wall Street banks.

“They’re starting with a little bit smaller base, but they’ve put into place strategies where they can get more trading and more profit,” said Kenneth Leon, an analyst who covers the financial industry for S&P Capital IQ. “There’s still plenty of runway for Morgan Stanley to

keep improving.”

Excluding an accounting adjustment and a tax benefit, earnings were 65 cents a share, topping the 54-cent average estimate of 23 analysts surveyed by Bloomberg.

Revenue excluding accounting adjustments rose to $8.69 billion from $8.12 billion a year earlier.

Revenue from fixed- income sales and trading rose 19 percent to $997 million. That surpassed estimates of $895 million from Matt Burnell at Wells Fargo & Co. and $825 million from Macquarie Group Ltd.’s David Konrad.

Goldman Sachs Group Inc. posted fixed-income revenue of $1.98 billion, and Citigroup Inc. reported $2.98 billion.

In equities trading, Morgan Stanley’s revenue increased 4 percent from a year earlier to $1.78 billion. That compared with $1.03 billion at Bank of America Corp. and $1.46 billion at Goldman Sachs. It also topped Konrad’s estimate of $1.6 billion and Burnell’s $1.68 billion.

JPMorgan Chase & Co. and Citigroup Inc. posted earnings this week that topped analysts’ estimates on bigger- thanexpected increases in fixedincome trading revenue. The firms cited increased volatility and volume in currency and bond markets in September.

Morgan Stanley is seeking to increase the return on equity of its fixed-income trading business to higher than 10 percent and has been held back by low returns in commodities, interest rates and currency trading. One part of the plan was agreeing to sell its oil-merchanting business to Russian company OAO Rosneft.

The bank said last week that the deal may not be completed in time to beat a year-end deadline, as it needs U.S. regulatory approval and Rosneft faces U.S. sanctions. Morgan Stanley Chief Financial Officer Ruth Porat had said the sale would increase returns since the unit broke even last year and had $4 billion in risk-weighted assets.

Investment banking generated $1.34 billion in third-quarter revenue. That figure, up 35 percent from a year earlier, included $392 million from fi- nancial advisory, $464 million from equity underwriting and $484 million from debt underwriting.

Morgan Stanley was the second- ranked adviser on global announced mergers and acquisitions in the first nine months, according to data compiled by Bloomberg. It also ranked third in underwriting global equity offerings and fourth in U.S. high-yield debt, the data show.

Asset management reported a pretax gain of $188 million, compared with $300 million in the previous year’s period.