Morgan Stanley profit jumps 61.7 percent on trading comeback

[October 19, 2016]  (Reuters) - Morgan Stanley reported a better-than-expected quarterly profit on Wednesday, boosted by a surge in bond trading that followed Britain's surprise vote to leave the European Union and bouts of anxiety about monetary policy around the world.

Earnings applicable to shareholders rose 61.7 percent to $1.52 billion from $939 million for the quarter ended Sept. 30, while earnings per shares rose to 81 cents from 48 cents.

Earnings per share from continuing operations was 80 cents, far above the average analyst estimate of 63 cents, according to Thomson Reuters I/B/E/S.

Adjusted revenue from sales and trading of fixed-income securities and commodities more than doubled to $1.5 billion, boosting total revenue by 14.7 percent to $8.91 billion. Analysts had expected revenue of $8.17 billion.

Morgan Stanley wraps up a surprisingly strong quarter for big U.S. banks. Goldman Sachs Group Inc, Morgan Stanley's closest rival, reported a stronger-than-expected 58 percent rise in third-quarter profit on Tuesday, driven by a 34 percent rise in revenue from trading bonds, currencies and commodities.

Morgan Stanley's shares were up 0.7 percent at $32.55 in premarket trading.

"This quarter we saw record revenues in wealth management and a strong performance in our sales and trading business," Chief Executive James Gorman said in a statement.

The bank's compensation costs rose 19.2 percent to $4.10 billion in the quarter, while non-compensation costs fell 14.9 percent to $2.43 billion.

Morgan Stanley is in the midst of a cost-cutting program that it hopes will save $1 billion by 2017.

Revenue from wealth management, an area Gorman has been focusing on, rose 6.6 percent to $3.88 billion, accounting for nearly 44 percent of total revenue.

Equities sales and trading revenue, a traditional bright spot for the bank, rose to $1.9 billion from $1.8 billion.

Revenue from investment banking, which includes fees from mergers and for underwriting equity and debt offerings, fell about 7 percent to $1.23 billion.

Morgan Stanley's annualized return on average common equity - showing how well it is using shareholder money to generate profit - was 8.7 percent in the quarter, compared with 8.3 percent in the second quarter.

Gorman, who took the helm at the bank in 2010, has an ROE target of 9-11 percent by the end of 2017.

Morgan Stanley ranked third to Goldman Sachs and JPMorgan Chase & Co in M&A fees collected during the quarter and fourth behind and JPMorgan, Bank of America Corp and Goldman in fees from investment banking, which includes equity and debt underwriting, according to Thomson Reuters data.

The bank was exclusive financial adviser to Microsoft Corp in its $26.2 billion deal to buy LinkedIn Corp.

Up to Tuesday's close, Morgan Stanley's shares had risen 1.6 percent since the start of the year, outperforming those of Goldman Sachs, which fell 4.2 percent.

(Reporting by Sweta Singh and Sudarshan Varadhan in Bengaluru; Editing by Ted Kerr)

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