Morgan Stanley crushed profit expectations on trading and investment banking results that exceeded analysts' expectations.



The New York-based company said profit surged 39 percent to $2.44 billion in the second quarter from a year earlier, exceeding the $2 billion estimate of analysts surveyed by Thomson Reuters. Earnings per share of $1.30 surpassed the $1.11 estimate. Revenues climbed 12 percent to $10.6 billion, about $500 million more than analysts expected.

The shares were up 3.9 percent at 9:47 a.m.



In the bank's equities division, the biggest on Wall Street, the company delivered $2.5 billion in revenue on good performance across all products, especially financing, compared with the $2.29 billion estimate. It's bond trading department produced $1.4 billion, compared with the $1.29 billion estimate, on higher results in commodities and credit.



"Morgan Stanley’s performance in sales and trading was particularly impressive, especially compared to rival Goldman Sachs," Octavio Marenzi, head of capital markets management consultancy Opimas, said in an e-mail. On Tuesday, Goldman reported trading results that essentially matched expectations, prompting questions from analysts on why it didn't outperform like its rivals, including J.P. Morgan Chase.

Investment banking, which includes deal advisory and stock and bond issuance, generated $1.7 billion in revenue, compared with the $1.54 billion estimate. The business exceeded expectations across dealmaking and capital markets units, the bank said.



“We reported robust revenue and earnings growth this quarter with strength across all businesses and geographies,” Chief Executive Officer James Gorman said in a statement. “Our strong global franchise positions us well to continue to grow organically across each of our businesses and to deliver operating leverage.”



Still, revenues in wealth management and investment management were slightly below expectations. Wealth management produced $4.3 billion in revenue, compared with the $4.43 billion estimate, as the company said transactional revenues declined by almost 10 percent thanks to lower fixed income results. Investment management, the smallest of the company's three main divisions, generated $691 million in revenue, below the $707.9 million estimate.



Under Gorman, 59, Morgan Stanley has emphasized its wealth management division, a far steadier business than trading operations. He has also overhauled its fixed income business, moves that helped the company eclipse rival Goldman Sachs in market capitalization earlier this year. The executive behind that bond trading rebound, Ted Pick, was promoted this month to gain oversight of investment banking activities.

The company was forced last month to keep its capital return plans unchanged from last year after fumbling a key part of its annual stress test. Morgan Stanley said Wednesday that, as expected, it raised its quarterly dividend to 30 cents a share from 25 cents and authorized a $4.7 billion share buyback program, which is consistent with its 2017 plan.

Morgan Stanley shares were down 6.2 percent this year before Wednesday, underperforming the KBW Bank Index, which is almost unchanged.



