Morgan Stanley joined other banks in reporting that its trading revenue fell from the first quarter, the result of the stock market's spring plunge. But the company, which was hurt a year ago by a conservative trading strategy and steep losses on real estate investments, was able to beat analysts' overall revenue and profit expectations for this latest quarter.
Morgan Stanley's net income after payment of preferred stock dividends rose to $1.09 per share from a loss of $1.10 per share a year earlier, when it lost $1.26 billion.
Earnings from continuing operations, which excludes special charges, were 80 cents per share. Revenue jumped 53 percent to $7.95 billion.
Analysts polled by Thomson Reuters forecast earnings of 46 cents per share on revenue of $7.93 billion.
Shares rose $1.60, or 6.3 percent, to $26.82 in pre-opening trading.
Morgan Stanley's results came a day after competitor Goldman Sachs Group Inc. reported an 83 percent drop in profits as trading revenue fell sharply. Goldman also took charges to cover its civil fraud settlement with the Securities and Exchange Commission and costs tied to paying taxes on employee bonuses in Britain.
The slowdown from the volatile market wasn't as pronounced at Morgan Stanley, which saw trading revenue, or money made on buying and selling stocks and other securities, fall 11 percent to $3.35 billion compared with the first quarter.
Morgan Stanley was criticized last year for being too passive in its trading and missing out on some of the big profits that other banks made during the stock market's big rally. Trading revenue nearly doubled from the second quarter last year.
Morgan Stanley also has a huge retail brokerage business that it draws much of its revenue from, unlike Goldman Sachs, which is highly reliant on institutional clients for its business. The brokerage unit, Morgan Stanley Smith Barney, generated $3.07 billion in revenue during the second quarter, compared with $1.92 billion during the year-ago period. Morgan Stanley acquired a majority stake in Smith Barney from Citigroup Inc. during the middle of the second quarter last year, so year-ago results don't include a full quarter of business.
Morgan Stanley set aside $3.89 billion during the quarter for compensation, including $361 million to cover a special tax on bank employee bonuses in Britain. Compensation costs accounted for 49 percent of revenue during the second quarter, the same amount seen in the first quarter.