Wall Street investment bank Morgan Stanley reported its most profitable quarter since the financial crisis on Monday, boosted by higher revenue from trading bonds and equities.
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The bank's trading business, like those of its main rivals, got a boost in the quarter after the Swiss central bank scrapped a cap on the franc, the European Central Bank announced its quantitative easing program and the U.S. Federal Reserve took steps toward tightening monetary policy.
Global stocks also generally performed strongly.
Morgan Stanley capped a mostly strong quarter for the big U.S. banks with its 60 percent rise in net profit, followed by Goldman Sachs Group Inc, whose profit jumped 41 percent.
"We did not dial up risk to generate these earnings," Chief Executive James Gorman said on a call to discuss what he described as the bank's "strongest quarter in many years."
Morgan Stanley is focusing less on bond markets and more on managing money for the rich as a way to free up capital and meet stricter regulatory rules imposed since the financial crisis.
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Net income applicable to the bank's common shareholders rose to $2.31 billion, or $1.18 per share, in the quarter, from $1.45 billion, or 74 cents per share, a year earlier.
It was the bank's most profitable quarter since the second quarter of 2007, according to Thomson Reuters data.
HIGHEST PROFIT SINCE 2007
Morgan Stanley's shares were up 0.4 percent at $36.91 in early trading after being up as much as about 2.6 percent before the opening bell.
The bank achieved an adjusted average return-on-equity of 10.1 percent, above the 10 percent minimum set by Gorman as the bank focuses more on returns than revenue.
Excluding items, the Morgan Stanley reported earnings of $1.14 per share.
Adjusted earnings according to calculations by Thomson Reuters I/B/E/S worked out to 85 cents per share. On that basis, analysts had expected per-share earnings of 78 cents.
Net revenue excluding items rose 10.3 percent to $9.78 billion, beating the average estimate of $9.17 billion.
Revenue from wealth management rose 6.2 percent to $3.83 billion, accounting for 39 percent of total revenue. Pre-tax income from the business rose 24.6 percent to $855 million for a margin of 22 percent, within the expected year-end range.
Adjusted revenue from equities sales and trading rose by a third to $2.27 billion - a strong performance, but not enough to beat Goldman Sachs Group Inc's $2.32 billion.
Excluding special items, revenue from trading fixed-income securities and currencies (FIC) rose 15 percent to $1.90 billion, the highest in three years.
Goldman and JPMorgan Chase & Co also reported higher revenue from the business.
The wealth unit's contribution to revenue jumped to nearly 45 percent last year from less than 20 percent in 2006.
In the same period, FIC revenue fell to about 12 percent of revenue from more than a third.
Expenses for compensation and benefits rose 5 percent in the quarter.
(Additional reporting by Lauren Tara LaCapra; Editing by Ted Kerr)