Make that three in a row. After both Lehman Brothers and Goldman Sachs yesterday posted earnings that -- while still off relative to year-ago performance -- beat analyst expectations, Morgan Stanley provided the proverbial hat trick on Wednesday morning, soundly trumping forecasted earnings for the first quarter. The string of better-than-expected earnings for Wall Street comes on the heels of a historic collapse at Bear Stearns, the world's fifth-largest invesment bank. Morgan Stanley said it earned $1.55 billion, or $1.45/share, led by record revenues in equity sales and trading; the quarterly earnings were a 42 percent drop from year-ago levels. Bloomberg reported that analysts had been expecting earnings of $1.01/share. The earnings news buoyed the company's stock Wednesday, which was up more than nine percent to $46.90 in early trading in New York when this story was published. "While many of our businesses are facing challenging market conditions that we expect to continue in the months ahead, we are satisfied with how Morgan Stanley navigated the ongoing market turbulence," CEO John Mack said in a press statement. Despite the better-than-expected results, Morgan Stanley -- like Goldman and Lehman before it -- proved that it wasn't immune to the effects of the credit crunch. Total write-downs for the quarter came in at $2.3 billion, the company said, including $1.2 billion in net MBS and related securities write-downs and another $1.1 billion in mark-to-market activity on loans. Morgan Stanely reported $9.4 billion in write-offs last year, by comparison. Via Bloomberg, it now appears that expectations are apparently being raised for the rest of Wall Street's i-banks:
"With Lehman, Goldman and Morgan all coming out and saying 'here's how we're different,' we hope it will get everyone's concerns under control," said Ben Wallace, an analyst at Grimes & Co. in Westborough, Massachusetts, which manages $800 million and sold its Morgan Stanley stock earlier this year. "Expectations were pretty low for this group, especially after the Bear Stearns news."
Disclosure: The author held no positions in MS when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.