No Mortgage Slump Here: Morgan Stanley Soars

Morgan Stanley is the latest major Wall Street investment bank to report its earnings — and the results were literally golden in comparison to industry competitors. Morgan Stanley’s second quarter profit jumped a whopping 40 percent, with net income climbing to $2.58 billion versus $1.84 billion in the year-ago quarter. Bloomberg reports:

The company’s profit grew faster than earnings at Goldman, Lehman Brothers Holdings Inc. and Bear Stearns, which reported results last week. Merrill Lynch & Co., the third-biggest securities firm by market value after Goldman and Morgan Stanley, releases its second-quarter figures next month. All of the firms are based in New York.

Analysts appear to be most impressed with how the investment bank turned in strong numbers in its fixed-income and equity-trading business, an area that has clearly been a sore spot for many of Morgan Stanley’s competitors as of late. From the New York Times:

Revenue from the firm’s fixed-income sales and trading operations — which include mortgage-related securities — was up 39 percent from 2006, Morgan Stanley said. While the firm said revenue from residential mortgage securities fell in the second quarter, the decline was offset by strength in other credit products as well as interest-rate and currency-related trading.

I’m probably in line with the analysts on this — everyone else has just been getting clobbered in the fixed-income space this past quarter. I’m very intrigued as to how Morgan Stanley pulled this one off. The numbers resemble what I’d become accustomed to Bear Stearns throwing out there quarter after quarter until falling off the horse this year.

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