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Morgan Stanley Q1 beats estimates on trading business strength

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Morgan Stanley Q1 beats estimates on trading business strength

Morgan Stanley said Monday its first-quarter net income rose 59% to $2.4 billion as the recovering economy and a robust volume of mergers and acquisitions pushed its trading business higher. Earnings per diluted share, not including a one-time tax benefit, totaled $1.14, handily beating analysts’ consensus estimate of 79 cents. Net revenues for the quarter rose 10% from a year ago to $9.9 billion. Shares rose 2% to $37.50 in pre-market trading.1405597562000-AP-Earns-Morgan-Stanley

Reflecting its rising revenues, the investment bank’s compensation expenses rose by $200 million from a year ago to $4.5 billion. The institutional securities unit reported pre-tax income of $1.8 billion vs. $1.4 billion a year ago. Net revenues for the current quarter were $5.5 billion vs. $4.7 billion a year ago. The unit’s largest source of revenue,  advising companies on mergers and underwriting securities, rose to $471 million, up from $336 million a year ago. Equity underwriting revenues totaled $307 million, down from $315 million a year ago on fewer IPOs. Fixed-income underwriting revenues were $395 million, down from $485 million due to lower loan volumes.

Net revenues of equity sales and trading rose to $2.3 billion vs. $1.7 billion a year ago. Fixed income and commodities sales and trading reported net revenues of $1.9 billion, up from $1.7 billion. Like many other major banks, Morgan Stanley faces a variety of legal proceedings that represent a potential shadow on its financial results.

In its annual report filed with the Securities and Exchange Commission last month, Morgan reported that the U.S. Department of Justice and several states’ Attorneys General were investigating evidence the bank may have misled investors about the quality of residential mortgage-backed securities issued during the run-up to the national financial crisis. The California Attorney General’s office reached a preliminary conclusion in May 2014 that Morgan Stanley had “made knowing and material misrepresentations” regarding those types of securities, the bank disclosed. Morgan Stanley said it disagreed and has presented legal arguments to the California legal authorities.