Morgan Stanley recorded soaraway profits from its trading desks in the first three months of this year, meaning even one of the more cautious investment banks has restored its fortunes after the credit crisis.
The bank had held back on taking on too much risk as markets recovered in 2009, which meant it lost ground to more bullish rivals. But in its first quarterly results under a new chief executive yesterday it revealed a profit of $1.8bn (£1.2bn) for the period to the end of March, and a one-third jump in revenues. In the same period a year ago, the company had been in the red.
The turnaround relied largely on the expansion of activity on the company's trading desks, where all Wall Street banks have enjoyed bumper profitability thanks to the extra-low short-term interest rates around the world. Banks are able to borrow at low cost, and lend at higher interest rates.
Morgan Stanley said net revenues from fixed income sales and trading leapt from $1.3bn in the first quarter of 2009 to $2.7bn. "We've clearly benefited from a strong environment," said Ruth Porat, the company's recently appointed chief financial officer.
James Gorman, who was promoted to chief executive on 1 January, said: "Our intense focus on disciplined execution across Morgan Stanley's global franchise helped the firm deliver improved results this quarter, though we still have a great deal of work to do."
While Goldman Sachs and other big rivals revived quickly from the near-collapse of the industry in the autumn of 2008, Morgan Stanley initially kept constraints on its trading operations. Instead, it concentrated on becoming a more rounded firm, including extending its network of financial advisers, who look after wealthy clients' investments. Pre-tax income from that global wealth management division rose to $278m from $119m in the first quarter of 2009.
Across the group, net revenues jumped to $9.1bn from $2.9bn, and it set aside $4bn for compensation, or 41 per cent, compared to 65 per cent a year ago when it feared losing staff to higher-paying rivals. Earnings per share came in close to double many Wall Street forecasts.
Morgan Stanley shares had jumped more than 5 per cent by lunchtime trading in New York.