Buoyed in part by record wealth management gains and soaring sales and trading revenue, Morgan Stanley reported strong financial results in its third quarter.
For the period, Morgan Stanley posted net income of $2.2 billion, or $1.14 per share, up from $313 million, or 5 cents per share, in the third quarter of 2010.
Analysts polled by Thomson Reuters had been expecting a profit of $0.30 a share.
Those reported earnings rode on the back of an accounting practice known as the debt valuation adjustment (DVA) implemented in response to widening credit spreads. For the quarter, Morgan Stanley attributed $1.12 of its earnings per share to DVA thanks to weakened debt, leaving the firm with earnings of $0.02 per share before the accounting adjustment.
Still, the bank showed strong performance in some of its fundamental operations.
Morgan Stanley's Global Wealth Management Group was a notable bright spot on the balance sheet, tallying net new assets of $15.5 billion for the quarter, a record increase since the launch of the Morgan Stanley Smith Barney (MSSB) joint venture with Citigroup.
"Morgan Stanley effectively navigated turbulent markets while consolidating our market share gains with institutional clients and demonstrating resilience across the Global Wealth Management business as evidenced by record net new assets flows since the formation of MSSB," Morgan Stanley President and CEO James Gorman said in a statement.
Morgan Stanley holds a 51% share of the MSSB joint venture.
The bank's net revenue for the quarter checked in at $9.9 billion, up from $6.8 billion in the same period a year ago.
The sales and trading business saw net revenues of $5.4 billion, propelled by $3.4 billion related to DVA.
The Global Wealth Management Group notched $3.26 billion in net revenue, up from $3.1 billion a year ago, a gain attributed to higher revenues from asset management and commissions. Sequentially, the division's sales dipped slightly from $3.48 billion in the second quarter of 2011, a fluctuation that CFO Ruth Porat described as relatively flat in a "seasonally slow period."
"The global wealth management segment demonstrated revenue stability in the face of challenging market conditions, one of the benefits of MSSB that we have highlighted previously," Porat said on a conference call with analysts.
Net inflows to MSSB from fee-based accounts increased by $10.1 billion. The group saw its pre-tax margin increase to 11% for the quarter, up from 9% in the year-earlier period.
Speaking with analysts, Gorman sought to defuse rumors about Morgan Stanley's heavy vulnerability to the European debt crisis, and emphasized that the firm is working actively to reduce financial and strategic risks.
"The biggest challenge we've faced of late is subdued client activity," Gorman said, adding that the bank has "made far more progress than it has been given credit."
"Clearly we're in a very dynamic environment, and our journey is not done," he said. "Market conditions are challenging. We're constantly reassessing whether we're experience something that is secular or cyclical."
Shares of Morgan Stanley were up less than 1% in afternoon trading.