Sweet Home, Morgan Stanley

The hobbled residential lending business helped rather than hurt Morgan Stanley's (MS Quote - Cramer on MS - Stock Picks) blowout first quarter, the Wall Street firm's chief financial officer says.

Subprime lending falls within the New York-based global financial institution's fixed-income business, and to look at Morgan's first-quarter results, you'd never know the industry had a problem. Fixed-income sales and trading revenue rose 31% from a year ago to $3.6 billion, as credit products revenue soared 94%.

Shares rose 5% in heavy trading Wednesday afternoon.

The "largest driver was in credit markets, and residential was a big part of that driver," CFO David Sidwell said on a morning conference call. He added that Morgan's hedging strategies and its lending platform in subprime shone through in its strong results.

"In the aggregate, [subprime lending] was significant to our results," Sidwell said, though he declined to say specifically how much of an impact subprime had on earnings or how much subprime paper Morgan owns.

Morgan has some $2.5 billion in loans out to New Century (NEWC Quote - Cramer on NEWC - Stock Picks), the subprime lender whose credit was cut off by lenders earlier this month, he noted.

The market has been watching closely to see how much of an impact subprime lending has had on financial institutions such as Goldman Sachs (GS Quote - Cramer on GS - Stock Picks), Lehman Brothers (LEH Quote - Cramer on LEH - Stock Picks) and Bear Stearns (BSC Quote - Cramer on BSC - Stock Picks), because these firms have been big lenders to mortgage companies or hold stakes in subprime lending operations.

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