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Morgan Stanley Beats Estimates

Mark DeCambre

Morgan Stanley(MS Quote - Cramer on MS - Stock Picks), like its peers, posted depressed first-quarter earnings but managed to beat expectations that it would suffer much worse in the subprime-inspired credit crisis.

The New York-based investment firm reported a profit of $1.53 billion, or $1.45 a share. Analysts had been estimating a first-quarter profit of $1.03 a share on $7.19 billion of revenue, according to Thomson Financial.

Revenue at the investment bank, however, fell 17% to $8.3 billion, from $10 billion a year ago.

"While many of our businesses are facing challenging market conditions that we expect to continue in the months ahead, we are satisfied with how Morgan Stanley navigated the ongoing market turbulence," said CEO John Mack in statement.

Shares recently were up 7.5% to $46.08.

Morgan's better-than-expected results come a day after rival firms Lehman Brothers(LEH Quote - Cramer on LEH - Stock Picks) and Goldman Sachs(GS Quote - Cramer on GS - Stock Picks) also bested analyst first-quarter estimates. Morgan Stanley's results also come three days after Bear Stearns(BSC Quote - Cramer on BSC - Stock Picks), teetering on bankruptcy, was offered a $2-a-share buyout by JPMorgan Chase(JPM Quote - Cramer on JPM - Stock Picks), which was orchestrated by the Federal Reserve.

Morgan wrote down approximately $2.3 billion in hard to sell loans. Goldman wrote down a similar amount and Lehman wrote down about $1.8 billion in debt and other securities that have been stuck on its books since the summer. Morgan also posted a pretax loss of $161 million in its asset management business from securities issued by off-balance sheet structured investment vehicles, otherwise known as SIVs.

Amid a fierce crisis in credit that has humbled bankers and brokerage shops, Morgan Stanley saw revenue in fixed income sales and trading drop 15 % to $2.9 billion, still the firm's second-highest ever.

Return on equity also saw a decrease of 19.7% from 30.9% from the same period last year.

Market volatility helped lead equity sales and trading revenue experience a jump of 51% to $3.3 billion. Investment-banking revenue, including a 19% increase in fees for takeover advice, fell 10% to $1.1 billion. Revenue at the global wealth-management unit increased 6% $1.6 billion.