NEW YORK (

TheStreet

) --

Goldman Sachs

(GS) - Get Report

,

Morgan Stanley

(MS) - Get Report

and

JPMorgan Chase

(JPM) - Get Report

all took some trading risks in the second quarter, but it really only paid off for one Wall Street player.

Morgan Stanley was a stand-out performer this quarter, as its aggressive risk taking paid off despite a tough trading climate.

The investment bank topped analyst expectations for the second quarter, with trading revenue of $3.4 billion. Morgan's trading revenues also beat rival Goldman Sachs for the first time since the financial crisis.

Industry observers have been quick to note that Morgan Stanley took more risk during the second quarter than Goldman.

But the broad risk levels might not be the only explanation for divergent trading performances across investment banks. Where and when they took risk may have much to do with how a particular bank performed.

Morgan Stanley's average value at risk (VaR) in the second quarter rose 20%, to $145 million, from $121 million in the first quarter.

Value at risk is a measure of how much of a bank's money is at risk on any given day.

In contrast, Goldman Sachs took down risk significantly during the quarter, saying that an uncertain macroeconomic climate and unpredictable political factors reduced conviction among market participants.

The average daily VaR was $101 million, down 11% from the previous quarter and the lowest level it has been since the second quarter of 2006.

Goldman's trading results underperformed analyst expectations and its peers. Fixed income trading, the largest driver of its revenues, dropped 63% from the seasonally strong first quarter to $1.6 billion.

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"Maybe we made a bad decision in taking too little risk. I don't know," said David Viniar, CFO of Goldman Sachs, during a conference call as he tried to explain the underperformance in trading.

But JPMorgan Chase took down risk significantly too, and it did not fare as badly.

JPMorgan's average VaR declined 9.4%, to $58 million, from the previous quarter. Trading revenue did slip 16% to $5.5 billion sequentially, but was up on a year-on-year basis.

That suggests that Morgan Stanley and JPMorgan might have either experienced better client flows or made better trading calls than Goldman Sachs. JPMorgan said during the conference call that its client flows had been good across businesses.

Morgan Stanley CFO Ruth Porat said the bank took down risk to $129 million at the end of the quarter, as it was only in June that its clients really turned jittery. "...I think our view very much across the franchise is that what clients expect of us is content, with a point of view and that we put balance sheet and risk around that to facilitate trading where it makes sense. And I think in particular, in times like this, they are looking for a point of view, and that's what our team is very much focused on."

The breakdown across trading categories also shows differences in how the firms took advantage of opportunities. Both Goldman Sachs and JPMorgan reduced risk across rates, forex and equities, but stepped up risk in commodities. JPMorgan's value at risk in the commodities business rose 23% to $16 million from the first quarter.

On the other hand, commodities was the only segment in which Morgan Stanley cut back VaR. The investment bank said its clients stepped back during the quarter after dramatic swings in commodity prices, especially in energy.

Both JPMorgan and Goldman significantly reduced risk in equities. The equity markets experienced low volumes and volatility throughout the quarter.

Here again, Morgan Stanley differed, with value at risk in the equities category rising by 10% to $31 million.

Morgan also scaled up risk in its fixed income business by 25% to $131 million. But it was not nearly as successful in generating higher revenues to compensate for that risk. Trading revenue from was down from the first quarter in that segment, though it was up in the first half on a year on year basis.

Analysts say one quarter may not be sufficient to draw any conclusions about the health of a firm's trading business.

Goldman Sachs CFO David Viniar repeatedly pointed out during the analyst call that there is no such thing as a "run rate" in fixed income, meaning it is hard to extrapolate one quarter's performance to subsequent quarters.

--Written by Shanthi Bharatwaj in New York

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