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Morgan Stanley's Trading Business Delivers

Morgan Stanley shares were higher as strong trading revenue led to a better than expected profit for the first quarter.

Updates with Morgan Stanley's latest share price, added commentary.



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Morgan Stanley

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's efforts to bulk up its trading business paid off Wednesday as the company's first-quarter profit came in well ahead of Wall Street expectations.

The stock was surging in late morning trades, up 3% to $31.36 in recent action. Volume of 15.9 million was closing in on the issue's trailing three-month daily average of 20.2 million. The session-high of $32.01 was still some ways away from the stock's 52-week peak of $35.78, set in late October 2009, but there was some cause for optimism in the technicals.

"This one looks like it may be ready to break out," said Tim Collins, founder of Tangle Trade Management and a contributor to TheStreet's

. "If the stock can hold the current indicated gap open this morning, I think it has a very good chance of seeing $33 in very short order, followed by a trip to $35. I am going to look to get some long exposure today if this move holds."

Before the opening bell, the company reported first-quarter earnings from continuing operations of $1.8 billion, or $1.03 per share, on revenue of $9.1 billion. Including discontinued operations, the company earned 99 cents a share in the latest quarter. The latest results include the impact of a tax benefit of $382 million.

The average estimate of analysts polled by

Thomson Reuters

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was for Morgan Stanley to report earnings of 55 cents a share on revenue of $7.94 billion in the March period.

Revenue from fixed income sales and trading swelled to $2.7 billion in the latest three months, from $700 million in the fourth quarter. The company attributed the growth to a "solid performance in interest rate, credit & currency products." On the equity side, revenue reached $1.4 billion in the first quarter, doubling its total of $700 million in the fourth quarter. Total revenue from sales and trading for the latest quarter was $4.1 billion, well above $1.4 billion in the same period last year.

"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," said James Gorman, the company's president and CEO. "Within Institutional Securities, the build-out of our Sales and Trading business is beginning to pay off across our fixed income and equity platforms."

Revenue for the company's investment banking operations was modestly higher on a year-over-year basis, rising to $887 million from $811 million a year ago, while the global wealth management business turned in revenue of $3.1 billion in the quarter, essentially flat with its fourth-quarter total, but up from $1.3 billion in the same period a year earlier.

>> Who Owns Morgan Stanley?: Renaissance Technologies

Compensation expenses rose to $4.4 billion in the latest quarter from $2 billion last year, reflecting the impact of the Morgan Stanley Smith Barney joint venture with


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, which is majority-owned by Morgan Stanley and includes roughly 20,000 financial advisors.

Morgan Stanley said its total capital was $212.1 billion at quarter's end, and that its Tier 1 common ratio was stood at 8.2%. Total assets were $820 billion as of March 31, an increase of more than 30% from last year.

Morgan Stanley shares closed Tuesday at $30.45, and were up 2.9% year-to-date at that time.


Written by Michael Baron in New York