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Trading lifts US banks to post a profit

City A.M. Reporter
MORGAN Stanley yesterday smashed Wall Street expectations to report $757m (&pound;456m) in net profit, with its riskier trading operations stealing the thunder from its growing brokerage.<br /><br />Strong fixed income sales and trading revenue and improved investment banking underwriting results broke a three-quarter losing streak as Morgan Stanley belatedly joined rivals like Goldman Sachs in returning to the black after the collapse of the financial sector a year ago.<br /><br />The New York-based bank reported third quarter net income of $498m, or 38 cents a share, beating analysts&rsquo; average forecast of 27 cents a share.<br /><br />The bank has pledged to play a more conservative hand as it develops its brokerage business.<br /><br />Morgan Stanley chief financial officer Colm Kelleher said that the results were an &ldquo;affirmation&rdquo; that the firm&rsquo;s strategy was bearing fruit.<br /><br />But the third-quarter rebound came largely because of solid results in trading, a riskier area of the business where Morgan Stanley has hired hundreds of people in recent months.<br /><br />Co-president James Gorman is set to succeed chief executive John Mack &ndash; credited with keeping the bank alive during the darkest days of the crisis, but criticised for struggling to manage risk &ndash; early next year.<br /><br />Meanwhile Wells Fargo reported record profits of $3.2bn in the third-quarter, almost double the same period in 2008. <br /><br />The bank added that shareholder profit rose 60 per cent in the third quarter as mortgage banking revenue surged. It reported net income for common shareholders of $2.6bn, or 56 cents a share.