Wall St cheers after Morgan Stanley jumps

MORGAN Stanley’s stock jumped 8.9 per cent after it unveiled better-than-expected quarterly results yesterday.

But the bank still made a pre-tax loss of $655m (£401m) on the back of poor performance from its joint Japanese venture with Mitsubishi UFJ.

The results saw the bank’s pay-to-revenues ratio shoot up to 57 per cent – versus 49 per cent in the same quarter last year – which it blamed on the Japanese loss. Overall, the bank has put aside $4.3bn for compensation costs in the quarter, versus $4.4bn for the same period last year.

Like its rivals, the bank saw revenues from its trading business plummet due to declining client activity.

Revenues from sales and trading in the bank’s fixed income and commodities division nearly halved, from $2.7bn last year to $1.8bn in the second quarter of 2011.

However, revenues from commodities products actually increased.

And Morgan Stanley managed to shake off the general malaise in equities, posting a 21 per cent rise in revenues to $1.7bn.

The investment bank also improved upon last year, clocking an 18 per cent increase in advisory fees to $385m and an 11 per cent rise in underwriting revenues to $623m.

Its wealth management business also saw a strong 11 per cent rise in revenues to $3.4bn.

However, the bank has some work to do on its capital reserves, which it said were 11.8 per cent in core tier one capital – but only under Basel I rules. The loss in its Japanese venture means that Mitsubishi UFJ will have to deliver a $370m capital injection under the terms of the partnership.

•US private equity firm Blackstone also beat forecasts yesterday with $703m second quarter net income, adding that its funds now have $31bn of “dry powder” available to invest.