Fixed-Income Goal
Revenue at Morgan Stanley climbed to $9.28 billion from $7.96 billion a year earlier, the highest since the end of the financial crisis. Book value per share fell to $30.17 from $31.45 at the end of March. Net income was $1.19 billion, versus $1.96 billion in the same period of 2010.
"While global markets remained challenging this quarter, the firm delivered higher year-over-year revenues across our three major business segments," Gorman said in the statement.
In the second quarter, revenue from fixed-income sales and trading, which is run by Ken deRegt along with commodity trading co-heads Colin Bryce and Simon Greenshields, was $2.09 billion. That compared with $1.77 billion in the first quarter and $2.33 billion in the second quarter of 2010.
Excluding gains or losses from its own credit spreads, fixed-income revenue was $1.9 billion, higher than estimates of $1.5 billion from Richard Staite at Atlantic Equities LLP and $1.57 billion from Keith Horowitz at Citigroup Inc. Fixed-income trading revenue was $4.28 billion at JPMorgan Chase & Co., $3.03 billion at Citigroup and $1.6 billion at Goldman Sachs.
Bond Insurers
Fixed-income trading benefited from $471 million of gains in the second quarter attributed to hedges against exposure to bond insurers, Chief Financial Officer Ruth Porat said on a conference call today.
Morgan Stanley reported $318 million in losses in the first quarter and more than $1 billion in total losses since the start of 2010 related to the monoline insurers. The hedges were adjusted in the second quarter and otherwise would have resulted in more losses, Porat said.
Commodity trading revenue declined "meaningfully" in the quarter as client volume decreased, Porat said. That decline served to "really mask the relative progress" in the other fixed-income trading units in "difficult" markets, she said. The firm's daily average value-at-risk, a measure of how much it could lose in the markets, rose to $145 million from $121 million in the first quarter.
Gorman's Goal