By Lauren Tara LaCapra and Tanya Agrawal
(Reuters) - Morgan Stanley's second-quarter income more than doubled, helped by rising revenue in its retail brokerage business as it won more assets to manage from clients without adding brokers, the investment bank said on Thursday.
Onetime gains from a tax break and the ending of a joint venture with Citigroup in wealth management gave the bank its biggest income gains for the quarter. But, even excluding those items, the bank posted better results in businesses including merger advisory, stock and bond underwriting and investment management. The bank's results beat average forecasts, and its shares edged up 0.3 percent to $32.60.
Morgan Stanley has been reshaping its business after coming uncomfortably close to failing during the financial crisis. The second-largest stand-alone investment bank after Goldman Sachs Group Inc, long a powerhouse in areas like bond trading and commodities trading, has been increasing its reliance on its retail brokerage and investment management businesses.
These businesses tend to generate more stable earnings and are less likely to unravel during market calamities. Investment management and retail brokerage would typically account for about 30 percent or 40 percent of the bank's revenue a quarter in 2007, but in the second quarter of 2014 accounted for more than 50 percent.
In the second quarter, retail clients' assets rose $59 billion to $2 trillion, due in part to clients bringing money to the bank. Morgan Stanley managed to win those assets without expanding its broker force; the bank had 16,316 financial advisers at the end of June compared with 16,321 in the same quarter last year.
Revenue from wealth management rose 5 percent to $3.72 billion from the year-ago quarter.Overall, net income for shareholders rose to $1.86 billion, or 94 cents per share, in the second quarter from $803 million, or 41 cents per share, in the same quarter last year.
According to adjusted figures calculated by Thomson Reuters I/B/E/S, the company earned 60 cents per share, beating the average analyst estimate of 55 cents.
Morgan Stanley's shares were up 0.3 percent at $32.60 late Thursday morning. Up to Wednesday's close, the stock had risen 3.6 percent since the start of the year, just outperforming the KBW Bank Index.
The quarter included a $609 million tax benefit. The bank also received 100 percent of the income from its wealth management business during the quarter. In the second quarter of 2013, it shared that income with Citigroup, its joint venture partner. Morgan Stanley bought out Citigroup's remaining 35 percent stake in wealth management on June 28, 2013.
Revenue from fixed-income, currency and commodity trading fell 12.3 percent to $1 billion as a lack of volatility discouraged trading during the quarter. Those results exclude accounting adjustments linked to the value of the company's debt.
That decline is about in line with what rivals, including Goldman Sachs Group Inc, JPMorgan Chase & Co and Citigroup Inc, have posted this week for the second quarter.
Morgan Stanley, ranked No. 2 globally in mergers-and-acquisitions, benefited from a strong equities market in the quarter. Advisory revenue rose 26 percent to $418 million.
Separately, Chief Financial Officer Ruth Porat said in an interview that management does not believe that U.S. sanctions announced on Wednesday against Russian oil company Rosneft would affect a deal between the two companies.
(Reporting by Lauren Tara LaCapra and Tanya Agrawal; Editing by Ted Kerr and Jonathan Oatis)
