Morgan Stanley reports pickup in trading revenue

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NEW YORK (AP) — Morgan Stanley reported a much smaller loss than investors were expecting Thursday thanks to a pickup in trading revenue.

The New York investment bank did better than its rivals in the key area of executing trades for its clients in bonds, stocks, commodities and other financial instruments. While most other Wall Street banks reported declines in the second quarter, Morgan Stanley’s trading revenues rose 17 percent from the prior quarter to $3.4 billion.

Morgan Stanley and its clients appeared more willing to take risk than other investment banks. Goldman Sachs Group Inc. reduced a key measure of investment risk to the lowest level since late 2006. Morgan Stanley’s “value at risk,” a measure of how much money it could lose in any given day, increased to $145 million in the quarter, compared with $121 million in the first quarter of 2011 and $139 million in the second quarter of the prior year.

Morgan Stanley’s revenue from fixed income trading grew 18 percent from the previous quarter to $2.09 billion. Goldman Sachs Group Inc.’s fixed income trading revenue fell 63 percent from the previous quarter, while JPMorgan Chase & Co. and Citigroup Inc. reported declines of 18 percent and 20 percent. Goldman Sachs and others attributed the declines to investors being nervous about global economic issues.

Morgan Stanley’s stock jumped 5 percent to $22.88 in early trading Thursday.

Overall, the bank reported a loss of $558 million for the quarter after taking a $1.7 billion accounting charge related to converting an investment from a Japanese bank into common stock. Mitsubishi UFJ Financial Group helped rescue Morgan Stanley during the 2008 financial crisis with an investment of $9 billion.

The quarterly loss was equivalent to 38 cents per share, much less than the 61-cent loss analysts were expecting. Revenue of $9.3 billion was also more than analysts expected, according to FactSet.

Compensation expenses for Morgan Stanley employees, including salaries and bonuses, rose 20 percent to $4.7 billion from $3.8 billion in the same quarter last year.