FORTUNE -- James Gorman appears to have found Wall Street's secret sauce.
In a quarter when nearly all of its rivals struggled, Morgan Stanley (MS) reported better-than-expected earnings for the first three months of the year. Profits from continuing operations rose to $1.39 billion, up from $1.18 billion a year ago. Analysts had expected the company to earn $1.22 billion.
Even more impressive, revenue from bond trading at Morgan Stanley rose 9%. That same business line at Goldman Sachs (GS) was down 11%. And most of the rest of Wall Street saw double-digit drops.
A few years ago, Morgan Stanley was basically left for dead. Critics said the bank couldn't compete with JPMorgan Chase (JPM) and Bank of America (BAC), both of which got bigger in the financial crisis. Nonetheless, Morgan Stanley still had its lead in doing stock deals, particularly in the tech sector. Then came the bungled Facebook (FB) IPO, and the bank seemed like a goner.
Gorman's early 2009 acquisition of Citigroup's retail brokerage business Smith Barney has added stability to its operations, and the firm has been able to take back market share in its trading business.
That being said, the Smith Barney acquisition has tied Morgan Stanley's fortunes with the prospects of average retail investors, who tend to take a while to react to changes in the market. So, perhaps, it's not surprising that the firm would still be doing well after last year's huge run-up in stock prices.
But this year has been rockier for the market. If stocks continue to disappoint, Gorman's acquisition might not look so hot. What's more, Morgan Stanley's bond business had lagged the rest of the Street. So it's perhaps not as surprising that the bank would see a bounce back.
Also, a healthy percentage of the jump in trading revenue came from Morgan Stanley's commodities business, which regulators may soon force banks to scale back. And Morgan Stanley's return on equity, a key profitability metric on Wall Street, is still only 8.5%, lower than its rivals and far lower than the double-digit rates the bank used to report before the financial crisis.
Gorman will have to show that investors are willing to pay up for lower margins but more stable Wall Street businesses.
Still, these aren't concerns anyone will worry about today. Morgan Stanley's shares are up 45% from last year, nearly 5% on the good earnings alone. Morgan Stanley is not dead.
Twitter's investment bankers are telling their clients one thing while Main Street hears a different story.
FORTUNE -- Once again, Wall Street is telling its top-paying clients one thing, and the rest of us are getting a different story. This time it's the Twitter (TWTR) IPO.
According to the Wall Street Journal, analysts who work for Goldman Sachs (GS) and other banks on the IPO, which raised $1.8 billion, have been privately MOREStephen Gandel, senior editor - Nov 7, 2013 5:00 AM ET
No one wants to live through that again.
By Joshua Morgan Brown
FORTUNE -- If the modern financial media had been around in 1858, while Cyrus West Field was laying the first transatlantic telegraph cable under the ocean, we'd have been treated to hundreds of screeching headlines about the project's lack of immediate profitability -- rather than marveling at the instantaneous connection being established between two continents. I think there is MOREOct 7, 2013 11:03 AM ET
CEO James Gorman has defied predictions that he would be forced out of the firm and has nearly pulled off an amazing turnaround.
FORTUNE -- Nearly a year ago, James Gorman sat in a chair on his firm's trading floor, clipped on a microphone and stared into a camera. For Morgan Stanley's CEO, it was Facebook judgment day.
Next to him was CNBC's Maria Bartiromo. Gorman had agreed to the interview weeks before, MOREStephen Gandel, senior editor - May 17, 2013 11:05 AM ET
The botched offering is sure to make other successful startups think twice before putting themselves at the mercy of the common markets.
FORTUNE --There are lots of lessons to be drawn from the Facebook IPO: Don't let your CFO scrounge for every last dime. Make sure your CEO pays wardrobe deference to Wall Street. Remove board members who are more loyal to their bank accounts than to the company. But those MOREDan Primack - Sep 21, 2012 5:00 AM ET
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