Morgan Stanley quarterly profit up 39 percent

M&A, stock trading help boost Wall Street firm's bottom line

By JOE BEL BRUNO

AP Business Writer

updated 10:46 a.m. ET June 20, 2007

NEW YORK - Morgan Stanley, the No. 2 U.S. investment bank, on Wednesday reported fees from advising clients on acquisitions and stock trading lifted second-quarter profit 39 percent from the year-ago period.

For the three months ended May 31, profit after paying preferred dividends rose to $2.57 billion, or $2.45 per share, from $1.84 billion, or $1.75 per share a year earlier.

The record run on stocks this year, and frenzied pace of corporate takeovers, helped lift revenue 32 percent to a record $11.5 billion.

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Results topped Wall Street projections for a profit of $2.01 per share on $10.03 billion of revenue, according to analysts polled by Thomson Financial.

Chief Executive John Mack, who took over in 2005, has continued to impress Wall Street in turning around the once battered investment bank's brokerage and asset management businesses. Not only has he revived Morgan Stanley's profit growth, but has now begun the process of splitting off its Discover credit-card unit as a way to narrow the investment bank's focus.

"We believe there is still work that remains to be done, and we remain intensely focused on delivering value to Morgan Stanley's clients and shareholders over the long term," he said in a statement.

Morgan Stanley's results come a week after three of its Wall Street rivals delivered mixed results. Lehman Brothers Holdings Inc., Bear Stearns Cos., and Goldman Sachs Group Inc. all delivered results driven by equities trading, debt underwriting, and takeover advisory _ however, profit was hurt by subprime mortgage losses.