US banking giant Morgan Stanley lost money during the first quarter because an accounting rule cost the bank $2 billion.
But excluding that special item its earnings rose on much stronger trading revenue.
The Wall Street investment bank reported a loss of $119m, or 6 cents per share.
This compared with a profit of $736m, or 50 cents a share, the same time last year.
Excluding the special accounting item, known as debt valuation adjustment (DVA) - which requires companies to reflect changes to their own debt values, leading to charges when values rise and gains when values decline - Morgan Stanley earned $1.4 billion, or 71 cents per share.
Net revenue totaled $6.9 billion. Excluding DVA, revenue was $8.9 billion, up from $7.8 billion a year earlier.
Morgan Stanley's trading business was particularly strong on both an annual and quarterly basis. Competitors including Goldman Sachs Group reported weaker trading results compared with the first quarter of 2011, citing caution among clients amid global economic uncertainty.
Morgan Stanley's chief executive James Gorman said the sales and trading operation "showed broad-based gains across products and regions." He cited better operating performance in the bank's joint trading venture in Japan.
Excluding DVA, Morgan Stanley's trading revenue rose 33% to $5 billion. Pre-tax income from trading, excluding DVA, more than doubled, to $1.67 billion from $621m.
The investment bank also showed progress in its wealth-management business, which investors and analysts have been watching closely because the integration of its Morgan Stanley Smith Barney joint venture with Citigroup has been slower than expected.
Morgan Stanley's global wealth management business, which includes the joint venture, reported net revenue of $3.4 billion, with a pretax profit margin of 11%, up slightly from a year ago and from the previous quarter. The business reported more client assets in fee-based accounts and more revenue and assets per financial adviser.
