Morgan Stanley posted a higher than expected quarterly profit as stock trading revenue jumped 31%.
This was a surprisingly strong performance in a quarter when most rivals posted smaller gains or even declines in that business.
The rise in stock trading revenue offset most of the decline in fixed-income, currency, and commodity trading, where revenue fell 44%.
Morgan Stanley has had difficulty with fixed-income trading for years, but in the third quarter weak market conditions also shook most of the bank's competitors.
Equity trading has been more of a bright spot for Morgan Stanley. The bank has invested heavily in the business, hiring specialty sales staff to help institutional clients pick stocks and formulate complex trades.
Overall, the second-largest US investment bank posted third-quarter net income of $888m, compared with a loss of $1.01 billion a year earlier.
On a per-share basis after preferred stock dividends, the bank earned 44 cents from continuing operations, compared with a loss of 55 cents in the same quarter last year. The year-earlier figures included a charge of $2.3 billion to reflect a rise in the value of Morgan Stanley's debt.
Excluding one-time items, Morgan Stanley earned 50 cents per share in the latest quarter, beating analysts' average estimate by 10 cents, according to Thomson Reuters.
Overall revenue rose to $7.93 billion from $5.28 billion, driven by equities trading and the company's fast-growing wealth management business.
Adjusted revenue from equities trading rose 31% to $1.7 billion, while revenue from fixed income, currency and commodities trading fell 44% to $835m.
Trading activity in the bond market slowed markedly during the third quarter as investors braced for the Federal Reserve to start winding down its bond-buying stimulus programme. When the Fed decided to instead hold off on tapering, investors decided they could hold onto their bonds for a little longer instead of trading them.
Bond trading results for Morgan Stanley and Goldman Sachs Group, the top US investment bank, were worse than commercial banks'. Goldman posted a 47% drop in bond-trading revenue, excluding an accounting charge.
Bank of America and Citigroup reported declines of 20% and 26%, respectively.
Revenue in Morgan Stanley's wealth management business increased 8% to $3.48 billion, while the business's pretax profit margin edged up to 19%, getting closer to chief executive James Gorman's target of a minimum 20%.
Morgan Stanley completed its acquisition of brokerage Smith Barney from Citigroup in June. It now collects all of the earnings from the former joint venture but must wait until 2015 to accrue all of Smith Barney's client deposits.
