Morgan Stanley posted a 42% increase in quarterly profit as stock trading revenue soared, the latest sign that the No 2 US investment bank is regaining its footing.
Income rose in all the bank’s businesses. Profit from trading and investment banking was nearly six times higher than a year earlier, helped by stronger stock and bond trading, and profit in wealth management jumped 83%.
The bank said regulators approved the repurchase of $500mn of its stock, and Morgan Stanley shares rose 3.5% in early trading.
Net income attributable to common shareholders rose to $802mn, or 41¢ per share, in the second quarter from $564mn, or 29¢ per share, a year earlier.
Excluding special items, Morgan Stanley earned 45¢ per share, beating analysts’ average estimate of 43¢, according to Thomson Reuters I/B/E/S.
Revenue rose 22% to $8.50bn, while expenses rose 12% to $6.73bn, signaling that the bank is keeping a lid on cost growth.
Morgan Stanley easily beat analysts’ profit expectations, thanks largely to strength in trading and underwriting early in the quarter before interest rates spiked.
Stock trading revenue jumped to $1.8bn from $1.3bn a year earlier, excluding the debt valuation adjustment, or DVA, which reflects gains and losses on banks’ own debt.
Revenue from fixed income and commodities trading rose 50% to $1.15bn, excluding DVA.
As with its rivals, underwriting was a bright spot in the second quarter. Debt underwriting revenue rose 24% to $418mn, while equity underwriting revenue increased 16% to $327mn.
Advisory revenue rose 27% to $333mn despite weak M&A activity.
Wealth management revenue rose 10% to $3.53bn, representing a profit margin of 18.5%.

Norsk Hydro

Norsk Hydro, one of the world’s biggest aluminium producers, said it expects solid growth in demand this year to help to reduce oversupply that has put prices under pressure and hit profits.
“We have considerable inventories, but now on a stable level, and indications are that there is a tight physical market since we have record high ingot premiums,” Norsk Hydro chief executive Svein Richard Brandtzaeg told Reuters yesterday.
The Norwegian firm’s underlying operating profit fell to 518mn crowns ($86.30mn) from 531mn crowns in the year-ago period, beating expectations for 401mn crowns seen by analysts. The profit drop was mainly caused by the fall in aluminium prices. Shares were down 0.3% at 0758 GMT.
Ingot premiums — the price customers pay above the LME price — are currently at around $250-$300 per tonne which together with cost cuts have protected Hydro’s primary metals business from going into the red. The unit outperformed expectations in the quarter, compensating for increasing losses in the Bauxite and Alumina division. As well as low contract prices, profits were also hit by a power outage at its Brazilian Alunorte refinery.
Norsk Hydro declared force majeure after the Alunorte alumina refinery, the world’s largest, experienced the outages last month, leading to lower production. Output is expected to be hit in the third quarter as well. Brandtzaeg told a news conference the company sees demand growth in China of 8-10%. It said overall demand in Europe was expected to be stable, while there were signs of growing demand from the building and construction market in the US.
Hydro said it had sold forward around 50% of its expected primary aluminium production for the third quarter of 2013 at a price level of around $1,850 per tonne, excluding volumes from its Qatalum plant in Qatar.

Verizon

Verizon Communications said strength in its wireless business was tempered by weakness in its traditional wireline unit, producing weaker-than-expected revenue growth for the quarter and sending its shares down 1%.
Excluding a pension-related gain, Verizon said it earned 73¢ per share, compared with expectations for 72¢, according to Thomson Reuters I/B/E/S. But while operating revenue rose 4.3% at $29.8bn from $28.55bn, it was shy of estimates of $29.83bn.
Profit margin came to 49.8%, based on earnings before interest, taxes, depreciation and amortisation, which was below five analyst estimates between 50% and 50.9%.
Verizon reported churn of 0.93%, compared with his expectations for 0.9%.
The company said it increased its capital spending budget to between $16.4bn and $16.6bn for the full year, compared with its previous target of $16.2bn.
Verizone said it will need to spend more as it anticipates higher demand for wireless data services, and will have to start using a new chunk of wireless airwaves. It added 161,000 net new FiOS Internet customers and 140,000 net new FiOS video connections in the quarter.
Verizon’s earnings rose to $2.25bn, or 78¢ per share, from $1.83bn, or 64¢, in the year-ago quarter.
Tata Consultancy Services

India’s biggest IT outsourcing firm, Tata Consultancy Services, yesterday reported a 16.8% jump in quarterly net profit, beating market forecasts.
The company, which is popularly known as TCS and is part of the steel-to-tea Tata conglomerate, said net profit was Rs38.31bn ($641mn) for the first quarter to June, up from Rs32.8bn a year earlier.
Analysts had forecast a profit of about Rs37.6bn.
In the three months to June, TCS completed its acquisition of French IT services firm Alti for €75mn ($98mn).
The company said it also hired 1,350 people in the quarter and signed at least nine large deals.
Infosys said net profit rose to Rs23.74bn ($396mn) for the first quarter to June, from Rs22.89bn a year earlier.

Nokia

Finnish mobile phone maker Nokia yesterday reported a reduced loss of €227mn ($298mn) in the second quarter, but sales again fell sharply.
The loss was 84% less than in the same period last year, but sales fell by 24% to €5.695bn.
The decline in sales of traditional mobile phones continued, dropping 39% from the level a year earlier, while smartphone sales were down 24% over the same period.
“Sales of low end phones — a cash cow — collapsed,” said Eric Beaudet, an analyst at investment bank Natixis. “It’s worrying because this division needs to be profitable in order for them to manage the transition (to high end phones),” he said.
Sales of Lumia, the smartphone on which the troubled company has bet its future, rose by 32% from the previous quarter to 7.4mn units. But analysts had expected more.
“Lumia sales were slightly lower than expected,” said Hannu Rauhala, an analyst at Finnish bank Pohjola.
Mikael Rautanen of equity research provider Inderes was disappointed by the Lumia’s average selling price, which at €157 per unit was significantly lower than his own expectation of €175.
Nokia chief executive Stephen Elop said the phone was “showing increasing momentum.”
“During the third quarter, we expect that our new Lumia products will drive a significant part of our smart devices revenue,” he said in a statement.
Nokia used to be the global leader in making mobile phones but has been overtaken by rivals and is struggling to establish winning business models and mobile devices.
Nokia’s losses came in below a €276mn loss predicted by analysts polled by Dow Jones Newswires, but the revenue fall was sharper than a 17% consensus.
The group has cut costs by reducing its workforce by 23% in the past year and by 7% in the last quarter.
Yesterday the company said it planned to cut up to 400 jobs in its mobile phone division, “while also creating a number of new positions.”
Results were also boosted by a turnaround at telecom equipment maker Nokia Siemens Networks, which made a profit of €8mn, compared with a loss of €226mn in the same period last year.
Rautanen of Inderes said NSN had grown in importance for the company after it announced in early July that it was buying joint venture partner Siemen’s stake in the firm.
The acquisition would “create value” for shareholders, and would be strengthened “as a more independent entity,” Nokia said.
Shares in the company were 4.45 lower in late afternoon trading on the Helsinki bourse, where the main index was down 0.66%.

Safeway

Supermarket chain Safeway yesterday reported higher quarterly profit but revised its full-year forecast slightly lower.
The company, which recently announced the sale of its Canada assets and spun off its Blackhawk gift card unit, reported income from continuing operations of $68.1mn, or 28¢ per share, for the second quarter ended June 15. That compared with $47.6mn, or 20¢ per share, a year earlier.
Excluding the impact of increased legal reserves, Blackhawk initial public offering expenses and a gain from the sale of investments, profit from continuing operations in the latest quarter was 24¢ per share. After adjusting for discontinued operations, the Blackhawk IPO and other items, the company set its forecast at the lower end of its prior outlook for earnings of $2.25 to $2.45 per share. It did not give details.
In June, Safeway said it was selling its Canadian assets to grocery chain Sobeys in a $5.7bn deal and use the proceeds to pay down debt and buy back shares.
In April, California-based Safeway took Blackhawk Network Holdings public and continues to exercise control over the company it created in 2001. Safeway shares added 13¢ to $24.78 in early trading.