Morgan Stanley tracked arch rival Goldman Sachs in delivering stronger-than-expected results on Wednesday, but sounded a note of caution about the impact of trade tensions and geopolitical concerns on future trading revenue.
A 40 percent rise in first quarter profit at the bank was driven by the rise in market volatility since February, but Chief Financial Officer Jonathan Pruzan warned that market turbulence like that caused by a tit-for-tat row with China could push clients to the sidelines.
"Volatility is interesting because there's certain volatility that is pretty good and conducive to markets and clients and our results, and then there's volatility, like we saw in February, which was pretty gappy," Pruzan told Reuters.
"Our firm was able to absorb those spiky days, but too much of a good thing is not a good thing for our businesses."
He also pointed to the bank's struggles last year to match a strong first quarter when its sales and trading revenue surged 30 percent. This time round, sales and trading revenue jumped 26 percent in the first three months of the year, driven by strong gains in equities and bond trading.
Morgan Stanley's shares gained 2.35 percent to $53.24 in premarket trading.
"It shouldn't surprise anyone as it's now become the norm: With Morgan Stanley, there is always something good under the bank's earnings tree," said Axel Pierron, managing director of capital markets management consultancy Opimas.
Credit Suisse also called the results "solidly positive".
The bank's total trading revenue was $4.40 billion, slightly better than Goldman's $4.39 billion.
Morgan Stanley's bond trading revenue rose 9.3 percent on increased client activity after several sluggish quarters, in contrast to rivals JPMorgan Chase & Co and Citigroup Inc, where it was flat and fell 7 percent respectively.
Wealth management revenue rose 7.8 percent while pretax profit margin came in at 27 percent, the mid-point of Chief Executive Officer James Gorman's target of 26 percent to 28 percent.
Under Gorman, the bank has been relying more on businesses that generate steady fees, like wealth management, after its risk-taking nearly capsized it during the 2007-2009 financial crisis.
Investment banking revenue rose 6.8 percent, helped by higher advisory fees, while total underwriting revenue rose 2 percent.
For comparison, Goldman's investment banking revenue grew 5 percent, while total underwriting revenue rose 27 percent.
Morgan Stanley's total revenue rose 13.7 percent to $11.08 billion.
Pruzan also declined to comment on Morgan Stanley's share buyback plans, but said it still has $1.75 billion from the Federal Reserve's previous $5 billion authorization, and spent $1 billion in the first quarter buying back shares.
Goldman's CFO said on Tuesday that the bank will pause buybacks in the second quarter and instead use capital to facilitate trades, loans and deals for customers.
The bank's net income applicable to common shareholders rose 40 percent to $2.58 billion in the first quarter ended March 31.
On a per-share basis, the company's earnings rose to $1.45 from $1. Analysts were looking for $1.25 per share, according to Thomson Reuters I/B/E/S.