Morgan Stanley outperforms US financials on results

Morgan Stanley's five-year CDS moved tighter yesterday on better-than-expected results, outperforming the general trend amongst US financials, which were largely flat on the day. Morgan Stanley's spread moved 16 basis points tighter to 380bp according to data from Markit.

The bank reported 3Q profits of $2.15 billion, and also revealed it has gross exposure of $7.2 billion to debt from Italy, Spain, France, Portugal, Greece, and Ireland, with this figure falling to $1.8 billion when hedges are taken into account.

As with other financial institutions reporting third quarter results over the past week or so, much of Morgan Stanley's profits came as a result of an "accounting gain" that allows banks to make profits when the value of their own debt declines. But the bank still would have made a small profit even without this gain, as its core operating profits benefited from a steep rise in stock-trading revenue, which has increased on the back of continued market volatility.