Morgan Stanley’s profit climbs 39%

After languishing just a few years ago, the nation’s No. 2 investment bank has wrangled its way back as one of Wall Street’s shrewdest players.

Morgan Stanley said Wednesday that its second-quarter earnings rose 39%, powered by strong performances in most of its businesses. The company not only handily beat its numbers from last year, but it also outpaced its rivals in profit growth.

For John Mack, who became Morgan Stanley’s chief executive in 2005, “I think you can say, ‘Mission accomplished,’ ” said Richard Bove, a Punk, Ziegel & Co. analyst. “You have to put capital at risk in a meaningful fashion, and that’s just what he did.”

For the three months that ended May 31, profit after paying preferred dividends rose to $2.57 billion, or $2.45 a share, from $1.84 billion, or $1.75 a share, a year earlier.

The record run on stocks this year -- and the frenzied pace of corporate takeovers -- helped lift revenue 32% to a record $11.5 billion. Results topped Wall Street projections for a profit of $2.01 a share on $10.03 billion of revenue.

Morgan Stanley shares fell 48 cents Wednesday to $87.32.

Continued strength in corporate takeovers drove investment banking revenue to $1.7 billion, up 65%. Assets under management reached $560 billion, a 23% rise from a year earlier.

Morgan Stanley, like three rivals that reported financial results last week, said investments tied to mortgages hurt its results during the period.