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Morgan Stanley profit up
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June 22, 2000: 10:08 a.m. ET
M&A business helps overcome investment losses, bad consumer loans
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NEW YORK (CNNfn) - Morgan Stanley Dean Witter & Co. Thursday reported higher second-quarter earnings, as strength in securities trading overcame investment losses and larger provisions for consumer loan losses.
The financial services company -- which offers investment banking, asset management and a range of credit services including the Discover credit card -- became the latest brokerage house to beat Wall Street forecasts.
The nation's No. 2 brokerage house said it earned $1.5 billion, or $1.26 a diluted share, in its second quarter ended May 31. Analysts surveyed by First Call had forecast profits of $1.13 a share for the quarter. Earnings were $1.2 billion, or 97 cents a share, in the year-earlier period.
 Net revenue, or total revenue less interest expense, rose 25 percent to $7.1 billion. Investments posted a $236 million loss compared with the $150 million they added to revenue a year earlier.
Securities showed the strongest gain, up 28 percent to $5.5 billion, led by near-record results from mergers and acquisitions advising.
Net revenue from the Discover card and other credit operations showed the smallest gain, up 13 percent. The company increased the provision for consumer loan losses 71 percent from the year-earlier period to $204 million, but that's slightly below the loss provision in the fiscal first quarter.
For the first six months of its fiscal year, net income rose to $3 billion, or $2.60 a diluted share, from $2.2 billion, or $1.85 a share, a year earlier. Net revenue jumped 32 percent to $14.5 billion.
Other brokers top forecasts
Despite the fact that U.S. equity markets turned bearish in the period, many major brokers have been able to beat forecasts for the period. Those that have already reported better-than-expected results include Goldman Sachs Group Inc.(GS: Research, Estimates), Lehman Brothers Holdings Inc. (LEH: Research, Estimates) and Bear Stearns Cos. (BSC: Research, Estimates).
But the sector also saw dark earnings clouds appear on the horizon early Thursday as Judah Kraushaar, the influential Merrill Lynch analyst, lowered earnings estimates for Paine Webber Group (PWJ: Research, Estimates) for 2000 and 2001.
The big hit was for the calendar second quarter, as Kraushaar reduced forecasted earnings to 86 cents a share from his prior estimate of $1.07 a share. The consensus estimate for the period of $1.04 a share compared with $1.02 a year earlier.
Despite beating forecasts, Morgan Stanley (MWD: Research, Estimates) lost 1-15/16 at 83-11/16 in early trading Thursday. 
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