Morgan Stanley: No subprime hit

NEW YORK (CNNMoney.com) -- The subprime mortgage business has roiled markets recently but didn't dampen results at Morgan Stanley, which reported record quarterly earnings and revenue on Wednesday.

Morgan Stanley's results for the first quarter ended Feb. 28 blew past Wall Street's estimates, driven largely by strength in residential mortgage trading.

Shares of Morgan Stanley (up $3.16 to $79.27, Charts) jumped 4 percent in midday trading.

Morgan Stanley CFO David Sidwell also soothed investor concerns about the firm's exposure to the subprime mortgage sector.

Sidwell said subprime woes remain "a reasonably limited event" and that the firm hasn't seen any signs that those problems have spread to other parts of the mortgage market.

Morgan Stanley has its hand in nearly every corner of the subprime mortgage sector. It issues home loans directly to borrowers with weak credit. It also buys these loans, repackages them and sells them to investors.

The bank was also one of many Wall Street firms to provide financing to subprime mortgage provider New Century Financial, which is on the verge of bankruptcy.

Despite the problems in subprime, Morgan Stanley was well positioned in the residential mortgage market and managed the risk through hedging strategies, Sidwell said.

For the quarter, Morgan said net income soared 70 percent to $2.67 billion, or $2.51 a share. Net revenue climbed 29 percent to a record $11 billion.

Morgan Stanley has been expanding its footprint in the residential mortgage business. Last August it bought mortgage lender Saxon Capital for $706 million.

Sidwell said the company will continue to look at opportunities in the marketplace but that it has not made any definitive plans to make further acquisitions.

Morgan Stanley's stellar results come on the heels of upbeat results from Goldman Sachs (Charts), Lehman Brothers (Charts) and Bear Stearns (Charts).

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