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Morgan Stanley CEO not 'shocked' by fixed-income revenue jump

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Morgan Stanley CEO not 'shocked' by fixed-income revenue jump

's fixed-income tradingrevenue jumped up in the second quarter, and company executives don't think theresults were an anomaly.

Morgan Stanley reportedsecond-quarter revenue of $1.3 billion from fixed income and commodities sales andtrading, and that wasa 49% quarter-over-quarter increase. The fixed-income trading revenue slid 6% yearover year, but since then, Morgan Stanley has sold its oil merchanting business and a 25% reduction in fixed-incomeheadcount.

MorganStanley Chairman and CEO James Gorman said when the company made changes to itsfixed-income business, it expected trading revenue to achieve a run rate of $1 billionper quarter. Gorman still expects the business to hit that mark even though therevenue can fluctuate.

Gormanbelieves that some observers overreacted in recent quarters when Morgan Stanley'sfixed-income trading revenue dropped to the $500 million to $600 million range.He also played down the company's second-quarter results.

"It'sa good number this quarter," Gorman saidJuly 20 during the company's earnings conference call. "Are we shocked by it?Not really."

Duringthe call, analysts inquired about the sustainability of the fixed-income revenue,and one asked how much the business benefited from the market volatility createdby the U.K.'s vote to leave the European Union. CFO Jonathan Pruzan said the votedid lead to more trading volumes, but he said it was during a short period of time.

"Iwouldn't say that we over-earned," Pruzan said. "I would say that thevolume helped for a day or two, but [that] doesn't drive the overall performanceof a quarter."