By Liz Hoffman

Morgan Stanley on Thursday said its quarterly profit rose 25% from a year ago, another big U.S. bank to skate unscathed through the rockiest economy in years.

The firm reported profit of $2.7 billion, or $1.66 a share, on $11.7 billion in revenue. The results were higher than a year ago and beat the forecasts of analysts, who had predicted $1.28 in per-share earnings and $10.65 billion in revenue.

Morgan Stanley rounded out third-quarter earnings reports from the nation's big banks, which have weathered the pandemic better than many of the clients they serve. Each posted billions of dollars in profits -- and three including Morgan Stanley saw their profits grow from a year ago -- despite a deep recession and an economic outlook tied to the odds of a compromise in Washington.

"Consistent performance across the board," Chief Financial Officer Jonathan Pruzan said in an interview, describing the quarter. Looking ahead, Mr. Pruzan said he expects another round of stimulus spending out of Congress. "It's a matter of size and when, not if," he said, adding that "markets have been extremely constructive" since Morgan Stanley closed its quarterly books in September.

The biggest banks were buoyed mostly by their Wall Street arms, with trading revenue rising between 4% at Bank of America Corp. and almost 30% at Goldman Sachs Group Inc. Underwriting fees boomed, too, as companies sold stock and debt to investors to refill their pandemic-hit coffers.

Morgan Stanley followed suit, reporting a 20% rise in trading revenue and a 118% rise in stock underwriting. It is a smaller player in debt placements, where its revenue fell 18%.

The firm's return on tangible equity, a measure of how profitably it puts shareholders' money to use, was 15% for the quarter, hitting a target set by Chief Executive James Gorman earlier this year, before the pandemic crushed the global economy. The firm set aside $111 million for loan losses, more than a year ago but about half of its provisions in the second quarter.

The biggest changes afoot at Morgan Stanley haven't yet shown up in its financial results. The firm struck two big deals this year, acquiring E*Trade Financial Corp. for more than $11 billion in a transaction that was completed earlier this month, and fund manager Eaton Vance Corp., in a deal that is expected to close early next year.

Together, the acquisitions will continue Morgan Stanley's transformation under Mr. Gorman away from its Wall Street roots by adding steadier revenue from managing other people's money. One sign investors are buying the story: The firm's market capitalization this week passed that of Citigroup Inc., which has more than twice Morgan Stanley's annual profit.

Moody's Investors Service also upgraded the bank's credit rating earlier this month, reversing a 2012 downgrade that was one of the darkest moments of Mr. Gorman's tenure as CEO. A higher rating will lower Morgan Stanley's borrowing costs and make its trading arm more competitive in certain areas. "We've clawed our way back," Mr. Pruzan said.

Write to Liz Hoffman at liz.hoffman@wsj.com

(END) Dow Jones Newswires

10-15-20 0833ET