updated 3/22/2006 9:00:10 AM ET 2006-03-22T14:00:10

Net income at Wall Street firm Morgan Stanley rose 17 percent in its fiscal first quarter, the company said Wednesday, on record revenues stemming from growth in both investment banking and fixed-income trading.

For the quarter ended Feb. 28, Morgan Stanley earned $1.64 billion, or $1.54 per share, up from $1.4 billion, or $1.29 per share, in the first quarter of 2005. Revenue rose 24 percent to $8.48 billion from $6.84 billion a year ago.

Analysts surveyed by Thomson Financial had expected earnings of $1.21 per share on revenue of $7.55 billion.

Morgan Stanley joined rivals Goldman Sachs Group Inc., Lehman Brothers Holding Inc. and Bear Stearns Cos., all of which reported earnings last week, with record quarterly revenues. However, the continued restructuring under Chief Executive John Mack, who took over the job June 30, kept Morgan Stanley from achieving the record income the other firms posted. Like the others, however, Morgan Stanley’s results far outstripped analysts’ predictions.

Morgan Stanley’s institutional securities division saw record revenue of $5.5 billion, up 36 percent from a year ago, on strong gains in investment banking and fixed-income sales and trading. Fixed-income trading rose 36 percent year-over-year, a very strong gain considering that other Wall Street firms were only able to eke out minimal increases in a difficult trading environment.

In Morgan Stanley’s retail brokerage arm, which is undergoing an extensive reorganization, net revenue rose 4 percent to $1.4 billion. Higher fees were offset by lower transaction volumes in customer accounts, the company said. The company has cut 1,471 jobs in the brokerage division over the past year as it laid off poor performing brokers.

Revenue in Morgan Stanley’s asset management division was flat year-over-year at $695 million, while the Discover card division saw a 14 percent increase in sales to a record $1.09 billion as changes in the nation’s bankruptcy laws last October resulted in fewer charge-offs.

The earnings report came just as The Wall Street Journal reported that Morgan Stanley was cutting 50 to 60 jobs in its U.S. and European stock research departments. Some of those jobs and resources will be allocated to faster-growing Asian and emerging markets research.

The company also said in a regulatory filing Wednesday that it has offered to purchase TransMontaigne Inc., a supply chain management company for the energy and chemical industries, for $8.50 per share, or approximately $379 million. Morgan Stanley already owns about 10 percent of the company.

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