Morgan Stanley, the US investment banking and wealth management group, said income from continuing operations for the third quarter ended 31 August 2008 stood at $1.425 billion, or $1.32 per diluted share, compared with $1.474 billion, or $1.38 per diluted share, in the third quarter of last year.

Net revenues were $8.0 billion, an increase of 1 per cent above last year's third quarter. Non-interest expenses of $6.1 billion increased by 7 per cent from a year ago.

The results come in a week that has seen US rival Lehman Brothers file for bankruptcy, then agreed to be acquired by UK-based Barclays. Goldman Sachs also reported results yesterday.

Meanwhile, Morgan Stanley’s Global Wealth Management Group posted a pre-tax loss of $34 million compared with pre-tax income of $287 million a year before. The results for the quarter include a charge of $277 million for the settlement related to auction rate securities.

A number of Wall Street firms, including Morgan Stanley, have settled lawsuits with clients over the sale of ARS, which are a form of investment sold as an equivalent to cash but which suffered massive losses as the credit crisis erupted.

Continuing in its breakdown of wealth management results, the firm said net revenues were $1.6 billion, down 8 per cent from a year ago, reflecting lower asset management and underwriting revenues, although partly offset by higher net interest revenues from growth in the bank deposit sweep program.

Total client assets of $707 billion declined $27 billion, or 4 per cent, from last year's third quarter as net new assets were more than offset by asset depreciation. Client assets in fee-based accounts were $186 billion, a 12 per cent drop from a year ago and represent 26 per cent of total client assets.

The 8,500 global representatives at quarter-end achieved average annualized revenue per global representative of $741,000 and total client assets per global representative of $83 million. The number of global representatives has increased 2 per cent from the second quarter of this year driven by strong recruiting and low turnover.

John Mack, chairman and chief executive, said, "Despite unprecedented market conditions, Morgan Stanley's core client franchise achieved solid revenue growth, profitability and return on equity this quarter."

"We have continued to actively reduce our legacy positions and carefully manage our risk, capital and liquidity. I am confident that Morgan Stanley's strong balance sheet and product and geographic diversification leave us well-positioned to serve our clients and realize opportunities in these challenging markets," he added.