INSTANT VIEW: Morgan Stanley profit falls, beats estimate

NEW YORK (Reuters) - Morgan Stanley reported a better than forecast third quarter profit on Wednesday, helped by strong fixed income sales and trading revenues, ending a string of three straight losing quarters.

The New York-based firm reported net income for common shareholders of $498 million, or 38 cents a share, compared with $7.7 billion or $7.38 a share, in the year-ago period.

The 2008 figures were boosted by a one-off accounting gain resulting from declines in the value of certain liabilities in the bank's portfolio.

Analysts on average forecast earnings of 27 cents a share, according to Thomson Reuters I/B/E/S.

The following is reaction from industry analysts and investors:

JOE SALUZZI, CO-MANAGER OF TRADING AT THEMIS TRADING IN CHATHAM, NEW JERSEY

"There's nothing new amongst all these banks, and I think finally the market will realize we're priced for these things already, and I wouldn't be surprised to see a sell the news reaction, which we've been seeing.

The question people have to ask is, if Morgan Stanley and all these banks have had a good quarter, can they do it again next quarter? Can they do it again next quarter after that? Is it revenue based on speculative trading or is it revenue based on a solid business model?

If the Fed is giving you zero percent, and you're making five, it's a pretty easy business model, anybody can do it."

PETER CARDILLO, CHIEF MARKET ECONOMIST AT AVALON PARTNERS, NEW YORK

"Morgan Stanley beat expectations but that seems to be the case of most companies reporting now. We are still heading for a lower open today because the market has already taken into account that many companies will be beating forecast and the outlook on corporate America looks upbeat. This is the case of selling on the news. The scarcity of economic data today will also contribute to a pullback despite positive earnings news."

MICHAEL HOLLAND, PRESIDENT, HOLLAND & CO, NEW YORK

"The well announced strategy of less risk taking reduced the expectations somewhat, and therefore, they were able to outperform.

"The expectations were not huge as they were in the case of Goldman, for example, they outperformed the expectations, and that is good thing, and that's why the stock is up.

"At least for this quarter, the management strategy and the business model are working and the stock is reflecting that. You don't know how well they will be in succeeding in the future with this business model, but for now that is a very good performance in the quarter."

(Reporting by Juan Lagorio, Leah Schnurr and Angela Moon)