Morgan Stanley returned to profitability for the first time in a year as income from its investment banking operations offset losses in commercial real estate. The company said that stock and debt underwriting from investment banking, and rising profits from its retail brokerage business, which includes the Morgan Stanley Smith Barney joint venture with Citigroup, more than balanced out $400 million in commercial real estate losses.

The New York-based bank earned $498 million in the July-September period, after losing $13.18 billion during the last three quarters combined. Investors reacted by sending Morgan Stanley stock up sharply. The company's shares jumped $1.30, or 4 per cent, to $33.82 in early trading. The commercial real estate losses are a reminder that the broader economy continues to struggle even as financial companies profit from their investment banking and trading operations. Morgan Stanley has invested more heavily in commercial real estate than some competitors like Goldman Sachs Group.