Morgan Stanley (MS) Wednesday said its second-quarter profit rose 40 percent, trouncing expectations as a number of trading and investment banking businesses achieved record results.

The No. 2 investment bank by market value said net income rose to $2.58 billion, or $2.45 a share, in the quarter ended May 31 from $1.84 billion, or $1.75, in the year-earlier period. The results beat the average analyst profit estimate of $2.00 a share, according to Reuters Estimates.

Net revenue rose 32 percent from last year to a record $11.5 billion, exceeding forecasts by about 16 percent. On a continuing operations basis, Morgan Stanley said earnings reached a new high.

Shares of Morgan Stanley were up $1.71, or 1.9 percent, to $89.51 in pre-market electronic trade.

The blowout results come a week after Morgan's Wall Street rivals delivered mixed results, with subprime mortgage losses weighing on trading results as equities trading, merger advisory and debt underwriting fees soared.

Net revenue at the company's trading and investment banking division increased by 39 percent to a record $7.4 billion, powered by record M&A and underwriting fees. Morgan Stanley generated a 34 percent increase in fixed income sales and trading to $2.9 billion, its second-best quarter ever.

Equities trading also rose to an all-time high, fueled by growth in hedge fund services and derivatives, in line with the strong growth reported by other large securities firms this month.

Morgan Stanley, under the leadership of Chief Executive John Mack for the past two years, has been trying to revive brokerage, money management and credit card businesses that had long held down the company's overall growth.

Those efforts continue to show progress. In the latest quarter, Morgan Stanley said wealth management revenue rose 17 percent to $1.64 billion, while asset management revenue surged 68 percent to $1.51 billion.

The Discover credit card and payments division, however, reported a 13 percent decline in revenue and a 38 percent drop in pretax income. Discover is scheduled to be spun off to shareholders next week.

Shares of Morgan Stanley rose 5 percent during the second quarter, lagging the 6.4 percent gain by the AMEX Securities Broker-Dealer Index. Based on pre-market trade Wednesday, Morgan Stanley shares fetch 2.45 times their May 31 book value.