The US bank Morgan Stanley reported a 48% drop in profits in the first quarter of this year – much less than had been feared. The New York investment bank earned $736m, compared with $1.4bn in the first three months of last year.

The fall was largely down to a quick drop in income from bond trading and losses from a Japanese investment. But the earnings were almost 20% higher than market analysts’ forecasts and the shares closed 1.7% higher.

Income from bond trading was 35% down on the same sector last year, although 2010 was an unusually strong sector across Wall Street for that particular business. Most US banks saw income from that sector drop over the year, including Goldman Sachs and JPMorgan Chase.

Morgan Stanley’s chief fiscal officer Ruth Porat said that the division performed well in trading currencies and interest rate products such as government debt. He added that progress was made. From other prospective its business performed well. Morgan Stanley’s client base rose by 7%.

The bank’s periodical results included several one-off items, including an after-tax loss from its stake in a Japanese securities joint business enterprise.