The Wall Street powerhouse, however, recorded a total one-off loss of over $900 million that it said was related to a credit event and subsequent losses from "a single prime brokerage client."
Morgan Stanley was one of six banks who had exposure to Archegos Capital Management, a family office fund that defaulted on margin calls late last month and triggered a firesale of stocks across Wall Street.
The second-largest US bank by assets unlocked $2.7 billion from its reserves and unveiled a $25 billion stock repurchase plan, betting on a swift economic recovery driven by rapid vaccinations.
Consumer banking revenue at the bank, however, fell 12% to $8.1 billion in the quarter ended March. Net interest income, a key measure of how much the bank can make from lending, fell 16% to $10.2 billion in the quarter.
The company said it would sell up to 3.5 million shares and use the proceeds to speed up the shift in its business model to e-commerce in an overhaul being led by top shareholder and board member Ryan Cohen.
GameStop's stock has gained more than 900% so far this year, giving the company a valuation of as much as $34 billion at one point as retail traders bet against Wall Street hedge funds that had shorted its shares.