Morgan Stanley posted a 150% increase in first-quarter earnings on Friday, beating Wall Street's forecasts but also reporting a nearly $1 billion loss due to the fall of private equity firm Archegos.

The Wall Street giant said in a statement that the one-time losses were caused by a credit occurrence and ongoing losses from "a single prime brokerage customer," named Archegos during a conference call with analysts. Morgan Stanley was one of six banks with exposure to Archegos Capital Management, a family office fund that defaulted on margin calls late last month, causing a stock market panic.

In a note to clients, Oppenheimer analyst Chris Kotowski wrote, "It's not a financial occurrence in the great scale of things, but it will certainly raise questions." In premarket trading, Morgan Stanley's stock was falling more than 1%. Amid the one-time loss, overall earnings easily exceeded forecasts, capping off a strong quarter for Wall Street's biggest banks, which was aided by reserve sales, record capital markets activity, and an increase in trading volumes in the first quarter of 2021.

Investment banking profits were driven by a surge in global deal-making. Morgan Stanley's institutional securities company saw a 66 % increase in sales fuelled in part by a Reddit-fueled trading spree in "meme" shares like GameStop Corp.

Morgan Stanley and Goldman Sachs Group Inc. including rivals such as JPMorgan Chase & Co and Bank of America don't even have large consumer lending units, which has reduced their access to loan defaults during the pandemic and allowed them to reflect on their key aspects in investment banking and trading. Morgan Stanley reported that net income available to shareholders increased to $3.98 billion, or $2.19 per share, in the quarter ended March 31, compared to $1.59 billion, or $1.01 per share, a year earlier.

According to Refinitiv's IBES numbers, analysts expected a profit of $1.70 per share. The company's net sales increased by 61% to $15.72 billion. Morgan Stanley, like its major competitor Goldman Sachs, gained from an unparalleled surge in dealmaking through specially modified acquisition companies (SPACs). According to Refinitiv reports, global investment banking fees reached an overall high of $39.4 billion in the March quarter.

According to Refinitiv, Morgan Stanley lost second place in the league tables to JPMorgan Chase mostly during the quarter, but still hauled in significant investment banking fees. The league tables rank financial services firms based on the amount of M&A fees they generate. Morgan Stanley's investment banking profit more than doubled to $2.6 billion, thanks to a surge in SPAC transactions.

Morgan Stanley has made a record amount of money underwriting several high-profile IPOs, including Affirm Holdings and AppLovin Corp. Improved findings in inflation and jobs data, and signs of improvement in the US economy, pointed to better prospects for capital markets this year. Optimism has grown as a result of an ongoing vaccine schedule.