Morgan Stanley’s earnings rose sharply in the third quarter. The Wall Street investment bank, which reported its profits for the third three months of the year on Tuesday, also handily beat expectation, helped by a jump in trading revenue.

The Numbers: The bank’s net income was $1.5 billion, or 81 cents per share, in the quarter ended September 30. Analysts on average had expected earnings of 63 cents per share in the latest quarter. That was up 62% from the $939 million, or 48 cents per share, Morgan Stanley earned a year earlier. The main driver of the jump in profits was a jump in trading revenue. Overall, sales were up $1.1 billion in the quarter to $8.9 billion.

Morgan Stanley has been pursuing a $1 billion cost cutting program. Nonetheless, expenses in the quarter rose. The reason was higher pay. Morgan Stanley’s compensation expenses rose by $700 million to $4.1 billion in the quarter. Outside of pay, expenses dropped by $500 million drop in non-compensation expenses.

Shares of Morgan Stanley (MS) were up less than 1% to $32.60 in premarket trading.

What it Means: CEO James Gorman has been shifting Morgan Stanley‘s focus away from more volatile areas such as bond trading and towards more stable businesses such as wealth management. Nonetheless, third quarter earnings were driven by a jump in debt and commodity trading, which nearly tripled from a year ago to $1.5 billion. Revenue from its wealth management business was only up 6% in the quarter. Still, the bank emphasized that the profit margins in the later business was 23%, among the highest of its businesses.

“While the environment was more challenging for our equity underwriting and asset management businesses, our expense initiatives remain on track. Overall the results reflect steady progress against our long term strategic goals,” Gorman said in a statement.

What you May Have Missed: Despite the good results, the bank continued to struggle to boost profitability. It’s return on equity in the quarter was 8.7%, up slightly from 8.3% in the prior quarter, but still well short of Gorman’s target of 9%-to-11% by the end of next year. The bank’s closest rival Goldman Sachs (GS) had an ROE in the quarter of just over 11%.

Update: An earlier version of this story said that Morgan Stanley earned 83 cents per share, versus 49 cents a year ago. Those numbers were based on a count of “basic” shares. Based on fully diluted earnings, the more commonly used measure on Wall Street, Morgan Stanley earned 81 cents per share, versus 48 cents in the year ago quarter.