By Peter Rudegeair And Justin Baer 

Morgan Stanley joined many of its largest peers in posting higher first-quarter profits as the Wall Street firm benefited from busy markets and a flurry of corporate mergers.

The results beat analysts' estimates, lifting Morgan Stanley's shares by 1.3% to $37.21 in midday trading.

The New York-based bank posted a first-quarter profit of $2.39 billion, up 59% from $1.51 billion in the same period of 2014. On a per-share basis, Morgan Stanley's profit was $1.18, or 85 cents when stripping out accounting adjustments. Analysts polled by Thomson Reuters had expected earnings of 78 cents a share.

Morgan Stanley reported revenue of $9.91 billion, or $9.78 billion excluding accounting adjustments, its highest quarterly total in nearly eight years and its second-highest ever, according to the company. Analysts had projected $9.17 billion.

"This was our strongest quarter in many years with improved performance across most areas of the firm," Chief Executive James Gorman said in a news release.

Mr. Gorman has sought to reorient the bank away from unpredictable businesses such as bond trading to more consistent ones like wealth management. He appeared to achieve success in 2014, though it was offset somewhat by a $2.6 billion settlement announced in February that resolved a U.S. Department of Justice investigation into mortgage bonds it sold in the run-up to the financial crisis.

The bank is also in discussions with New York's attorney general over a potential $500 million settlement over similar mortgage-related issues, The Wall Street Journal reported Sunday.

Trading revenue was $4.08 billion in the quarter, up 26% from $3.24 billion in the same period a year ago. At rival Goldman Sachs Group Inc., first-quarter trading revenue rose 23%.

Within trading, revenue from bonds, foreign-exchange and commodities climbed 16% to $2 billion, and revenue from equities increased 31% to $2.29 billion.

Ruth Porat, the firm's finance chief, told The Journal that Morgan Stanley had better results trading commodities and currencies, as well as government bonds and other securities used to bet on the direction of interest rates. Equities, the division where stocks and derivatives based on them trade, was "strong across all products and strategies," she added. The firm saw investor interest in Europe and Asia climb during the period, said Ms. Porat, who is leaving the firm in coming weeks to become the chief financial officer at Google Inc.

Ms. Porat, who at one point considered joining the Obama administration's Treasury Department in a senior role, also said that after "fundamental regulatory change" at banks in the last five years, it could be time for a "time out" to "pause, digest and assess" what's working.

She added that Morgan Stanley has welcomed many of the new regulations, in contrast to other banks' "kicking and screaming."

Morgan Stanley's investment banking division, where Ms. Porat once helped advise clients including the U.S. Treasury during the financial crisis, saw revenue during the first quarter rise 3.3% to $1.17 billion. Fees from advising on deals rose 40% to $471 million, while fees from underwriting debt fell 19% to $395 million.

Revenue in Morgan Stanley's wealth-management arm rose to a record $3.83 billion from $3.61 billion last year. Investment-management revenue fell 11% to $669 million. The wealth unit, which has grown in importance at the firm since the financial crisis, also hit records for pretax profit, which rose to $855 million, and profit margin, which hit 22%.

Morgan Stanley's firmwide expenses rose to $7.05 billion from $6.62 billion in the first quarter last year. Compensation and benefits expense were $4.52 billion, up 5.1% from $4.31 billion a year ago.

Return on equity, a commonly used measure of bank profitability, rose to 13.5% from 8.5% in the first quarter a year ago, excluding an accounting adjustment. Morgan Stanley executives have pledged to lift return on equity above 10%. Excluding a tax benefit during the quarter, Morgan Stanley's return on equity from continuing operations stood at 10.1%.

It marked the first time the firm's ROE exceeded 10% since the first quarter of 2010--Mr. Gorman's first as CEO.

Shares of Morgan Stanley have fallen 5.3% through Friday's close since the start of 2015 compared with a 2.1% fall in the KBW index of bank stocks over the same period.

Some one-time items helped the firm's results this quarter. Morgan Stanley enjoyed an earnings benefit of $564 million because the taxes it paid on the repatriation of foreign earnings ended up being lower than expected. The bank said its effective tax rate in the quarter was 13.6%, down from 46.2% in the fourth quarter and 33.1% a year ago. Ms. Porat said Morgan Stanley's tax rate would be around 30% going forward.

Write to Peter Rudegeair at peter.rudegeair@wsj.com

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