Morgan Stanley reported better-than-expected first-quarter earnings today, at least temporarily easing investor nerves. Still, overall revenues and earnings were well below last year’s levels: Net revenue was $8.3 billion for the quarter, a 17-percent decline from last year’s first quarter. Earnings were $1.5 billion, down 42 percent from $2.3 billion in the first quarter of last year. But the wealth-management unit was again a bright spot, reporting increases in both revenues and earnings.

Net revenue in the global wealth-management unit was $1.6 billion, up 6 percent from the first quarter of last year, “reflecting higher net interest revenue from growth in the bank deposit sweep program and stronger transactional revenue,” according to the press release. Pre-tax income in the global wealth-management group was $254 million, up 12 percent from $226 million in the first quarter of last year. The unit’s pre-tax profit margin was 16 percent in the quarter, up one point from the same time last year.

Even with the market turbulence, the wealth-management unit attracted assets from clients: The first quarter saw $11.4 billion in net new client assets, a 70-percent increase from the first quarter of 2007. Still, while total client assets are now $722 billion, a 5-percent increase from the year-ago quarter, that is $36 million (or 5 percent) less than the fourth quarter of 2007. Additionally, fee-based client assets dropped to $185 billion from the first quarter of last year.

CEO John Mack says that trouble in the capital markets is far from over, but that his firm is on solid ground: “We achieved strong results across our equities and fixed income sales and trading business this quarter, as we effectively capitalized on market opportunities and aggressively managed our positions,” said Mack in the earnings release. He praised the investment bank and the wealth-management unit as well.

Mack has been under fire from an activist investor group, CtW, for the lack of risk management that has led to the firm’s $11 billion in write-downs thus far. They’d like to see Mack step down, an event at least one analyst says would be a big mistake. Punk Ziegel analyst Dick Bove, who also defended former Merrill Lynch CEO Stanley O’Neal before he was let go last year, says in a March 12 research note on the Thomson Financial website, “The record is not impressive. Yet despite the record, it would be a major error to relieve Mr. Mack of his position.” He continues: “To build a long term view and then execute the strategy requires a stable management team. Mr. Mack may be a gunslinger of the old variety, but he is a very smart gunslinger, and is likely to have learned from his mistakes.” The release also announces the hire of Ken deRegt as the firm’s new chief risk officer.