James Gorman, chairman and chief executive officer of Morgan Stanley, speaks during a Bloomberg Television interview in Beijing, China, on Thursday, May 30, 2019.
Giulia Marchi | Bloomberg | Getty Images
Morgan Stanley posted results on Thursday below analysts’ expectations for second quarter profit and revenue on weaker-than-expected investment banking revenue.
Here are the numbers:
- Earnings of $1.39 per share vs $1.53 of estimate of analysts surveyed by Refinitiv
- Revenue of $13.13 billion vs $13.48 billion estimate
Profit dropped 29% from a year earlier to $2.5 billion, or $1.39 per share, the New York-based bank said in a release. Revenue dipped 11% to $13.13 billion, driven by the steep 55% decline in investment banking revenue.
The results confirm what some analysts had feared for Morgan Stanley, which runs one of the larger equity capital markets operations on Wall Street. The firm’s investment banking division produced $1.07 billion in second-quarter revenue, $400 million below analysts’ $1.47 billion estimate that itself had been ratcheted down in recent weeks.
Shares of the bank dipped less than 1% in premarket trading.
Wall Street banks are grappling with the collapse in IPOs and debt and equity issuance this year, a sharp reversal from the deals boom that drove results last year. The change was triggered by broad declines in financial assets, pessimism over the possibility of a recession and the Russian invasion of Ukraine.
“Overall, the firm delivered a solid quarter in what was a more volatile market environment than we have seen for some time,” CEO James Gorman said in the release. He added that good trading results “helped partially counter weaker investment banking activity.”
Equities trading produced $2.96 billion in revenue in the quarter, above the $2.77 billion estimate, while fixed-income trading revenue of $2.5 billion handily exceeded the $1.98 billion estimate.
Morgan Stanley co-President Ted Pick said last month that markets would be dominated by concern over inflation and recession in a period of transition after nearly 15 years of easy-money policies by central banks came to an end.
“The banking calendar has quieted down a bit because people are trying to figure out whether we’re going to have this paradigm shift clarified sooner or later,” Pick said.
Still, parts of Morgan Stanley’s operations benefited. Bond traders are expected to post strong results, thanks to volatility in commodities and interest rates.
While analysts expect that the bank’s giant wealth management and investment management divisions – responsible for half of the firm’s revenue – will hold up better than investment banking, lower asset values will reduce revenue there as well.
Shares of the bank have dropped 24% this year through Wednesday, worse than the 19% decline of the KBW Bank Index.
Wells Fargo and Citigroup are scheduled to report results on Friday, while Bank of America and Goldman Sachs post on Monday.
This story is developing. Please check back for updates.
