Morgan Stanley’s earnings were hurt by the downturn in investment banking

Morgan Stanley reported a 30 percent year-over-year decline in net income in the third quarter, marking the longest streak of declines since 2019 as the company continues to suffer from a decline in investment banking fees.

The Wall Street Bank announced Friday that its third-quarter net income was $2.6 billion, or $1.47 per share, compared with $3.7 billion, or $1.98 per share share in the same period last year. Analysts had forecast quarterly net income of $2.7 billion, or $1.52 per share, according to data compiled by Bloomberg.

The bank’s net income for the quarter was $13 billion, down 12 percent from $14.8 billion a year earlier and slightly below analysts’ expectations of $13.2 billion.

“While investment banking and investment management have been adversely affected by the market environment, fixed income and equities have weathered the difficult markets well,” Morgan Stanley chief executive James Gorman said in a statement.

The declines partly reflect stellar numbers released in 2021, when banks like Morgan Stanley benefited from record deals. However, mergers and acquisitions and new listings have slowed more than bank executives expected earlier in the year.

Investment banking revenue fell 55 percent to $1.3 billion, slightly above analysts’ estimate of $1.2 billion. Trading revenue, which benefited from recent market volatility, fell 3 percent to $4.5 billion, below analyst estimates of $4.8 billion.

The bank also took $35 million in loan loss provisions, including haircuts on loans held for sale to fund bridge financing for transactions such as leveraged buyouts. Morgan Stanley is the lead bank helping to fund Elon Musk’s $44 billion acquisition of Twitter, a deal that could cost lenders hundreds of millions of dollars or more in losses.

Revenue in wealth management, which includes online trading platform ETrade, rose 3 percent to $6.1 billion, in line with estimates of $6.1 billion. In wealth management, which houses Eaton Vance after Morgan Stanley acquired the wealth manager last year, revenue shrank 20 percent to $1.2 billion, below estimates of $1.4 billion .

Morgan Stanley stock fell 2.8 percent in early trading after Wall Street’s opening bell on Friday. Morgan Stanley’s earnings were hurt by the downturn in investment banking

Adam Bradshaw

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