New York-based bank earnings dropped 19% to $2.98 billion, or $1.70 per share, due to falling investment banking and trading activities. Worldwide sales dropped by 2% to $14.52 billion for the company.
As CEO, James Gorman has overseen Morgan Stanley’s meteoric rise to the top of the wealth management industry through a series of acquisitions. Most of the bank’s income comes from wealth and investment management, more stable areas of business that assist to cushion the impact of more erratic trading and banking operations.
Gorman, in the results statement, said, “The investments we have made in our wealth management business continue to bear fruit as we added a robust $110 billion in net new assets this quarter.” Revenues from both equities and bonds were high, but investment banking activity remained low.
The $6.56 billion in revenue generated by the wealth management division is in line with the $6.56 billion forecast by StreetAccount. The gain was driven by a rebound in net interest income as higher rates and loan growth more than made up for lower earnings from asset management caused by falling markets.
First-quarter trading revenue was down from a year ago as Wall Street adjusts to a post-pandemic normal, but Morgan Stanley’s traders still managed to beat estimates by about $250 million.
The $2.58 billion in revenue generated by the bank’s fixed-income traders was above the $2.33 billion forecast by StreetAccount. A total of $2.73 billion was made through trading stocks, which is somewhat more than the $2.65 billion that was predicted.
Investment banking income fell 24% to $1.25 billion due to fewer merger and acquisition activities and weaker stock and debt issuance, just beating the $1.2 billion forecast.
Last but not least, investment management, the bank’s smallest sector, saw revenues decline 3% to $1.29 billion, well below the $1.34 billion expectation, as management fees decreased in light of deteriorating markets. The bank’s stock fell 3% in premarket trade, following a general market downturn.
Morgan Stanley Falls Because Its Net Interest Income Falls Short Of Predictions
Shares of Morgan Stanley (NYSE: MS) are down in pre-market trade on Wednesday after the firm announced lower-than-expected NII.
The bank reported quarterly earnings per share that were above expectations, and quarterly revenue that was $14.5 billion, rather than the predicted $14.03 billion. The acceleration in stock sales & trading and advising divisions was mitigated by the 11% growth in wealth management revenue.
The total amount of deposits was $347.52B, which is less than the $352.1B that was predicted. While the standardized CET1 ratio was in line at 15.1%, the return on equity was 12.4%, which was below the consensus of 12.7%.
James P. Gorman, the company’s chairman and chief executive officer, said, “We maintained our strong capital levels and remain well positioned to provide long-term value to our shareholders.”
In spite of the continued slowdown in investment banking activity, the company reported a net increase of $110B in assets for the quarter.