Morgan Stanley sees Q3 profit slide on investment bank slowdown
Morgan Stanley’s third-quarter earnings slid amid sluggish results from the firm’s investment bank and a miss in wealth management.
Revenue from the fixed-income trading business slumped 11% and, along with muted fees from dealmaking, caused a drop in net income. Revenue of $6.4 billion from the firm’s wealth management business missed analysts’ estimates, and net new assets slumped to $35.7 billion from $89.5 billion the prior quarter.
“This is solid performance in a mixed environment,” Morgan Stanley chief financial officer Sharon Yeshaya said in an interview. “Our announcements in terms of M&A this quarter were up 50% on a year-over-year basis. We see the backlog continuing to grow,” with everything pointing to a rebound.
Even with the declines, Morgan Stanley joined the biggest U.S. banks in surpassing trading expectations. Chief Executive James Gorman has been expressing hope for a rebound in deals and capital raising, saying last quarter that slumping investment-banking fees had bottomed and will rebound in the months ahead, with a return to normalcy likely next year.
Gorman, who has been running the bank since 2010, is nearing the end of his tenure. He has vowed to have a successor named before May, though a decision could come months ahead of that deadline. The three candidates in the running to replace him are Ted Pick and Andy Saperstein, the firm’s co-presidents, and investment management chief Dan Simkowitz.
Morgan Stanley shares dropped 3% to $77.95 at 8:01 a.m. in early New York trading. The stock was already down 5.5% this year through Tuesday.
Net income for the quarter totaled $2.44 billion, or $1.38 a share. That came in higher than the $1.30 average estimate of analysts in a Bloomberg survey.
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