Wall Street Can’t Shake Off Investment-Banking Slump

livemint.com:

Morgan Stanley said Wall Street is having a tough time emerging from the doldrums. Morgan Stanley said Tuesday that second-quarter profit fell 13% from a year ago, driven by a 22% decline in trading revenue. Investment-banking fees were about flat after falling sharply in recent quarters.

JPMorgan Chase and Citigroup last week both reported drop-offs in trading and investment banking. At Goldman Sachs, a Wall Street standard-bearer, analysts expect profits to drop by more than half when the bank reports on Wednesday, according to FactSet. Still, the results so far have topped analyst expectations.

Investors sent shares of Morgan Stanley up 6%, with smaller gains for Citigroup and JPMorgan. Bank of America, which reported higher earnings Tuesday, rose 4%. Shares of Charles Schwab shot up 11%, even after it reported a big profit decline and continued deposit outflow.

JPMorgan and Wells Fargo both turned in blockbuster profit gains last week, helped by big consumer businesses that have been able to charge more on loans. JPMorgan’s purchase of the failed First Republic, with government help, also boosted its consumer and commercial businesses. The picture for Wall Street businesses is more complicated.

A resilient U.S. economy hasn’t done much to shake the uncertainty that has kept corporate executives from taking their companies public and pursuing deals. And calmer financial markets have reined in the trading boom that had been a bright spot for the industry.

Trading revenue posted big gains during the pandemic, when markets took a nosedive, and in its aftermath, when stocks came roaring back. Market volatility induced by sky-high inflation was also good for trading desks. Now, the banks are still making more in trading