Morgan Stanley’s third-quarter earnings fell 9% from a year ago as investment banking and trading revenue declined, another sign that Wall Street is still struggling to recover from the long recession.
Its performance has placed it near the bottom of the major banks. Its earnings decline was less than the 33% decline at rival Goldman Sachs (GS), but lagged behind increases at JPMorgan (JPM), Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C).
Its investment banking revenues fell 27% from a year ago, putting it last among major banks with large Wall Street operations.
Investment banking fees at Goldman Sachs, Bank of America and Citigroup rose from last year. At JPMorgan, these fees fell much less — 2.6% — over the same period.
Morgan Stanley’s revenues from stock and bond trading also decreased by 4%. One bright spot was that the wealth and investment management units achieved higher profits year-on-year.
“While the market environment remained mixed this quarter, the company delivered strong results,” said CEO James Gorman, who announced in May his plans to step down as leader “sometime in the next 12 months.”
Morgan Stanley shares fell 3.5% in early trading before the market opened on Wednesday.
Year-to-date, its stock is down 5.5%, outperforming all of its peers except JPMorgan Chase and Wells Fargo.
But in the past three months, it has fallen 7%, a steeper decline than all of its big-bank peers except Citigroup.
Gorman told analysts that the company is “seeing increasing evidence of mergers and acquisitions and underwriting calendars being built.” While the momentum is expected to “continue this year,” Morgan Stanley expects most of the activity to occur in 2024.
“Despite the weaker quarterly results, we continue to see broad sector diversification of our completed deals, and the backlog reflects a similar pattern,” the company’s CFO Sharon Yeshaya added on a call with analysts.
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