Morgan Stanley reports fall in quarterly profit

Wall Street investment bank Morgan Stanley reported a lower, but better-than-expected, adjusted second-quarter profit on Wednesday, helped by a decline in expenses.

The bank said its net income attributable to common shareholders was $1.43 billion, or 75 cents per share, in the quarter ended June 30. Analysts on average had expected earnings of 59 cents per share in the latest quarter.

Morgan Stanley reported an adjusted profit of $1.69 billion, or 79 cents per share, a year earlier.

The earnings for the latest quarter take into account a rule change that no longer requires Morgan Stanley to reflect changes in the value of its own debt in its earnings.

Morgan Stanley, which is in the midst of a $1 billion cost cutting programme, said total non-interest expenses fell 8.4 per cent to $6.43 billion in the quarter. Compensation costs fell 8.9 per cent to $4.02 billion.

The bank, which has struggled to boost shareholder returns over the last several quarters, reported a return on equity of 8.3 per cent, well short of chief executive James Gorman’s target of 9 to 11 per cent by the end of next year.

Morgan Stanley’s shares were up 3.5 per cent at $29.18 in premarket trading. Like its rivals, the bank has had to focus on cutting costs as investors and companies have steered clear of dealmaking, listing stocks and issuing debt.

Mr Gorman has been shifting Morgan Stanley’s focus away from more volatile areas such as bond trading and towards more stable businesses such as wealth management.

The bank has reorganized its fixed income unit since the beginning of the year, including exiting the physical oil business and shedding headcount by about 25 percent.

Adjusted sales and trading revenue fell about 2 per cent to 3.26 billion.

Revenue from fixed income and commodities trading rose 2.4 per cent to $1.30 billion, while equities trading revenue fell 5.5 per cent to $2.15 billion.

“Our results this quarter reflect solid performance in an improved but still fragile environment,” Mr Gorman said in a statement.

Reuters