Profits halve at Morgan Stanley as trading slumps

Wall Street bank’s trading and investment banking businesses take a hit from market volatility

Morgan Stanley’s quarterly profit more than halved as the Wall Street bank’s trading and investment banking businesses took a hit from market volatility early in the year. But the bank still handily beat market expectations, helping to push up its shares 2.8 per cent to $26.49 in light premarket trading on Monday.

Earnings applicable Morgan Stanley’s common shareholders fell 54.4 per cent to $1.06 billion, or 55 cents per share, in the quarter ended March 31, from $2.31 billion, or $1.18 per share, a year earlier. Excluding an accounting adjustment, the bank also earned 55 cents per share. Analysts on average had expected earnings of 46 cents per share, according to Thomson Reuters I/B/E/S. Sliding commodity and oil prices, worries about the Chinese economy and uncertainty about US interest rates made for wobbly markets in January and February, scaring off traders, investors and companies hoping to list on stock exchanges.

All of the big US banks that have released results for the first quarter have reported lower revenue from investment banking and trading. Goldman Sachs Group Inc, Morgan Stanley's traditional rival, will wrap up the earnings season for big US banks on Tuesday.

"The first quarter was characterised by challenging market conditions and muted client activity," chief executive James Gorman said in a statement. "While we see some signs of market recovery, global uncertainties continue to weigh on investor activity."


Morgan Stanley’s stock fell about 21 per cent in the quarter - the sharpest decline of any big US bank. Adjusted revenue from fixed income and commodities trading fell 54.1 per cent to $873 million in the quarter, while equities trading revenue declined 9.3 per cent to $2.06 billion.

Morgan Stanley has been shifting its focus away from more volatile areas such as bond trading and towards more stable businesses such as wealth management Revenue from wealth management fell 4.3 per cent to $3.67 billion during the quarter.