World Economy

Morgan Stanley Profits Slump

Morgan Stanley Profits Slump Morgan Stanley Profits Slump

Morgan Stanley said its profit fell 53% in the first quarter after concerns about the economy sent shivers through the capital markets, limiting Wall Street clients’ appetite to trade or make deals.

Earnings beat estimates, however, sending shares up about 3% in premarket trading. Net income dropped to $1.13 billion, or 55 cents a share, from $2.39 billion a year earlier. Analysts polled by Thomson Reuters had expected a per-share profit of 46 cents, MarketWatch reported.

Revenue tumbled to $7.79 billion, shy of the $7.87 billion forecast by analysts.

Morgan Stanley and other big banks are muddling through a steep slump in their debt-trading business. The downturn prompted the firm to cut jobs from the unit, which has weighed down Morgan Stanley’s return on equity, a key measure of banks’ profitability.

Return on equity fell to 6.2% from 13.5% in the first quarter a year earlier, excluding an accounting adjustment. Morgan Stanley executives have pledged to lift returns to 9% to 11%.

The volatile markets also conspired to weaken investment-banking activity in the first quarter, hurting a division that had been a bright spot last year.

Trading revenue fell 34% to $2.69 billion from $4.08 billion in the first quarter of 2015, a sharper drop than some peers.

Debt, currencies and commodities trading revenue fell 56% to $873 million, while the revenue from equity trading dropped 10% to $2.06 billion.

The drop in trading revenue, especially at the firm’s fixed-income business, wasn’t as sharp as many analysts and investors had feared heading into April. Bank stocks have rallied in the past week in part on relief that the most dire predictions about the first quarter proved unfounded.

Investment-banking revenue fell 16% to $990 million from $1.17 billion in the first quarter a year ago. Fees from advising on mergers and other deals rose 25% to $591 million, while revenue on stock and bond underwriting slipped 43% to $399 million.

Revenue in Morgan Stanley’s wealth-management arm was $3.67 billion, compared with $3.83 billion a year ago. In Morgan Stanley’s investment-management division, revenue fell 29% to $477 million due to losses on its private-equity and real estate funds.

The bank is bearing the brunt of its cost-cutting efforts. The New York-based investment bank cut about 1,440 positions in the first quarter of 2016, the biggest reduction since the start of 2013, according to figures released Monday.