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 Morgan Stanley, the last of the big U.S. banks to release
third-quarter earnings, said on Monday its trading revenue fell 17.2
percent to $2.03 billion in the period, contributing to a 42.4
percent drop in profit attributable to shareholders.
The bank's shares were down 5.8 percent in premarket trade.
Morgan Stanley joins arch rival Goldman Sachs Group Inc as well as
Citigroup Inc, Bank of America Corp and JPMorgan Chase & Co <JPM.N>
in reporting grim results from trading, a business many of them are
trying to back away from.
The results also capped a generally downbeat quarter for the six big
U.S. banks. Among them, only Wells Fargo & Co <WFC.N> managed an
increase in revenue, while Citi turned in the biggest rise in net
profit - 51 percent - largely due to cost cuts.
"The volatility in global markets in the third-quarter led to a
difficult environment, impacting in particular our fixed income
business and our Asia merchant banking business," Chief Executive
James Gorman said in a statement.
Earnings applicable to common shareholders fell to $939 million, or
48 cents per share, from $1.63 billion, or 83 cents per share, a
year earlier. Excluding items, the bank earned 34 cents a share.
Analysts on average had expected earnings of 62 cents per share,
according to Thomson Reuters I/B/E/S. It was not immediately clear
if the reported figures were comparable.
Consolidated net revenue fell 12.8 percent to $7.77 billion in the
three months ended Sept. 30. Excluding accounting adjustments, net
revenue was $7.33 billion, missing the average analyst estimate of
$8.54 billion.
WEALTH REVENUE SLIPS
Revenue in the bank's increasingly important wealth management
business fell 3.5 percent to $3.64 billion, but accounted for 46.9
percent of revenue, compared with 42.4 percent in the same quarter
last year.
The pre-tax margin in the wealth business also expanded to 23
percent from 22 percent, within Gorman's target of 22 to 25 percent
by the end of the year.
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Morgan Stanley has been focusing on wealth management since the
financial crisis as focuses less on volatile businesses such as bond
trading to free up capital.
Like other big banks, Morgan Stanley has also been trading less off
its own balance sheet to comply with stricter regulations designed
to protect the financial system.
Revenue from investment banking, a traditional strength for the
bank, fell 15.3 percent to $1.31 billion in a strong M&A market.
Morgan Stanley ranked second globally in mergers advisory volumes in
the first nine months of the year, after Goldman, according to
Thomson Reuters data.
Morgan Stanley said it had spent 18.4 percent less on employee
compensation in the quarter, the lowest since the second quarter of
2010.
Weak trading revenues are likely to mean Wall Street bankers and
traders will get smaller bonuses this year.
Up to Friday's of $33.95, Morgan Stanley's shares had fallen 12.5
percent this year, underperforming the KB banking index, which
dropped 4.4 percent.
(Reporting by Richa Naidu and Sudarshan Varadhan in Bengaluru;
Editing by Ted Kerr)
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