Lucas Jackson/Reuters
Morgan Stanley on Friday posted third-quarter earnings and revenue that fell short of expectations.
The Wall Street giant said an uncertain macroenvironment led to investment banking revenue tumbling by 55% to $1.27 billion.
Morgan Stanley shares have dropped in 2022 but by less than the broader S&P 500 Financial sector.
Morgan Stanley on Friday posted a drop in earnings and revenue for the third quarter that also missed forecasts, hurt by a slump in its investment banking business.
Here are the key numbers:
Quarterly revenue: $12.99 billion vs. $13.29 billion projected by analysts polled by FactSet Diluted earnings per share: $1.47 vs. $1.52 analyst consensus
The revenue and per-share earnings results represented year-over-year declines of 26% and 12%, respectively.
The firm’s net interest income rose by 49% to $2 billion from $1.35 billion a year earlier for the quarter that ended September 30. But investment banking revenue sank by 55%, dropping to $1.277 billion from $2.85 billion, with the company citing an uncertain macroeconomic environment as driving limited activity in that portion of its operations.
Stock in Morgan Stanley turned lower in pre-market trade following the financial results, losing 3.5%. The shares year-to-date have declined by 19%, slightly outperforming the 23% loss for the S&P 500’s Financial sector.
“Firm performance was resilient and balanced in an uncertain and difficult environment, delivering a 15% return on tangible common equity,” CEO James Gorman said in the company’s financial report. “While Investment Banking and Investment Management were impacted by the market environment, Fixed Income and Equity navigated challenging markets well.”
Equity trading revenue fell 14% to $2.46 billion, while fixed-income trading revenue jumped 33% to $2.18 billion amid market volatility.
Other Wall Street banks began to release third-quarter results on Friday. JPMorgan’s earnings and revenue beat expectations.
Net interest income at banks was generally expected to benefit from a rise in interest rates directed by the Federal Reserve’s battle against hot inflation. But weak stock prices this year suggest investors have been concerned that higher borrowing rates and a potential recession could crimp loan demand and investment banking activity.
FactSet last week said the S&P 500 Financials sector is expected to report the second-largest year-over-year earnings decline of the S&P 500’s 11 sectors, at 13.5%, with pressure in part on the consumer finance and capital markets industries.