Morgan Stanley (NYSE: MS) on Thursday reported a worse-than-expected second-quarter profit, falling short of analysts’ estimates for the first time in nine quarters, as its investment banking business suffered from a downturn in global dealmaking
• Results were hurt by steep 55% slump in investment banking revenue
• CEO Gorman warned US might head into recession, but unlikely to be like 2008 financial crisis
Morgan Stanley (NYSE: MS) on Thursday reported a worse-than-expected second-quarter profit, falling short of analysts’ estimates for the first time in nine quarters, as its investment banking business suffered from a downturn in global dealmaking.
The banking sector is hit hard by Russia’s invasion of Ukraine, a surge in oil price above $100 a barrel, Federal Reserve rate hikes, and fears of a recession.
However, in a call with analysts, Morgan Stanley CEO James Gorman said the current environment is not as bad as the 2008 financial crisis and stressed his bank was in good shape.
“I think it’s important to say, though, it is not 2008 ... This is a different type of financial stress in the system, and frankly, the banking sector is much stronger,” he said.
Although Gorman warned the US might head into some form of recession, he also mentioned that it is unlikely to be “deep and dramatic.”
Shares of the bank slumped almost 4% in the morning but recovered some losses afterwards.
Wall Street analysts had expected a profit of $1.53 per share.
Morgan Stanley provisioned $101 million for credit losses this quarter from $73 million a year ago.
It also recorded a $200 million expense related to a regulatory matter tied to the use of unapproved personal devices and record-keeping requirements.
Revenue from the wealth management business dipped 6% and contributed to an 11% slide in Morgan Stanley’s net income.
Morgan Stanley’s equity and fixed income underwriting revenue also plunged 86% and 49%, respectively.