Morgan Stanley profits hit by investment banking slowdown

Morgan Stanley has reported a 30 per cent year-on-year fall in second-quarter net income as investment banking fees plunged amid a dramatic slowdown in stock market listings.

The bank also signalled on Thursday that it expected to pay a $200mn penalty related to a wide-ranging federal investigation into the use of unapproved communication channels on Wall Street.

Morgan Stanley said net income applicable to shareholders was $2.4bn or $1.39 per share, down from $3.4bn or $1.85 per share in the same period last year. Analysts had forecast quarterly net income of $2.75bn or $1.58 per share, according to data compiled by Bloomberg.

The bank’s net revenues for the second quarter were $13.1bn, down 11 per cent from a year earlier, and slightly lower than analysts’ expectations of $13.2bn.

Investment banking revenue fell 55 per cent to $1.07bn, compared with analysts’ estimates of $1.3bn. Revenues from trading, which benefited from recent market volatility, were up 7 per cent at $5bn, in line with analysts’ estimates.

Revenues in wealth management, which includes online trading platform ETrade, were down 6 per cent at $5.7bn, missing estimates for $6bn.

In investment management, which houses Eaton Vance following Morgan Stanley’s acquisition of the money manager last year, revenue fell 17 per cent to $1.4bn, in line with analysts’ estimates.

In its discussion of expenses, Morgan Stanley signalled that it was nearing a settlement with regulators looking into the use of unapproved communications channels by Wall Street staff.

It said it would be “impacted by $200mn related to a specific regulatory matter concerning the use of unapproved personal devices and the firm’s record-keeping requirements”.

JPMorgan Chase last year agreed to pay US regulators a record $200mn for failing to keep records of staff communications on personal devices.

This piece was amended to reflect Morgan Stanley’s earnings per share in the second quarter of 2021