Morgan Stanley profits affected by slowdown in investment banking

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Morgan Stanley reported a 30% year-on-year drop in its second quarter net income due to a plunge in investment banking fees and a sharp slowdown in stock exchange listings.

On Thursday, the bank indicated that it would pay a $200mn penalty in connection to a broad federal investigation into Wall Street’s use of unapproved communication channels.

Morgan Stanley’s net income applicable for shareholders was $2.4bn (or $1.39 per shared), down from $3.4bn (or $1.85 per share) during the same period last fiscal year. Bloomberg data shows that analysts expected quarterly net income to be $2.75 billion or $1.58 each share.

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.

Incomes from wealth management, which includes ETrade online trading platformThey were at $5.7bn down 6 percent, with $6bn estimates missing.

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.

Morgan Stanley, in its discussion of expenses signaled that it was closing in on a settlement.

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 ChaseLast year, the US regulators paid a record $200mn to settle charges of failing to maintain records of communications between staff and personal devices.

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

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