Third-quarter profits at Morgan Stanley (MS) dropped 9% from a year ago as revenue from investment banking and trading fell, another sign that Wall Street is still struggling to recover from a prolonged slump.
Investors signaled their disappointment, sending the firm’s stock down roughly 7% Wednesday morning. That puts the stock on pace for its largest single-day drop in more than three years.
Morgan Stanley’s performance placed it near the bottom of the big banks. Its drop in profit was smaller than the 33% decline at rival Goldman Sachs (GS) but it trailed profit jumps reported by JPMorgan (JPM), Bank of America (BAC), Wells Fargo (WFC) and Citigroup (C).
Its investment banking revenues fell 27% from a year ago, placing it last among the big banks with sizable Wall Street operations.
Investment banking fees at Goldman Sachs, Bank of America and Citigroup all rose from a year ago. At JPMorgan, these fees fell by a much lesser degree — 2.6% — for the same period.
Morgan Stanley’s revenue from trading stocks and bonds was also down, by 4%. Its wealth and investment management units both posted higher year-over-year profits but fell short of analyst expectations.
“While the market environment remained mixed this quarter, the firm delivered solid results,” said CEO James Gorman, who in May announced plans to step down as leader “at some point in the next 12 months.”
Before Wednesday’s results its stock had dropped by 5.5% year to date, outperforming all its peers except JPMorgan Chase and Wells Fargo.
In the last three months, however, it has fallen 7%, a steeper decline than all its big-bank peers except for Citigroup.
Gorman told analysts that the firm is “seeing increasing evidence of M&A and underwriting calendars that are building.” While he expects “momentum to continue this year,” Morgan Stanley expects most of the activity to materialize in 2024.”
The firm’s CFO Sharon Yeshaya added in a call with analysts that “despite the weaker quarterly results, we continue to see broad sector diversification of our completed deals, and the backlog reflects a similar pattern.”
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