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Morgan Stanley has reported a drop in third-quarter income and slower progress at its juggernaut wealth administration enterprise, placing the financial institution’s shares on observe for his or her largest fall in additional than three years.
The US financial institution on Wednesday reported web revenue of $2.4bn for the quarter, down 9 per cent from a 12 months earlier and barely forward of analysts’ estimates for $2.3bn, in response to information compiled by Bloomberg.
Morgan Stanley’s earnings had been hit by funding banking revenues falling virtually 30 per cent from a 12 months earlier. Extra troubling for traders was its wealth administration unit, which has been a giant progress driver for Morgan Stanley lately.
Revenues in wealth administration got here in beneath analysts’ estimates at $6.4bn. This was up 5 per cent from the identical quarter final 12 months however marked a slowdown from latest quarters.
The division introduced in about $36bn in web new property, a metric carefully adopted by traders, throughout the quarter, down from $65bn within the earlier quarter.
“That’s clearly beneath latest quarters,” chief government James Gorman mentioned on a name with analysts. “It’s in line with what I’ve been saying for a very long time, these numbers will bounce round.”
Morgan Stanley shares had been down greater than 7 per cent in early New York buying and selling, falling to the bottom value up to now 12 months and placing the inventory on observe for its worst day since June 2020.
Gorman, 65, is nearing the tip of his tenure as chief government after almost 14 years. He has promised to step down by Might 2024 and the financial institution’s board of administrators, which Gorman chairs, is selecting his successor from a trio of inside candidates who every lead one in every of Morgan Stanley’s three divisions: funding banking and buying and selling boss Ted Decide, wealth administration head Andy Saperstein and Dan Simkowitz, who runs funding administration.
Gorman mentioned he “would depart on the earliest attainable second that the board feels snug making that call, and I’ve made that very clear to them”.
Funding banking revenues, which have fallen over the previous 18 months amid an industry-wide slowdown in exercise, had been significantly sluggish for Morgan Stanley, falling 27 per cent 12 months on 12 months to $938mn.
This bucked a broader pattern at rivals corresponding to Goldman Sachs and JPMorgan Chase, which both reported slight will increase or solely modest declines.
“While you take a look at the [investment banking] offers of this specific quarter, that’s based mostly on the finished transactions,” Morgan Stanley’s chief monetary officer Sharon Yeshaya informed the Monetary Occasions.
The financial institution nonetheless had been hiring funding bankers in anticipation of a rebound, she mentioned.
“We’ve been trying ahead. So over the past 18 to 24 months we’ve been hiring new expertise in funding banking,” she mentioned.
Mounted revenue buying and selling revenues fell 11 per cent to $1.9bn, beating expectations of $1.8bn. Revenues from fairness buying and selling totalled $2.5bn, up per cent and in addition forward of estimates for $2.4bn.
Funding administration, which is Morgan Stanley’s smallest division however expanded lately by means of the acquisition of Eaton Vance, reported an increase in revenues of 14 per cent within the third quarter, to $1.3bn.
Extra reporting by Harriet Clarfelt in New York
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