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Morgan Stanley reported a 9 percent drop in third-quarter profit, as slowing growth in the Wall Street bank’s massive wealth management business was exacerbated by falling revenues in investment banking and trading.
The bank on Wednesday reported net income of $2.4 billion for the quarter, down from $2.6 billion a year earlier, and slightly ahead of analysts’ estimates of $2.3 billion, according to data compiled by Bloomberg.
Investment banking revenues, which have declined over the past 18 months amid an industry-wide slowdown in activity, were particularly sluggish for Morgan Stanley, falling nearly 30 percent year over year to $938 million. This bucked the broader trend at rivals such as Goldman Sachs and JPMorgan Chase, which either reported slight increases or only modest declines.
“While the market environment remained mixed this quarter, the company delivered strong results,” CEO James Gorman said in a statement.
Gorman is nearing the end of his term as president after nearly 14 years. He has promised to step down in May 2024, and the bank’s board, which Gorman chairs, is selecting his successor from three internal candidates who each run one of Morgan Stanley’s three divisions: Ted Beck, Andy Saperstein and Dan Simkowitz.
Morgan Stanley’s institutional securities division, which Beck runs and which includes investment banking and trading, posted better-than-expected net revenue of $5.7 billion.
That number is still down 3 percent year over year, as deals continue to dry up across Wall Street. Investment banking advisory revenue fell to $449 million from $693 million a year ago, as Morgan Stanley worked on fewer mergers and acquisitions that closed in the quarter.
“When you look at [investment banking] “This quarter’s deals in particular are based on completed transactions,” Sharon Yeshaya, Morgan Stanley’s chief financial officer, told the Financial Times.
She added that the bank is still hiring investment bankers in anticipation of the recovery.
“We’ve been looking. So, over the last 18 to 24 months we’ve been recruiting new talent in investment banking.
Meanwhile, the wealth management unit, which is run by Saperstein and has been a big driver of growth for Morgan Stanley in recent years, reported a rise in revenue to $6.4 billion, up 5 percent from the same quarter last year. However, this exceeded estimates of $6.6 billion and represents a slowdown in the pace of growth compared to recent quarters.
The company’s client asset volume fell by 2 percent on a quarterly basis to $4.798 trillion, lower than analysts’ expectations of $4.88 trillion.
Simkotis heads investment management, Morgan Stanley’s smallest division, although it expanded through the acquisition of Eaton Vance. Third-quarter revenue rose 14 percent to $1.3 billion. This matches market expectations of $1.3 billion.