Morgan Stanley Profit Falls 29%


Morgan Stanley

MS -1.26%

said Thursday its second-quarter profit fell 29% from a year ago, reflecting a drop in corporate deal making.

The New York bank posted a profit of $2.5 billion, or $1.39 a share. Analysts polled by FactSet had expected $1.56 a share. Revenue fell 11% to $13.1 billion in the quarter, which also missed expectations of $13.39 billion.

Investment banking revenue, including fees from mergers and acquisitions, dropped 55%. Weak bond and stock markets, coupled with high inflation, led corporate executives to pause plans to make deals or take their companies public.

However, wild market swings during the quarter were good for Morgan Stanley’s traders, whose revenue rose 21% from a year ago.

The firm’s return on tangible equity, a measure of how efficiently it uses shareholder money, weighed in at 13.8% in the quarter.

Morgan Stanley shares fell slightly in premarket trading Thursday. The bank’s shares were down 24% this year through Wednesday.

Though Morgan Stanley is a big player in the Wall Street businesses of trading and deal making, it is usually protected in volatile spells by its giant money-management arm.

Chief Executive

James Gorman

has grown those businesses, which he calls a “ballast” that evens out the firm’s earnings, over the past two years with the acquisitions of E*Trade and asset manager Eaton Vance.

Wealth management revenue was $5.7 billion in the quarter, down 6% from a year earlier. That unit accounted for 44% of total company revenue.

The number of retail-trading clients at Morgan Stanley was 7.8 million at the end of June, up from 7.6 million in the first quarter. The average daily number of retail trades the company handled was 880,000, down 13% from the first quarter.

Investment management revenue fell 17% from a year earlier.

Write to Charley Grant at [email protected]

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