Morgan Stanley’s profits drop as trading slowdown bites

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Morgan Stanley’s net profit fell 13 per cent during the second quarter, as chief executive James Gorman’s wealth management drive failed to offset declines in trading. 

For the second quarter, Morgan Stanley reported net income to shareholders of $2.2bn, down from $2.5bn a year earlier and in line with analysts’ estimates, according to data compiled by Bloomberg.

“The firm delivered solid results in a challenging market environment. The quarter started with macroeconomic uncertainties and subdued client activity, but ended with a more constructive tone,” Gorman said in a statement. 

Under Gorman, Morgan Stanley has grown considerably in more stable businesses such as wealth and asset management in an effort to make its earnings less volatile. But the Wall Street bank remains subject to market swings in trading and investment banking, which are suffering from an industry-wide slowdown and deals drought. 

Gorman is planning to step down as chief before the middle of next year and is expected to select his successor from a trio of internal candidates who each run one of Morgan Stanley’s three divisions: Ted Pick, Andy Saperstein and Dan Simkowitz. 

The bank’s wealth management unit, which is run by Saperstein and has been a significant growth driver for Morgan Stanley in recent years, reported revenues of $6.7bn, up 16 per cent year on year and ahead of estimates for $6.5bn. The business took in $89.5bn in net new assets, well ahead of analysts’ forecasts for $60.3bn. 

Morgan Stanley’s institutional securities division, run by Pick and which comprises investment banking and trading, reported $5.65bn in net revenues, down 8 per cent from a year ago and slightly exceeding analysts’ expectations for $5.5bn.

Investment management, headed by Simkowitz, is Morgan Stanley’s smallest division but expanded through the acquisition of Eaton Vance. Revenues in the second quarter fell 9 per cent to about $1.3bn, meeting market expectations.