Morgan Stanley’s Q3 Profits Decline Amid Wall Street Slowdowns

A Slump in Investment Banking and Trading Revenues

Morgan Stanley (MS) witnessed a 9% drop in third-quarter profits compared to a year ago, signaling ongoing challenges on Wall Street in the wake of a prolonged slump.

Lagging Behind Peers

While the decline in profits was milder than the 33% dip at rival Goldman Sachs (GS), Morgan Stanley’s performance placed it near the bottom among major banks. Notably, JPMorgan (JPM), Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C) reported profit increases. Morgan Stanley’s investment banking revenues plummeted by 27% year-over-year, marking it as the weakest performer among large Wall Street-focused banks.

Mixed Results in Investment Banking

In contrast, Goldman Sachs, Bank of America, and Citigroup all saw increases in investment banking fees from the previous year. JPMorgan reported a modest decrease of 2.6% during the same period.

Challenges in Trading Revenues

Morgan Stanley also faced a 4% decline in revenue from trading stocks and bonds. However, there were brighter spots in its wealth and investment management units, both of which posted higher year-over-year profits.

CEO’s Outlook

Morgan Stanley’s CEO, James Gorman, remarked, “While the market environment remained mixed this quarter, the firm delivered solid results.” Gorman, who announced his intention to step down as leader within the next 12 months, provided insight into the challenging market conditions.

Stock Performance

Morgan Stanley’s stock witnessed a 3.5% decline in early trading before the market opened on Wednesday. Year to date, its stock has declined by 5.5%, performing better than its peers except JPMorgan Chase and Wells Fargo. However, over the last three months, it experienced a steeper 7% drop, surpassing all big-bank peers except Citigroup.

Future Prospects

Gorman expressed optimism, noting that the firm is “seeing increasing evidence of M&A and underwriting calendars that are building.” While the momentum is expected to continue through the year, most of the activity is anticipated to materialize in 2024, according to Morgan Stanley’s outlook. The firm’s CFO, Sharon Yeshaya, highlighted sector diversification in completed deals and a backlog reflecting a similar pattern despite weaker quarterly results.


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