Morgan Stanley’s profits plummeted 13% as trading and deals dried up – but the banking giant’s boss believes post-pandemic sentiment has “bottomed out”.
The New York-based financial company led by CEO James Gorman reported a profit for the second quarter from $2.2 billion on Tuesday — down from the $2.5 billion reported in the same period a year ago.
While trading revenue fell 22% year over year, investment banking revenue, including fees from mergers and acquisitions, was flat year over year at about $1.08 billion, the report showed.
“I really think we’ve bottomed out,” Gorman told Bloomberg Television, citing the industry’s downturn in commercial and investment banking.
Morgan Stanley’s earnings of $1.24 per share came in above the $1.15 per share analysts were expecting.
Revenue also beat estimates, rising 2% to $13.5 billion.
Bank of America also reported better-than-expected earnings, pushing the Dow to a 52-week high.
Morgan Stanley’s share price rose nearly 6%.
“The company has delivered solid results in a challenging market environment,” Gorman — who took over the company in 2010 and will step down within a year — said in the earnings release, after the period began amid uncertainty surrounding the banking crisis, geopolitical tensions and other developments of US interest rates.
The wealth management unit’s net income rose 16% in the quarter to a record $6.7 billion, and it added nearly $90 billion in new assets.
Gorman attributed the earnings drop to $308 million in severance costs that the company paid to more than 3,000 employees who were issued pink slips during the quarter.
Morgan Stanley has reduced its headcount by 3.6% so far this year as the difficult economic environment has resulted in slower business execution.
All eyes are now on Goldman Sachs, which is due to report its second-quarter results on Wednesday morning.
Analysts expect the David Solomon-led investment bank to post an impressive 49% year-over-year decline in earnings per share to $3.94 per share.
The sharp decline follows Goldman executives actively downplayed Earnings results after a 25% fall in retail sales and a wave of layoffs that affected 250 employees at all levels, including 125 directors.
according to estimates Goldman Sachs’ net sales are also expected to fall by 11.8% to $10.5 billion from 2022, according to foreign exchange market Forex.
Meanwhile, BofA’s earnings rose 19% to $7.41 billion, or 88 cents a share, compared to $6.25 billion, or 73 cents a share, reported in the same period last year.
The bank’s revenue rose 11% in the second quarter to $25.33 billion.
Both earnings and revenue beat analyst estimates of 84 cents a share and $25.05 billion, respectively.
Tuesday’s rosy results followed excellent earnings published by JPMorgan last week.
America’s largest bank by total assets and market cap saw revenue soar 34% to $42.4 billion in the second quarter — well above the $38.96 billion expected by analysts.
Net income also posted a sharp increase, rising 67% to $14.5 billion, or $4.75 per share.
Morgan CEO Jamie Dimon used the earnings report as an opportunity to “welcome our new First Republic employees” after JPMorgan acquired the ill-fated bank in May.
Citigroup also on Friday achieved a better than expected profit and profitthough revenue fell 1% year over year to $19.44 billion.
Earnings fell 36% year over year to $2.9 billion, or $1.33 per share, from $4.5 billion.
Jane Fraser, Citi CEO, attributed the losses to “the long-awaited investment banking recovery that is yet to come, resulting in a disappointing quarter.”