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July 15, 2022

Morgan Stanley Q2 performance slips on weak investment banking

Morgan Stanley has reported net revenues of $13.1bn for the second quarter of 2022, a 11% fall from $14.8bn in the same period a year earlier.

These results come after a pause of the deals booms amid heightened fears of a recession, rising inflation, and a volatile market caused by the ongoing Ukraine conflict.

The bank’s net income totalled $2.5bn or $1.39 per diluted share in the three-month-period ending 30 June 2022, compared with $3.5bn or $1.85 per diluted share in the year-ago quarter.

Net revenues at Morgan Stanley Wealth Management’s unit plummeted to $5.7bn from $6.1bn during this period. The unit’s pre-tax income was $1.5bn as against $1.6bn a year ago.

The unit’s asset management revenues rose 2%, benefiting from increased asset levels due to positive fee-based flows. This was partly offset by lower market levels.

Net revenues at the investment management division decreased 17% to $1.4bn from $1.7bn, while pre-tax income fell to $249m from $430m.

A slump in equity markets led to a drop in asset management and related fees.

In the Institutional Securities arm, pre-tax income dropped to $1.6bn from $2.5bn, while net revenues slipped 14% year-on-year to $6.1bn.

Investment banking revenues were $1.07bn, down 55% from the prior year. However, the volatility benefitted trading revenue, with fixed income revenues soaring 49% and equity revenues rising 5%.

The bank’s Standardised Common Equity Tier 1 (CET1) capital ratio stood at 15.2% at the end of June 2022, 190 basis points above the new aggregate standardised approach CET1 requirement starting 1 October 2022.

Morgan Stanley Chairman and CEO James Gorman said: “Overall the firm delivered a solid quarter in what was a more volatile market environment than we have seen for some time. Strong results in Equity and Fixed Income helped partially counter weaker investment banking activity.

“We continue to attract positive flows across our Wealth Management business, and Investment Management continues to benefit from its diversification. Finally, we finished the quarter in a strong capital position to ensure we move forward with confidence.”

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