Morgan Stanley’s revenue from investment banking plummeted as capital markets seized up, underlining a slow quarter for Wall Street as a dour outlook for the economy muddles the path forward.
Surging inflation and Federal Reserve efforts to help combat it have put investors on watch for a recession and the spillover effect an economic contraction can have for financial firms. Banks’ capital markets units, which have lifted fortunes across the industry over the past two years, were hurt by a sharp slowdown in the second quarter.“It was a very solid quarter in the face of market volatility,” CFO Sharon Yeshaya said in an interview.
Trading revenue of $5.46bn surpassed the $5.1bn average estimate, and was up from $4.51bn a year ago. That was mostly led by a 49% jump in fixed-income revenue, which climbed to $2.5bn. Last week, Morgan Stanley picked two veteran dealmakers as the new heads of its investment-banking group. Eli Gross, who led the transportation and infrastructure banking practice, and Simon Smith, who helmed the European banking franchise, have both been at the bank since 1998. They take over from Susie Huang and Mark Eichorn, who were named executive chairs.
Wealth management, where Morgan Stanley is anticipating higher net interest income this year as a result of rising rates, reported revenue of $5.74bn in the second quarter, down 5.9% from a year earlier. Net new assets fell 26% to $52.9bn.
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