Business Maverick: Morgan Stanley Hit by Banking Slump as Recession Fears Loom

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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.

The firm’s investment-banking group posted $1.07 billion in revenue, down 55% from a year earlier, a bigger decline than the 47% drop analysts had predicted. The bank also reported an additional $413 million hit driven by mark-to-market losses on corporate loans held for sale as credit spreads widened.

“It was a very solid quarter in the face of market volatility,” Chief Financial Officer Sharon Yeshaya said in an interview. “Market activity and client activity should help support the level in equities and fixed-income businesses. But the volatility delays some of the pipeline to convert on the investment-banking side, especially on the M&A side.”

Trading revenue of $5.46 billion surpassed the $5.1 billion average estimate, and was up from $4.51 billion a year ago. That was mostly led by a 49% jump in fixed-income revenue, which climbed to $2.5 billion. The New York-based firm was also first to lend credibility to Elon Musk’s attempt in April to buy Twitter Inc. by helping cobble together the financing for the $44 billion bid. Since then, it has also been dragged into the ensuing mess after the world’s richest man changed his mind about wanting to own the social-media platform.

 

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