Jan 17 (Reuters) – Morgan Stanley ( MS.N ) reported a smaller-than-expected 41% fall in fourth-quarter profit on Tuesday as the bank’s trading business got a boost from market volatility, offsetting a blow from slow deal-making.
Dealmaking was virtually at a standstill for much of last year as risk appetite plummeted in light of rapidly deteriorating macroeconomic conditions and geopolitical tensions.
The gloom follows what has been a bumper 2021 for Wall Street investment bankers who advised on multibillion-dollar mergers and acquisitions while securing some of the biggest client lists to go public in more than a decade.
Morgan Stanley’s investment banking revenue fell 49% to $1.25 billion in the fourth quarter, with revenue falling in the bank’s advisory, equity and fixed income segments.
The slowdown in the investment banking business affected the company’s net income, which decreased by 12% to $12.7 billion.
“In terms of investment banking, it’s been a tough year for the stock market so I don’t think anyone expects the industry to report big earnings,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. .
Trading was a surprisingly bright spot for Morgan Stanley, with the unit’s revenue jumping 26% to $3.02 billion in the fourth quarter, as clients seek to hedge against market risks by shifting portfolios toward more defensive assets.
The company’s shares, which have lost about 13% of their value in the past year, rose about 1.7% in premarket trading to $93.25.
The bank’s asset management business, which tends to generate steady income, saw revenue rise 6% in the quarter as interest income increased amid the U.S. central bank’s rate hikes for much of last year.
Morgan Stanley reported mixed earnings for major US banks in the fourth quarter. Its closest rival Goldman Sachs Group Inc ( GS.N ) reported a bigger-than-expected 69% drop in quarterly profit on Tuesday due to heavy losses in its consumer business and a drop in dealmaking.
On an adjusted basis, Morgan Stanley earned $1.31 per share, the bank said.
Profit attributable to the company’s common stockholders for the three months ended Dec. 31 was $2.11 billion, or $1.26 per share.
Analysts had expected the bank to report earnings of $1.19 per share, according to Refinitiv data.
Morgan Stanley increased its provision for loan losses in the fourth quarter to $87 million from $5 million a year earlier on concerns about a looming U.S. recession and deteriorating consumer credit quality.
Reporting by Manya Saini and Mehnaz Yasmin in Bengaluru and Carolina Mandl and Saeed Azhar in New York; Additional reporting by Amruta Khandekar; Editing: Shounak Dasgupta
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