The U.S. bank Morgan Stanley earned 13% less in the second quarter of 2023. As reported by the New York firm, the company’s profit declined to $2.182 billion compared with the $2.495 billion achieved between April and June of the previous year. Similarly, profit was down 27% from the previous quarter, when earnings totaled $2.98 billion. The firm’s shares are up 6% in the Wall Street session.
However, the figures surprised the consensus. Analysts had expected earnings per share to come in at $1.15, but this was nine cents higher ($1.24). Similarly, the company’s revenues were better than expected and climbed to 13.457 billion dollars, 2% more than in the same period of 2022 (13.132 billion), and significantly above the 13.080 billion estimated by the consensus.
After learning these figures, Morgan Stanley shares are moving moderately on Wall Street So far this year, the stock has rebounded about 1.6%, although in the last three months it has accumulated losses of close to 4%.
James P. Gorman, chairman and CEO of the U.S. firm, noted that the results were “solid” due to the “challenging market environment” in which they were achieved. “The quarter began with macroeconomic uncertainties and low customer activity, but ended on a more constructive note. We remain confident in our ability to grow in a variety of market environments while maintaining a strong capital position,” he explained.
On the other hand, the investment bank’s RoTe (‘return on tangible equity’) has fallen to 12.1% from 13.8% in the same quarter last year, while the bank’s CET1 ratio stood at 15.5%. The expense efficiency ratio in the first half was 75% and expenses for the quarter included severance payments of $308 million and integration-related expenses of $99 million.
Similarly, Morgan Stanley increased provisions for credit losses to 97 million from 82 million in the second quarter of 2022. According to the company, this is “primarily due to deteriorating credit in the commercial real estate sector, as well as modest portfolio growth.”
By business segment, the Institutional Securities division reduced its revenues from $6,119 million to $5,654 million this quarter. The investment banking division was little changed and had revenues of 1,075 million euros, while revenue from equities and fixed income fell by 14% and 31% to 2,548 million and 1,716 million, respectively.
According to Morgan Stanley, equity net revenues declined from the prior year “primarily due to declines in spot and derivative products, due to lower client activity and lower market volatility.” Similarly, fixed income revenues declined “due to declines in most products, with the exception of rates, as a result of lower client activity and lower market volatility compared to the elevated levels of a year ago.”
However, Morgan Stanley’s Wealth Management segment posted net client assets of $90 billion and record net income of $6.7 billion versus $5.7 billion previously. “Pre-tax margin came in at 25.2%, as a result of higher severance costs, integration-related expenses and higher provisions for credit losses,” they detail.
Finally, the Investment Management area saw revenue decline to $1.281 billion, down some $130 million from a year ago, despite assets under management growing by $60 million to $1.412 billion. According to the New York firm, asset management and related fees declined from a year earlier, due “primarily” to “lower average assets due to lower asset values from the prior-year quarter and the cumulative effect of fund outflows.”
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