Morgan Stanley Quarterly Profit Drops 30% -- Update
April 16 2020 - 8:14AM
Dow Jones News
By Liz Hoffman
Morgan Stanley's profit fell 30% in the first quarter, the last
big U.S. bank to lurch through a period of stress wrought by the
coronavirus.
The Wall Street firm reported a quarterly profit of $1.7
billion, or $1.01 a share, on revenue of $9.49 billion. Both
figures were down from a year ago.
The results fell just shy of projections by stock analysts, who
had revised their estimates downward as the coronavirus pummeled
the markets and the U.S. economy. Analysts polled by FactSet
expected $1.16 a share, or $1.89 billion, of profit on $9.85
billion of revenue.
Morgan Stanley is the smallest of the six major U.S. banks with
few true peers in the bunch, which has left some investors unsure
how it will fare in a coronavirus downturn.
Its Wall Street businesses are roughly the same size as Goldman
Sachs Group Inc.'s, but its giant wealth-management arm tracks more
closely with Bank of America Corp.'s Merrill Lynch unit. It doesn't
have a credit-card arm, where JPMorgan Chase & Co. and
Citigroup Inc. are steeling for a wave of defaults, and is largely
sitting out the government's small-business emergency lending
program.
Morgan Stanley's 61-year-old chief executive, James Gorman,
spent more than a week in March sickened with the coronavirus,
showing the disease's fever and chills though none of its deadly
respiratory symptoms.
The quarter challenged U.S. megabanks in ways unseen since the
financial crisis of 2008. They contended with falling interest
rates and wildly swinging asset prices, sorted through
unprecedented government intervention in the financial markets, and
steeled themselves for a lengthy recession.
Profits were sharply lower across the group, with declines
ranging from 45% at Bank of America to 89% at Wells Fargo. More
pain is likely ahead.
Morgan Stanley's traders, like their rivals at other banks,
performed well in the quarter. Revenue in that business rose 30% to
$4.9 billion, with gains in both fixed-income, where it is smaller,
and stock-trading, where it is the biggest player on Wall
Street.
Investment banking, where Morgan Stanley helps companies arrange
mergers and sell stocks and bonds, reported $1.1 billion in fees,
basically flat from a year ago.
In wealth management, where it handles $2.4 trillion for more
than 3.5 million households, revenue was steadier at $4 billion.
The firm charges flat fees on about half of its accounts, based on
portfolio values as of Jan. 1, which spared it from the steep
market declines that followed. On the other half, it charges
trading commissions and other product fees.
Its smallest business, asset management, reported $692 million
in revenue, down 14% from a year ago. When companies get less
valuable -- as nearly every company in America has in recent weeks
-- funds like those Morgan Stanley runs must reflect those
changes.
Morgan Stanley is seeking to complete its takeover of discount
broker E*Trade Financial Corp. The takeover was announced on Feb.
20, the day after what would prove to be the peak for the S&P
500 index.
Morgan Stanley shares, Mr. Gorman's currency for the deal, have
tumbled alongside the market and the deal, worth $13.8 billion to
E*Trade stockholders when it was agreed, is now worth $9.4
billion.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
April 16, 2020 07:59 ET (11:59 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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