Morgan Stanley earnings hurt by volatile markets

Morgan Stanley’s fourth-quarter results were hit hard by volatile trading at the end of 2018, and the bank missed Wall Street estimates on both its top and bottom lines.

The announcement sent shares in the US investment bank down nearly 5 per cent in pre-market trading.

Revenues at Morgan Stanley's large equity trading unit were flat against the year before, trailing rivals JPMorgan, Citigroup and Bank of America, which all saw equity trading growth. In fixed-income trading, Morgan Stanley struggled more than its rivals, with revenues falling 30 per cent.

Investment banking fees were also down, with a strong quarter for M&A advisory offset by dreary results in equity and debt underwriting, where revenues fell 22 and 28 per cent, respectively. There was little respite to be found in the wealth management division, which saw a slight decline in sales.

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“In 2018 we achieved record revenues and earnings, and growth across each of our business segments – despite a challenging fourth quarter . . . While the global environment remains uncertain, our franchise is strong and we are well positioned to pursue growth,” said chief executive James Gorman.

Total revenue for the quarter, at $8.5 billion (€7.4 billion), was well below an analysts’ target of $9.3 billion. Earnings per share was $0.81, down 5 per cent from the prior year.

Both compensation expense and total operating expense fell, but it was not enough to offset the decline in revenues. – Copyright The Financial Times Limited 2019