Thursday 16 April 2020 3:31 pm

Morgan Stanley profit drops by nearly a third

Morgan Stanley today said profit for the first quarter fell 32 per cent as its advisory and wealth management businesses took a hit from the economic fallout of the coronavirus pandemic.

Morgan Stanley’s wealth management unit, which contributes roughly half of its total revenue, fell eight per cent to $4.04bn (£3.23), after it was hit by the chaos in financial markets.

Read more: Goldman Sachs profit nearly halves as coronavirus hits investment

The wealth business, which the bank has previously been a reliable source of revenue during periods of market volatility, reported a pre-tax margin of 26.1 per cent, below the bank’s target range of 28-30 per cent.

“Over the past two months, we have witnessed more market volatility, uncertainty and anxiety as a result of the devastating covid-19 than at any time since the financial crisis,” chief executive James Gorman said.

Read more: Citi profit halves as US banks brace for coronavirus impact

Advisory revenue fell 11 per cent as dealmaking plunged in the quarter as businesses braced for a massive slowdown in the coming months.

The bank’s trading desks were a bright spot with a 30 per cent surge in revenue, boosted by wild swings in markets during the quarter. This was led by a 29 per cent jump in bond trading and a 20 per cent rise in equities.

“While it’s too early to predict how this will unfold, Morgan Stanley navigated the quarter well given the conditions,” Gorman said.

The bank said earnings attributable to common shareholders fell to $1.59bn, or $1.01 per share, in the quarter ended 31 March, from $2.34bn, or $1.39 per share, a year ago.

Read more: Bank of America profit nearly halves after it sets aside $4.8bn to cover bad loans

Analysts had expected a profit of $1.14 per share, according to IBES data from Refinitiv.

Morgan Stanley joined fellow big US banks Goldman Sachs, Bank of America, Citi and Wells Fargo in posting steep profit drops in the first quarter as the world looks set to endure the deepest recession since the 1930s.

Profit at Goldman, Citi and Bank of America fell by nearly half, while Wells Fargo’s profit fell nearly 90 per cent.

Read more: US stocks fall after dire jobless claims data

Profit at the big banks was hit by billions of dollars in credit provisions to cover an expected wave of loan defaults as the coronavirus crashes the US economy.

Today the US Department of Labor said 5.2m Americans made new jobless claims last week, taking the total of people to have made new claims in the last month to 22m.

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