“Maybe on an annual basis we are closing in on a sustainable and predictable level” for fixed-income revenue, Kotowski said. “That would be a significant positive after years of grinding lower industrywide, but of course one needs more than one quarter to draw that conclusion firmly.”
Foreign exchange, commodities and securitized products were areas of strength within fixed income, particularly ahead of the Brexit vote, Chief Financial Officer Jonathan Pruzan said in an interview. Client activity has subsided since then, though foreign exchange could experience bouts of volatility, he said.
“We’ve got a lot of macro, geopolitical uncertainty which will generally lead to people being on the sidelines and reduction of flows and confidence on the one hand,” he said. “On the other, we’ve seen recoveries in equity and commodities prices, so people are trying to set up for the second half of the year.”
Return on equity was 8.3 percent in the second quarter. The firm’s target is 9 percent to 11 percent by the end of 2017.
Brokerage Results
Wealth-management revenue slid 1.7 percent to $3.81 billion, compared with the $3.7 billion estimate of Jason Goldberg at Barclays Plc. Investment-banking revenue fell 23 percent to $1.1 billion from a year earlier, matching analysts’ average estimate, on a decline in stock and bond underwriting.
Morgan Stanley was alone among big U.S. banks last month in being forced to resubmit its capital plan to gain approval from regulators to increase payouts to shareholders. Gorman said on the conference call he’s working “extremely hard” to ensure a successful resubmission later this year.
JPMorgan Chase & Co. kicked off earnings season last week by beating estimates as fixed-income trading revenue and loan growth jumped. Citigroup Inc. and Bank of America Corp. also exceeded estimates, while Wells Fargo & Co.’s results were in line with expectations. Goldman Sachs Group Inc. on Tuesday said net income surged 74 percent on gains in fixed-income trading and debt underwriting.