Morgan Stanley’s revenue from investment banking plummeted as capital markets seized up, underlining a slow quarter for Wall Street as a dour outlook for the economy muddles the path forward.
The firm’s investment-banking group posted $1.07 billion in revenue, down 55% from a year earlier, a bigger decline than the 47% drop analysts had predicted. The bank also reported an additional $413 million hit driven by mark-to-market losses on corporate loans held for sale as credit spreads widened.
Morgan Stnaley’s trading unit helped pick up the slack as fixed-income revenue surged amid heightened volatility and clients scrambled to reposition their books.
Surging inflation and Federal Reserve efforts to help combat it have put investors on watch for a recession and the spillover effect an economic contraction can have for financial firms. Banks’ capital-markets units, which have lifted fortunes across the industry over the past two years, were hurt by a sharp slowdown in the second quarter.
“It was a very solid quarter in the face of market volatility,” Chief Financial Officer Sharon Yeshaya said in an interview. “Market activity and client activity should help support the level in equities and fixed-income businesses. But the volatility delays some of the pipeline to convert on the investment-banking side, especially on the M&A side.”
JPMorgan Chase & Co., which reported results earlier Thursday, suspended share buybacks as Chief Executive Officer Jamie Dimon said he’s “mindful of economic uncertainties.”
Morgan Stanley shares slumped 23% in the first six months of the year, its worst performance for two consecutive quarters in more than a decade. The stock slipped 1% to $74.20 at 8:54 a.m. in early New York trading.
Trading revenue of $5.46 billion surpassed the $5.1 billion average estimate, and was up from $4.51 billion a year ago. That was mostly led by a 49% jump in fixed-income revenue, which climbed to $2.5 billion.
“Strong results in equity and fixed income helped partially counter weaker investment banking activity,” CEO James Gorman said in a statement.
Revenue from equity underwriting plunged to $148 million, while debt underwriting declined 49% to $326 million. Advisory revenue fell 9.9% to $598 million.