Morgan Stanley shares slide after 8.5% drop in Q3 profit

New York-based bank reports net income of $2.4 billion in quarter ending September

Morgan Stanley's revenue surged 2.2 per cent year-on-year to nearly $13.3 billion in the last quarter. Bloomberg
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Morgan Stanley shares dropped more than 8 per cent on Wednesday after the US bank reported an 8.5 per cent annual drop in net income in the third quarter.

Net income dropped to $2.4 billion, or $1.38 per diluted share in the September quarter, said the New York-headquartered bank.

However, its revenue surged 2.2 per cent year-on-year to nearly $13.3 billion during the period.

James Gorman, chairman and chief executive of Morgan Stanley, said the firm delivered solid results while the market environment remained mixed during the quarter.

"Our equity and fixed income businesses navigated markets well, and both wealth and investment management produced higher revenues and profits year-over-year,” he said.

The bank’s institutional securities division reported a revenue of $5.7 billion compared to $5.8 billion in the same period last year.

Investment banking revenues dropped 27 per cent yearly to $938 million, driven by a slump in advisory revenues due to fewer completed merger and acquisition transactions in the July-September period, the lender said.

“Fixed income net revenues decreased as lower client activity and less favourable market conditions drove declines in rates and foreign exchange," the bank said.

"These declines were partially offset by constructive trading environments in commodities, as well as agency and non-agency trading.”

The wealth management arm added $6.4 billion to the overall revenue in the last quarter, nearly 5 per cent down on a yearly basis. This unit’s asset management revenues increased 7 per cent compared to a year ago reflecting higher average asset levels and the impact of cumulative positive fee-based asset flows.

Meanwhile the investment management unit earned revenue of $1.3 billion, up 14 per cent compared to the same period a year ago.

Morgan Stanley, one of the biggest banks in the US, expects a surge in its earnings in the upcoming quarters.

“Our ability to gather assets, together with our strong capital position and leading client franchises, position us to deliver continued growth and strong shareholder returns going forward,” Mr Gorman said.

In May, Mr Gorman announced his plan to resign within a year. He stated that the company's board has reduced the search for his successor to three internal executives.

In the same month, the bank said it was preparing to cut about 3,000 jobs from the global workforce to focus on expenses as recession fears delay a rebound in deal making.

Under its share repurchase programme, the bank repurchased $1.5 billion worth of its outstanding common stock during the previous quarter.

The Morgan Stanley board also announced a $0.85 quarterly dividend per share payable on November 15 to common shareholders of record as of October 31.

Updated: October 18, 2023, 5:13 PM