By Mike Caggeso
Associate Editor
Quarterly earnings at Morgan Stanley (MS) sunk a heavy 56% as falling institutional securities, declining investment-banking figures, and mounting trading losses hurt the second-largest U.S. investment bank.
Shares were down 6.48% in pre-market trading on news that income from continuing operations fell to $1.03 billion, or 95 cents a share, from $2.36 billion, or $2.45 a share, the year earlier.
Net revenue clocked in at $6.5 billion, a 38% drop from last year.
"Given the turbulent environment this quarter, we stayed close to shore and continued strengthening the Firm's capital and liquidity positions," John J. Mack, chairman and chief executive, said in a statement. "The difficult market conditions and lower levels of client activity impacted our results, particularly in fixed income and asset management."
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And sadly, it could have been much worse. According to the statement, Morgan Stanley pulled in $1.43 billion pretax from a pair of divestures – $698 million from its Spanish wealth management business, and $732 million from the secondary offering of MSCI Inc. (MXB).
"If you have to go all the way to Spain to make numbers, it's not good. How many more rabbits do they have in their hat? What's going to be the driver of earnings growth going forward?" Matt McCormick, a stock analyst at Bahl & Gaynor Investment Counsel in Cincinnati, told Reuters.
Among its trading loss, Morgan Stanley was particularly hurt by its commodity plays, Colm Kelleher, the firm's chief financial officer, told Bloomberg.
"We took a contrarian view on some positions in the energy sector and it didn't work out for us," Kelleher said. "Our traders, who have a very good track record on this, frankly got the timing wrong."
Last month, Morgan Stanley announced plans to cut as much as 5% of its workforce. Since October, it has cut at least 3,000 jobs, Bloomberg reported.
The bank's recent earnings fall in line with how it fared in the first quarter.
Last fiscal quarter (ended Feb. 29), Morgan Stanley's quarterly revenue fell 17% to $8.3 billion. Income from continuing operations fell to $1.55 billion, or $1.45 a share. That's down from $2.31 billion, or $2.17 a share, in the year-earlier period, but well above analysts' expectations of $7.3 billion revenue and $1.03 a share.
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