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Morgan Stanley Shares Slide After “Challenging” Quarter Sparked Top- & Bottom-Line Miss

Hot on the heels of JPMorgan’s disappointing results, Morgan Stanley shares are slumping after the bank reported worse-than-expected Q2 results missing top and bottom-lines and taking a large regulatory charge.

Q2 EPS disappointed (printing $1.44 vs $1.56 expected) but the big headline maker was that revenue of $13.1 billion fell short of expectations of $13.3 billion (with wealth-management revenue of $5.74 billion missed the average estimate of $5.81 billion).

While the bank missed on the top-line, it did manage to deliver better-than-expected results for both its equities and FICC sales and trading businesses. But on the debt capital markets side, revenue disappointed (coming in at $326 million, below the $374 million that analysts expected).

“Overall the Firm delivered a solid quarter in what was a more volatile market environment than we have seen for some time,” CEO James Gorman said in a statement.

“We finished the quarter in a strong capital position to ensure we move forward with confidence,” he added.

Worse still investment banking revenues were down 55% YoY (dramatically missing analysts estimates)

“Advisory revenues decreased from a year ago driven by lower levels of completed M&A transactions. Equity underwriting revenues significantly decreased from a year ago on lower issuances given uncertainty in the markets. Fixed income underwriting revenues decreased from a year ago as macroeconomic conditions contributed to lower issuances.”

Additionally, MS set aside $200 million to cover the SEC probe into bankers and traders’ use of apps like WhatsApp:

“The Firm’s expense efficiency ratio was 74%, impacted by $200 million related to a specific regulatory matter concerning the use of unapproved personal devices and the Firm’s record-keeping requirements.”

The end result, MS shares are down but recovering from their worst levels…

Finally, looking ahead, Morgan Stanley took a $101 million provision for credit losses, up from $73 million a year ago, suggesting the economy may not be as rosy as so many talking heads continue to proclaim.

Tyler Durden
Thu, 07/14/2022 – 08:03
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