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Morgan Stanley misses analysts’ estimates on worse-than-expected investment banking revenue

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James Gorman, chairman and chief executive officer of Morgan Stanley, speaks during a Bloomberg Television interview in Beijing, China, on Thursday, May 30, 2019.
Giulia Marchi | Bloomberg | Getty Images

Morgan Stanley is set to report second-quarter earnings before the opening bell on Thursday.

Here’s what Wall Street expects:

  • Earnings: $1.53 a share, according to Refinitiv
  • Revenue: $13.48 billion, 8.7% lower than a year earlier
  • Wealth management: $5.99 billion, according to StreetAccount
  • Trading: Equities $2.77 billion, Fixed Income $1.98 billion
  • Investment Banking: $1.47 billion

Was a pickup in bond trading enough to offset the drop in investment banking fees in the second quarter?

That’s the question for Morgan Stanley, which runs one of the larger equity capital markets operations on Wall Street.

Wall Street banks are grappling with the collapse in IPOs and debt and equity issuance this year, a sharp reversal from the deals boom that drove results last year. The change was triggered by broad declines in financial assets, pessimism over the possibility of a recession and the Russian invasion of Ukraine.

Morgan Stanley co-President Ted Pick said last month that markets would be dominated by concern over inflation and recession in a period of transition after nearly 15 years of easy-money policies by central banks came to an end.

“The banking calendar has quieted down a bit because people are trying to figure out whether we’re going to have this paradigm shift clarified sooner or later,” Pick said.

Still, parts of Morgan Stanley’s operations are expected to benefit. Bond traders are expected to post strong results, thanks to volatility in commodities and interest rates.

While analysts expect that the bank’s giant wealth management and investment management divisions – responsible for half of the firm’s revenue – will hold up better than investment banking, lower asset values will reduce revenue there as well.

Shares of the bank have dropped 24% this year through Wednesday, worse than the 19% decline of the KBW Bank Index.

Wells Fargo and Citigroup are scheduled to report results on Friday, while Bank of America and Goldman Sachs post on Monday.

This story is developing. Please check back for updates.