Investing.com - Morgan Stanley (NYSE:MS) followed the trend set by rivals this week in reporting a drop in profit due to choppy market conditions.
Earnings per share fell over 5% from a year earlier to $1.23, but were still higher than the $1.15 expected by analysts. Strong revenue gains of more than 20% in its wealth management and investing management businesses helped to offset a decline in revenues at institutional securities which includes investment banking and its sales and trading division.
Overall revenue fell 3.5% to $10.24 billion, fractionally ahead of forecasts for $10.01 billion.
The bank's shares traded largely sideways in premarket after the release. By 08:10 AM ET (12:10 GMT) in premarket trade, they were at $43.65, unchanged from before the publication. They've lost 2.5% this week as most of its Wall Street rivals have reported declining trading income and a squeeze on lending margins. Morgan Stanley has one of the smallest lending businesses of the big Wall Street banks.
The bank saw a decline of 3% in net interest income from a year earlier, matching similar reports from rivals this week. Margins have been squeezed as the spread between short- and long-term interest rates has shrunk, crimping banks' ability to invest customer deposits profitably.
Morgan Stanley is the last of the six largest U.S. banks to report earnings in a difficult environment. Rising geopolitical uncertainties and the impact of future interest rate cuts by the Federal Reserve present challenges to banks’ efforts to increase revenue.
Rival Bank of America (NYSE:BAC) noted that fact on Wednesday after its own earnings report, saying that Fed policy easing will likely hit net interest income.
Markets are currently pricing in a 25 basis point reduction at the Fed’s July 30-31 meeting with an additional two rate cuts by the end of the year.
Morgan Stanley follows other major Financial sector earnings this month
On Tuesday, JPMorgan reported second quarter EPS of $2.82 on revenue of $29.57B, compared to forecasts of EPS of $2.51 on revenue of $28.84B.
Bank of America earnings beat analysts' expectations on Wednesday, with second quarter EPS of $0.74 on revenue of $23.08B. Investing.com analysts expected EPS of $0.71 on revenue of $23.12B
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