Morgan Stanley Quarterly Profit Drops 30% -- Update

By Liz Hoffman 

Morgan Stanley's profit fell 30% in the first quarter, the last big U.S. bank to lurch through a period of stress wrought by the coronavirus.

The Wall Street firm reported a quarterly profit of $1.7 billion, or $1.01 a share, on revenue of $9.49 billion. Both figures were down from a year ago.

The results fell just shy of projections by stock analysts, who had revised their estimates downward as the coronavirus pummeled the markets and the U.S. economy. Analysts polled by FactSet expected $1.16 a share, or $1.89 billion, of profit on $9.85 billion of revenue.

Morgan Stanley is the smallest of the six major U.S. banks with few true peers in the bunch, which has left some investors unsure how it will fare in a coronavirus downturn.

Its Wall Street businesses are roughly the same size as Goldman Sachs Group Inc.'s, but its giant wealth-management arm tracks more closely with Bank of America Corp.'s Merrill Lynch unit. It doesn't have a credit-card arm, where JPMorgan Chase & Co. and Citigroup Inc. are steeling for a wave of defaults, and is largely sitting out the government's small-business emergency lending program.

Morgan Stanley's 61-year-old chief executive, James Gorman, spent more than a week in March sickened with the coronavirus, showing the disease's fever and chills though none of its deadly respiratory symptoms.

The quarter challenged U.S. megabanks in ways unseen since the financial crisis of 2008. They contended with falling interest rates and wildly swinging asset prices, sorted through unprecedented government intervention in the financial markets, and steeled themselves for a lengthy recession.

Profits were sharply lower across the group, with declines ranging from 45% at Bank of America to 89% at Wells Fargo. More pain is likely ahead.

Morgan Stanley's traders, like their rivals at other banks, performed well in the quarter. Revenue in that business rose 30% to $4.9 billion, with gains in both fixed-income, where it is smaller, and stock-trading, where it is the biggest player on Wall Street.

Investment banking, where Morgan Stanley helps companies arrange mergers and sell stocks and bonds, reported $1.1 billion in fees, basically flat from a year ago.

In wealth management, where it handles $2.4 trillion for more than 3.5 million households, revenue was steadier at $4 billion. The firm charges flat fees on about half of its accounts, based on portfolio values as of Jan. 1, which spared it from the steep market declines that followed. On the other half, it charges trading commissions and other product fees.

Its smallest business, asset management, reported $692 million in revenue, down 14% from a year ago. When companies get less valuable -- as nearly every company in America has in recent weeks -- funds like those Morgan Stanley runs must reflect those changes.

Morgan Stanley is seeking to complete its takeover of discount broker E*Trade Financial Corp. The takeover was announced on Feb. 20, the day after what would prove to be the peak for the S&P 500 index.

Morgan Stanley shares, Mr. Gorman's currency for the deal, have tumbled alongside the market and the deal, worth $13.8 billion to E*Trade stockholders when it was agreed, is now worth $9.4 billion.

Write to Liz Hoffman at [e-mail]

(END) Dow Jones Newswires

April 16, 2020 07:59 ET (11:59 GMT)

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