Morgan Stanley's profit falls on rising costs and slow merger and IPO activity

Key takeaways

  • Morgan Stanley's third-quarter profit fell as sales at its wealth management and investment banking units fell short of estimates.
  • The bank said Higher compensation and a decline in mergers and IPOs hurt its earnings.
  • The news sent Morgan Stanley shares tumbling to levels not seen in more than a year.

Shares of Morgan Stanley (MS) fell more than 7% in early trading Wednesday after reporting a drop in earnings then that sales of the investment banking business's wealth management and investment banking divisions failed to meet estimates.

Morgan Stanley announced that its profits for the third quarter of fiscal 2023 fell 8.5% from last year to $2.41 billion, or $1.38 per share. Revenue rose 2.2% to $13.27 billion.

Revenue at the wealth management unit came in at $6.4 billion, below forecasts of about $200 million due to compensation costs higher. Investment banking sector sales fell 26.5% to $938 million, also well below expectations. The company pointed to weak mergers and initial public offerings (IPOs) to explain this decline.

Trading was a bright spot for Morgan Stanley, with stock trading revenue of $2.51 billion and bond sales of $1.95 billion, both above forecasts.

CEO James Gorman said that the bank generated solid results, even if “the market environment remained mixed this quarter”.

Morgan Stanley shares have dropped to their lowest level in more than a year after the news.


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