Trading Revenue Sinks Morgan Stanley Shares

Morgan Stanley

shares fell 3 percent in premarket trading after it missed expectations and posted a steep drop in its trading revenue. Excluding adjustments related to credit spreads, the investment bank earned $338 million, or 16 cents a share; it had reported a loss of $1.1 billion, or 46 cents a share, in the year-ago period. Analysts had been expecting earnings of 29 cents a share, on average. Excluding debt valuation adjustments, revenue was $6.6 billion, down 27 percent from $9 billion in the same period last year. The company said fixed income, commodity and equity revenue reflected a “challenging global environment with reduced levels of client activity.” Its institutional securities business reported revenue excluding items of $2.9 billion, down more than 40 percent from $4.9 billion a year earlier, and $5 billion in the first quarter of this year. Morgan Stanley is attempting to build up its mainstream banking business – partly a response to regulation, as well as an attempt to rely less heavily on volatile trading results. The Wall Street Journal report this week that it has named Eric Heaton, formerly at Deutsche Bank, as head of institutional and retail banking. He reportedly will oversee commercial banking products for institutional clients. Goldman Sachs

the other large U.S. investment bank, also is expected to begin building up a private banking business to cater to institutional and wealthy clients.