Morgan Stanley Misses Q3 Expectations, Shares Fall

Shares of

dropped over 5 percent in pre-market trading after the company reported weaker-than-expected earnings for the third quarter. The New York-based bank posted a quarterly profit of $1.02 billion, or $0.48 per share, compared to $1.69 billion, or $0.83 per share, in the year-ago period. Excluding DVA and the net discrete tax benefit in the year-ago quarter, the bank's net income dropped to $740 million, or $0.34 per share, from $1.3 billion, or $0.64 per share in the year-earlier period. Its revenue declined 12.8 percent to $7.77 billion. Excluding accounting adjustments, revenue came in at $7.33 billion. However, analysts were expecting earnings of $0.63 per share on revenue of $8.54 billion. The average estimate among 86 Estimize users was for earnings of $0.69 per share and revenue of $8.87 billion Trading revenue declined around 17 percent to $2.03 billion in the quarter. Institutional Securities posted quarterly pre-tax income from continuing operations of $688 million, versus pre-tax income of $1.2 billion in the year-ago quarter. Wealth Management posted pre-tax income from continuing operations of $824 million, up from $800 million. Investment Management posted a pre-tax loss from continuing operations of $38 million, versus pre-tax income of $193 million in the year-earlier quarter. Compensation expense declined to $3.4 billion from $4.2 billion, while non-compensation expenses rose to $2.9 billion from $2.5 billion. The annualized return on average common equity came in at 5.6 percent in the quarter, or 3.9 percent excluding DVA. James P. Gorman, Chairman and Chief Executive Officer, said, "The volatility in global markets in the third quarter led to a difficult environment, impacting in particular our Fixed Income business and our Asia Merchant Banking business. The Firm benefited from the stability of the Wealth Management business, our ongoing leadership in Equities and the continued strength of our Investment Banking franchise. Our business model provides a steady foundation for the Firm as we navigate these challenging markets and focus intensely on addressing areas of underperformance." Morgan Stanley shares fell 5.72 percent to $32.00 in pre-market trading.