Morgan Stanley earns $1.67 billion in 2Q, down 8.5 per cent from a year earlier

NEW YORK, N.Y. – Morgan Stanley’s second-quarter profit fell 8.5 per cent from a year earlier, the bank said Monday, despite better results at all three of its core businesses.

The investment bank and asset management firm earned $1.67 billion, down from $1.82 billion a year ago. On a per-share basis, that amounted to 85 cents, compared with 92 cents in the same period last year, when a one-time tax benefit boosted results.

Total net revenue at the bank rose to $9.74 billion from $8.61 billion.

“We delivered a strong quarter across each of our businesses,” said Morgan Stanley CEO James Gorman in a statement.

Profits jumped at Morgan Stanley’s institutional securities division, which includes its investment bank, and its stock, bond and commodities trading desks. Equity sales and trading revenues totalled $2.3 billion in the quarter, compared with $1.8 billion a year ago, as client activity rose. Fixed income and commodities trading also did well as net revenues climbed to $1.3 billion from $1 billion.

The increase in trading revenue was notable for a couple reasons. Morgan Stanley was alone among the big banks — including the conglomerates like JPMorgan Chase and Citigroup as well as its main competitor Goldman Sachs — to report a jump in trading revenue this quarter. Secondly, the bank did well in trading even though it has been transitioning, under Gorman, away from the volatility of markets trading and opting for steadier businesses like wealth and asset management.

Its wealth management arm, which includes the old Smith Barney franchise, reported net revenues of $3.88 billion versus $3.7 billion a year earlier, helped by higher asset management fees.

Morgan Stanley’s results also included a six-cent per share adjustment that is tied to the value of the firm’s underlying debt. Including that adjustment, Morgan earned 79 cents per share, which was well ahead of the 74 cents that analysts were expecting.

Shares of Morgan Stanley slipped 3 cents, or 2 per cent, to $40.17 in morning trading. Shares are up 5 per cent so far this year.