Morgan Stanley Reports Disappointing Earnings
As 2018 came to a close, banks were not faring well, but Morgan Stanley seems to have suffered more than the rest. Earnings report indicates that Morgan Stanley had the worst performance in terms of bond trading when compared to the other main five investment banks on Wall Street.
Morgan Stanley found itself facing the harsh economic climate of December more strongly than its rivals due to the absence of consumer banking. While other banks were able to support themselves as they could rely on an alternative, Morgan Stanley was confronted by the state of affairs in December and ended up facing the brunt of those issues.
The results are, in fact, so disappointing that they represent the weakest haul for Morgan Stanley after it had been revamped in 2015 to help fix its problems. Many analysts are left questioning what exactly happened and why. Mike Mayo (a veteran bank analyst) had this to say on the matter: “On the one hand, we could say, ‘Oh, this is Morgan Stanley acting conservatively, scrubbing the balance sheet, etc.’ On the other hand, it could be the Morgan Stanley of old where you had hiccups in fixed income like the second half of 2015 or 2013 or during the financial crisis.”
After the overwhelming economic problems of 2008, Wall Street endeavored to combat the volatile and inconsistent nature of earnings across trading and advisory businesses. However, entities such as Goldman Sachs and Morgan Stanley still rely primarily on trade for revenue. The crisis did serve to encourage them to look for additional sources of income, whether that was in terms of consumer banking or wealth management. Even so, Morgan Stanley’s earnings report highlights how sensitive these entities are in the market.
The situation with Morgan Stanley is so disappointing that apparently, it failed to meet even the lowest projections. Another analyst James Shanahan discusses the possible reasoning for this performance: “Among the biggest U.S. banks, generally the ones with the biggest revenue shortfalls have the most sensitivity to markets. Morgan Stanley’s institutional securities and wealth management divisions are exposed to global financial market volatility.”