Morgan Stanley: The market's getting better, but our clients aren't

Morgan Stanley had a tough first quarter. Management says market conditions have gotten better. But clients are still nervous.

Morgan Stanley's (MS) earnings plunged from a year ago.

The investment bank reported Q1 earnings of $1.1 billion or $0.55 per share. This was down from $2.4 billion or $1.18 per share a year ago. However, this was better than the $0.47 expected by analysts.

Shares are up 2% in pre-market trading.

“The first quarter was characterized by challenging market conditions and muted client activity," CEO James Gorman said. "Against that backdrop, our businesses delivered stable results."

Wall Street's investment banks had a rough first quarter as market volatility put a freeze on deals, which also led to lower trading activity. JPMorgan (JPM), Bank of America (BAC), and Citi (C) echoed these woes.

Investment banking revenue fell 16% to just $990 million. Trading revenue plummeted 45% to $1.89 billion. Sales and trading revenue in equities, fixed income and commodites all fell.

Morgan Stanley's institutional business got slammed by weak investment banking and trading. (Image: Morgan Stanley)
Morgan Stanley's institutional business got slammed by weak investment banking and trading. (Image: Morgan Stanley)

The market's recovering, but clients aren't

There was good news and bad news in Morgan Stanley's report.

The good news is it could've been worse. Investors and analysts expected results to be bad. But not only are the results not worse, they're actually better than expected.

The bad news is that clients are really responding to improving market conditions.

"While we see some signs of market recovery, global uncertainties continue to weigh on investor activity," Gorman said.

As usual, clients tend to behave on a lag as they work through the memory of recent turmoil and assess the ever-present risks in the market.

"We remain focused on executing against our priorities, helping clients navigate difficult markets while controlling our expenses and managing risk prudently."

Sam Ro is managing editor at Yahoo Finance

Read more:

Bank of America's earnings reflect 2 big themes in the economy

Jamie Dimon: 'The economy is going strong'

Wall Street bull emerges, makes bold call on stocks

Earnings season will be awful — Here are 2 reasons why you shouldn’t panic

Merrill Lynch chief economist nails the truth about risk in a perfect 3-word sentence

 

Advertisement