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(Reuters) – Morgan Stanley (MS.N) said on Wednesday that its fourth-quarter profit fell 41%, a weaker-than-expected decline. The bank’s trading business was boosted by market volatility, offsetting the blow from the slowdown in trading.
Dealmaking had virtually come to a standstill for much of the last year as risk appetite plummeted in the face of rapidly deteriorating macroeconomic conditions and geopolitical tensions.
Wall Street investment bankers have advised on multi-billion dollar mergers and acquisitions and undertook listings for some of the largest clients to access public markets for more than a decade.
Revenues from Morgan Stanley’s investment banking business declined 49% in the fourth quarter to $1.25 billion, with revenue declines across the banking advisory, equity and fixed income segments.
A slowdown in investment banking weighed on the company’s net revenues, which fell 12% to $12.7 billion.
“As far as investment banking is concerned, it’s been a tough year for stock markets, so no one expects the industry to report huge gains,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. I don’t think so,” he said. .
Trading was a surprising bright spot for Morgan Stanley, with fourth quarter revenues up 26% to $3.02 billion. This is because clients seek to hedge market risk by realigning their portfolios towards more defensive assets.
The company’s shares, which lost about 13% of its value last year, rose about 1.7% to $93.25 in pre-market trading.
The bank’s wealth management business, which tends to generate steady income, saw earnings rise 6% in the quarter as interest income rose amid rate hikes by the US Federal Reserve through most of last year.
Morgan Stanley summarizes fourth-quarter earnings for major US banks. Closest rival Goldman Sachs Group Inc (GS.N) on Tuesday reported a better-than-expected 69% quarterly profit decline due to heavy losses and weak trading in its consumer business.
Morgan Stanley earned $1.31 per diluted share on an adjusted basis, the bank said.
Earnings applicable to the Company’s common stockholders for the three months ended December 31 were $2.11 billion, or $1.26 per diluted share.
Analysts had expected the bank to report earnings of $1.19 per share, according to Refinitiv data.
Morgan Stanley increased its allowance for loan losses in the fourth quarter to $87 million, up from $5 million a year ago. This is due to fears of a looming US recession and deteriorating consumer credit quality.
Reporting by Manya Saini and Menaz Yasmin of Bengaluru and Carolina Mandor and Saeed Azhar of New York. Additional reporting by Amruta Khandekar. Editing by Shounak Dasgupta
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