Morgan Stanley investment banking slides

One of the world’s 30 systemically important banks, Morgan Stanley (MS), is set to report first-quarter earnings, with figures expected to show a 19% decline in net income to $3bn, primarily due to lower investment banking revenue and the impact of the recent banking crisis. Investment banking revenue is forecast to have declined by 26% from the same period last year, with total revenue likely to fall by 5% to just over $14bn. The quarter’s earnings per share are expected to be $1.80, down 12% on last year’s figure.

The drop in global dealmaking, mergers, and acquisitions, coupled with a decline in initial public offerings, was a significant contributor to the drop in investment banking revenue at Morgan Stanley. Commission and fees from clients are expected to have declined by almost 18% from the previous year. The first quarter saw a fall in global IPO volumes of 8%, continuing the downward trend from last year, when volumes fell by almost 50% compared to 2019.

Higher trading revenues are expected to help offset some of the decline in earnings, with trading revenue predicted to rise by 35% to $4.1bn compared to the previous quarter, driven by gains in equity and fixed-income trading. Lending activity is also expected to help offset the fall in investment banking revenue, with Morgan Stanley’s balance sheet predicted to have shown an 11% increase to $217bn.

Morgan Stanley’s shares have risen by 3% so far this year, outperforming the broader S&P 500 Financial Sector, which has fallen by 4%. The earnings report will be released on Wednesday, April 19, with investors hoping for a positive outlook despite the potential challenges facing the banking sector.