Morgan Stanley (MS), one of only 30 international banks deemed systemically important by global regulators, will likely report first-quarter earnings fell by almost one-fifth from last year, as lower investment banking revenue and a lending slowdown stemming from last month’s banking crisis offset higher trading revenues.
Net income probably fell 19% to $3 billion, dragged down by investment banking revenue that is expected to have tumbled 26% from the year-ago quarter. Total revenue likely fell 5% to just over $14 billion. Earnings per share (EPS) are forecast at $1.80, down 12% from a year ago. Morgan Stanley will report its first-quarter earnings before markets open on Wednesday, April 19.
A decline in global dealmaking, mergers and acquisitions (M&A), and initial public offerings slashed investment banking revenue at Morgan Stanley, with commissions and fees from clients projected to have tumbled almost 18% from a year earlier. Global IPO volumes fell 8% in the first quarter, according to Ernst & Young, continuing their slide from last year when they fell by almost half compared to 2021.12
The first quarter’s market rebound should buffer Morgan Stanley’s earnings. Trading revenues are expected to rise 35% from last quarter to $4.1 billion, led by gains in equity and fixed-income trading.
| Morgan Stanley Key Metrics | |||
|---|---|---|---|
| Estimate for Q1 FY 2023 | Q1 FY 2022 | Q1 FY 2021 | |
| Investment Banking Revenue ($M) | 1,299 | 1,758 | 2,840 |
| Net Income ($M) | 3,004 | 3,715 | 4,168 |
| Earnings per Share ($) | 1.80 | 2.04 | 2.22 |
Lending activity should also partly offset the declines in investment banking revenue, with the value of loans on Morgan Stanley’s balance sheet projected to have risen 11% to $217 billion. Net interest income is expected to rise 12% to $2.5 billion. Loan issuance was particularly strong early in the quarter, driven by higher demand for commercial and real estate loans. However, lending slowed in March amid uncertainty in the banking sector following the collapse of Silicon Valley Bank and Signature Bank.
Morgan Stanley shares are up 3% year-to-date, outperforming the broader S&P 500 Financial Sector, which is down 4% so far this year.
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