Morgan Stanley
It's also a complete inversion of what happened during the first few quarters of the bull market when the economy was struggling but financial markets were on fire due to the Federal Reserve's policies and fiscal stimulus. Then, we had strong reports from Wall Street-centric banks like Morgan Stanley, while Main Street-oriented banks posted weak results. Currently, investment banking revenues are plunging, while net interest income and loan demand are strong even in an economy with significant challenges.
Inside the Numbers
In Q2, Morgan Stanley reported $1.39 in earnings per share which fell short of expectations of $1.53 per share. This was a 29% decline from last year's Q2. Revenue was down 11% and also fell short of expectations at $13.1 billion vs expectations of $13.5 billion.
Investment banking generated $1.1 billion in revenue which was below expectations of $1.5 billion. Management pointed to the moribund IPO market and the lack of new debt and equity issuance. There were also tough comps given last year's Q2 marked the peak of ebullience in financial markets.
Some weakness was offset by trading performance. Equities trading produced $3 billion in revenue, beating estimates of $2.8 billion. Fixed income also beat at $2.5 billion vs $2 billion. Wealth management and investment management revenue declined as well due to lower asset prices.
There are a couple of bright spots for investors. One is the company purchased $2.7 billion of stock during the quarter which is more than 2% of its total market cap. The company also approved a new $20 billion buyback, nearly 15% of its total market cap.
The company is also quite cheap with a forward P/E of 10.4 which is much cheaper than the S&P 500's
