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Stock market volatility stems profit slide at Morgan Stanley

Morgan Stanley has been accused of making up a fake job title for one of its employees in an attempt to trick EU regulators into believing it had moved top execs to Europe to meet post-Brexit rules.
The Financial Times reported that a German banker, who was hired in 2021 as an executive director, the rank below managing director, was given the title 'head of loan trading', but was allegedly told not to actively use the title.

Strong trading activity driven by investors navigating choppy financial markets stemmed a profit slide at Wall Street investment bank Morgan Stanley, the firm announced today.

A five per cent jump in equity net income in the three months to June compared to the same period a year ago kept the bank’s bottom line in reasonable health.

Revenue generated from its bond market arm also climbed nearly $1bn (£840m) over the last year, caused by investors repositioning their portfolios to price in the US Federal Reserve hiking interest rates rapidly.

Profits dropped around $1.6bn (£1.3bn), led lower by a $101m (£85m) loan loss charge and an over 55 per cent drop in investment banking revenue.

“Advisory revenues decreased from a year ago driven by lower levels of completed [merger and acquisition] transactions,” Morgan Stanley said in its trading update.  

A weakening global economic outlook sparked by inflation surging to generational highs in the developed world, ongoing Covid-19 supply and demand mismatches and Russia’s invasion of Ukraine has sent a chill through the deal making environment.

“Strong results in equity and fixed income helped partially counter weaker investment banking activity,” James Gorman, chief executive and chairman of Morgan Stanley, said.

The results were not as bad as Morgan Stanley’s rival JP Morgan, who notched a 28 per cent drop in profits due to setting aside nearly $428m (£360m) of reserves to deal with an expected uptick in loan defaults.

Experts are closely monitoring banks’ assessment of the US and global economic outlook due to the huge cache of data they have on businesses and firms’ health.

US second quarter earnings season, which kicked off today, is anticipated to be tamed by stateside inflation soaring to a near 41-year high of 9.1 per cent and the impact of the Fed’s succession of rate rises.