Morgan Stanley (MS.N) reported a smaller-than-expected 41% drop in fourth-quarter profit on Tuesday as the bank’s trading business got a boost from market volatility, offsetting the hit from sluggish dealmaking.
Dealmaking was at a virtual halt for most of last year as risk appetite waned sharply in the face of rapidly deteriorating macroeconomic conditions and geopolitical tensions.
The gloom follows what was a bumper 2021 for Wall Street’s investment bankers who advised on multi-billion dollar mergers and buyouts, while underwriting listings of some of the biggest clients to tap the public markets in over a decade.
Revenue from the bank’s investment banking business fell 49% to $1.25 billion in the fourth quarter, with revenue declines across Morgan Stanley’s advisory, equity and fixed income segments.
The company’s shares, which lost about 13% of their value last year, rose about 1% in premarket trading.
The investment banking business slowdown weighed on Morgan Stanley’s net revenue, pulling it down 12% to $12.7 billion in the fourth quarter.
Still, trading has been a surprise bright spot for the bank, with the unit’s revenue jumping 26% to $3.02 billion in the fourth quarter.
The company’s wealth management business, which tends to generate steady income, saw revenue climb 6% in the quarter.
Morgan Stanley wraps up a mixed fourth-quarter earnings for the big U.S. banks.
On an adjusted basis, the bank earned $1.31 per diluted share, Morgan Stanley said.
Profit applicable to Morgan Stanley’s common shareholders for the three months ended Dec. 31 was $2.11 billion or $1.26 per diluted share.
According to Refinitiv data, analysts expected the bank to report a profit of $1.19 per share.
The bank increased its provision for credit losses in the reported quarter to $87 million from $5 million a year earlier amid worries of a looming recession in the U.S. and worsening consumer credit quality.