Morgan Stanley misses profit estimates in Q2 as dealmaking stalls

Morgan Stanley missed profit estimates for the first time in nine quarters on Thursday, as its investment banking unit struggled to cope with a slump in global dealmaking.

The U.S. Federal Reserve's aggressive actions to contain runaway inflation has rattled global financial markets, forcing corporates to curb their appetite for deals, while also slowing their efforts to raise cash through stock and debt offerings.

The turmoil has, in turn, upended a lucrative revenue stream for investment banks, whose results are also facing tough year-earlier comparisons when accommodative monetary policies led to record levels of deals.

Revenue from investment banking plunged 55% to $1.1 billion, with the bank's advisory business taking a 10% hit. Equity and fixed income underwriting revenue also plunged 86% and 49%, respectively.

JPMorgan Chase & Co reported a 61% drop in investment banking revenue.

Morgan Stanley's wealth management business, which is seen as a durable source of revenue, did little in the quarter to offset the slump in dealmaking.

Revenue from the business dipped 6% and contributed to a 11% slide in Morgan Stanley's net revenue and a 30% drop in profit.

Morgan Stanley also said it had recorded a $200 million expense related to a regulatory matter tied to the use of unapproved personal devices and record-keeping requirements.

The bank reported a profit of $2.4 billion, or $1.39 per share, for the quarter ended June 30, compared with $3.4 billion, or $1.85 per share, a year earlier.
 

Analysts on average had expected a profit of $1.53 per share, according to data from Refinitiv.

Shares of the bank were down 1.2% in premarket trade, after dropping nearly 23.6% this year as of last close.