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As increased income from its wealth management division offset declining revenue from its investment banking and trading units, Morgan Stanley’s first-quarter profit exceeded expectations.
However, in premarket trade, shares decreased by more than 2%.
While wealth management witnessed an 11% increase in revenue and brought in $110 billion in net new assets, investment banking saw a 24% decline in revenue to $1.25 billion.
Investment banks on Wall Street have been worst hit by a decline in mergers and acquisitions as investors shied away from riskier bets in the face of erratic markets and quickly rising interest rates.
Initial public offerings have also virtually stopped due to the unrest as startups delay their market debuts until investor sentiment improves.\
The downswing in investment banking activity, which forms the core of the bank’s business, dragged its total revenue down nearly 2% to $14.5 billion in the quarter.
“The investments we have made in our Wealth Management business continue to bear fruit,” Chief Executive James Gorman said in a statement.
Results from Morgan Stanley round out a choppy reporting season for Wall Street’s biggest banks as the collapse of two mid-sized lenders in March sent shockwaves across the world and further fueled recession worries.
The bank’s closest rival Goldman Sachs Group Inc also reported a slump in its investment banking unit as dealmaking and bond trading slumped and it lost money on the sale of some assets in its consumer business.
Morgan Stanley set aside $234 million in the quarter compared with $57 million a year ago, bracing for a deterioration in commercial real estate and customers potentially falling behind on loan payments amid rising costs of borrowing and recession worries.
The bank earned $1.70 per share, beating analysts’ average estimate of $1.62 per share, according to Refinitiv data.
