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Morgan Stanley’s profit falls 12% on decline in dealmaking




A decline in deal-making weighed on Morgan Stanley
‘s

result for the second quarter, but the investment bank was still able to top expectations.

The share rose 0.3% in pre-market trading.

Profit at Morgan Stanley (ticker: MS ) fell 12% year over year to $2.2 billion, or $1.24 per share, on revenue of $13.5 billion. Analysts surveyed by FactSet had forecast earnings of $1.20 per share on $13 billion in revenue.

“The company delivered solid results in a challenging market environment. The quarter started with macroeconomic uncertainty and subdued customer activity, but ended on a more constructive note,” CEO James Gorman said Tuesday.

Despite the challenging forecast, Morgan Stanley has done reasonably well this year. Shares have risen a modest 2%, lagging behind the jump of 1[ads1]8%


S&P 500 .

but there are other reasons for investors to get excited about Morgan Stanley’s stock. After passing the Federal Reserve’s annual stress test last month, the bank lifted its quarterly dividend by 9.7% to 85 cents a share. It also said it is reauthorizing its $20 billion buyback plan.

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Wall Street doesn’t know to expect much from Morgan Stanley’s investment banking division. Deal activity has fallen in the industry as financing costs have become more expensive with higher interest rates and a more challenging regulatory regime under President Biden has become more hostile to mergers. Advisory revenue at Morgan Stanley fell 24% to $455 million, reflecting fewer completed deals. This was offset by increases in share and interest guarantees.

This is a problem that has also weighed on the results of JPMorgan Chase ( JPM ) and Citigroup ( C ), which released second-quarter results on Friday. Instead, investors will be paying attention to how Morgan Stanley manages the more predictable side of the asset and wealth management business. Wealth management had a record in net income, rising to $6.7 billion from $5.7 billion in the quarter last year.

Beyond earnings, Wall Street will be looking for signs of succession planning. In May, chief executive James Gorman announced his intention to step down from the top job within the next year. There are three internal candidates likely to succeed Gorman, who said he intends to continue as executive chairman after relinquishing the CEO role.

Bank of America (BAC) also posted results on Tuesday. Goldman Sachs

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(GS) reports on Wednesday.

Write to Carleton English at carleton.english@dowjones.com



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