Morgan Stanley Profit Slumps 30% As Deals Stall, Recession Risks Rise.

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Morgan Stanley’s second-quarter profit slumped 30%, it reported, falling short of analysts’ estimates for the first time in nine quarters; as its investment banking business suffered from a slump in global dealmaking.

The banking sector is reeling from Russia’s invasion of Ukraine, a surge in the price of oil above $100. A barrel and Federal Reserve rate hikes, triggering fears of a recession.
Still, Morgan Stanley CEO James Gorman told analysts that the current environment is not as bad as the 2008 financial crisis.

Morgan Stanley shares were down 1.1% in afternoon trade, having fallen by almost a quarter year-to-date.
The U.S. Federal Reserve’s aggressive actions to contain runaway inflation has rattled global financial markets; curbingcompanies’ appetite for deals, while also slowing their efforts to raise cash through stock and debt offerings. The turmoil has upended a lucrative revenue stream for investment banks.

Banks could see further pain down the road, showed inflation had accelerated again. Likely adding more pressure on the Fed to raise rates.
The bank’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.
Morgan Stanley’s equity and fixed income underwriting revenue also plunged 86% and 49%, respectively.

Overall, 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. Although. they were sanguine about the result which came during a tough environment.
-Reuters.

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