During the first quarter, Morgan Stanley (NYSE:MS) reportedly said that fees for its investment banking unit was down 15.6% to $851 million. We have seen a developing trend with Morgan Stanley’s peers as well. Goldman Sachs Group, Inc. (NYSE:GS) fees from investment banking were down 9% and JP Morgan Chase & Co.’s (NYSE:JPM) fees were down 23%.
Overall, Morgan Stanley had positive aspects of the report. Sales and trading revenues came in at $2.2 billion, if you include DVA Fixed Income and Commodities sales and trading net revenues. Morgan Stanley posted investment banking revenues of $851 million and ranked #1 in global IPOS and #2 in global announced and completed M&A. The firm’s Global Wealth Management Group gave Morgan Stanley net revenues of $3.4 billion and Asset Management’s net revenue came in at $533 million.
Corsair Capital was down by about 3.5% net for the third quarter, bringing its year-to-date return to 13.3% net. Corsair Select lost 9.1% net, bringing its year-to-date performance to 15.3% net. The HFRI – EHI was down 0.5% for the third quarter but is up 11.5% year to date, while the S&P 500 returned 0.6% Read More
Here is what Morgan Stanley CEO, James P. Gorman had to say about his firm’s results: “This quarter is further evidence that Morgan Stanley has rebounded from the financial crisis of 2008 and is in a significantly stronger position. Revenues of $8.9 billion, excluding the impact of DVA, were higher on both a year-over-year and a quarter-over-quarter basis. Of particular note was the strength in sales and trading, which showed broad-based gains across products and regions” (streetofwalls.com).
As you can see, despite investment banking revenues being down 16%, the firm had other bright spots that you should be focusing on more. However, Morgan Stanley just fell through $17 to $16.92, down almost 3% on the day.
Interestingly enough, Citigroup was the only investment bank to post a positive boost in fees. The firm saw its investment banking fees up 2.3% to $811 million. Citigroup is usually considered one of the laggards in the industry during recent years and JP Morgan is considered top tier. Now the tides have turned and the usual weak firm topped everyone while the usual outperformer was dead last. Finance can be volatile and you certainly can not count on specific numbers until they are reported.
The drop in fees for all the investment banks just shows that there is still some recovery left for investment banks. However, as we saw with Morgan Stanley, other divisions within the investment bank showed much improvement and impressive accomplishments. Right now, a lot of these investment banking firms are being targeted by investors who bought faulty mortgages during the financial crisis and are now suing the bank where they got the mortgage. Many executives have commented that this could hurt underlying numbers as they are being hit hard with lawsuits and legal fees. Watch for these cases to continue and how the bank responds.