Amid a fairly bleak atmosphere after Wall Street closed down on Wednesday Morgan Stanley (NYSE:MS) announced its earnings this morning for the first quarter of 2012. The company announced earnings per share of $0.71 on revenue of $6.94 billion. Analysts were wondering about downside risks surrounding the company after Goldman Sachs reported in its earnings that client activity had been low in some areas. That company announced a lower revenue for the quarter as well. Today’s announcement took that worry away an blew analysts out of the water.
Analysts expected earnings of $0.45 per share. The same had expected revenue of around 7.31 billion. As the quarter has dragged on estimates for the company’s performance have gotten lower and lower. The company earned $9.49 billion and $0.46 in earnings per share. The disappointing year on year performance will not build confidence in the investment market in general has been blown away by Morgan Stanley’s results. The big investment banks have been under performing recently and it leads to questions being asked about the industry as a whole.
Investors in the company have been worried by the company’s most recent quarter in which it reported a loss. In Q4 2011 the firm lost $250 million, that came after profits in the firs three quarters of year. The company earned $968 million, $1.19 billion and $2.2 billion in the first third and fourth quarters of 2011 respectively. The loss in revenue the company has suffered through is the clear motivator in the earnings problem.
Revenues are down across the board in investment banking. Goldman managed to raise its profit by going on a huge cost cutting spree, losing 2000 employees. The company’s main boost to earnings in the quarter was the pay off of a deal made in 2008 to restore confidence in the firm in the midst of the financial crisis. The trend in revenues has many causes some highlighted in today’s report.
Investment banking is changing. The climate surrounding the industry and the atmosphere within it are both changing. Clients are demanding lower fees and banks are avoiding. Many analysts are pointing to a weakness in stocks for the period to come advocating more creative investment approaches a mood that doesn’t help the banks. Fears surround the effect of regulatory pressure and the Dodd Frank bill. Along with the economy, which is still depressed, these factors have led to a lull in the industry that may not be recovered without creative solutions.
Morgan Stanley will open a at 17.66 today after a disappointing day of trading Wednesday that left the company down just over 1%.