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Morgan Stanley 2Q profits decline as trading slows down

July 18, 2019
FILE - This March 1, 2017, file photo shows the Morgan Stanley headquarters in New York. Morgan Stanley reports earnings Thursday, July 18, 2019. (AP Photo/Mark Lennihan, File)
FILE - This March 1, 2017, file photo shows the Morgan Stanley headquarters in New York. Morgan Stanley reports earnings Thursday, July 18, 2019. (AP Photo/Mark Lennihan, File)

NEW YORK (AP) — Morgan Stanley’s second-quarter profits fell by 9% from a year ago, as Wall Street’s smallest big bank did not benefit as much from rising interest rates and instead was impacted by a slowdown in trading.

The New York-based company said it earned a profit of $2.2 billion, or $1.23 per share, down from a profit of $2.27 billion, or $1.30 per share, a year earlier. Analysts polled by FactSet were looking for Morgan Stanley to earn $1.14 a share.

Unlike its bigger competitors, Morgan Stanley is not as positively impacted by higher interest rates because the bank’s primary businesses involve trading, advising companies on deal-making, and its steadier wealth management division.

Other banks have reported a slow quarter in trading and advising, and Morgan Stanley’s results were no different. Investment banking revenues were down 13% from a year earlier, and sales and trading revenues were down 12% from a year ago.

Morgan Stanley’s wealth management business had a better quarter. Net revenues rose from $4.33 billion to $4.41 billion, while expenses were mostly unchanged. Under Chief Executive James Gorman, Morgan Stanley has shifted some of its business into less volatile industries like wealth management to avoid wild swings in its profits that used to happen with trading.

Morgan Stanley’s return on tangible common equity was 12.8% in the quarter, down from 14.9% a year earlier. Return on equity is a measurement on how well an investment bank is doing with the assets it holds. Banks like Morgan Stanley aim to keep return on equity above 10%.

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