Morgan Stanley (MS) Miss Costs Banks Earnings Sweep

A 24% decline in revenue prevented Morgan Stanley (NYSE: MS) from making it an even six for six for the big banks this earnings season.

The investment bank failed to beat consensus earnings estimates despite swinging to a $591 million profit a year after suffering a $558 million loss in the second quarter. Excluding accounting adjustments, the 16-cents-a-share profit trailed the 29 cents per share most analysts were projecting.

That made Morgan Stanley the only big bank to fall short of second-quarter earnings estimates. Each of the five other major U.S. financials beat analyst projections.

The earnings miss has pushed Morgan Stanley shares down 4.5% in early trading.

A 48% decline in the company’s trading revenue spelled doom for the big bank. Trading losses are no surprise given the volatile second-quarter market conditions. Fellow investment-banking giant Goldman Sachs (NYSE: GS) saw its earnings and revenue decline 11% and 9%, respectively, last quarter.

The difference was that Morgan Stanley’s fixed-income sales declined 70% year over year, while Goldman Sachs’ increased more than 40%. The bank also blamed its recent credit downgrade courtesy of Moody’s – which added billions in collateral – for the firm’s tough quarter.

Morgan Stanley shares have now fallen 12% for the year – most among the 10 largest U.S. banks.

Published by Wyatt Investment Research at