Morgan Stanley’s Institutional Services Division Had A Bad Q4 Across Almost All Metrics

james gorman crown

We just reported on Morgan Stanley’s full earnings.

Taking a closer look at the ‘Institutional Services’ division (investment banking and trading), show weakness across most of its businesses.

That’s not surprising, given the unit post a loss of $779 million for the quarter. 

But where did this loss come from?

Here’s a sampling of the bad news for the fourth quarter:

  • Advisory revenues dropped 16% to $406 million
  • Underwriting revenues dropped 54% to $477 million, with equity underwriting seeing a particularly sharp 71% decline to $189 million. Fixed income underwriting dropped 22% to $288 million
  • Fixed Income and Commodities sales and trading posted a $257 net loss, related to part to the firm’s MBIA settlement
  • Equity sales and trading net revenues of $1.3 billion were a lone bright spot. Revenues over the same period last year were $1.1 billion.

The bottom line is that with this type of performance in the fourth quarter, Morgan Stanley’s recent move to cap compensation, which has been called a ‘quiet downsizing’, seems like a rational response to declining profitability in the most heavily compensated division posted an almost $800 million dollar loss.