Now we’ll get a real test of how forgiving the market is willing to be when it comes to big bank results and FICC fumbles.
Wall Street came into Thursday 0-4 on the FICC front as Citi, JPMorgan, BofA and Goldman all turned in lackluster fixed income trading results for Q4 and now, you can add Morgan Stanley to the list.
The bank’s Q4 FICC sales and trading revenue came in at just $564 million versus estimates of $822.5 million. As we’re fond of putting it: “Juuuust a bit outside.” Just like its peers, Morgan cited “unfavorable market making conditions”, wider credit spreads and volatile rates markets to explain the FICC miss. That weakness was “partially offset by increases in commodities revenues”, the bank says.
That FICC number represents a truly awful 30% decline, making Gorman the proud owner of the worst FI results on Wall Street for Q4.
In equities, revenues were $1.9 billion. That’s basically unchanged from a year ago and it’s below consensus too ($2.01 billion).
IB revenue on the whole beat, coming in at $1.49 billion versus estimates of $1.35 billion, and it looks like that’s (unsurprisingly) due to advisory revenues jumping thanks to M&A. Both equity and fixed income underwriting revenues dove from a year earlier.
The top and bottom line were both misses. Adjusted EPS was $0.73, missing even the low end of the range and well short of estimates ($0.89). Q4 revenue was $8.55 billion, woefully short of the $9.35 billion folks were expecting and again below the lowest estimate ($8.97 billion).
In wealth management, Q4’s pre-tax margin was 24.4% – that doesn’t sound great, although I’m no authority on that. Net revenue there was $4.14 billion – that’s down from a year ago.
This is all a big let down versus Q3 and really, versus the bank’s other quarters in 2018 which were all impressive.
I’m not entirely sure what you want to make of this, but suffice to say it’s going to be a lot harder for the market to ignore this set of numbers on the way to giving Morgan the benefit of the doubt the way investors did for Citi and JPM on Monday and Tuesday.
The shares were crushed in the premarket following the report.