US investment bank Morgan Stanley on Wednesday said quarterly profit dropped 24 percent on sharply lower trading and underwriting, and fell short of its forecast last week due to costs from Parmalat SpA litigation. The banking, brokerage and credit card company said net income slid to $928 million, or 86 cents a share, for the second quarter ended May 31, from $1.22 billion, or $1.10 a share, in the year-earlier period.
Analysts, on average, expected Morgan Stanley to earn 91 cents a share, according to a survey by Reuters Estimates.
Its shares rose 43 cents to $51.40 in opening Wednesday trade on the New York Stock Exchange.
The most recent results included $140 million of net expenses related to legal matters. The company initiated Parmalat settlement talks after it issued a profit warning on June 13.
As it had cautioned, net revenue fell 9 percent to $6.04 billion from a year ago, but topped the analysts' average estimate of $5.6 billion.
Revenue at the institutional securities division fell 15 percent amid a 28 percent decline in fixed-income sales and against a strong trading quarter last year. Underwriting revenue dropped 33 percent, including a steep decline in stock offerings.
Stock underwriting results fell by one-half, compared with a 31 percent decline industrywide. Since Chief Executive Philip Purcell shook up management at the end of March, Morgan Stanley has been roiled by the departures of more than 30 executives. Equities was the hardest-hit area.
As expected, Morgan Stanley was strong in financial advising as an increase in mergers and acquisitions activity fuelled a 10 percent jump in fees. Morgan Stanley is the top arranger of announced M&A transactions this year.
Meanwhile, the bank's much-maligned individual investor businesses remained sluggish.
Net revenue at its Discover credit card division was flat and managed credit card loans were unchanged at $46.8 billion versus a year ago, while investment management revenue fell 7 percent.
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