While banks have been appreciatingâ€”especially high-fidelity banksâ€”investment banks, especially ones focused on sales and trading, are going through the thicket. Morgan Stanley represents a company in such an industry sector; with the amount of weight on global capital markets itâ€™s hard to see an end in sight.
Take, for example, the sheer amount of credit losses that sovereign nations and municipalities have been suffering in 2012 alone. Litigation has also costed companies within this industry considerably with large settlement payments and losses in goodwill. In addition, regulation will continue to weigh on the industry, heavily. With some observers also pointing to a new wave of home foreclosures in the states, Morgan Stanley will remain entrenched in a thorny economy, based on its focus on speculative markets.
As described by the companyâ€™s investor relations, quarterly performance resulted in a drop in revenues of 24% to a total of $6.6 billion. A near $400 million charge was experienced in the quarter by way of a Moodyâ€™s downgrade in their credit rating prompting a $2.9 billion in credit support for its trading activity. Excluding this charge, also known as, DVAâ€”a charge due to credit spreads and other credit factorsâ€” the revenue would have been a full $7 billion.
There were a couple bright spots adding to a silver lining for the poor quarter including the completion of a fully integrated wealth management business with Smith Barney and their recognition for being a powerhouse in global IPO underwriting. Morgan Stanley was named number one in global IPO. In the earnings call, the Facebook IPO was highlighted with a successful raising of $16 billion in capital. Another successful IPO, Global Venutres, in the recent quarter was highlighted.
The company will focus on pairing its fixed-income businesses; such as, bonds and its derivatives. They will also focus on its global wealth management business, which offers a promise for the future.
The latest reports rumor a sale of Morgan Stanleyâ€™s commodities business to Qatar. As reported by Reuters online, â€œMorgan Stanley is in advanced talks over selling a stake in its multibillion-dollar commodities trading division to Qatar’s sovereign wealth fundâ€¦â€