Fixed income revenue down 50% at Morgan Stanley

Fixed income and commodities sales again identified as major contributor to lower revenues, though cash equities are also struggling.

Fixed income & commodities (FIC) sales at Morgan Stanley have more than halved in the first quarter of 2016, painting a dire picture for the division.

Q1 figures show it was a tough few months for trading, with equities sales also falling.

FIC revenue dropped from $1.9 billion in the first three months of 2015 to just $873 million this year. Morgan Stanley said lower commodity revenues were linked to depressed energy prices. It also reported lower levels of client activity in rates and FX amid a challenging credit environment.

Equity sales saw a relatively small decline, down from $2.3 billion to £2.1 billion year-on-year. Volatility in global equity markets and declining interest in cash equities were cited as reasons in the quarterly results statement.

Investment services also saw a dire year, with revenues of $32 million, down from £112 million last year, which Morgan Stanley said was due to investments associated with its compensation plans.

However, the institutional securities business performed better in its advice business. Advisory revenues linked to M&A activity increased from $471 million in 2015 to $591 million this year. However, underwriting revenues for equities dropped from $307 million to $160 million, while fixed income underwriting sales fell from $395 million to $239 million.

Overall revenue for the bank’s institutional securities division saw revenue fall 32% from $5.46 billion to $3.71 billion. Pre-tax income halved from $1.81 billion to $908 million.

James Gorman, chairman and chief executive officer, said, “The first quarter was characterised by challenging market conditions and muted client activity. Against that backdrop, our businesses delivered stable results. While we see some signs of market recovery, global uncertainties continue to weigh on investor activity.”

In December, Morgan Stanley confirmed it would be making significant cuts to its FIC division.