Major Events in Wall Street This Week
With JPMorgan Chase & Co. (NYSE: JPM) and Morgan Stanley (NYSE: MS) announcing that sales in that unit more than halved, fears that investment banking would take a significant blow throughout Wall Street in the second quarter appeared to be verified on Thursday.
JPMorgan’s investment banking revenue was $1.4 billion, down 61 percent from last year’s last quarter. This decline was mostly attributable to a 54 percent fee decline across all products. However, the bank also had revenue markdowns of around $250 million on some loans.
Revenues from investment banking at Morgan Stanley dropped by 55% to $1.1 billion. At the same time, the advising division saw a 10% decline. Revenue from equity and fixed income underwriting fell by 86% and 49%, respectively. Both lenders ascribed the downturn to the difficult macroeconomic climate, which included rising volatility brought on by the situation in Ukraine and which made businesses wary of entering the market to conduct transactions and obtain stock and loans.
While that volatility increased fixed income and equity trading revenues at JPMorgan by 15% and at Morgan Stanley by 8% as clients hurried to restructure their portfolios, it was insufficient to counteract the decline in deals following a record-breaking quarter last year that was largely fueled by loose monetary policy. Those spigots have been shut off by the aggressive US Federal Reserve interest rate increases.
Experts’ Tips for Safe Investment
According to Chris O’Keefe, Lead Portfolio Manager of Logan Capital Management Risk-taking in investment banking has plummeted off a cliff. It should be no surprise that advice and equity underwriting were put on hold due to recessionary concerns. Customers are following the advice to don’t fight the Fed.
Analysts claim that Morgan Stanley’s investment banking fees fell short of expectations. JPMorgan’s capital markets division also underperformed, boding poorly for other Wall Street banks. The other two transaction powerhouses, Citigroup Inc. (NYSE: C) and Goldman Sachs Group (NYSE: GS), will report on Friday and Monday, respectively.
Executives from Morgan Stanley and JPMorgan told analysts that while their deal pipelines were strong, agreements might not conclude because of the hazy economic and market environment. On a different call later Thursday morning, Yeshaya stated that businesses and institutions continued to make agreements on favorable market days. The market is operating from that standpoint, she continued.
