Morgan Stanley Faces Slowdown in Deal Making

Morgan Stanley (MS) is expected to report a decline in earnings in its second-quarter results, due to a slowdown in deal making. Analysts surveyed by FactSet forecast a 20% drop in profit to $2 billion, translating to earnings of $1.20 per share. Revenue is also expected to decrease slightly to $13 billion from $13.1 billion in the year-ago quarter.

However, Wall Street is cautious about Morgan Stanley’s investment banking division. Declining deal activity, driven by higher financing costs and a more challenging regulatory environment under President Biden, has impacted the division’s performance. Similar challenges have been faced by JPMorgan Chase (JPM) and Citigroup (C), as evident from their second-quarter results released on Friday. As a result, investors will be closely monitoring Morgan Stanley’s management of its asset and wealth management business, which is considered more predictable.

Beyond the earnings report, there is also interest in succession planning within the company. In May, CEO James Gorman announced his intention to step down from his role within the next year. Currently, there are three internal candidates in line for the position, with Gorman expected to continue as executive chairman even after relinquishing the CEO role.

On the same day, Bank of America (BAC) will also release its results, followed by Goldman Sachs (GS) on Wednesday.