Morgan Stanley's wealth management net income slumped 8% year-over-year, part of an overall weak quarter for the firm that saw companywide profits drop 53%.

Morgan said that net income for its wealth management unit fell $493 million for the quarter from $535 million for the year-ago period. Senior leadership blamed the weak showing partly on volatile markets during the first quarter and "muted client activity."

Commission-based revenue for the wealth management unit fell 22% year-over-year, falling to $412 million from $526 million for the year-ago period. That contributed to an overall decline in revenues of 4%.

The drop was partially offset by growth in the firm's banking and lending business, which has been a key focus for Morgan Stanley's leadership.

Net interest income rose 21% to $831 million.

CEO James Gorman has recently been cutting costs across the company, particularly in Morgan's fixed-income business.

"If these markets were to continue as is, our goals will be extremely difficult to achieve, and we would therefore take additional appropriate actions," Gorman said in a conference call with analysts. The company is reviewing every product and business to "convince ourselves that we need our footprint as its currently configured," he said.


CFO Jonathan Pruzan told analysts that while clients' risk appetite diminished during the first quarter, the Labor Department's new fiduciary rule has not been a factor in the company's performance.

Client assets were down 2% year-over-year, falling to $1.999 trillion. The firm reported $5.9 billion in fee-based asset flows for the quarter – down 48% from the prior quarter and 56% for the year-ago period.

Advisor headcount – at 15,888 – remained almost unchanged from the prior quarter.  Revenue per advisor slipped 4% year-over-year, falling to $923,000 from $959,000.


Companywide, first-quarter net income fell 53% to $1.13 billion, or 55 cents a share, from $2.39 billion, or $1.18, a year earlier. Profit surpassed the 47-cent average estimate of 22 analysts surveyed by Bloomberg. The decline in trading revenue was smaller than some analysts predicted.

Morgan dipped 0.3% to $25.69 at 11:13 a.m. in New York. The stock has dropped 19% this year, the worst performance in the 90-company Standard & Poor’s 500 Financials Index.

While Gorman has been shrinking the fixed-income trading division to emphasize the less-volatile wealth-management business, Morgan is still exposed to slumping markets that hurt results across Wall Street. The firm follows J.P. Morgan, Bank of America and Citigroup in lowering expenses to compensate for falling revenue. Goldman Sachs, which reports results Tuesday, is embarking on its biggest cost-cutting push in years, people with knowledge of the effort said last week.

With additional reporting from Bloomberg.

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