Morgan Stanley’s MS second-quarter 2020 results, slated to be announced on Jul 16, are likely to get support from the rise in market volatility along with higher client activities, which resulted from the continued uncertainty related to the coronavirus pandemic. Therefore, trading income (one of the major revenue components for the company) is expected to have improved in the quarter, thus, supporting overall performance to some extent.
Like the first quarter, the pandemic along with concerns surrounding its impact on the economy weighed on investor sentiments. Thus, investors kept moving toward safe havens like Treasury bonds and other commodities like gold. Therefore, Morgan Stanley’s equity and fixed income markets revenues are expected to have improved in the to-be-reported quarter.
The Zacks Consensus Estimate for equity trading revenues is pegged at $2.16 billion for the second quarter, which suggests a rise of 1.2% from the prior-year quarter’s reported figure. Also, the consensus estimates for fixed income trading revenues of $1.51 billion indicates a year-over-year jump of 33.6%.
The consensus estimates for trading revenues, which is pegged at $3.62 billion, suggests growth of 9.5% from the year-ago figure.
Now, let’s take a look at the other factors that are expected to have influenced Morgan Stanley’s second-quarter performance:
Underwriting fees may offer marginal or no support: Amid near-zero interest rates and the Federal Reserve’s bond purchase program, which commenced on Mar 23, bond issuance volumes were strong in the quarter as companies took this as an opportunity to bolster their balance sheets. Hence, growth in Morgan Stanley’s debt underwriting fees (accounting for more than 50% of total underwriting fees) is expected to have been solid. The consensus estimates for debt underwriting fees is pegged at $455 million, suggesting an increase of 8.3% from the previous-year quarter’s reported figure.
As companies tried to build liquidity to tide over the pandemic-led crisis, there was a substantial rise in follow-up equity issuances in the second quarter, which is expected to have provided considerable support to equity underwriting revenues. However, IPO activities declined in the quarter before picking up a bit in the last weeks of June. Thus, Morgan Stanley’s equity underwriting fees are not expected to have improved significantly in the second quarter. Compared with the prior-year quarter, the company is expected to have witnessed a decline in the same. The Zacks Consensus Estimate for equity underwriting fees of $427 million indicates a year-over-year decline of 21.8%.
The consensus estimates for total underwriting fees of $882 million indicates an 8.7% year-over-year decline.
Advisory income likely to decline: Deal making went for a toss in the to-be-reported quarter as the coronavirus pandemic continued to wreak havoc. The economy and business activities almost came to a grinding halt. Also, global M&As plunged to the lowest level in more than a decade. Thus, Morgan Stanley’s advisory fees are likely to have been adversely impacted.
The consensus estimate for advisory fees is pegged at $335 million, suggesting a decrease of 33.8% from the prior-year quarter’s reported figure.
Net interest income (NII) growth likely to be hurt: During the quarter, commercial and industrial loans witnessed significant growth. However, due to the continued uncertainty related to the virus outbreak, overall loan growth remained soft.
Despite decent growth in loans, Morgan Stanley’s NII is likely to have been hurt because of lower rates. Notably, the Federal Reserve’s move to cut interest rates to near zero in March to support the U.S. economy from the virus-induced slowdown is expected to have hampered net interest yield in the to-be-reported quarter as well.
Expenses may witness a rise: Expense reduction, which has long been the main strategy of the company to remain profitable, is not likely to have been a major support in the quarter. As it continues to make investments in the franchise, overall costs are likely to have remained elevated in the to-be-reported quarter.
However, with most of the branches either closed or working with limited staff, overhead expenses are likely to have fallen to an extent.
All information on this website is of a general nature. The information is not adapted to conditions that are specific to your person or entity. The information provided can not be considered as personal, professional or legal advice or investment advice to the user.
Signal Factory is not represented as a registered investment consultant or brokerage dealer nor offers to buy or sell any of the financial instruments mentioned in the service offered.
While Signal Factory believes that the content provided is accurate, there are no explicit or implied warranties of accuracy. The information provided is believed to be reliable; Signal Factory does not guarantee the accuracy or completeness of the information provided. Third parties refer to Signal Factory to provide technology and information if a third party fails, and then there is a risk that the information may be delayed or not delivered at all.
All information and comments contained on this website, including but not limited to, opinions, analyzes, news, prices, research, and general, do not constitute investment advice or an invitation to buy or sell any type of instrument. Signal Factory assumes no responsibility for any loss or damage that may result, directly or indirectly, from the use or dependence on such information.
All information contained on this web site is a personal opinion or belief of the author. None of these data is a recommendation or financial advice in any sense, also within the meaning of any commercial act or law. Writers, publishers and affiliates of Signal Factory are not responsible for your trading in any way.
The information and opinions contained in the site are provided for information only and for educational reasons, should never be considered as direct or indirect advice to open a trading account and / or invest money in Forex trading with any Forex company . Signal Factory assumes no responsibility for any decisions taken by the user to create a merchant account with any of the brokers listed on this website. Anyone who decides to set up a merchant account or use the services, free of charge or paid, to any of the Forex companies mentioned on this website, bears full responsibility for their actions.
Any institution that offers a service and is listed on this website, including forex brokers, financial companies and other institutions, is present only for informational purposes. All ratings, ratings, banners, reviews, or other information found for any of the above-mentioned institutions are provided in a strictly objective manner and according to the best possible reflection of the materials on the official website of the company.
Forex trading is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against merchants. Before each Forex investment, you should carefully consider your goals, past experience and risk level. The opinions and data contained on this site should not be considered as suggestions or advice for the sale or purchase of currency or other instruments. Past results do not show or guarantee future results.
Neither Signal Factory nor its affiliates ensure the accuracy of the content provided on this Site. You explicitly agree that viewing, visiting or using this website is at your own risk.