Wall Street bank Morgan Stanley has reported a quarterly profit that fell far short of market expectations and offered little hope that things would improve anytime soon, capping a generally gloomy quarter for big US banks.
Morgan Stanley's profit slumped for the second straight quarter, as uncertainty about the timing of a US interest rate hike and worries about China's cooling economy sent shudders through global markets.
The bank's shares tumbled as much as 6.9% in morning trading - the biggest percentage drop since November 2012 - wiping out about $4.6bn in market value.
Chief Financial Officer Jonathan Pruzan offered a subdued outlook for the current quarter, although he said there had been a modest rebound in global markets.
"So far in the quarter, some of the key drivers that will likely drive client activity are mixed," Mr Pruzan said on a call with analysts.
"Drivers of near-term uncertainty, including the Fed, China, commodities and global growth, have not diminished," he added.
Financial markets have been on tenterhooks for months, trying to gauge when the US Federal Reserve will raise interest rates for the first time since 2006.
Morgan Stanley said adjusted revenue in its business that sells and trades fixed-income securities and commodities (FIC) fell 42% to $583m in the quarter ended 30 September. Overall profit attributable to shareholders fell 42.4%.
The FIC results suggest a tough road ahead for Ted Pick, the former global equities head who was recently promoted to lead the bank's entire sales and trading business.
Morgan Stanley joins arch rival Goldman Sachs as well as Citigroup, Bank of America Corp, and JPMorgan Chase in reporting grim results from trading, a business that many of them are trying to become less reliant on.
Goldman's profit also plunged, by 38%, as its revenue from trading bonds, currencies and commodities fell by a third to $1.46bn, although the bank has said it remains committed to trading.
"We don't think this quarter says anything negative about Morgan Stanley's safety and soundness, but it looks like one they'd like to forget ASAP," Oppenheimer analyst Chris Kotowski said.
Revenue in the bank's increasingly important wealth management business fell 3.5% to $3.64bn, but accounted for 46.9% of revenue, compared with 42.4% in the same quarter last year.
The pre-tax margin in the wealth business expanded to 23% from 21%, within Chief Executive James Gorman's target of 22%-25% by the end of the year.
Morgan Stanley has been focusing on wealth management since the financial crisis and focuses less on volatile businesses such as bond trading to free up capital.
