Morgan Stanley: The market's getting better, but our clients aren't

The corporate logo of financial firm Morgan Stanley is pictured on the company's world headquarters in the Manhattan borough of New York City, in this January 20, 2015 file photo. Morgan Stanely plans to cut $1 billion in costs by 2017 by outsourcing some operations and making greater use of technology, Chief Executive James Gorman said January 19, 2016. REUTERS/Mike Segar/Files · Yahoo Finance · REUTERS

Sam Ro · Contributor

Mon, Apr 18, 2016, 5:41 AM

Morgan Stanley's (MS) earnings plunged from a year ago.

The investment bank reported Q1 earnings of $1.1 billion or $0.55 per share. This was down from $2.4 billion or $1.18 per share a year ago. However, this was better than the $0.47 expected by analysts.

Shares are up 2% in pre-market trading.

“The first quarter was characterized by challenging market conditions and muted client activity," CEO James Gorman said. "Against that backdrop, our businesses delivered stable results."

Wall Street's investment banks had a rough first quarter as market volatility put a freeze on deals, which also led to lower trading activity. JPMorgan (JPM), Bank of America (BAC), and Citi (C) echoed these woes.

Investment banking revenue fell 16% to just $990 million. Trading revenue plummeted 45% to $1.89 billion. Sales and trading revenue in equities, fixed income and commodites all fell.

Morgan Stanley's institutional business got slammed by weak investment banking and trading. (Image: Morgan Stanley)

The market's recovering, but clients aren't

There was good news and bad news in Morgan Stanley's report.

The good news is it could've been worse. Investors and analysts expected results to be bad. But not only are the results not worse, they're actually better than expected.

The bad news is that clients are really responding to improving market conditions.

"While we see some signs of market recovery, global uncertainties continue to weigh on investor activity," Gorman said.

As usual, clients tend to behave on a lag as they work through the memory of recent turmoil and assess the ever-present risks in the market.

"We remain focused on executing against our priorities, helping clients navigate difficult markets while controlling our expenses and managing risk prudently."

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Sam Ro is managing editor at Yahoo Finance

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