JPMorgan, Morgan Stanley Zapped By Skidding Earnings

Investment banking revenues at JPMorgan Chase & Co. and Morgan Stanley fell by more than half in the second quarter, confirming apprehensions that Wall Street's investment banking business would take a significant hit in the second quarter, Saeed Azhar and David Henry reported for Reuters.

Photo Insert: Wells Fargo analysts noted that JPMorgan's capital markets business missed projections, which "bodes negatively for other Wall St banks."

Investment banking revenue at JPMorgan decreased by 61 percent year-over-year to $1.4 billion, mostly due to a 54 percent drop in fees across all products. The bank also recorded markdowns of around $250 million on some loans in its investment banking businesses.

Morgan Stanley reported a 55 percent decline in investment banking revenues to $1.1 billion, and a 10 percent decline in its advising division. Additionally, equity and fixed income underwriting revenue decreased by 86% and 49%, respectively.

Both institutions ascribed the decline to the adverse macroeconomic environment, notably the escalating instability caused by the Ukraine conflict, which discouraged enterprises from entering the market to conduct transactions and raise equity and loans.

While volatility increased fixed income and equity trading revenues by 15% at JPMorgan and by 8% at Morgan Stanley, it was not enough to overcome the decline in deals following a record-breaking quarter. These faucets have been shut off by aggressive interest rate hikes by the Federal Reserve of the United States.

According to analysts, Morgan Stanley's investment banking fees fell short of consensus projections. Wells Fargo analysts noted that JPMorgan's capital markets business missed projections, which "bodes negatively for other Wall St banks."

Citigroup Inc. and Goldman Sachs Group, the two major deal titans, will report respectively on Friday and Monday.

According to Michelle Price of Reuters, Morgan Stanley and JPMorgan officials told analysts that their deal pipelines were robust, but that agreements may not conclude owing to unpredictable economic and market conditions.

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