NEW YORK, USA — It's tough being a big bank these days.
Morgan Stanley, the storied investment house, reported that its revenue was down sharply for April through June and its profit missed Wall Street expectations yesterday. Its stock was clobbered — down more than five per cent.
The report capped a dismal season for the banking industry. This spring was marked by choppy financial markets, concern about the world economy, awkward adjustments to new regulations and one scandal after another.
"It was a tough quarter and a disappointing quarter," Morgan Stanley CEO James Gorman said.
Of the country's six megabanks, only Wells Fargo — which brags about relying on plain-vanilla ways of making money, like taking deposits and making loans — was able to pull in more revenue than it did a year ago.
JPMorgan Chase was the only one of the Big Six that didn't slash jobs, but it had its own black eye — a surprise trading loss that ballooned to almost US$6 billion and embarrassed CEO Jamie Dimon.
For Morgan Stanley, the embarrassment was the stock market debut of Facebook in May. Leading the public offering was supposed to be a coup for the bank, but instead it brought angry clients, regulatory investigations and lawsuits.
The headaches are still piling up for banks. In late June, Moody's slashed the debt ratings for every megabank except Wells Fargo. The following week, the British bank Barclays admitted that it had tampered with a critical global interest rate.
So far, the rate-fixing fallout has been contained to Barclays. But Bank of America, Citigroup and JPMorgan also help set the interest rate in question and are all but certain to face inquiries from regulators.
The bleak spring emphasises the long shadow of the financial crisis, now almost four years behind the banks. They are still working out how to be successful in an environment of tougher regulation and public outrage.
"We don't see much relief coming soon, and it's forcing a lot of banks to say, 'You know, this is more than what we can ride through, this is more than just temporary,"' said Bert Ely, a banking consultant in Alexandria, Virginia.
He said banks have decided that they must "get more serious about cost-cutting and getting out of businesses that they don't make much money in".
Together, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo slashed nearly 24,000 jobs over the year, or about 2.6 per cent of their total work force.
The sharpest cuts were at Goldman Sachs, which shed nine per cent of its jobs, Morgan Stanley, which cut six per cent, and Bank of America, which cut four per cent.
Morgan Stanley also said yesterday that it spent 21 per cent less on compensation and benefits. It's bringing in smaller classes of trainees and moving people who don't need to be in New York to cheaper cities like Baltimore.