Morgan Stanley’s first quarter results are out. So are Bank of America’s. They tell a tale similar to that of other firms: better times sales and trading - especially in fixed income, worse times in M&A.
One thing in particular stands out: Morgan Stanley’s fixed income performance. It is good: very good. Excluding DVA, Morgan Stanley’s revenues were up 34% year-on-year in the first quarter. Goldman’s FICC revenues were down 17% over the same period. Bank of America’s FICC revenues were also up, although less impressively: a mere 11%.
Morgan Stanley’s performance is all the more exciting in light of a recent note from Glenn Schorr at Nomura. Schorr had argued that Morgan Stanley’s fixed income results would be similar to Goldman’s on the grounds that the two banks have a similar client franchise, and that Citi and JPMorgan’s results were superior because they had a lot of corporate customers (Goldman being more focused on hedge funds and asset managers). Apparently not. It’s also worth noting that Morgan Stanley achieved its big revenue gain without taking more risk: like Goldman, it cut VaR 30%.
Schorr’s Goldman note (written before BofA and Morgan Stanley reported) includes the following graph noting that JPMorgan has been the big winner of fixed income market share since 2009 and that Goldman has been the big loser. Today’s results suggest Morgan Stanley has been a big winner too. In its defence, Goldman predicted its fixed income franchise wouldn’t maintain the gains it made post-crisis. But it may not have foreseen quite such a significant fall from grace.
In other news related to Morgan Stanley: overall compensation at its institutional securities division rose 10% year on year. The business made a loss of $313m, but this was attributable to a negative accounting charge of $2bn related to the cost of buying back the bank’s own debt.
Lawrence Fink gives a very good reason why Morgan Stanley’s FICC success may not last. (Bloomberg)
It’s ok, Blackrock’s new system won’t compete with bond traders. (Financial Times)
Cazenove Capital Management, hiring in Europe. (Investment Europe)
Chief Executive Officer Brian T. Moynihan regards trading units run by Thomas K. Montag as critical to reviving income and had warned he would cut costs more deeply if results didn’t improve. (Bloomberg)
Politics hits Josef Ackermann’s last days at Deutsche: “At a recent meeting, Mr. Ackermann and his successors appeared unwilling to even look at each other, a person familiar with the matter said.” (WSJ)
Macquarie says while in 2006 investment banking made up just 11% of Standard Chartered’s profits, the number increased to 27% in 2011, mostly due to activity in Asia. (WSJ)
Fund manager leaves Moore to set up own hedge fund, fails, returns to Moore. (Finalternatives)
The chair of Goldman’s compensation committee was once chair of the compensation committee at a company which backdated its stock options. (Financial Times)
Newly qualified associates at Allen & Overy now on £61,500. Lawyers two to three years post qualification now on £68,500 and £74,500 respectively. (City Am)
Barclays is moving Thomas Kalaris to New York, where he will run the US division alongside Jerry Del Missier. (The Times)
Goldman insider trader says he gave away thousands of dollars to the homeless. (Bloomberg)
Impress your interviewer by discussing overnight indexed swap discounting as an alternative to LIBOR swap rates. (Boston University School of Management)