Morgan Stanley Q1 2025 Earnings Forecast: Revenue Drops Amid Investment Banking Slump, Shares Rise

Morgan Stanley, recognized as one of the 30 Global Systemically Important Banks (G-SIBs), is projected to experience a notable decrease in Q1 2024 earnings compared to the previous year. The primary factors contributing to this decline include a sharp reduction in investment banking revenue and a slowdown in lending activity triggered by last month's banking sector disruptions.

Net income is forecasted to fall approximately 19% to $3 billion, with investment banking revenue expected to plunge by 26% year-over-year. Total revenue is anticipated to decrease by 5%, settling just above $14 billion. Earnings per share (EPS) are predicted at $1.80, marking a 12% decline from Q1 2023. Morgan Stanley plans to release its Q1 earnings report before market open on Wednesday, April 19, 2024.

Key Insights:

• Net income projected at $3 billion, down 19% year-over-year due to a 26% drop in investment banking revenue.
• Total revenue expected to decline 5% to $14 billion compared to last year.
• EPS forecasted at $1.80, reflecting a 12% decrease from Q1 2023.

The slowdown in global dealmaking, mergers and acquisitions (M&A), and initial public offerings (IPOs) has significantly impacted Morgan Stanley's investment banking division. Client commissions and fees are estimated to have decreased by nearly 18% compared to the previous year. According to Ernst & Young, global IPO volumes dropped 8% in Q1 2024, continuing a downward trend that began last year after a steep fall from 2021 levels.

Despite the challenges in investment banking, Morgan Stanley’s earnings are partially supported by a market rebound in Q1. Trading revenues are expected to surge 35% from the previous quarter, reaching $4.1 billion, driven by strong performance in both equity and fixed-income trading.

Lending activity is also expected to provide some relief, with loan balances projected to increase 11% to $217 billion. Net interest income may rise 12% to $2.5 billion, fueled by robust loan issuance early in the quarter, especially in commercial and real estate sectors. However, lending momentum slowed in March amid uncertainty following the collapses of Silicon Valley Bank and Signature Bank.

Year-to-date, Morgan Stanley shares have gained 3%, outperforming the broader S&P 500 Financial Sector, which has declined 4% so far in 2024.

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