Morgan Stanley (MS), the investment bank that’s shrinking its fixed-income unit, lost money from trading on seven days in the third quarter, down from eight a year earlier.
Traders generated more than $100 million on one day, a decrease from nine in the third quarter of 2012, the New York-based company said yesterday in a regulatory filing. None of the daily losses exceeded the bank’s so-called value-at-risk, an estimate of potential trading losses.
Morgan Stanley posted the highest equity-trading revenue among the five biggest Wall Street banks, while also generating the least fixed-income trading revenue. The firm already has reached its 2014 goal of cutting capital used by the fixed-income unit as part of Chief Executive Officer James Gorman’s plan to double return on equity.
Those cuts in risk-weighted assets and expense reductions mean Morgan Stanley can reach its ROE goals for fixed-income trading even if annual revenue falls below $6 billion, the average for the past three years, Chief Financial Officer Ruth Porat said last month. The firm has generated $3.5 billion from the business this year, excluding accounting charges, the lowest revenue for the first nine months since the credit crisis.
Morgan Stanley produced $5.11 billion from equity trading in the period, up 39 percent from a year earlier and the biggest jump among the nine largest global investment banks.
The firm also said its holdings of physical commodities fell to $3.41 billion, the lowest level in more than four years. The Federal Reserve is reviewing banks’ ability to own physical-commodity businesses, and Gorman has said the firm could pursue a deal related to the unit if he found one that worked.