Deal-Making Drought

Deal-Making Drought

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  • Morgan Stanley reported a 19% decrease in first-quarter profit compared to last year, mainly due to a slowdown in deal making. The bank's profit was $2.98 billion, or $1.70 per share, exceeding analysts' expectations of $1.63 per share, according to FactSet. While revenue declined 2% to $14.52 billion, it beat the estimated revenue of $13.97 billion. However, investment banking revenue, including fees from mergers and acquisitions, fell 24% from the previous year to $1.25 billion in the first quarter.
  • Many corporate executives are hesitant to pursue deals or take their companies public due to higher interest rates, a possible recession, and an unpredictable stock market. Morgan Stanley's investment banking revenue fell by 24%, but its wealth-management business saw an 11% increase in revenue, accounting for 45% of the company's total revenue. JPMorgan and Goldman also experienced a decline in investment banking revenue, with falls of 19% and 26%, respectively.

Why it matters

Last month, the U.S. banking sector experienced the collapses of Silvergate Capital Corp., Silicon Valley Bank, and Signature Bank. To prevent a run on deposits at First Republic Bank, Morgan Stanley and other major U.S. banks provided $2.5 billion in uninsured deposits. Some bankers view the current crisis as an opportunity for midsize deals valued between single-digit billions and below $20 billion. Meanwhile, others anticipate an increase in M&A activity among smaller banks as they may be more willing to be acquired.


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