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Morgan Stanley's equities trading business saw net revenues plunge 14% at $2.46 billion driven by market falls and a drop in customer activity (well below expectations of $2.69 billion).

However, on the bright side of all the market volatility, fixed income is up 33% at $2.18 billion as a result of what the bank says is “high client engagement.”

Companywide revenue slid 12% to $13 billion, compared with analysts’ expectations of $13.2 billion, and net income dropped 29% to $2.63 billion.

In one of the anticipated bright spots, Morgan Stanley also fell short of expectations in Q3 net interest income, coming in at $2.0 billion - well below the $2.37 billion expected.

Morgan Stanley’s “big problem is it just doesn’t have as much NII/NIM exposure as the other banks,” according to Vital Knowledge founder Adam Crisafulli.

Additionally, the company’s investment-banking group posted $1.28 billion in revenue in the third quarter, down 55% from a year earlier.

Revenue from equity underwriting collapsed 78% to $218 million, while debt underwriting slumped 35% to $366 million. The slump also hit mergers-and-acquisitions bankers, with advisory revenue dropping 46%.

“While Investment Banking and Investment Management were impacted by the market environment, fixed income and equity navigated challenging markets well,” Chief Executive Officer James Gorman said in a statement.

“We continue to maintain our strong capital position while repurchasing $2.6 billion of shares and distributing a healthy dividend,” he added.

There was one more bright spot, wealth management came in on par with expectations and added $65 billion in new assets.

Interestingly, the provision for credit losses was less than expected (just $35 million vs expectations of $73.9 million).

The reaction is notable with MS shares down around 4% in the pre-market...

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Finally, it looks like being a painful year for MS bankers as total compensation expenses for the institutional securities division are $1.95 billion for Q3, which compares to $2.25 billion a year earlier.

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