Morgan Stanley's quarterly profit fell by more than half as the Wall Street bank's fixed-income trading and investment banking businesses took a hit from market volatility early in the year.
But the earnings still handily beat expectations as the bank slashed employee compensation, helping to push up its shares 2.5% in premarket trading on Monday.
Sliding commodity and oil prices, worries about the Chinese economy and uncertainty about US interest rates made for wobbly markets in January and February, scaring off traders, investors and companies hoping to list on stock exchanges.
All of the big US banks that have released first-quarter results have reported lower revenue from investment banking and trading, but earnings have generally topped low expectations.
"The first quarter was characterized by challenging market conditions and muted client activity," Chief Executive James Gorman said in a statement.
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"While we see some signs of market recovery, global uncertainties continue to weigh on investor activity."
Morgan Stanley's stock fell about 21% in the quarter - the sharpest decline of any big US bank.
The bank's return on average common equity was 6.2% in the quarter ended March 31, well short of Gorman's target of 10 percent.
"It is going to be very difficult to achieve the 10% return on equity when you have revenues as muted as they were in the first quarter," Stephen Biggar, an analyst at Argus Research, told Reuters.
Earnings applicable to common shareholders fell 54.4% to $1.06 billion, or 55 cents per share, in the period, from $2.31 billion, or $1.18 per share, a year earlier, when the bank reported its most profitable quarter since the financial crisis.
Excluding an accounting adjustment, the bank also earned 55 cents per share.
Analysts on average had expected earnings of 46 cents per share, according to Thomson Reuters I/B/E/S.
Net revenue fell 21.3%to $7.79 billion, missing the average estimate of $7.87 billion.
CHANGING FOCUS
Morgan Stanley has been shifting its focus away from more volatile areas such as bond trading and towards more stable businesses such as wealth management.
Revenue from wealth management fell 4.3% to $3.67 billion during the quarter, but this accounted for 47% of net revenue compared with 39% in the same period of 2015.
The bank said it cut the cost of compensation and benefits by 18.6% to help offset declining revenue.
Adjusted revenue from fixed income and commodities trading slid 54.1% to $873 million.
Equities trading revenue fell 9.3% to $2.06 billion, reflecting volatile global equity markets.
Investment banking revenue, which includes fees from mergers and income from equity and debt underwriting, fell 18.4% to $1.11 billion. The business was a strength in the prior quarter.
Industrywide investment banking fees fell 29% in the period, the worst first-quarter since 2009, according to Thomson Reuters data.
Morgan Stanley ranked second globally in mergers advisory for the quarter, behind Goldman Sachs Group Inc, Morgan Stanley's traditional rival, which will wrap up the earnings season for big US banks on Tuesday.
Up to Friday's close of $25.76, Morgan Stanley's stock had fallen about 19% this year.