The FOX Business Network has learned that on the heels of its strong earnings, where Morgan (MS) managed to crank out higher bond trading revenues than Goldman (GS), Wall Street’s perennial trading powerhouse, the big financial firm called Wall Street analysts to an unusual meeting with its fixed-income chief to reinforce its stellar performance and possibly boost its share price.
The meeting with bond chief Kenneth M. deRegt raised eyebrows on Wall Street among the analysts who received the invite. “It was odd,” said one analyst who received the invite. “Usually you don’t get one of these to meet with the head of just one division.”
Morgan has been under pressure to boost fixed-income revenues after several recent losing quarters and multiple disasters in 2007 and 2008, where trading losses nearly sank the firm. CEO James Gorman has described repairing fixed-income as his top priority.
With today’s results, fixed-income might not be fully repaired, but it has come a long way from the dog days earlier in the year, particularly when compared with rival Goldman. Overall, Morgan recorded a loss for the quarter, largely the result of one-time charges related to converting preferred stock held by a Japanese bank that provided Morgan with capital during the financial crisis to common shares.
A closer look shows that Morgan’s revenue came in at around $9 billion, compared with $7 billion at Goldman, and in terms of bond trading, Morgan took in $4 billion compared with $3.5 billion at Goldman.
Just after those results were announced, selective analysts were invited to what has been described as a “ victory lap meeting,” at Morgan. By midday, shares of Morgan were up 12% on the earnings.
“The people at Morgan are calling it a meet-and-greet with deRegt,” said one Wall Street analyst, “but given what went down today, it’s actually something more.”
A Morgan Stanley spokesman declined to comment on the meeting.
Some analysts fear Morgan’s victory lap is coming too soon, however. The firm had a good quarter, but it displays erratic financial results. Rubbing salt in the wounds of Goldman may not be a smart idea, either.
Goldman has been cutting back risk taking on its trading desks in recent quarters, which is resulting in its weaker earnings and lower revenue of late. The firm, analysts say, is grappling with a business model that was once based on taking big bets in various markets, which now has to change because of new regulatory requirements.
That said, Goldman is widely considered the best managed firm on Wall Street, while analysts and investors have yet to come to a consensus on Gorman and his business model, which focuses largely on providing advice to small investors through Morgan’s brokerage department, and investment banking advice to major corporations, even when the trading business does well.
As first reported by FOX Business, Morgan has instituted a near hiring freeze, and will only hire for “critical positions.” It has also drawn up plans for large-scale layoffs if Wall Street business conditions don’t improve.
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