Morgan Stanley delivered quarterly earnings that fell well short of analysts' expectations on Monday, as investors fled the bond, currency and commodity markets amid uncertainty about the timing of a U.S. interest rate hike and concerns about China's cooling economy.
Shares of Morgan Stanley slumped more than 4 percent in premarket trading following the report. (Get the latest quote here.)
The investment banking giant posted third-quarter adjusted earnings of 42 cents per share, down from 65 cents a share in the year-earlier period.
Revenue fell to $7.33 billion from $8.54 billion a year ago. Trading revenue fell about 17 percent to $2.03 billion.
Wall Street had expected Morgan Stanley to deliver quarterly earnings per share of 62 cents on $8.54 billion in revenue, according to consensus estimates from Thomson Reuters.
"The volatility in global markets in the third-quarter led to a difficult environment, impacting in particular our fixed income business and our Asia merchant banking business," Chief Executive James Gorman said in a statement.
"The Firm benefited from the stability of the Wealth Management business, our ongoing leadership in Equities and the continued strength of our Investment Banking franchise. Our business model provides a steady foundation for the Firm as we navigate these challenging markets and focus intensely on addressing areas of underperformance."
Bank earnings have been hit by weak capital markets in the third quarter. Analysts have cut Morgan Stanley from 68 cents to 63 cents, according to FactSet. Earnings expectations have been reduced for 53 of the 88 companies in the S&P 500's financial sector.
The weakness comes as loan growth has held fairly steady thanks to a robust climate in commercial real estate. The sector jumped 9.7 percent in the third quarter, its best of the year after rising 6.7 percent in 2014, according to Federal Reserve data.
Investment banking also has been fairly solid throughout the year. While global revenue is down 10 percent year over year, it's been flat at $28 billion in the U.S., thanks to a record $9.7 billion haul in mergers and acquisition revenue, according to Dealogic.
Shares of Morgan Stanley had risen roughly 4 percent over the past 12 months.
Morgan Stanley joins archrival Goldman Sachs as well as Citigroup, Bank of America, and JPMorgan Chase in reporting a drop in revenue from trading.
The results capped a generally downbeat quarter for the six big U.S. banks. Among them, only Wells Fargo managed an increase in revenue while Citi turned in the biggest rise in net profit, largely due to cost cuts.
Revenue from investment banking, a traditional strength for the bank, fell 15.3 percent to $1.31 billion in a strong M&A market.
Morgan Stanley ranked second globally in mergers advisory volumes in the first nine months of the year, after Goldman, according to Thomson Reuters data.
— CNBC's Jeff Cox and Reuters contributed to this report.