On the Call: Morgan Stanley CEO says customers on sidelines because of economic concerns

On the Call: Morgan Stanley CEO

NEW YORK — Morgan Stanley reported a $1.58 billion profit Wednesday as the continued integration of its brokerage business, Smith Barney, helped the bank recover from a loss last year.

However, the second quarter saw a slowdown in client activity, both from retail customers and institutional investors. Customers were concerned about the health of the global economy, particularly government debt problems in Europe and signs of slowing growth in the U.S. Those worries kept investors out of the market.

Morgan Stanley’s CEO James Gorman discussed during a conference call with analysts the mindset of customers and how that might affect profitability in the next few quarters.

Here’s what Gorman had to say:

“The macro environment was characterized by uncertainties regarding global growth, concerns on European sovereign credit risks, and in the United States, the impact of financial regulatory reform. Volumes and client activity across businesses were light, reflecting both institutional and retail investors lack of conviction …

“Retail investors have been risk averse in the current environment with higher volatility and lower returns in the equity markets. We believe this will continue in the immediate term …

“In the short term, however, earnings are likely to be choppy given the market environment.”