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» VISIT US ONLINE @ DSNEWS.COM 13 MORGAN STANLEY JOINS EARNINGS SLIDE PARADE e nation's largest banks (JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, and PNC) all reported year-over-year declines in net income for the first quarter. Goldman Sachs is expected to report a sharp decline in profits when it releases its Q1 earnings statement. e latest large financial firm to have its profits plummet is Morgan Stanley. According to the release of the investment banking firm's Q1 earnings statement on Monday, Citing market volatility during the first quarter, Morgan Stanley reported a net income of $1.1 billion for the three-month period ending March 31, 2016—a year-over-year decline of more than 50 percent from Q1 2015's net income of $2.4 billion. Morgan Stanley's earnings per diluted share dropped from $1.18 to $0.55 year-over-year in the first quarter, and net revenues declined from $9.9 billion down to $7.8 billion. e firm's return on equity (ROE), which is a key measure of profitability, dropped from 13.5 percent down to 6.2 percent. e Q1 earnings for Morgan Stanley beat analysts' expectations of 46 cents per share and $7.87 billion in net revenue, but profits took a tumble largely driven by decreased trading activity due to sliding oil and commodity prices, concerns over global markets, and interest rate uncertainty in the United States. "e first quarter was characterized by challenging market conditions and muted client activity," Chairman and CEO James P. Gorman said. "Against that backdrop, our businesses delivered stable results. While we see some signs of market recovery, global uncertainties continue to weigh on investor activity. We remain focused on executing against our priorities, helping clients navigate difficult markets while controlling our expenses and managing risk prudently." Also in the first quarter of 2016, for the second consecutive February, Morgan Stanley announced a multi-billion dollar settlement with the federal government to resolve claims that the firm sold toxic mortgage-backed securities to investors before the crisis. is time, it was for $3.2 billion with both federal and state regulators. In February 2015, the firm announced a $2.6 billion settlement that substantially cut into profits for 2014; without the litigation costs stemming from the settlement, profits skyrocketed by nearly 75 percent in 2015. HEADWINDS DEVASTATE GOLDMAN SACHS' Q1 PROFITS Investment banking firm Goldman Sachs is the latest financial firm to have its profits take a turn for the worse. According to Goldman Sachs' 2016 first quarter earnings statement, net income at the firm fell 60 percent year-over-year due to operational troubles in all areas of the business. Goldman Sachs reported net earnings of $1.14 billion for the first quarter ended March 31, 2016, up 48 percent from $765 million in the fourth quarter of 2015 but down 60 percent from a year ago when earnings totaled $2.84 billion. Net revenues at the investment firm fell 13 percent from the fourth quarter of 2015 to $6.34 billion for the first quarter of 2016 and decreased 40 percent from $10.62 billion last year. Lloyd C. Blankfein, Chairman and CEO at Goldman Sachs noted, "e operating environment this quarter presented a broad range of challenges, resulting in headwinds across virtually every one of our businesses." Diluted earnings per common share were $2.68 compared with $5.94 for the first quarter of 2015 and $1.27 for the fourth quarter of 2015, the statement showed. Investment banking net revenues were $1.46 billion for the first quarter of 2016, 23 percent lower than the first quarter of 2015 and 5 percent lower than the fourth quarter of 2015. Meanwhile, underwriting net revenues fell 27 percent year-over-year to $692 million, due to "significantly lower net revenues in equity underwriting, reflecting low levels of industry-wide activity during the quarter," the statement said. On the other hand, Goldman Sachs said that debt underwriting net revenues were significantly higher compared with the first quarter of 2015, "primarily reflecting an increase in investment-grade activity." Overall, the firm's investment banking transaction backlog decreased compared with the end of 2015, but was higher compared with the end of the first quarter of 2015. Investing and lending net revenues fell 93 percent from the last quarter and 95 percent year-over-year to $87 million for the first quarter of 2016. Goldman Sachs attributes this decrease to a "significant decrease in net revenues from investments in both private and public equities, which were negatively impacted by generally lower global equity prices and corporate performance during the first quarter of 2016." Debt securities and loans net revenues were also significantly lower compared with the first quarter of 2015, primarily "reflecting lower net revenues related to loans and lending commitments to institutional clients (including higher provision for losses) and lower net gains from investments," the statement said. "Looking ahead, we will continue to focus on delivering superior service to our clients and managing our business efficiently, which remain essential to generating shareholder value over the long term," Blankfein said. "The first quarter was characterized by challenging market conditions and muted client activity." —James P. Gorman, Chairman and CEO, Morgan Stanley "The operating environment this quarter presented a broad range of challenges, resulting in headwinds across virtually every one of our businesses." —Lloyd Blankfein, Goldman Sachs Chairman and CEO