Morgan Stanley's first-quarter earnings show that not much has been done to heal the weakness in its fixed-income department.
Revenue from trading bonds, commodities, and currencies fell 42 percent to $1.5 billion for the first quarter of 2013 from $2.6 billion in the year-earlier period.
Those results a markedly worse than the firm's competitors. Goldman Sachs saw its fixed-income trading revenue decline by just 7 percent.
Equities sales and trading for institutional clients did not provide any relief here either, with revenue falling 20 percent.
It appears that Morgan Stanley's customers are either pulling back, moving business to rival Wall Street firms, or that Morgan Stanley is just making serious trading errors. Morgan pointed to interest rates and commodities as a particular source of weakness.
It's not as if Morgan Stanley can explain away the losses by an abundance of caution. It's daily value-at-risk in the institutional securities division that houses the fixed-income and equities traders declined by just 14.32 percent compared to a year ago.
Compensation expenses for the institutional securities division fell by 13.6 percent-which seems the least the firm can do for shareholders given the poor performance of its sales and trading desks. Morgan Stanley did not disclose how much of this compensation decline fell upon the fixed-income traders.
We haven't lost track of the fact the bank was able to claim a quarterly profit of $984 million , 49 cents a share, compared to a loss of $94 million, or 6 cents a share, for the first quarter of 2012. Once you exclude an item here and there, you can even tell a story where Morgan Stanley made 61 cents per share. A solid "beat" of the 57-cent consensus expectations put together by the folks at Thompson Reuters.
Once you scrape out the noise from accounting charges tied to the value of its debt, however, Morgan Stanley's earnings actually fell. Earnings on operations were just $1.2 billion from $1.3 billion a year earlier. Revenue dipped to $8.5 billion from $8.9 billion.
Morgan Stanley may no longer be facing an existential threat, and its wealth management business is doing well. But in many ways, Morgan Stanley is still the sick man of Wall Street.
-By CNBC's John Carney; Follow him on Twitter @Carney