Morgan Stanley beats by $0.05, beats on revs (32.50)
Reports Q2 (Jun) earnings of $0.60 per share, excluding DVA and non-recurring items, $0.05 better than the Capital IQ Consensus Estimate of $0.55; revenues rose 3.2% year/year to $8.61 bln vs the $8.18 bln consensus.
- For the current quarter, income from continuing operations applicable to Morgan Stanley was $1.9 billion, or $0.94 per diluted share, compared with income of $1.0 billion, or $0.43 per diluted share, for the same period a year ago. This included a net discrete tax benefit of $609 million or $0.31 per diluted share, principally related to the remeasurement of reserves and related interest as well as DVA.
- Compensation expense was $4.2 billion compared with $4.1 billion a year ago. Non-compensation expenses of $2.4 billion decreased from $2.6 billion a year ago reflecting lower litigation expenses.
- Institutional Securities reported pre-tax income from continuing operations of $1.0 billion compared with $981 million in prior year. The quarter's pre-tax margin was 24% (excluding DVA, 22%). Income after the noncontrolling interest allocation and before taxes was $1.0 billion. Net revenues for the current quarter were $4.2 billion compared with $4.4 billion a year ago.
- Advisory revenues of $418 million increased from $333 million a year ago reflecting higher levels of M&A activity.
- Equity underwriting revenues of $489 million increased from $327 million a year ago reflecting a favorable equity market environment.
- Fixed income underwriting revenues of $525 million increased from $418 million a year ago reflecting a favorable debt underwriting environment.
- Equity sales and trading net revenues of $1.8 billion were relatively unchanged from the prior year quarter, with ongoing strength in prime brokerage offset by lower revenues in derivatives due to declines in client volumes and volatility.
- Fixed Income & Commodities sales and trading net revenues of $1.0 billion decreased from $1.2 billion a year ago. Results reflected revenue declines in foreign exchange on lower levels of volatility, partly offset by higher results in securitized and credit products.
- Compensation expense of $1.7 billion decreased from $1.8 billion a year ago on lower revenues. Non-compensation expenses of $1.5 billion for the current quarter decreased from $1.6 billion driven primarily by lower litigation costs.
- Morgan Stanley's average trading Value-at-Risk (VaR) was $48 million compared with $50 million in Q1 and $61 million in prior year.
- Wealth Management reported pre-tax income from continuing operations of $767 million compared with $655 million in prior year. The quarter's pre-tax margin was 21%. Net revenues for the current quarter were $3.7 billion compared with $3.5 billion a year ago.
- Asset management fee revenues of $2.1 billion increased from $1.9 billion a year ago primarily reflecting an increase in fee based assets and positive flows.
- Transactional revenues of $991 million decreased from $1.0 billion a year ago reflecting lower commissions and fees and investment banking revenues due to lower underwriting activity in closed-end funds.
- Net interest income of $578 million increased from $446 million a year ago on higher deposit and loan balances.
- Compensation expense for the current quarter of $2.2 billion increased from $2.0 billion a year ago on higher revenues. Non-compensation expenses of $762 million decreased from $834 million a year ago, due principally to the absence of costs in the prior year period incurred in conjunction with the purchase of the remaining interest in the Joint Venture.
- Investment Management reported pre-tax income from continuing operations of $205 million compared with pre-tax income of $160 million in the second quarter of last year. The quarter's pre-tax margin was 30%. Income after the noncontrolling interest allocation and before taxes was $198 million.
- Net revenues of $692 million increased from $673 million in the prior year. Results reflect higher gains on investments in Merchant Banking and higher results in Traditional Asset Management, partly offset by lower revenues in the Real Estate Investing business driven by the deconsolidation of certain legal entities associated with a real estate fund sponsored by the Firm.
- Common Equity Tier 1 risk-based capital ratio was approximately 13.8% and its Tier 1 risk-based capital ratio was approximately 15.2%.
- At June 30, 2014, book value and tangible book value per common share were $33.48 and $28.53,22 respectively.