Morgan Stanley (NYSE: MS) today reported net revenues of $6.9 billion for the first quarter ended March 31, 2012 compared with $7.6 billion a year ago. For the current quarter, the loss from continuing operations applicable to Morgan Stanley was $78 million, or a loss of $0.05 per diluted share 4 compared with income of $984 million, or $0.51 per diluted share, for the same period a year ago.
Results for the quarter included negative revenue of $2.0 billion compared with negative revenue of $189 million a year ago related to changes in Morgan Stanley’s debt-related credit spreads and other credit factors (Debt Valuation Adjustment, DVA). 1
Excluding DVA, net revenues for the current quarter were $8.9 billion compared with $7.8 billion a year ago and income from continuing operations applicable to Morgan Stanley was $1.4 billion, or $0.71 per diluted share, compared with $1.1 billion, or $0.59 a year ago. 2, 5
Compensation expense was $4.4 billion, which included severance expense of $138 million related to staff reductions, 6 compared with $4.3 billion a year ago. Non-compensation expenses of $2.3 billion decreased from $2.4 billion a year ago.For the current quarter, the net loss applicable to Morgan Stanley, including discontinued operations, was $0.06 per diluted share, compared with net income of $0.50 per diluted share in the first quarter of 2011. 7
|Summary of Firm Results (dollars in millions)|
|As Reported||Excluding DVA (2), (3)|
|Net||MS Earnings||Net||MS Earnings|
|Revenues||Cont.Ops (1)||Revenues||Cont.Ops (1)|
- Sales and trading net revenues were $2.2 billion, or $4.1 billion excluding DVA. 8 Fixed Income and Commodities sales and trading net revenues reflected balanced strength across businesses and regions with solid levels of customer activity and an improved credit environment. Equity sales and trading net revenues reflected strong performance despite challenging markets.
- Investment Banking revenues were $851 million. The Firm ranked #1 in global IPOs and #2 in global announced and completed M&A. 9
- Global Wealth Management Group delivered net revenues of $3.4 billion, with global fee based asset flows of $8.7 billion.
- Asset Management reported net revenues of $533 million and assets under management or supervision of $304 billion.
|Summary of Institutional Securities Results (dollars in millions)|
|As Reported||Excluding DVA (1)|
- Advisory and equity underwriting revenues declined from a year ago on lower levels of market activity. Fixed income underwriting revenues increased from a year ago reflecting growth in investment grade, high yield bond and loan fees.
- Fixed income and commodities sales and trading net revenues of $2.6 billion increased 34% from a year ago, reflecting increased contributions from most products, with particular strength in interest rates, commodities and corporate credit. 8
- Equity sales and trading net revenues of $1.8 billion increased 6% from the prior year reflecting solid performance across all regions with notable growth in electronic and retail volumes. 8
- Other sales and trading net losses were $286 million compared with losses of $460 million in the prior year. Results for the current quarter primarily reflected losses on economic hedges related to the Firm’s long-term debt and costs related to the amount of liquidity held.
- Other revenues were $58 million compared with negative revenues of $602 million in the first quarter of last year. Results for the prior year quarter included a loss of $655 million arising from the Firm’s 40% stake in a Japanese securities joint venture (Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. or MUMSS) controlled and managed by our partner, Mitsubishi UFJ Financial Group, Inc.
- Compensation expense for the current quarter 6 was $2.1 billion. The reported compensation to net revenue ratio was 70%; excluding DVA, this ratio was 42%. 10 Non-compensation expenses of $1.2 billion were essentially unchanged from a year ago.
- Morgan Stanley’s average trading Value-at-Risk measured at the 95% confidence level was $84 million compared with $123 million in the fourth quarter of 2011.
|Summary of Global Wealth Management Group Results (dollars in millions)|
- Net revenues of $3.4 billion were essentially unchanged from a year ago as higher asset management and net interest revenues were mostly offset by lower commissions.
- Compensation expense for the current quarter 6 was $2.1 billion with a compensation to net revenue ratio of 62%. Non-compensation expenses were $922 million compared with $951 million a year ago.
- Total client assets were $1.7 trillion at quarter end. Client assets in fee-based accounts were $531 billion, or 30% of total client assets. Global fee based asset flows for the quarter were $8.7 billion.
- The 17,193 global representatives at quarter end achieved average annualized revenue per global representative of $787,000. Total client assets per global representative were $101 million.
|Summary of Asset Management Results (dollars in millions)|
- Net revenues were $533 million compared with $622 million a year ago primarily reflecting lower gains on principal investments in the Merchant Banking business. 14
- Compensation expense for the current quarter 6 was $218 million with a compensation to net revenue ratio of 41%. Non-compensation expenses of $187 million decreased from $244 million a year ago.
- Assets under management or supervision at March 31, 2012 of $304 billion increased from $276 billion a year ago. The increase primarily reflected net customer inflows in Morgan Stanley’s liquidity funds.
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