Morgan Stanley (NYSE:MS) today reported net revenues of $8.9 billion for the first quarter ended March 31, 2014 compared with $8.2 billion a year ago. For the current quarter, income from continuing operations applicable to Morgan Stanley was $1.5 billion, or $0.72 per diluted share, 5 compared with income of $981 million, or $0.49 per diluted share, 5 for the same period a year ago.
Results for the current quarter included positive revenue related to changes in Morgan Stanley’s debt-related credit spreads and other credit factors (Debt Valuation Adjustment, DVA) 1 of $126 million, compared with negative revenue of $317 million a year ago.
Excluding DVA, net revenues for the current quarter were $8.8 billion compared with $8.5 billion a year ago. 6 Income from continuing operations applicable to Morgan Stanley was $1.4 billion, or $0.68 per diluted share, compared with income of $1.2 billion, or $0.60 per diluted share, a year ago. 3,6
Compensation expense was $4.3 billion compared to $4.2 billion a year ago. 7 Non-compensation expenses were $2.3 billion compared to $2.4 billion a year ago.For the current quarter, net income applicable to Morgan Stanley, including discontinued operations, was $0.74 per diluted share, 5 compared with net income of $0.48 per diluted share in the first quarter of 2013. 5
|Summary of Firm Results (dollars in millions)|
|As Reported||Excluding DVA 6|
|Net||MS Income||Net||MS Income|
|Revenues||Cont. Ops.||Revenues||Cont. Ops.|
- Institutional Securities net revenues excluding DVA were $4.5 billion 8 reflecting continued strength in Equity sales and trading and Investment Banking, and improved performance in Fixed Income & Commodities sales and trading.
- Wealth Management net revenues were $3.6 billion and pre-tax margin was 19%. 9 Fee based asset flows for the quarter were a record $19.0 billion, with total client assets exceeding $1.9 trillion at quarter end.
- Investment Management reported net revenues of $740 million with assets under management or supervision of $382 billion.
|Summary of Institutional Securities Results (dollars in millions)|
|As Reported||Excluding DVA 8|
- Advisory revenues of $336 million increased from $251 million a year ago reflecting higher levels of M&A activity. Equity underwriting revenues of $315 million increased from $283 million a year ago reflecting higher IPO volumes. Fixed income underwriting revenues of $485 million increased from $411 million a year ago reflecting an increase in loan fees.
- Equity sales and trading net revenues of $1.7 billion increased from $1.6 billion a year ago reflecting higher levels of client activity across products and particularly strong performance in prime brokerage. 11
- Fixed Income & Commodities sales and trading net revenues of $1.7 billion increased from $1.5 billion a year ago. 11 Results reflect strong performance in commodities and solid results in credit and securitized products, despite lower volumes across most fixed income businesses.
- Other sales and trading net losses of $244 million compared with net revenues of $72 million a year ago, primarily reflecting costs related to the Firm’s long-term funding.
- Compensation expense of $1.9 billion and non-compensation expenses of $1.4 billion for the current quarter were relatively unchanged from a year ago. 7
- Morgan Stanley’s average trading Value-at-Risk (VaR) measured at the 95% confidence level was $50 million compared with $51 million in the fourth quarter of 2013. 12
|Summary of Wealth Management Results (dollars in millions)|
- Asset management fee revenues of $2.0 billion increased from $1.9 billion a year ago primarily reflecting an increase in fee based assets and positive flows.
- Transactional revenues 13 of $1.0 billion decreased from $1.1 billion a year ago primarily reflecting lower closed-end fund and other new issue activity.
- Net interest income of $539 million increased from $413 million a year ago on higher deposit and loan balances.
- Compensation expense for the current quarter of $2.2 billion increased from $2.1 billion a year ago on higher revenues. 7 Non-compensation expenses of $762 million decreased from $808 million a year ago reflecting continued expense discipline.
- Total client assets exceeded $1.9 trillion at quarter end. Client assets in fee based accounts of $724 billion increased 17% compared with the prior year quarter. Fee based asset flows for the quarter were $19.0 billion.
- Wealth Management representatives of 16,426 increased from 16,284 as of March 31, 2013. Average annualized revenue per representative of $881,000 and total client assets per representative of $118 million increased 4% and 7%, respectively, compared with the prior year quarter.
|Summary of Investment Management Results (dollars in millions)|
- Net revenues of $740 million increased from $645 million in the prior year. Results primarily reflect higher gains on investments in Merchant Banking and higher results in Traditional Asset Management, partly offset by lower gains on investments in Real Estate Investing. 16
- Compensation expense for the current quarter of $285 million increased from $259 million a year ago. 7 Non-compensation expenses of $192 million decreased from $199 million a year ago.
- Assets under management or supervision at March 31, 2014 of $382 billion increased from $341 billion a year ago primarily reflecting market appreciation and positive flows. The business recorded net flows of $6.0 billion in the current quarter.
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