- Net Revenues of $8.9 Billion and
Earnings per Diluted Share from Continuing Operations of
$0.72
- Excluding DVA,1 Net
Revenues were $8.8 Billion and Earnings per Diluted Share from
Continuing Operations of $0.682,3
- Strong Performance Across All
Business Segments; Investment Banking Ranked #1 in Global Announced
M&A and #2 in Global Equity and Global IPOs;4
Record Global Fee Based Asset Flows of $19.0 Billion in Wealth
Management
- Quarterly Dividend Increased to
$0.10 per Share
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 DVA6
Net MS Income Net MS Income
Revenues Cont. Ops. Revenues
Cont. Ops. 1Q 2014 $8,929 $1,466 $8,803 $1,391 4Q
2013 $7,825 $96 $8,193 $337 1Q 2013
$8,150 $981 $8,467
$1,182
Business Overview
- Institutional Securities net revenues
excluding DVA were $4.5 billion8 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.
James P. Gorman, Chairman and Chief Executive Officer, said,
“This quarter we generated higher year-over-year revenues in all
three of our business segments, demonstrating the momentum we have
built across the Firm. We continue to execute on our multi-year
strategy to deliver consistent returns for our shareholders through
revenue growth and strong expense discipline. We are pleased that
this year we will commence a further share repurchase of up to $1
billion and double our dividend.”
Summary of Institutional Securities
Results
(dollars in millions)
As Reported
Excluding DVA8
Net Pre-Tax Net Pre-Tax Revenues
Income Revenues Income
1Q 2014 $4,609 $1,353 $4,483 $1,227 4Q 2013 $3,323 $(1,263)
$3,691 $(895) 1Q 2013 $4,081
$799 $4,398 $1,116
INSTITUTIONAL SECURITIES
Institutional Securities reported pre-tax income from continuing
operations of $1.4 billion compared with $799 million in the first
quarter of last year. The quarter’s pre-tax margin was 29%
(excluding DVA, 27%).8,9 Income after the noncontrolling interest
allocation and before taxes was $1.3 billion.10 Net revenues for
the current quarter were $4.6 billion compared with $4.1 billion a
year ago. DVA resulted in positive revenue of $126 million in the
current quarter compared with negative revenue of $317 million a
year ago. Excluding DVA, net revenues for the current quarter were
$4.5 billion compared with $4.4 billion a year ago.8 The following
discussion for sales and trading excludes DVA.
- 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)
Net Pre-Tax
Revenues Income 1Q 2014 $3,622 $691 4Q 2013
$3,732 $709 1Q 2013 $3,470
$597
WEALTH MANAGEMENT
Wealth Management reported pre-tax income from continuing
operations of $691 million compared with $597 million in the first
quarter of last year. The quarter’s pre-tax margin was 19%.9 Net
revenues for the current quarter were $3.6 billion compared with
$3.5 billion a year ago.
- 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 revenues13 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.
Since the second quarter of 2013, net income no longer includes
a noncontrolling interest allocation to Citigroup Inc. (Citi)
following the completed acquisition of the Wealth Management Joint
Venture. The prior year quarter included a noncontrolling interest
allocation to Citi of $121 million.14
Summary of Investment Management
Results
(dollars in millions)
Net Pre-Tax
Revenues Income 1Q 2014 $740 $263 4Q 2013 $842
$337 1Q 2013 $645 $187
INVESTMENT MANAGEMENT
Investment Management reported pre-tax income from continuing
operations of $263 million compared with pre-tax income of $187
million in the first quarter of last year.15 The quarter’s pre-tax
margin was 36%.9 Income after the noncontrolling interest
allocation and before taxes was $209 million.
- 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.
CAPITAL
Morgan Stanley’s Common Equity Tier 1 capital ratio was
approximately 14.1% and its Tier 1 capital ratio was approximately
15.6% at March 31, 2014. Effective January 1, 2014, the Firm became
subject to the U.S. Basel III final rule. Certain requirements in
this rule are fully in effect while others are subject to
transitional provisions that, without regard to any impact on
capital from future earnings and any issuances of securities
qualifying as regulatory capital, are expected to reduce the Firm’s
regulatory capital over the next several years.17
At March 31, 2014, book value and tangible book value per common
share were $32.38 and $27.41,18 respectively, based on
approximately 2.0 billion shares outstanding.
OTHER MATTERS
The effective tax rate from continuing operations for the
current quarter was 33.0%, reflecting the geographic mix of
earnings.
During the quarter ended March 31, 2014, the Firm repurchased
approximately $150 million of its common stock or approximately 4.9
million shares. The Firm announced a share repurchase of up to $1.0
billion of common stock beginning in the second quarter of 2014
through the end of the first quarter of 2015.
The Firm increased its quarterly dividend to $0.10 per share
from $0.05 per share, payable on May 15, 2014 to common
shareholders of record on April 30, 2014.
Morgan Stanley is a leading global financial services firm
providing a wide range of investment banking, securities,
investment management and wealth management services. The Firm’s
employees serve clients worldwide including corporations,
governments, institutions and individuals from more than 1,200
offices in 43 countries. For further information about Morgan
Stanley, please visit www.morganstanley.com.
A financial summary follows. Financial,
statistical and business-related information, as well as
information regarding business and segment trends, is included in
the Financial Supplement. Both the earnings release and the
Financial Supplement are available online in the Investor Relations
section at www.morganstanley.com.
# # #
(See Attached Schedules)
This earnings release contains forward-looking statements.
Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date on
which they are made and which reflect management's current
estimates, projections, expectations or beliefs and which are
subject to risks and uncertainties that may cause actual results to
differ materially. For a discussion of additional risks and
uncertainties that may affect the future results of the Company,
please see “Forward-Looking Statements” immediately preceding Part
I, Item 1, “Competition” and “Supervision and Regulation” in Part
I, Item 1, “Risk Factors” in Part I, Item 1A, “Legal Proceedings”
in Part I, Item 3, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7
and “Quantitative and Qualitative Disclosures about Market Risk” in
Part II, Item 7A in the Company's Annual Report on Form 10-K for
the year ended December 31, 2013 and other items throughout the
Form 10-K and the Company’s Current Reports on Form 8-K, including
any amendments thereto.
1 Represents the change in the fair value of certain of Morgan
Stanley’s long-term and short-term borrowings resulting from
fluctuations in its credit spreads and other credit factors
(commonly referred to as “DVA”).
2 From time to time, Morgan Stanley may disclose certain
“non-GAAP financial measures” in the course of its earnings
releases, earnings conference calls, financial presentations and
otherwise. For these purposes, “GAAP” refers to generally accepted
accounting principles in the United States. The Securities and
Exchange Commission (SEC) defines a “non-GAAP financial measure” as
a numerical measure of historical or future financial performance,
financial positions, or cash flows that is subject to adjustments
that effectively exclude, or include amounts from the most directly
comparable measure calculated and presented in accordance with
GAAP. Non-GAAP financial measures disclosed by Morgan Stanley are
provided as additional information to investors in order to provide
them with greater transparency about, or an alternative method for
assessing, our financial condition and operating results. These
measures are not in accordance with, or a substitute for GAAP, and
may be different from or inconsistent with non-GAAP financial
measures used by other companies. Whenever we refer to a non-GAAP
financial measure, we will also generally present the most directly
comparable financial measure calculated and presented in accordance
with GAAP, along with a reconciliation of the differences between
the non-GAAP financial measure we reference and such comparable
GAAP financial measure.
3 Earnings (loss) per diluted share amounts, excluding DVA, are
non-GAAP financial measures that the Firm considers useful for
investors to allow better comparability of period-to-period
operating performance. Such exclusions are provided to
differentiate revenues associated with Morgan Stanley borrowings,
regardless of whether the impact is either positive, or negative,
that result solely from fluctuations in credit spreads and other
credit factors. The reconciliation of earnings (loss) per diluted
share from continuing operations applicable to Morgan Stanley
common shareholders and average diluted shares from a non-GAAP to
GAAP basis is as follows (shares and DVA are presented in
millions):
1Q 2014
1Q 2013
Earnings (loss) per diluted share from cont. ops. – Non-GAAP $0.68
$0.60 DVA impact $0.04 $(0.11) Earnings (loss) per diluted share
from cont. ops. – GAAP $0.72 $0.49 Average diluted shares –
Non-GAAP 1,969 1,940 DVA impact 0 0 Average diluted shares – GAAP
1,969 1,940
4 Source: Thomson Reuters – for the period of January 1, 2014 to
March 31, 2014 as of April 1, 2014.
5 Includes preferred dividends and other adjustments related to
the calculation of earnings per share for the first quarter of 2014
and 2013 of approximately $56 million and $26 million,
respectively. Refer to page 3 of Morgan Stanley’s Financial
Supplement accompanying this release for the calculation of
earnings per share.
6 Net revenues and income (loss) from continuing operations
applicable to Morgan Stanley, excluding DVA, are non-GAAP financial
measures that the Firm considers useful for investors to allow for
better comparability of period-to-period operating performance. The
reconciliation of net revenues and income (loss) from continuing
operations applicable to Morgan Stanley from a non-GAAP to GAAP
basis is as follows (amounts are presented in millions):
1Q 2014
4Q 2013
1Q 2013
Firm net revenues – Non-GAAP $8,803 $8,193 $8,467 DVA impact $126
$(368) $(317) Firm net revenues – GAAP $8,929 $7,825 $8,150
Income (loss) applicable to MS – Non-GAAP $1,391 $337 $1,182 DVA
after-tax impact $75 $(241) $(201) Income (loss) applicable to MS –
GAAP $1,466 $96 $981
7 The first quarter of 2013 included severance expense of $132
million associated with the Firm’s reduction in force in January
2013 which was reflected in the business segments’ results as
follows: Institutional Securities: $113 million, Wealth Management:
$15 million and Investment Management: $4 million.
8 Institutional Securities net revenues and pre-tax income
(loss), excluding DVA, are non-GAAP financial measures that the
Firm considers useful for investors to allow for better
comparability of period-to-period operating performance. The
reconciliation of net revenues and pre-tax income (loss) from a
non-GAAP to GAAP basis is as follows (amounts are presented in
millions):
1Q 2014
4Q 2013
1Q 2013
Net revenues – Non-GAAP $4,483 $3,691 $4,398 DVA impact $126 $(368)
$(317) Net revenues – GAAP $4,609 $3,323 $4,081 Pre-tax
income (loss) – Non-GAAP $1,227 $(895) $1,116 DVA impact $126
$(368) $(317) Pre-tax income (loss) – GAAP $1,353 $(1,263) $799
9 Pre-tax margin is a non-GAAP financial measure that the Firm
considers useful for investors to assess operating performance.
Pre-tax margin represents income (loss) from continuing operations
before taxes divided by net revenues.
10 Noncontrolling interests reported in the Institutional
Securities business segment primarily represents the allocation to
Mitsubishi UFJ Financial Group, Inc. of Morgan Stanley MUFG
Securities Co., Ltd., which the Firm consolidates.
11 Sales and trading net revenues, including Fixed Income &
Commodities (FIC) and Equity sales and trading net revenues
excluding DVA, are non-GAAP financial measures that the Firm
considers useful for investors to allow better comparability of
period-to-period operating performance. The reconciliation of sales
and trading, including FIC and Equity sales and trading net
revenues from a non-GAAP to GAAP basis is as follows (amounts are
presented in millions):
1Q 2014
1Q 2013
Sales & Trading – Non-GAAP $3,115 $3,178 DVA impact $126 $(317)
Sales & Trading – GAAP $3,241 $2,861 FIC Sales &
Trading – Non-GAAP $1,654 $1,515 DVA impact $76 $(238) FIC Sales
& Trading – GAAP $1,730 $1,277 Equity Sales &
Trading – Non-GAAP $1,705 $1,591 DVA impact $50 $(79) Equity Sales
& Trading – GAAP $1,755 $1,512
12 VaR represents the loss amount that one would not expect to
exceed, on average, more than five times every one hundred trading
days in the Firm’s trading positions if the portfolio were held
constant for a one-day period. Further discussion of the
calculation of VaR and the limitations of the Firm’s VaR
methodology is disclosed in Part II, Item 7A “Quantitative and
Qualitative Disclosures about Market Risk” included in Morgan
Stanley’s Annual Report on Form 10-K for the year ended December
31, 2013. Refer to page 7 of Morgan Stanley’s Financial Supplement
accompanying this release for the VaR disclosure.
13 Transactional revenues include investment banking, trading,
and commissions and fee revenues.
14 On June 28, 2013, the Firm completed the purchase of the
remaining 35% interest in the Morgan Stanley Smith Barney Joint
Venture from Citi, increasing the Firm’s interest from 65% to 100%.
In the quarter ended March 31, 2013, Citi’s results related to its
35% interest were reported in net income (loss) applicable to
nonredeemable noncontrolling interests on page 8 of Morgan
Stanley’s Financial Supplement accompanying this release.
15 Results for the first quarter of 2014 and 2013 included
pre-tax income of $54 million and $50 million, respectively,
related to investments held by certain consolidated real estate
funds. The limited partnership interests in these funds are
reported in net income (loss) applicable to noncontrolling
interests on page 10 of Morgan Stanley’s Financial Supplement
accompanying this release.
16 Net revenues for the current quarter included gains of $54
million compared with gains of $52 million in the prior year first
quarter related to investments held by certain consolidated real
estate funds.
17 Beginning with the first quarter of 2014, the Firm calculates
its Common Equity Tier 1 capital and Tier 1 capital (and the
numerator of the related Common Equity Tier 1 and Tier 1 risk-based
capital ratios) using the U.S. Basel III final rule’s definition of
capital and regulatory deductions and adjustments, subject to
transitional provisions. In the first quarter of 2014, the Firm
calculated the denominator of its risk-based capital ratios using
credit risk-weighted assets (RWAs) determined under the Basel
I-based rules and market RWAs determined under the existing market
risk rules known as “Basel 2.5.” The Firm’s capital takes into
consideration regulatory capital requirements as well as capital
required for organic growth, acquisitions and other business needs.
These computations are preliminary estimates as of April 17, 2014
(the date of this release) and could be subject to revision in
Morgan Stanley’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2014. The methods for calculating the Firm’s
risk-based capital ratios will change through 2022 as aspects of
the U.S. Basel III final rule are phased in and as the Firm begins
calculating RWAs using the U.S. Basel III advanced approaches in
the second quarter of 2014, subject to a capital floor consisting
of the Basel I-based and Basel 2.5 rules through December 31, 2014
and the U.S. Basel III standardized approach from January 1,
2015.
18 Tangible common equity and tangible book value per common
share are non-GAAP financial measures that the Firm considers to be
useful measures of capital adequacy. Tangible common equity equals
common equity less goodwill and intangible assets net of allowable
mortgage servicing rights deduction. Tangible book value per common
share equals tangible common equity divided by period end common
shares outstanding.
MORGAN STANLEY
Quarterly Financial Summary (unaudited, dollars in
millions, except for per share data)
Quarter Ended Percentage Change From:
Mar 31, 2014 Dec 31, 2013 Mar 31, 2013 Dec
31, 2013 Mar 31, 2013 Net revenues Institutional
Securities $ 4,609 $ 3,323 $ 4,081 39 % 13 % Wealth Management
3,622 3,732 3,470 (3 %) 4 % Investment Management 740 842 645 (12
%) 15 % Intersegment Eliminations (42 ) (72 )
(46 ) 42 % 9 % Consolidated net revenues $ 8,929 $ 7,825
$ 8,150 14 % 10 %
Income (loss) from
continuing operations before tax Institutional Securities $
1,353 $ (1,263 ) $ 799 * 69 % Wealth Management 691 709 597 (3 %)
16 % Investment Management 263 337 187 (22 %) 41 % Intersegment
Eliminations 0 0 0 -- --
Consolidated income (loss) from continuing operations before tax $
2,307 $ (217 ) $ 1,583 * 46 %
Income (loss)
applicable to Morgan Stanley Institutional Securities $ 925 $
(563 ) $ 641 * 44 % Wealth Management 423 476 256 (11 %) 65 %
Investment Management 118 183 84 (36 %) 40 % Intersegment
Eliminations 0 0 0 -- --
Consolidated income (loss) applicable to Morgan Stanley $ 1,466
$ 96 $ 981 * 49 % Earnings (loss) applicable
to Morgan Stanley common shareholders $ 1,449 $ 36 $
936 * 55 %
Earnings per basic share: Income
from continuing operations $ 0.73 $ 0.02 $ 0.50 * 46 % Discontinued
operations $ 0.02 $ - $ (0.01 ) * * Earnings per basic share $ 0.75
$ 0.02 $ 0.49 * 53 %
Earnings per diluted share:
Income from continuing operations $ 0.72 $ 0.02 $ 0.49 * 47 %
Discontinued operations $ 0.02 $ - $ (0.01 ) * * Earnings per
diluted share $ 0.74 $ 0.02 $ 0.48 * 54 %
Financial
Metrics: Return on average common equity from continuing
operations 8.9 % 0.3 % 6.3 % Return on average common equity 9.2 %
0.2 % 6.2 % Return on average common equity from
continuing operations excluding DVA 8.3 % 1.8 % 7.5 % Return on
average common equity excluding DVA 8.5 % 1.7 % 7.4 % Common
Equity Tier 1 capital ratio (transitional) 14.1 % 12.8 % 11.5 %
Tier 1 capital ratio (transitional)
15.6 % 15.7 % 13.9 % Book value per common share $ 32.38 $
32.24 $ 31.21 Tangible book value per common share $ 27.41 $ 27.16
$ 27.38 Notes: - Beginning with the first
quarter of 2014, the Firm calculates its Common Equity Tier 1
capital and Tier 1 capital (and the numerator of the related Common
Equity Tier 1 and Tier 1 risk-based capital ratios) using the U.S.
Basel III final rule’s definition of capital and regulatory
deductions and adjustments, subject to transitional provisions. For
information on the calculation of regulatory capital and ratios for
prior periods, please refer to Part 2, Item 7 "Regulatory
Requirements" in Morgan Stanley's Annual Report on Form 10-K for
the year ended December 31, 2013. Prior periods have not been
recast to reflect the new requirements. - Results for the quarters
ended March 31, 2014, December 31, 2013 and March 31, 2013, include
positive (negative) revenue of $126 million, $(368) million and
$(317) million, respectively, related to the movement in Morgan
Stanley's credit spreads and other credit factors on certain
long-term and short-term debt (Debt Valuation Adjustment, DVA). -
The return on average common equity metrics, return on average
common equity excluding DVA metrics, and tangible book value per
common share are non-GAAP measures that the Firm considers to be
useful measures to assess operating performance and capital
adequacy. -
Common Equity Tier 1 capital ratio
(transitional) and the Tier 1 capital ratio (transitional) equals
Common Equity Tier 1 capital divided by risk-weighted assets (RWAs)
and Tier 1 capital divided by RWAs, respectively.
- Book value per common share equals common equity divided by
period end common shares outstanding. - Tangible book value per
common share equals tangible common equity divided by period end
common shares outstanding. - See page 4 and related End Notes of
the Financial Supplement for additional information related to the
calculation of the financial metrics.
11
MORGAN STANLEY Quarterly Consolidated
Income Statement Information (unaudited, dollars in
millions) Quarter
Ended Percentage Change From: Mar 31, 2014 Dec
31, 2013 Mar 31, 2013 Dec 31, 2013 Mar 31,
2013 Revenues: Investment banking $ 1,308 $ 1,559 $ 1,224 (16
%) 7 % Trading 2,962 1,512 2,694 96 % 10 % Investments 359 523 338
(31 %) 6 % Commissions and fees 1,216 1,166 1,167 4 % 4 % Asset
management, distribution and admin. fees 2,549 2,499 2,346 2 % 9 %
Other 227 284 199 (20 %)
14 % Total non-interest revenues 8,621 7,543 7,968 14 % 8 %
Interest income 1,343 1,099 1,388 22 % (3 %) Interest expense
1,035 817 1,206 27 % (14
%) Net interest 308 282 182
9 % 69 % Net revenues 8,929 7,825
8,150 14 % 10 % Non-interest expenses:
Compensation and benefits 4,305 3,992 4,214 8 % 2 %
Non-compensation expenses: Occupancy and equipment 359 369 377 (3
%) (5 %) Brokerage, clearing and exchange fees 443 411 428 8 % 4 %
Information processing and communications 424 446 448 (5 %) (5 %)
Marketing and business development 147 190 134 (23 %) 10 %
Professional services 452 548 440 (18 %) 3 % Other 492
2,086 526 (76 %) (6 %) Total
non-compensation expenses 2,317 4,050 2,353 (43 %) (2 %)
Total non-interest expenses 6,622
8,042 6,567 (18 %) 1 % Income
(loss) from continuing operations before taxes 2,307 (217 ) 1,583 *
46 % Income tax provision / (benefit) from continuing operations
762 (402 ) 333 * 129 % Income
(loss) from continuing operations 1,545 185
1,250 * 24 % Gain (loss) from discontinued
operations after tax 39 (12 ) (19 ) * *
Net income (loss) $ 1,584 $ 173 $ 1,231 * 29 % Net income
applicable to redeemable noncontrolling interests 0 0 122 -- * Net
income applicable to nonredeemable noncontrolling interests
79 89 147 (11 %) (46 %) Net
income (loss) applicable to Morgan Stanley 1,505
84 962 * 56 % Preferred stock dividend
/ Other 56 48 26 17 % 115
% Earnings (loss) applicable to Morgan Stanley common shareholders
$ 1,449 $ 36 $ 936 * 55 % Amounts
applicable to Morgan Stanley: Income (loss) from continuing
operations 1,466 96 981 * 49 % Gain (loss) from discontinued
operations after tax 39 (12 ) (19 ) * *
Net income (loss) applicable to Morgan Stanley $ 1,505 $ 84
$ 962 * 56 % Pre-tax profit margin 26 % * 19 %
Compensation and benefits as a % of net revenues 48 % 51 % 52 %
Non-compensation expenses as a % of net revenues 26 % 52 % 29 %
Effective tax rate from continuing operations 33.0 % * 21.0 %
Notes: - Pre-tax profit margin is a non-GAAP
financial measure that the Firm considers to be a useful measure to
assess operating performance. -
In the quarter ended March 31, 2014,
discontinued operations included a pre-tax gain on sale of $45
million ($40 million after tax) and other operating results related
to Canterm Canadian Terminals, Inc. (reported in the Institutional
Securities business segment).
- The quarter ended December 31, 2013 included a discrete tax
benefit of approximately $192 million consisting of $100 million
related to the remeasurement of reserves and related interest based
on new information regarding the status of certain tax authority
examinations and $92 million related to the establishment of a
deferred tax asset associated with the reorganization of certain
non-U.S. legal entities. - For the quarter ended March 31, 2013,
the income tax provision from continuing operations included a net
tax benefit of approximately $142 million consisting of a $81
million benefit resulting from a retroactive change in U.S. tax law
and $61 million discrete net tax benefit from the remeasurement of
reserves and related interest (reported in the Institutional
Securities business segment). 12
MORGAN
STANLEY Quarterly Earnings Per Share (unaudited,
dollars in millions, except for per share data)
Quarter Ended Percentage
Change From: Mar 31, 2014 Dec 31, 2013
Mar 31, 2013 Dec 31, 2013 Mar 31, 2013
Income (loss) from continuing operations $
1,545 $ 185 $ 1,250 * 24 % Net income applicable to redeemable
noncontrolling interests 0 0 122 -- * Net income applicable to
nonredeemable noncontrolling interests 79 89
147 (11 %) (46 %) Net income (loss) from continuing
operations applicable to noncontrolling interests 79 89 269 (11 %)
(71 %)
Income (loss) from continuing operations applicable to
Morgan Stanley 1,466 96 981 * 49 % Less: Preferred Dividends 54
48 24 13 % 125 % Less: Morgan Stanley Smith Barney Joint Venture
Redemption Adjustment - - - --
--
Income (loss) from continuing operations applicable to Morgan
Stanley, prior to allocation of income to Participating Restricted
Stock Units 1,412 48 957 * 48 %
Basic EPS
Adjustments: Less: Allocation of earnings to Participating
Restricted Stock Units 2 0 2 *
--
Earnings (loss) from continuing operations applicable to
Morgan Stanley common shareholders $ 1,410
$ 48 $ 955 * 48 % Gain (loss)
from discontinued operations after tax 39 (12 ) (19 ) * * Less:
Gain (loss) from discontinued operations after tax applicable to
noncontrolling interests 0 0 0
-- --
Gain (loss) from discontinued operations after tax
applicable to Morgan Stanley 39 (12 ) (19 ) * * Less:
Allocation of earnings to Participating Restricted Stock Units
0 0 0 -- --
Earnings (loss)
from discontinued operations applicable to Morgan Stanley common
shareholders 39 (12 ) (19 )
* *
Earnings (loss) applicable to Morgan Stanley common
shareholders $ 1,449 $ 36 $
936 * 55 % Average basic common shares outstanding
(millions) 1,924 1,905 1,901 1 % 1 %
Earnings per basic share: Income from continuing operations
$ 0.73 $ 0.02 $ 0.50 * 46
% Discontinued operations
$ 0.02 $ -
$ (0.01 ) * * Earnings per basic share
$ 0.75 $ 0.02
$ 0.49 * 53 %
Earnings
(loss) from continuing operations applicable to Morgan Stanley
common shareholders $ 1,410 $ 48
$ 955 * 48 %
Earnings (loss) from
discontinued operations applicable to Morgan Stanley common
shareholders 39 (12 ) (19 ) * *
Earnings (loss)
applicable to Morgan Stanley common shareholders $
1,449 $ 36 $ 936 * 55 %
Average diluted common shares outstanding and common stock
equivalents (millions) 1,969 1,970 1,940 -- 1 %
Earnings per diluted share: Income from
continuing operations
$ 0.72 $ 0.02
$ 0.49 * 47 % Discontinued operations
$
0.02 $ - $ (0.01 ) * *
Earnings per diluted share
$ 0.74
$ 0.02 $ 0.48
* 54 % Notes: - The Firm calculates
earnings per share using the two-class method as described under
the accounting guidance for earnings per share. For further
discussion of the Firm's earnings per share calculations, see page
13 of the Financial Supplement and Note 15 to the consolidated
financial statements in the Firm's Annual Report on Form 10-K for
the year ended December 31, 2013. 13
Morgan StanleyMedia Relations:Michele Davis,
212-761-9621orInvestor Relations:Celeste Mellet Brown,
212-761-3896
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