- Fourth Quarter Net Revenues of $9.0
Billion and Earnings per Diluted Share of $0.81
- Fourth Quarter Results Reflect
Continued Strength in Sales and Trading and M&A
- Record Quarterly Wealth Management
Net Revenues of $4.0 Billion; Pre-Tax Margin of
22%1,2
- Full Year Net Revenues of $34.6
Billion and Earnings per Diluted Share of $2.92
Morgan Stanley (NYSE: MS) today reported net revenues of $9.0
billion for the fourth quarter ended December 31, 2016 compared
with $7.7 billion a year ago.3 For the current quarter, net income
applicable to Morgan Stanley was $1.7 billion, or $0.81 per diluted
share,4 compared with income of $908 million, or $0.39 per diluted
share,4 for the same period a year ago.3
The prior year quarter included DVA losses of $124 million.
Excluding DVA in the prior year quarter, net revenues were $7.9
billion and income applicable to Morgan Stanley was $986 million,
or $0.43 per diluted share.5
Compensation expense of $4.1 billion increased from $3.7 billion
a year ago6 primarily driven by higher revenues. Non-compensation
expenses of $2.7 billion compared with $2.6 billion a year ago.
The effective tax rate for the current quarter was 25.2%, which
reflected net discrete tax benefits of $135 million primarily
related to the remeasurement of reserves and related interest due
to new information regarding the status of a multi-year tax
authority examination.
The annualized return on average common equity was 8.7 percent
in the current quarter.7
Fourth Quarter Business Overview
- Institutional Securities net revenues
were $4.6 billion reflecting strong results across our Sales and
Trading franchise and continued strength in M&A advisory.
- Wealth Management net revenues were
$4.0 billion and pre-tax margin was 22%.2 Fee-based asset flows for
the quarter were $17.1 billion.
- Investment Management reported net
revenues of $500 million with assets under management or
supervision of $417 billion.
James P. Gorman, Chairman and Chief Executive Officer, said,
“Our quarterly results reflect consistent strong performance, while
our annual results show meaningful earnings growth over 2015. We
reported solid results in Sales & Trading and Advisory, and
record revenues in Wealth Management, while managing expenses
prudently. We are optimistic about opportunities in 2017 and beyond
and remain focused on serving our clients and achieving our
strategic objectives.”
FOURTH QUARTER RESULTS
Summary of Institutional Securities Results
(dollars in millions) As
Reported Excluding DVA8 Net Pre-Tax Net Pre-Tax
Revenues Income Revenues Income 4Q 2016 (a) $4,614
$1,326 * * 3Q 2016 (a) $4,553 $1,383 * *
4Q 2015
$3,419 $548 $3,543 $672
a)
Effective January 1, 2016, the Firm early
adopted the provision of new accounting guidance that requires
changes in DVA to be presented in other comprehensive income as
opposed to net revenues. Results for 2015 were not restated
pursuant to this guidance, and as such, 4Q 2015 is the only period
where net revenues and pre-tax income are adjusted for the impact
of DVA.3
INSTITUTIONAL SECURITIES
Institutional Securities reported pre-tax income from continuing
operations of $1.3 billion compared with pre-tax income of $548
million a year ago, or $672 million excluding DVA.3,8
Net revenues for the current quarter were $4.6 billion compared
with $3.4 billion a year ago, or $3.5 billion excluding DVA.3,8 The
following discussion for sales and trading excludes DVA from the
prior year period.
- Advisory revenues of $628 million
increased from $516 million a year ago on higher levels of
completed M&A activity. Equity underwriting revenues of $225
million decreased from $352 million in the prior year quarter on
lower IPO market volumes. Fixed income underwriting revenues of
$421 million increased from $346 million in the prior year quarter
driven primarily by higher non-investment grade loan and bond
fees.
- Sales and Trading net revenues of $3.2
billion increased from $2.3 billion a year ago:3,9
-- Equity sales and trading net revenues of $2.0
billion increased from $1.8 billion a year ago reflecting solid
results across products and regions, with particular strength in
derivatives.3,9 -- Fixed Income sales and trading net
revenues of $1.5 billion increased from $550 million a year ago
reflecting higher results across products on improved market
conditions compared with the prior year period.3,9 -- Other
sales and trading net losses of $234 million compared with losses
of $103 million a year ago primarily reflecting higher costs
associated with the Firm’s funding and liquidity and lower revenues
associated with corporate loan hedging activity.
- Other revenues of $150 million
increased from $31 million a year ago reflecting mark-to-market
gains associated with held for sale corporate loans.
- Compensation expense of $1.6 billion
increased from $1.2 billion a year ago6 on higher revenues.
Non-compensation expenses of $1.7 billion for the current quarter
increased from $1.6 billion a year ago primarily reflecting higher
litigation costs, partly offset by continued expense
discipline.
Morgan Stanley’s average trading Value-at-Risk (VaR) measured at
the 95% confidence level was $39 million compared with $42 million
from the third quarter of 2016 and $46 million in the fourth
quarter of the prior year.10
Summary of Wealth Management Results (dollars in
millions) Net Pre-Tax Revenues Income 4Q
2016 $3,990 $891 3Q 2016 $3,881 $901 4Q 2015 $3,751 $768
WEALTH MANAGEMENT
Wealth Management reported pre-tax income from continuing
operations of $891 million compared with $768 million in the fourth
quarter of last year. The quarter’s pre-tax margin was 22%.2 Net
revenues for the current quarter were $4.0 billion compared with
$3.8 billion a year ago.
- Asset management fee revenues of $2.2
billion increased from $2.1 billion a year ago reflecting market
appreciation and positive flows.
- Transactional revenues11 of $774
million decreased from $861 million a year ago. Results for the
current period reflect lower commissions and lower revenues related
to investments associated with certain employee deferred
compensation plans.
- Net interest income of $984 million
increased from $779 million a year ago principally driven by higher
deposit and loan balances. Wealth Management client liabilities
were $73 billion at quarter end, an increase of $9 billion compared
with the prior year quarter.12
- Compensation expense for the current
quarter of $2.2 billion increased from $2.1 billion a year ago6
driven by higher revenues, partially offset by a decrease in the
fair value of deferred compensation plan referenced investments.
Non-compensation expenses of $876 million increased from $837
million a year ago reflecting a provision in connection with
certain brokerage tax reporting issues that are being addressed,
partly offset by lower professional services costs.
Total client assets for the quarter were $2.1 trillion and
client assets in fee-based accounts were $877 billion at quarter
end. Fee-based asset flows for the quarter were $17.1 billion.
Wealth Management representatives of 15,763 produced average
annualized revenue per representative above $1.0 million in the
current quarter.
Summary of Investment Management Results (dollars
in millions) Net Pre-Tax Revenues Income 4Q 2016
$500 $28 3Q 2016 $552 $97 4Q 2015 $621 $123
INVESTMENT MANAGEMENT
Investment Management reported pre-tax income from continuing
operations of $28 million compared with $123 million in the fourth
quarter of last year.
- Net revenues of $500 million decreased
from $621 million in the prior year, reflecting losses of
approximately $60 million on sales and markdowns of legacy LP
investments in third party sponsored funds in the current quarter
compared with investment gains in the prior year period. Asset
management fees were essentially unchanged from a year ago.
- Compensation expense for the current
quarter of $249 million decreased from $278 million a year ago6
principally due to a decrease in deferred compensation associated
with carried interest. Non-compensation expenses of $223 million
were relatively unchanged from a year ago.
- Assets under management or supervision
at December 31, 2016 were $417 billion.
FULL YEAR RESULTS
Full year net revenues were $34.6 billion compared with $35.2
billion a year ago.3 Net income applicable to Morgan Stanley for
the current year was $6.0 billion, or $2.92 per diluted share,4
compared with net income of $6.1 billion, or $2.90 per diluted
share,4 a year ago.3
Excluding DVA revenues of $618 million in the prior year, net
revenues were $34.5 billion and income applicable to Morgan Stanley
was $5.7 billion, or $2.70 per diluted share.5 The prior year also
included approximately $564 million, or $0.29 per diluted share, of
net discrete tax benefits.13
The Firm’s compensation expense of $15.9 billion for the current
year decreased from $16.0 billion a year ago.6 Non-compensation
expenses of $9.9 billion decreased from $10.6 billion a year ago
driven by lower litigation costs and expense management.
The effective tax rate from continuing operations for the full
year was 30.8%.
The return on average common equity was 8.0 percent for the full
year ended 2016.7
Summary of Segment Results (dollars in
millions)
As Reported Excluding DVA8 Net Pre-Tax
Net Pre-Tax Revenues Income Revenues Income
FY
2016 FY 2015 FY 2016 FY
2015 FY 2016 (a) FY
2015 FY 2016 (a) FY
2015 Institutional Securities $17,459 $17,953 $5,123 $4,671
* $17,335 * $4,053 Wealth Management $15,350 $15,100 $3,437 $3,332
* * * * Investment Management $2,112 $2,315 $287 $492 * * * *
a)
Effective January 1, 2016, the Firm early
adopted the provision of new accounting guidance that requires
changes in DVA to be presented in other comprehensive income as
opposed to net revenues. Results for 2015 were not restated
pursuant to this guidance, and as such, full year 2015 net revenues
and pre-tax income for the Institutional Securities segment are
adjusted for the impact of DVA.3
INSTITUTIONAL SECURITIES
Institutional Securities reported pre-tax income from continuing
operations of $5.1 billion compared with $4.7 billion a year ago,
or $4.1 billion excluding DVA.3,8 Net revenues for the current year
were $17.5 billion compared with $18.0 billion a year ago, or $17.3
billion excluding DVA.3,8 Compensation expense of $6.3 billion
decreased from $6.5 billion a year ago6 reflecting continued
disciplined compensation management. The compensation to net
revenue ratio for the current year was 36%.14 Non-compensation
expenses of $6.1 billion decreased from $6.8 billion a year ago
primarily driven by lower litigation costs and expense
management.
WEALTH MANAGEMENT
Wealth Management reported pre-tax income from continuing
operations of $3.4 billion compared with $3.3 billion a year ago.
Net revenues for the current year were $15.4 billion compared with
$15.1 billion a year ago. The year’s pre-tax margin was 22%.2
Compensation expense was $8.7 billion compared with $8.6 billion a
year ago.6 Non-compensation expenses of $3.2 billion for the
current year were relatively unchanged from a year ago.
INVESTMENT MANAGEMENT
Investment Management reported pre-tax income from continuing
operations of $287 million compared with $492 million a year ago.
Net revenues of $2.1 billion decreased from $2.3 billion a year
ago. Compensation expense was $937 million compared with $954
million a year ago.6 Non-compensation expenses of $888 million
compared with $869 million a year ago.
CAPITAL
As of December 31, 2016, the Firm’s Common Equity Tier 1 and
Tier 1 risk-based capital ratios under Advanced Approach
transitional provisions were approximately 16.8% and 19.0%,
respectively.15
As of December 31, 2016, the Firm estimates its pro forma fully
phased-in Common Equity Tier 1 risk-based capital ratio under the
Advanced Approach and pro forma fully phased-in Supplementary
Leverage Ratio to be approximately 15.8% and 6.3%,
respectively.15,16,17
At December 31, 2016, book value and tangible book value per
common share were $36.99 and $31.98,18 respectively, based on
approximately 1.9 billion shares outstanding.
OTHER MATTERS
During the quarter ended December 31, 2016, the Firm repurchased
approximately $1.0 billion of its common stock or approximately 27
million shares. During the year ended December 31, 2016, the Firm
repurchased $3.5 billion of its common stock or approximately 117
million shares compared with $2.1 billion of its common stock or
approximately 59 million shares during the year ended December 31,
2015.
The Board of Directors declared a $0.20 quarterly dividend per
share, payable on February 15, 2017 to common shareholders of
record on January 31, 2017.
Morgan Stanley is a leading global financial services firm
providing a wide range of investment banking, securities, wealth
management and investment management services. With offices in more
than 42 countries, the Firm’s employees serve clients worldwide
including corporations, governments, institutions and individuals.
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)
NOTICE:
The information provided herein may include certain non-GAAP
financial measures. The definition of such measures or
reconciliation of such metrics to the comparable U.S. GAAP figures
are included in this earnings release and the Financial Supplement,
both of which are available on www.morganstanley.com.
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 Firm,
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 Firm’s Annual Report on Form 10-K for the
year ended December 31, 2015 and other items throughout the Form
10-K, the Firm’s Quarterly Reports on Form 10-Q and the Firm’s
Current Reports on Form 8-K, including any amendments thereto.
1 The Firm prepares its Consolidated Financial Statements using
accounting principles generally accepted in the United States (U.S.
GAAP). 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. The Securities and Exchange Commission 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 U.S. GAAP. Non-GAAP financial measures
disclosed by Morgan Stanley are provided as additional information
to investors and analysts in order to provide them with greater
transparency about, or an alternative method for assessing, our
financial condition, operating results, or prospective regulatory
capital requirements. These measures are not in accordance with, or
a substitute for U.S. 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 define it or present the most directly
comparable financial measure calculated and presented in accordance
with U.S. GAAP, along with a reconciliation of the differences
between the non-GAAP financial measure we reference and such
comparable U.S. GAAP financial measure.
2 Pre-tax margin is a non-GAAP financial measure that the Firm
considers useful for investors and analysts to assess operating
performance. Pre-tax margin represents income (loss) from
continuing operations before taxes divided by net revenues.
3 Effective January 1, 2016, the Firm early adopted the
provision of new accounting guidance that requires unrealized gains
and losses from Morgan Stanley’s debt-related credit spreads and
other credit factors (Debt Valuation Adjustments, or DVA) to be
presented in Other comprehensive income as opposed to net revenues
and net income. Results for 2015 are not restated pursuant to that
guidance.
4 Includes preferred dividends and other adjustments related to
the calculation of earnings per share for the fourth quarter of
2016 and 2015 of approximately $157 million and $155 million,
respectively. Includes preferred dividends and other adjustments
related to the calculation of earnings per share for the years
ended 2016 and 2015 of approximately $471 million and $456 million,
respectively. Refer to page 13 of Morgan Stanley’s Financial
Supplement accompanying this release for the calculation of
earnings per share.
5 Excluding DVA from net revenues, net income applicable to
Morgan Stanley and earnings (loss) per diluted share amounts are
non-GAAP financial measures that the Firm considers useful for
investors and analysts to allow better comparability of
period-to-period operating performance. The reconciliation of net
revenues, net income (loss) applicable to Morgan Stanley and
earnings (loss) per diluted share applicable to Morgan Stanley
common shareholders from a U.S. GAAP to non-GAAP basis is as
follows (Net revenues, net income (loss) reconciliation and average
diluted shares are presented in millions – also see footnote
3):
4Q 2015 FY 2015 Net
revenues - U.S. GAAP $7,738 $35,155 DVA impact $(124) $618 Net
revenues - Non-GAAP $7,862 $34,537 Net income (loss)
applicable to MS - U.S. GAAP $908 $6,127 DVA impact $(78) $399 Net
income (loss) applicable to MS - Non-GAAP $986 $5,728
Earnings (loss) per diluted share - U.S. GAAP $0.39 $2.90 DVA
impact ($0.04) $0.20 Earnings (loss) per diluted share - Non-GAAP
$0.43 $2.70 Average diluted shares - U.S. GAAP 1,939 1,953
6 The fourth quarter of 2015 included severance expense of $155
million associated with the Firm’s restructuring actions, which was
recorded in the business segments as follows: Institutional
Securities: $125 million, Wealth Management: $20 million and
Investment Management: $10 million.
7 Annualized return on average common equity and return on
average common equity are non-GAAP financial measures that the Firm
considers useful for investors and analysts to allow better
comparability of period-to-period operating performance. The
calculation of return on average common equity uses annualized net
income for the quarter or full year net income applicable to Morgan
Stanley less preferred dividends as a percentage of average common
equity.
8 Institutional Securities net revenues and pre-tax income
(loss), excluding DVA, is a non-GAAP financial measure that the
Firm considers useful for investors and analysts to allow for
better comparability of period-to-period operating performance. The
reconciliation of net revenues and pre-tax income (loss) from a
U.S. GAAP to non-GAAP basis is as follows (amounts are presented in
millions - also see footnote 3):
4Q2015 FY 2015 Net revenues
- U.S. GAAP $3,419 $17,953 DVA impact $(124) $618 Net revenues -
Non-GAAP $3,543 $17,335 Pre-tax income (loss) - U.S. GAAP
$548 $4,671 DVA impact $(124) $618 Pre-tax income (loss) - Non-GAAP
$672 $4,053
9 Sales and trading net revenues, including Fixed Income and
Equity sales and trading net revenues excluding DVA are non-GAAP
financial measures that the Firm considers useful for investors and
analysts to allow better comparability of period-to-period
operating performance. The reconciliation of sales and trading,
including Fixed Income and Equity sales and trading net revenues
from a U.S. GAAP to non-GAAP basis is as follows (amounts are
presented in millions – also see footnote 3):
4Q 2015 FY 2015 Sales &
Trading - U.S. GAAP $2,141 $12,450 DVA impact $(124) $618 Sales
& Trading - Non-GAAP $2,265 $11,832 Fixed Income Sales
& Trading - U.S. GAAP $460 $4,758 DVA impact $(90) $455 Fixed
Income Sales & Trading - Non-GAAP $550 $4,303 Equity
Sales & Trading - U.S. GAAP $1,784 $8,288 DVA impact $(34) $163
Equity Sales & Trading - Non-GAAP $1,818 $8,125
10 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 the Annual
Report on Form 10-K for the year ended December 31, 2015 (2015 Form
10-K). Refer to page 6 of Morgan Stanley’s Financial Supplement
accompanying this release for the VaR disclosure.
11 Transactional revenues include investment banking, trading,
and commissions and fee revenues.
12 Wealth Management client liabilities reflect U.S. Bank
lending and broker dealer margin activity.
13 The impact to earnings per diluted share is calculated by
dividing each of the net discrete tax benefit and the net after-tax
impact of DVA by the average number of shares outstanding of
approximately 2.0 billion.
14 Institutional Securities full year 2016 compensation ratio of
36% is calculated based on compensation expense of $6,275 million
divided by net revenues of $17,459 million.
15 The Firm’s binding risk-based capital ratios for regulatory
purposes are the lower of the capital ratios computed under the (i)
standardized approaches for calculating credit risk risk-weighted
assets (RWAs) and market risk RWAs (the “Standardized Approach”);
and (ii) applicable advanced approaches for calculating credit
risk, market risk and operational risk RWAs (the “Advanced
Approach”). At December 31, 2016, the binding ratio is based on the
Advanced Approach transitional rules. For information on the
calculation of regulatory capital and ratios for prior periods,
please refer to Part II, Item 7 “Liquidity and Capital Resources -
Regulatory Requirements” in the Firm’s 2015 10-K and Part I, Item 2
“Liquidity and Capital Resources – Regulatory Requirements” in the
Firm’s 10-Q for the quarter ended September 30, 2016.
16 The pro forma fully phased-in Common Equity Tier 1 risk-based
capital ratio and pro forma fully phased-in Supplementary Leverage
Ratio are non-GAAP financial measures that the Firm considers to be
useful measures for investors and analysts to evaluate compliance
with new regulatory capital requirements that have not yet become
effective.
17 The Firm is required to disclose information related to its
supplementary leverage ratio, which through to the end of 2017 will
include the effects of transitional provisions. The supplementary
leverage ratio will become effective as a capital standard on
January 1, 2018. Specifically, beginning on January 1, 2018, the
Firm must maintain a Tier 1 supplementary leverage capital buffer
of at least 2% in addition to the 3% minimum supplementary leverage
ratio (for a total of at least 5%), in order to avoid limitations
on capital distributions, including dividends and stock
repurchases, and discretionary bonus payments to executive
officers. The Firm’s pro forma Supplementary Leverage Ratio
estimate utilizes a fully phased-in Tier 1 capital numerator of
approximately $66.4 billion and a fully phased-in supplementary
leverage exposure denominator of approximately $1.06 trillion. The
Firm’s estimates are subject to risks and uncertainties that may
cause actual results to differ materially from estimates based on
these regulations. Further, these expectations should not be taken
as projections of what the Firm’s supplementary leverage ratios or
earnings, assets or exposures will actually be at future dates. See
“Risk Factors” in Part I, Item 1A in the 2015 Form 10-K for a
discussion of risks and uncertainties that may affect the future
results of the Firm.
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 for investors and analysts.
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
Consolidated
Financial Summary
(unaudited, dollars in millions, except for per share data)
Quarter Ended Percentage Change From:
Twelve Months Ended
Percentage
Dec 31, 2016
Sept 30, 2016 Dec 31, 2015 Sept 30, 2016
Dec 31, 2015 Dec 31, 2016 Dec 31, 2015
Change
Net revenues
Institutional Securities $
4,614
$ 4,553 $ 3,419 1 % 35 % $ 17,459 $ 17,953 (3 %) Wealth Management
3,990
3,881 3,751 3 % 6 % 15,350 15,100 2 % Investment Management 500 552
621 (9 %) (19 %) 2,112 2,315 (9 %) Intersegment Eliminations
(83
)
(77 ) (53 ) (8 %) (57 %) (290 ) (213 )
(36 %) Net revenues $ 9,021 $ 8,909 $ 7,738 1
% 17 % $ 34,631 $ 35,155 (1 %)
Income (loss) from
continuing operations before tax Institutional Securities $
1,326 $ 1,383 $ 548 (4 %) 142 % $ 5,123 $ 4,671 10 % Wealth
Management 891 901 768 (1 %) 16 % 3,437 3,332 3 % Investment
Management 28 97 123 (71 %) (77 %) 287 492 (42 %) Intersegment
Eliminations 1 0 0 * *
1 0 * Income (loss) from continuing
operations before tax $ 2,246 $ 2,381 $ 1,439
(6 %) 56 % $ 8,848 $ 8,495 4 %
Net Income (loss)
applicable to Morgan Stanley Institutional Securities $ 1,104 $
966 $ 341 14 % * $ 3,649 $ 3,696 (1 %) Wealth Management 531 564
480 (6 %) 11 % 2,104 2,085 1 % Investment Management 30 67 87 (55
%) (66 %) 225 346 (35 %) Intersegment Eliminations 1
0 0 * * 1 0
* Net Income (loss) applicable to Morgan Stanley $ 1,666 $
1,597 $ 908 4 % 83 % $ 5,979 $ 6,127 (2
%) Earnings (loss) applicable to Morgan Stanley common shareholders
$ 1,509 $ 1,518 $ 753 (1 %) 100 % $ 5,508
$ 5,671 (3 %)
Financial Metrics: Earnings per
diluted share $ 0.81 $ 0.81 $ 0.39 -- 108 % $ 2.92 $ 2.90 1 %
Earnings per diluted share excluding DVA $ 0.81 $ 0.81 $ 0.43 -- 88
% $ 2.92 $ 2.70 8 % Return on average common equity 8.7 % 8.7 % 4.4
% 8.0 % 8.5 %
Return on average common equity excluding
DVA
8.7 % 8.7 % 4.9 % 8.0 % 7.8 %
Notes:
-
Effective January 1, 2016, the Firm early
adopted the provision of new accounting guidance that requires
unrealized gains and losses from Morgan Stanley’s debt-related
credit spreads and other credit factors (Debt Valuation
Adjustments, or DVA) to be presented in other comprehensive income
as opposed to net revenues and net income. This change is reflected
in the consolidated results and the Institutional Securities
segment for 2016. Results for 2015 were not restated pursuant to
this guidance.
-
Refer to End Notes, U.S. GAAP to Non-GAAP
Measures and Definition of Performance Metrics on pages 14 - 16
from the Financial Supplement for additional information related to
the calculation of the financial metrics.
11
Morgan Stanley
Consolidated Income
Statement Information
(unaudited, dollars in millions) Quarter Ended
Percentage Change From: Twelve Months Ended
Percentage Dec 31, 2016 Sept 30, 2016 Dec
31, 2015 Sept 30, 2016 Dec 31, 2015 Dec 31,
2016 Dec 31, 2015 Change Revenues: Investment
banking $ 1,377 $ 1,225 $ 1,310 12 % 5 % $ 4,933 $ 5,594 (12 %)
Trading 2,789 2,609 1,465 7 % 90 % 10,209 10,114 1 % Investments
(19 ) 87 133 * * 160 541 (70 %) Commissions and fees 1,043 991
1,095 5 % (5 %) 4,109 4,554 (10 %) Asset management, distribution
and admin. fees 2,754 2,686 2,611 3 % 5 % 10,697 10,766 (1 %) Other
194 308 87 (37 %) 123 %
825 493 67 % Total non-interest
revenues 8,138 7,906 6,701 3 % 21 % 30,933 32,062 (4 %)
Interest income 1,868 1,734 1,514 8 % 23 % 7,016 5,835 20 %
Interest expense 985 731 477
35 % 106 % 3,318 2,742 21 % Net
interest 883 1,003 1,037
(12 %) (15 %) 3,698 3,093 20 % Net
revenues 9,021 8,909 7,738
1 % 17 % 34,631 35,155 (1 %)
Non-interest expenses: Compensation and benefits 4,083 4,097 3,650
-- 12 % 15,878 16,016 (1 %) Non-compensation expenses:
Occupancy and equipment 311 339 348 (8 %) (11 %) 1,308 1,382 (5 %)
Brokerage, clearing and exchange fees 480 491 457 (2 %) 5 % 1,920
1,892 1 % Information processing and communications 460 456 467 1 %
(1 %) 1,787 1,767 1 % Marketing and business development 169 130
194 30 % (13 %) 587 681 (14 %) Professional services 578 489 638 18
% (9 %) 2,128 2,298 (7 %) Other 694 526
545 32 % 27 % 2,175 2,624
(17 %)
Total non-compensation expenses
2,692 2,431 2,649 11 % 2 % 9,905 10,644 (7 %)
Total non-interest
expenses 6,775 6,528 6,299
4 % 8 % 25,783 26,660 (3 %)
Income (loss) from continuing operations before taxes 2,246
2,381 1,439 (6 %) 56 % 8,848 8,495 4 %
Income tax provision / (benefit) from
continuing operations
566 749 496 (24 %) 14 %
2,726 2,200 24 % Income (loss) from
continuing operations 1,680 1,632
943 3 % 78 % 6,122 6,295
(3 %) Gain (loss) from discontinued operations after tax 0
8 (7 ) * * 1 (16 )
* Net income (loss) $ 1,680 $ 1,640 $ 936 2 % 79 % $ 6,123 $ 6,279
(2 %) Net income applicable to nonredeemable noncontrolling
interests 14 43 28 (67 %)
(50 %) 144 152 (5 %) Net income (loss)
applicable to Morgan Stanley 1,666 1,597
908 4 % 83 % 5,979 6,127
(2 %) Preferred stock dividend / Other 157
79 155 99 % 1 % 471
456 3 % Earnings (loss) applicable to Morgan Stanley
common shareholders $ 1,509 $ 1,518 $ 753 (1
%) 100 % $ 5,508 $ 5,671 (3 %) Pre-tax profit
margin 25 % 27 % 19 % 26 % 24 % Compensation and benefits as a % of
net revenues 45 % 46 % 47 % 46 % 46 % Non-compensation expenses as
a % of net revenues 30 % 27 % 34 % 29 % 30 %
Effective tax rate from continuing
operations
25.2 % 31.5 % 34.5 % 30.8 % 25.9 % Notes:
-
Refer to End Notes, U.S. GAAP to Non-GAAP
Measures and Definition of Performance Metrics on pages 14 - 16
from the Financial Supplement for additional information.
12
Morgan Stanley
Earnings Per Share Summary
(unaudited, dollars in millions,
except for per share data)
Quarter Ended Percentage Change From: Twelve
Months Ended Percentage Dec 31, 2016 Sept 30,
2016
Dec 31, 2015
Sept 30, 2016 Dec 31, 2015 Dec 31, 2016 Dec
31, 2015 Change Income (loss) from
continuing operations $ 1,680 $ 1,632 $ 943 3 % 78 % $ 6,122 $
6,295 (3 %) Net income applicable to nonredeemable noncontrolling
interests 14 43 28 (67 %) (50 %)
144 152 (5 %)
Income (loss) from continuing
operations applicable to Morgan Stanley 1,666 1,589 915 5 % 82
% 5,978 6,143 (3 %) Less: Preferred Dividends and allocation of
earnings to Participating
Restricted Stock Units
157 79 155 99 % 1 % 471
456 3 %
Income (loss) from continuing operations
applicable to Morgan Stanley
common shareholders
1,509 1,510 760 -- 99 % 5,507 5,687 (3 %) Gain (loss) from
discontinued operations after tax 0 8 (7 ) * * 1 (16 ) * Less: Gain
(loss) from discontinued operations after tax applicable to
noncontrolling interests
0 0 0 -- -- 0 0 -- Less: Allocation of earnings to Participating
Restricted Stock Units 0 0 0 -- --
0 0 --
Earnings (loss) from discontinued
operations applicable to Morgan Stanley
common shareholders
0 8 (7 ) * *
1 (16
) *
Earnings (loss) applicable to Morgan Stanley
common shareholders $ 1,509 $ 1,518
$ 753 (1 %) 100 %
$ 5,508 $
5,671 (3 %) Average basic common shares outstanding
(millions) 1,806 1,838 1,889 (2 %) (4 %) 1,849 1,909 (3 %)
Earnings per basic share: Income from continuing
operations
$ 0.84 $ 0.82 $
0.40 2 % 110 %
$ 2.98 $ 2.98 --
Discontinued operations
$ - $ 0.01
$ - * --
$ - $ (0.01
) * Earnings per basic share
$
0.84 $ 0.83
$ 0.40 1 %
110 %
$ 2.98
$ 2.97
-- Average diluted common shares
outstanding and common stock
equivalents (millions)
1,853 1,879 1,939 (1 %) (4 %) 1,887 1,953 (3 %)
Earnings per diluted share: Income from continuing
operations
$ 0.81 $ 0.80 $
0.39 1 % 108 %
$ 2.92 $ 2.91 --
Discontinued operations
$ - $ 0.01
$ - * --
$ - $ (0.01
) * Earnings per diluted share
$
0.81 $ 0.81
$ 0.39 --
108 %
$ 2.92
$ 2.90
1 %
Notes: - Refer to End Notes, U.S. GAAP to
Non-GAAP Measures and Definition of Performance Metrics on pages 14
- 16 from the Financial Supplement for additional information.
13
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170117005734/en/
Morgan StanleyMedia Relations: Michele Davis,
212-761-9621Investor Relations: Sharon Yeshaya, 212-761-1632
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