- Net Revenues of $8.6 Billion and
Earnings per Diluted Share from Continuing Operations of
$0.94
- Excluding DVA,1 Net
Revenues were $8.5 Billion and Earnings per Diluted Share from
Continuing Operations of $0.912,3
- Excluding DVA and Net Discrete Tax
Benefit, Net Income Applicable to Morgan Stanley Increased 46% from
the Prior Year Period4
- Wealth Management Record Client
Assets of $2 Trillion; Pre-Tax Margin of 21%5
- Investment Banking Ranked #2 in
Global Announced M&A and #3 in Global IPOs6;
Continued Strength in Equity Sales & Trading
Morgan Stanley (NYSE:MS) today reported net revenues of $8.6
billion for the second quarter ended June 30, 2014 compared with
$8.5 billion a year ago. For the current quarter, income from
continuing operations applicable to Morgan Stanley was $1.9
billion, or $0.94 per diluted share7, compared with income of $1.0
billion, or $0.43 per diluted share7, for the same period a year
ago. Results for the quarter 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.8 The earnings per
share calculation for the prior year second quarter included a
negative adjustment of approximately $151 million, or $0.08 per
diluted share, related to the purchase of the final remaining
interest in the Morgan Stanley Smith Barney Joint Venture (Joint
Venture).9
Results for the current quarter included positive revenue
related to the change in the fair value of certain of the Firm’s
long-term and short-term borrowings resulting from the fluctuation
in the firm’s credit spreads and other credit factors (Debt
Valuation Adjustment, DVA) of $87 million, compared with $175
million a year ago.
Excluding DVA, net revenues for the current quarter were $8.5
billion compared with $8.3 billion a year ago.10 Income from
continuing operations applicable to Morgan Stanley was $1.9
billion, or $0.91 per diluted share, compared with income of $900
million, or $0.37 per diluted share, a year ago. 2,3,10
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.
For the current quarter, net income applicable
to Morgan Stanley, including discontinued operations, was $1.9
billion or $0.94 per diluted share,7 compared with net income of
$980 million or $0.41 per diluted share in the second quarter of
2013.7 Excluding DVA and the net discrete tax benefit of $609
million, net income applicable to Morgan Stanley for the current
quarter was $1.3 billion, which represents an increase of 46% from
the prior year quarter.4
Summary of Firm Results
(dollars in millions)
As Reported
Excluding DVA10
Net MS Income Net MS Income Revenues
Cont. Ops. Revenues Cont. Ops. 2Q 2014
$8,608 $1,936 $8,521 $1,875 1Q 2014 $8,947 $1,466 $8,821 $1,391 2Q
2013 $8,515 $1,011 $8,340
$900
Business Overview
- Institutional Securities net revenues
excluding DVA were $4.2 billion11 reflecting continued strength in
Investment Banking and Equity sales and trading, and lower
performance in Fixed Income & Commodities sales and trading due
to lower market activity.
- Wealth Management net revenues were
$3.7 billion and pre-tax margin was 21%.5 Fee based asset flows for
the quarter were $12.5 billion. Total client assets were a record
$2.0 trillion at quarter end.
- Investment Management reported net
revenues of $692 million with assets under management or
supervision of $396 billion.
James P. Gorman, Chairman and Chief Executive
Officer, said, “Our quarterly results demonstrated solid
performance, despite a muted operating environment. We are seeing
momentum across our businesses, with particular strength in
Investment Banking, Equity Sales & Trading and Wealth
Management – where profit margins hit 21% for the first time since
the founding of the JV and assets entrusted to us by clients
reached $2 trillion. We also continued to be disciplined on
expenses, while focusing on delivering higher returns.”
Summary of Institutional Securities
Results
(dollars in millions)
As Reported
Excluding DVA11
Net Pre-Tax Net Pre-Tax Revenues
Income Revenues Income 2Q 2014 $4,248 $1,014
$4,161 $927 1Q 2014 $4,627 $1,371 $4,501 $1,245 2Q 2013
$4,358 $981 $4,183
$806
INSTITUTIONAL SECURITIES
Institutional Securities reported pre-tax income from continuing
operations of $1.0 billion compared with $981 million in the second
quarter of last year. The quarter’s pre-tax margin was 24%
(excluding DVA, 22%).5,11 Income after the noncontrolling interest
allocation and before taxes was $1.0 billion.12 Net revenues for
the current quarter were $4.2 billion compared with $4.4 billion a
year ago. DVA resulted in positive revenue of $87 million in the
current quarter compared with $175 million a year ago. Excluding
DVA, net revenues for the current quarter of $4.2 billion were
relatively unchanged from a year ago.11 The following discussion
for sales and trading excludes DVA.
- 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.13
- Fixed Income & Commodities sales
and trading net revenues of $1.0 billion decreased from $1.2
billion a year ago.13 Results reflected revenue declines in foreign
exchange on lower levels of volatility, partly offset by higher
results in securitized and credit products.
- Other sales and trading net losses of
$241 million compared with a net loss of $54 million a year ago,
reflecting losses on economic hedges and other costs related to the
Firm’s long-term debt.
- Other Revenues were $108 million
compared with $152 million a year ago primarily reflecting lower
gains in our Japanese joint venture, Mitsubishi UFJ Morgan Stanley
Securities Co., Ltd.
- 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) measured at the 95% confidence level was $48
million compared with $50 million in the first quarter of 2014 and
$61 million in the second quarter of the prior year.14
Summary of Wealth Management
Results
(dollars in millions)
Net Pre-Tax Revenues
Income 2Q 2014 $3,715 $767 1Q 2014 $3,622 $691 2Q 2013
$3,531 $655
WEALTH MANAGEMENT
Wealth Management reported pre-tax income from continuing
operations of $767 million compared with $655 million in the second
quarter of last year. The quarter’s pre-tax margin was 21%.5 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 revenues15 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.16
- Total client assets exceeded $2.0
trillion at quarter end. Client assets in fee based accounts of
$762 billion increased 21% compared with the prior year quarter.
Fee based asset flows for the quarter were $12.5 billion.
- Wealth Management representatives of
16,316 were relatively unchanged compared with the prior year
period. Average annualized revenue per representative of $908,000
and total client assets per representative of $123 million
increased 5% and 13%, respectively, compared with the prior year
quarter.
Subsequent to the second quarter of 2013, net
income no longer includes a noncontrolling interest allocation to
Citigroup Inc. (Citi) following the completed acquisition of the
Joint Venture. The prior year quarter included a noncontrolling
interest allocation to Citi of $100 million.17
Summary of Investment Management Results
(dollars in millions)
Net Pre-Tax Revenues
Income 2Q 2014 $692 $205 1Q 2014 $740 $263 2Q 2013
$673 $160
INVESTMENT MANAGEMENT
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.18 The quarter’s pre-tax
margin was 30%.5 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.19,20
- Compensation expense for the current
quarter of $291 million compared with $297 a year ago.
Non-compensation expenses of $196 million decreased from $216
million a year ago.
- Assets under management or supervision
at June 30, 2014 of $396 billion increased from $347 billion a year
ago primarily reflecting market appreciation and positive flows.
The business recorded net flows of $7.6 billion in the current
quarter.
CAPITAL
In February 2014, the Federal Reserve Board approved the Firm’s
use of the U.S. Basel III Advanced Approaches (“Advanced Approach”)
to calculate and publicly disclose its regulatory capital
requirements beginning in the second quarter of 2014. The Firm is
subject to a “capital floor” such that its regulatory capital
ratios currently reflect the lower of its ratios calculated under
the Advanced Approach and under transitional U.S. Basel I and Basel
2.5 capital rules. As of June 30, 2014, under the Advanced Approach
transitional rules, which represent the Firm’s regulatory capital
ratios due to the capital floor, the Firm’s Common Equity Tier 1
risk-based capital ratio was approximately 13.8% and its Tier 1
risk-based capital ratio was approximately 15.2%.21
At June 30, 2014, book value and tangible book value per common
share were $33.48 and $28.53,22 respectively, based on
approximately 2.0 billion shares outstanding.
OTHER MATTERS
The effective tax rate from continuing operations for the
current quarter was 1.6%. The quarter included a net discrete tax
benefit of $609 million principally related to the remeasurement of
reserves and related interest due to new information regarding the
status of a multi-year tax authority examination.
The previously announced sale of the Firm’s ownership stake in
TransMontaigne Inc. to NGL Energy Partners LP was completed on July
1, 2014.
During the quarter ended June 30, 2014, the Firm repurchased
approximately $284 million of its common stock or approximately 9.3
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 declared a $0.10 quarterly dividend per common share,
payable on August 15, 2014 to common shareholders of record on July
31, 2014.
Morgan Stanley is a leading global financial services firm
providing a wide range of investment banking, securities,
investment management and wealth management services. With offices
in more than 43 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)
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, the Company’s Quarterly Report on Form 10-Q 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 the
Firm’s long-term and short-term borrowings resulting from the
fluctuation in the firm’s credit spreads and other credit factors
(Debt Valuation Adjustment, 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):
2Q 2014 2Q
2013 Earnings (loss) per diluted share from cont. ops. –
Non-GAAP $0.91 $0.37 DVA impact $0.03 $0.06 Earnings (loss) per
diluted share from cont. ops. – GAAP $0.94 $0.43 Average
diluted shares – Non-GAAP 1,969 1,951 DVA impact 0 0 Average
diluted shares – GAAP 1,969 1,951
4 Net income (loss) applicable to Morgan
Stanley, excluding DVA and the net discrete tax benefit is a
non-GAAP financial measure that the Firm considers useful for
investors to allow for better comparability of period-to-period
operating performance. The reconciliation of net income (loss)
applicable to Morgan Stanley from a non-GAAP to GAAP basis is as
follows (amounts are presented in millions):
2Q 2014 2Q
2013 Net income (loss) Applicable to MS – Non-GAAP $1,265
$869 DVA after-tax impact $61 $111 Net discrete tax benefit $609 $0
Net income (loss) Applicable to MS – GAAP $1,935 $980
5 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.
6 Source: Thomson Reuters – for the period of March 31, 2014 to
June 30, 2014 as of July 1, 2014.
7 Includes preferred dividends and other adjustments related to
the calculation of earnings per share for the second quarter of
2014 and 2013 of approximately $79 million and $177 million,
respectively. The second quarter of last year included a negative
adjustment of approximately $151 million related to the purchase of
the remaining 35% interest in the Morgan Stanley Smith Barney Joint
Venture. Refer to page 3 of Morgan Stanley’s Financial Supplement
accompanying this release for the calculation of earnings per
share.
8 The impact to earnings per diluted share from continuing
operations is calculated by dividing the net discrete tax benefit
by the average number of diluted shares outstanding.
9 The Firm completed the purchase of the remaining 35% interest
in the Morgan Stanley Smith Barney Joint Venture from Citigroup
Inc. (Citi) on June 28, 2013 for the previously established price
of $4.7 billion. The Firm recorded a negative adjustment of
approximately $151 million (net of tax) to reflect the difference
between the purchase price for the 35% redeemable noncontrolling
interest in the joint venture and its carrying value. The impact to
earnings per diluted share from continuing operations is calculated
by dividing the negative adjustment by the average number of
diluted shares outstanding.
10 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):
2Q 2014
1Q 2014 2Q 2013 Firm net revenues –
Non-GAAP $8,521 $8,821 $8,340 DVA impact $87 $126 $175 Firm net
revenues – GAAP $8,608 $8,947
$8,515
Income (loss) applicable to MS – Non-GAAP $1,875 $1,391 $900
DVA after-tax impact $61 $75 $111 Income (loss) applicable to MS –
GAAP $1,936 $1,466 $1,011
11 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):
2Q 2014
1Q 2014 2Q 2013 Net revenues – Non-GAAP
$4,161 $4,501 $4,183 DVA impact $87 $126 $175 Net revenues – GAAP
$4,248 $4,627 $4,358 Pre-tax income (loss) – Non-GAAP $927
$1,245 $806 DVA impact $87 $126 $175 Pre-tax income (loss) – GAAP
$1,014 $1,371 $981
12 Noncontrolling interests reported in the Institutional
Securities business segment includes the allocation to Mitsubishi
UFJ Financial Group, Inc. of Morgan Stanley MUFG Securities Co.,
Ltd., which the Firm consolidates.
13 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):
2Q 2014 2Q 2013 Sales & Trading –
Non-GAAP $2,559 $2,902 DVA impact $87 $175 Sales & Trading –
GAAP $2,646 $3,077 FIC Sales & Trading – Non-GAAP $1,011
$1,153 DVA impact $50 $61 FIC Sales & Trading – GAAP $1,061
$1,214 Equity Sales & Trading – Non-GAAP $1,789 $1,803
DVA impact $37 $114 Equity Sales & Trading – GAAP $1,826 $1,917
14 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.
15 Transactional revenues include investment banking, trading,
and commissions and fee revenues.
16 Results for the current quarter included a $14 million
benefit related to an insurance recovery.
17 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 June 30, 2013, Citi’s results related to its
35% interest were reported in net income (loss) applicable to
redeemable noncontrolling interests on page 8 of Morgan Stanley’s
Financial Supplement accompanying this release.
18 Results for the second quarter of 2014 and 2013 included
pre-tax income of $6 million and $20 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 nonredeemable noncontrolling interests
on page 10 of Morgan Stanley’s Financial Supplement accompanying
this release.
19 On April 1, 2014, the Firm deconsolidated approximately $2
billion in total assets related to a real estate fund sponsored by
the Firm.
20 Net revenues for the current quarter included gains of $6
million compared with gains of $21 million in the prior year second
quarter related to investments held by certain consolidated real
estate funds.
21 As an Advanced Approach banking organization, the Firm is
required to compute risk-based capital ratios using both (i) a
standardized approach for calculating credit risk weighted assets
(“RWAs”) as supplemented by standardized market RWAs calculated
under U.S. Basel III (the “Standardized Approach”); and (ii) after
completing the parallel run process on April 1, 2014, an advanced
internal ratings-based approach for calculating credit RWAs and
advanced measurement approaches for calculating operational RWAs,
as supplemented by advanced market RWAs calculated under Basel III
(the “Advanced Approach”). To implement a provision of the
Dodd-Frank Act, U.S. Basel III subjects Advanced Approach banking
organizations, such as the Firm, to a permanent “capital floor.” In
calendar year 2014, the capital floor framework utilizes the U.S.
Basel I-based rules as supplemented by the existing market risk
rules known as “Basel 2.5”. Beginning on January 1, 2015, the
capital floor framework will replace the U.S. Basel I/2.5 component
with the U.S. Basel III Standardized Approach. In the first quarter
of 2014, the Firm calculated the denominator of its risk-based
capital ratios using credit RWAs determined under the Basel I-based
rules and market RWAs determined under Basel 2.5. In the second
quarter of 2014, the Firm calculated the denominator of its
risk-based capital ratios using the Advanced Approach. These
computations are preliminary estimates as of July 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 June
30, 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. The Firm’s capital takes into
consideration regulatory capital requirements as well as capital
required for organic growth, acquisitions and other business
needs.
22 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: Six Months
Ended Percentage June 30, 2014 Mar 31,
2014 June 30, 2013 Mar 31, 2014 June 30,
2013 June 30, 2014 June 30, 2013 Change
Net revenues Institutional Securities $ 4,248 $ 4,627 $
4,358 (8 %) (3 %) $ 8,875 $ 8,457 5 % Wealth Management 3,715 3,622
3,531 3 % 5 % 7,337 7,001 5 % Investment Management 692 740 673 (6
%) 3 % 1,432 1,318 9 % Intersegment Eliminations (47 )
(42 ) (47 ) (12 %)
-
(89 ) (93 ) 4 % Consolidated net revenues $ 8,608
$ 8,947 $ 8,515 (4 %) 1 % $ 17,555 $
16,683 5 %
Income (loss) from continuing
operations before tax Institutional Securities $ 1,014 $ 1,371
$ 981 (26 %) 3 % $ 2,385 $ 1,798 33 % Wealth Management 767 691 655
11 % 17 % 1,458 1,252 16 % Investment Management 205 263 160 (22 %)
28 % 468 347 35 % Intersegment Eliminations 0
0 0
-
-
0 0
-
Consolidated income (loss) from continuing operations before tax $
1,986 $ 2,325 $ 1,796 (15 %) 11 % $ 4,311
$ 3,397 27 %
Income (loss) applicable to
Morgan Stanley Institutional Securities $ 1,330 $ 925 $ 584 44
% 128 % $ 2,255 $ 1,225 84 % Wealth Management 471 423 326 11 % 44
% 894 582 54 % Investment Management 135 118 101 14 % 34 % 253 185
37 % Intersegment Eliminations 0 0
0
-
-
0 0
-
Consolidated income (loss) applicable to Morgan Stanley $ 1,936
$ 1,466 $ 1,011 32 % 91 % $ 3,402 $
1,992 71 % Earnings (loss) applicable to Morgan Stanley
common shareholders $ 1,856 $ 1,449 $ 803 28 %
131 % $ 3,305 $ 1,739 90 %
Earnings per
basic share: Income from continuing operations $ 0.96 $ 0.73 $
0.44 32 % 118 % $ 1.70 $ 0.94 81 % Discontinued operations $ - $
0.02 $ (0.02 )
*
*
$ 0.02 $ (0.03 ) * Earnings per basic share $ 0.96 $ 0.75 $ 0.42 28
% 129 % $ 1.72 $ 0.91 89 %
Earnings per diluted
share: Income from continuing operations $ 0.94 $ 0.72 $ 0.43
31 % 119 % $ 1.66 $ 0.92 80 % Discontinued operations $ - $ 0.02 $
(0.02 )
*
* $ 0.02 $ (0.03 ) * Earnings per diluted share $ 0.94 $ 0.74 $
0.41 27 % 129 % $ 1.68 $ 0.89 89 %
Financial Metrics:
Return on average common equity from continuing operations 11.5 %
8.9 % 5.4 % 10.2 % 5.9 % Return on average common equity 11.5 % 9.2
% 5.2 % 10.4 % 5.7 % Return on average common equity
from continuing operations excluding DVA 10.9 % 8.3 % 4.6 % 9.6 %
6.1 % Return on average common equity excluding DVA 10.9 % 8.5 %
4.4 % 9.7 % 5.9 %
Common Equity Tier 1 capital ratio
Advanced (Transitional)
13.8 % 14.1 % 11.8 %
Tier 1 capital ratio Advanced
(Transitional)
15.2 % 15.6 % 14.1 % Book value per common share $ 33.48 $
32.38 $ 31.48 Tangible book value per common share $ 28.53 $ 27.41
$ 26.27 Notes:
- Results for the quarters ended June 30,
2014, March 31, 2014 and June 30, 2013, include positive (negative)
revenue of $87 million, $126 million and $175 million,
respectively, related to the change in the fair value of certain of
the Firm's long-term and short-term borrowings resulting from the
fluctuation in the Firm's credit spreads and other credit factors
(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.
- In the quarter ended June 30, 2014, the Firm began using the U.S.
Basel III Advanced Approaches (Advanced Approach) to calculate its
regulatory capital requirements. Prior periods have not been recast
to reflect the new requirements.
- Common Equity Tier 1 capital ratio
Advanced (Transitional) and the Tier 1 capital
ratio Advanced (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: Six
Months Ended Percentage June 30, 2014 Mar 31,
2014 June 30, 2013 Mar 31, 2014 June 30,
2013 June 30, 2014 June 30, 2013 Change
Revenues: Investment banking $ 1,633 $ 1,308 $ 1,303 25 % 25 % $
2,941 $ 2,527 16 % Trading 2,516 2,962 2,894 (15 %) (13 %) 5,478
5,588 (2 %) Investments 227 359 188 (37 %) 21 % 586 526 11 %
Commissions and fees 1,138 1,216 1,217 (6 %) (6 %) 2,354 2,384 (1
%) Asset management, distribution and admin. fees 2,621 2,549 2,404
3 % 9 % 5,170 4,750 9 % Other 206 245
305 (16 %) (32 %) 451 522
(14 %) Total non-interest revenues 8,341 8,639 8,311 (3 %)
-
16,980 16,297 4 % Interest income 1,250 1,343 1,415 (7 %)
(12 %) 2,593 2,803 (7 %) Interest expense 983
1,035 1,211 (5 %) (19 %) 2,018
2,417 (17 %) Net interest 267
308 204 (13 %) 31 % 575
386 49 % Net revenues 8,608 8,947
8,515 (4 %) 1 % 17,555
16,683 5 % Non-interest expenses: Compensation and benefits
4,200 4,305 4,103 (2 %) 2 % 8,505 8,317 2 % Non-compensation
expenses: Occupancy and equipment 359 359 374
-
(4 %) 718 751 (4 %) Brokerage, clearing and exchange fees 458 443
456 3 %
-
901 884 2 % Information processing and communications 411 424 470
(3 %) (13 %) 835 918 (9 %) Marketing and business development 165
147 163 12 % 1 % 312 297 5 % Professional services 532 452 458 18 %
16 % 984 898 10 % Other 497 492
695 1 % (28 %) 989 1,221 (19 %)
Total non-compensation expenses 2,422 2,317 2,616 5 % (7 %) 4,739
4,969 (5 %) Total non-interest
expenses 6,622 6,622 6,719
-
(1 %) 13,244 13,286 -- Income
(loss) from continuing operations before taxes 1,986 2,325 1,796
(15 %) 11 % 4,311 3,397 27 % Income tax provision / (benefit) from
continuing operations 32 780 574
(96 %) (94 %) 812 925 (12 %)
Income (loss) from continuing operations 1,954
1,545 1,222 26 % 60 % 3,499
2,472 42 % Gain (loss) from discontinued operations
after tax (1 ) 39 (31 ) * 97 %
38 (50 ) * Net income (loss) $ 1,953 $ 1,584 $ 1,191
23 % 64 % $ 3,537 $ 2,422 46 % Net income applicable to redeemable
noncontrolling interests 0 0 100
-
* 0 222 * Net income applicable to nonredeemable noncontrolling
interests 18 79 111 (77
%) (84 %) 97 258 (62 %) Net income
(loss) applicable to Morgan Stanley 1,935
1,505 980 29 % 97 % 3,440
1,942 77 % Preferred stock dividend / Other 79
56 177 41 % (55 %) 135
203 (33 %) Earnings (loss) applicable to Morgan
Stanley common shareholders $ 1,856 $ 1,449 $ 803
28 % 131 % $ 3,305 $ 1,739 90 % Amounts
applicable to Morgan Stanley: Income (loss) from continuing
operations 1,936 1,466 1,011 32 % 91 % 3,402 1,992 71 % Gain (loss)
from discontinued operations after tax (1 ) 39
(31 ) * 97 % 38 (50 ) * Net income
(loss) applicable to Morgan Stanley $ 1,935 $ 1,505 $
980 29 % 97 % $ 3,440 $ 1,942 77 %
Pre-tax profit margin 23 % 26 % 21 % 25 % 20 % Compensation and
benefits as a % of net revenues 49 % 48 % 48 % 48 % 50 %
Non-compensation expenses as a % of net revenues 28 % 26 % 31 % 27
% 30 % Effective tax rate from continuing operations 1.6 % 33.5 %
32.0 % 18.8 % 27.2 % Notes:
- In the quarter ended June 30, 2014,
income tax provision / (benefit) from continuing operations
included a net discrete tax benefit of $609 million (primarily
reported in the Institutional Securities business segment)
principally related to the remeasurement of reserves and related
interest due to new information regarding the status of a
multi-year tax authority examination.
- Preferred stock dividend / other
includes allocation of earnings to Participating Restricted Stock
Units (RSUs). For the quarter and six months ended June 30, 2013,
the Firm recorded a negative adjustment of approximately $151
million (net of tax) related to the purchase of the remaining
interest in the Morgan Stanley Smith Barney Joint Venture. This
adjustment negatively impacted the calculation of basic and fully
diluted earnings per share.
- Pre-tax profit margin is a non-GAAP
financial measure that the Firm considers to be a useful measure to
assess operating performance. Pre-tax profit margin percentages
represent income from continuing operations before income taxes as
a percentage of net revenues.
12
MORGAN STANLEY Quarterly Earnings Per
Share (unaudited, dollars in millions, except for per share
data)
Quarter Ended Percentage Change From: Six
Months Ended Percentage June 30, 2014 Mar 31,
2014 June 30, 2013 Mar 31, 2014 June 30,
2013 June 30, 2014 June 30, 2013 Change
Income (loss) from continuing operations $
1,954 $ 1,545 $ 1,222 26 % 60 % $ 3,499 $ 2,472 42 % Net income
applicable to redeemable noncontrolling interests 0 0 100 -- * 0
222 * Net income applicable to nonredeemable noncontrolling
interests 18 79 111 (77 %) (84
%) 97 258 (62 %) Net income (loss) from
continuing operations applicable to noncontrolling interests 18 79
211 (77 %) (91 %) 97 480 (80 %)
Income (loss) from continuing
operations applicable to Morgan Stanley 1,936 1,466 1,011 32 %
91 % 3,402 1,992 71 % Less: Preferred Dividends 76 54 24 41 % * 130
48 171 % Less: Morgan Stanley Smith Barney Joint Venture Redemption
Adjustment - - 151
-
* - 151 *
Income (loss) from continuing
operations applicable to Morgan Stanley, prior to allocation of
income to Participating Restricted Stock Units 1,860 1,412 836
32 % 122 % 3,272 1,793 82 %
Basic EPS Adjustments:
Less: Allocation of earnings to Participating Restricted Stock
Units 3 2 2 50 % 50 % 5
4 25 %
Earnings (loss) from continuing operations
applicable to Morgan Stanley common shareholders $
1,857 $ 1,410 $ 834 32 % 123 %
$ 3,267 $ 1,789 83 % Gain (loss)
from discontinued operations after tax (1 ) 39 (31 ) * 97 % 38 (50
) * Less: Gain (loss) from discontinued operations after tax
applicable to noncontrolling interests 0 0
0
-
-
0 0
-
Gain (loss) from discontinued operations after tax applicable to
Morgan Stanley (1 ) 39 (31 )
*
97 % 38 (50 ) * 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 (1 ) 39
(31 ) * 97 %
38 (50 ) *
Earnings (loss) applicable to Morgan Stanley common
shareholders $ 1,856 $ 1,449
$ 803 28 % 131 %
$ 3,305 $
1,739 90 % Average basic common shares outstanding
(millions) 1,928 1,924 1,908
-
1 % 1,926 1,904 1 %
Earnings per basic share:
Income from continuing operations
$ 0.96 $
0.73 $ 0.44 32 % 118 %
$ 1.70
$ 0.94 81 % Discontinued operations
$ -
$ 0.02 $ (0.02 ) * *
$
0.02 $ (0.03 ) * Earnings per basic
share
$ 0.96 $
0.75 $ 0.42 28 %
129 %
$ 1.72 $ 0.91
89 %
Earnings (loss) from continuing
operations applicable to Morgan Stanley common shareholders
$ 1,857 $ 1,410 $ 834 32
% 123 %
$ 3,267 $ 1,789 83 %
Earnings (loss) from discontinued operations applicable to
Morgan Stanley common shareholders (1 ) 39 (31 ) * 97 % 38 (50
) *
Earnings (loss) applicable to Morgan Stanley common
shareholders $ 1,856 $ 1,449
$ 803 28 % 131 %
$ 3,305 $
1,739 90 % Average diluted common shares outstanding
and common stock equivalents (millions) 1,969 1,969 1,951
-
1 % 1,969 1,946 1 %
Earnings per diluted
share: Income from continuing operations
$ 0.94
$ 0.72 $ 0.43 31 % 119 %
$
1.66 $ 0.92 80 % Discontinued operations
$ - $ 0.02 $ (0.02
) * *
$ 0.02 $ (0.03 ) *
Earnings per diluted share
$ 0.94
$ 0.74 $ 0.41
27 % 129 %
$ 1.68
$ 0.89 89 %
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 Quarterly Report on Form 10-Q for the
quarter ended March 31, 2014.
13
Morgan StanleyMedia Relations:Michele Davis,
212-761-9621orInvestor Relations:Celeste Mellet Brown,
212-761-3896
Morgan Stanley (NYSE:MS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Morgan Stanley (NYSE:MS)
Historical Stock Chart
From Apr 2023 to Apr 2024