Business & Finance
Business and Finance
Business and Finance
Fri, July 23, 2010
Thu, July 22, 2010 Morgan Stanley, Bank of America, JPMorgan, Goldman Sachs and Citigroup
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Morgan Stanley (NYSE: [ MS ]), Bank of America (NYSE: [ BAC ]), JPMorgan Chase & Co. (NYSE: [ JPM ]), Goldman Sachs (NYSE: [ GS ]) and Citigroup (NYSE: [ C ]).
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Here are highlights from Wednesdaya™s Analyst Blog:
Morgan Stanley Tops, Profit Soars
Morgan Stanleya™s (NYSE: [ MS ]) second quarter earnings came in at 80 cents per share, substantially ahead of the Zacks Consensus Estimate of 47 cents. This also compares much favorably with the loss of $1.36 in the year-ago quarter.
This represents Morgan Stanleya™s fourth consecutive quarter of income from continuing operations, post-economic crisis.
Including discontinued operations, net income for the reported quarter came in at $1.09 per share, compared with a net loss of $1.10 in the year-ago quarter.
Results for the reported quarter include Morgan Stanley Smith Barney (MSSB) results effective the closure of the deal on May 31, 2009. Morgan Stanley owns 51% of MSSB. Results were aided by robust top-line growth, resulting from higher trading revenue, commissions, asset management fees and improved interest income. Net revenues for the reported quarter were positively impacted by Morgan Stanleya™s debt-related credit spreads. However, higher compensation and non-compensation expenses were the downside.
Behind the Headlines
Including discontinued operations, net income for the reported quarter was $1.9 billion, up from $149 million in the year-ago quarter. Discontinued operations included an after-tax gain of $514 million related to the sale of its retail asset management business, including Van Kampen Investments.
Net revenues for the quarter increased 53% year-over-year to $8.0 billion. Net revenues included $750 million related to Morgan Stanleya™s debt-related credit spreads compared with negative $2.3 billion in the year-ago quarter.
Net interest income was $152 million compared to a loss of $197 million in the year-ago quarter.
Total compensation and benefits expense increased only 2% year-over-year to $3.9 billion, while total non-compensation expense increased 21% year-over-year to $2.4 billion. Compensation expenses included a charge of $361 million related to the U.K. governmenta™s payroll tax on 2009 discretionary bonuses. Higher compensation costs related to MSSB were partially offset by lower compensation costs in Institutional Securities.
Segment Results
Institutional Securitiesa™ pre-tax income from continuing operations was $1.6 billion compared with a loss of $298 million in the prior-year quarter. Net revenues in this segment were $4.5 billion, up 50% from $3.0 billion in the year-ago quarter.
Global Wealth Managementa™s pre-tax income from continuing operations was $207 million compared with a loss of $71 million a year ago. Results for the reported quarter benefited from the results of MSSB. Net revenues were $3.1 billion compared with $1.9 billion in the year-ago quarter.
Asset Managementa™s pre-tax loss from continuing operations was $86 million compared with a loss of $210 million in the year-ago quarter. Net revenues for the reported quarter were $410 million, up 15% from $358 million a year ago.
As of June 30, 2010, total assets under management were $251 billion, up from $242 billion as of June 30, 2009, reflecting market appreciation partly offset by net customer outflows, primarily in Morgan Stanleya™s money market funds.
During the quarter, Morgan Stanley was ranked #2 in global announced and completed M&A and #1 in global IPOs.
At June 30, 2010, Book value per common share was $29.65, up from $27.21 at June 30, 2009. Morgan Stanleya™s Tier 1 capital ratio, under Basel I, was approximately 16.4% and Tier 1 common ratio was approximately 9.2%.
Dividend Update
Concurrent with the earnings release, Morgan Stanley declared a quarterly dividend of $0.05 per common share. The dividend will be paid on August 13, 2010 to common shareholders of record on July 30, 2010.
However, there are concerns related to the impact of the upcoming financial reform bill which will be signed by President Obama today. Following the approval, the financial reform bill would partially restrict proprietary trading of commercial banks. Also, derivatives trading would be restricted, which are used to hedge risk or speculate the future value of assets. As a result, a significant impact on profitability is expected for the big commercial banks including Morgan Stanley, Bank of America (NYSE: [ BAC ]), JPMorgan Chase & Co. (NYSE: [ JPM ]), Goldman Sachs (NYSE: [ GS ]) and Citigroup (NYSE: [ C ]).
Though continuing pressure on trading revenues will hurt the profitability of Morgan Stanley in the upcoming quarters, a slowdown in loan loss reserves like other large banks will support the bottom-line.
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