Morgan Stanley Reports Net Revenues of $10.0 Billion and EPS of
$1.27
Morgan Stanley (NYSE: MS) today reported net revenues of
$10.0 billion for the third quarter ended September 30, 2019
compared with $9.9 billion a year ago. Net income applicable to
Morgan Stanley was $2.2 billion, or $1.27 per diluted share,1
compared with net income of $2.1 billion, or $1.17 per diluted
share,1 for the same period a year ago.
James P. Gorman, Chairman and Chief Executive Officer,
said, “We delivered strong quarterly earnings despite the typical
summer slowdown and volatile markets. Firmwide revenues were over
$10 billion for the third consecutive quarter, and we produced an
ROE within our target range. Our consistent performance shows the
stability of our business model. We remain committed to controlling
our expenses and are well positioned to pursue our growth
initiatives.”
Financial Summary2
($ millions, except per share data)
Highlights
Firm
3Q
2019
3Q
2018
- Firm net revenues reflect strong performance across all our
business segments; the highest third quarter in the last
decade.3
Net revenues
$10,032
$9,872
Compensation expense
$4,427
$4,310
Non-compensation expenses
$2,895
$2,711
Pre-tax income8
$2,710
$2,851
Net income app. to MS
$2,173
$2,112
- Book value4 and Tangible book value5 increased 12%
year-over-year.
Expense efficiency ratio9
73%
71%
Earnings per diluted share
$1.27
$1.17
Book value per share4
$45.49
$40.67
Tangible book value per share5
$39.73
$35.50
Return on equity6
11.2%
11.5%
- ROE of 11.2%6 and ROTCE of 12.9%6 remain strong and in line
with our expectations.
Return on tangible equity6
12.9%
13.2%
Institutional Securities
Net revenues
$5,023
$4,929
- Institutional Securities net revenues at $5.0 billion reflects
strength across products, characterized by strong client engagement
despite seasonality and volatile markets.
Investment Banking
$1,535
$1,459
Sales & Trading
$3,455
$3,130
Wealth Management
Net revenues
$4,358
$4,399
- Wealth Management delivered a pre-tax margin of 28.4%7 on
continued expense discipline.
Fee-based client assets ($ billions)10
$1,186
$1,120
Fee-based asset flows ($ billions)11
$15.5
$16.2
Loans ($ billions)
$76.6
$71.1
Investment Management
Net revenues
$764
$653
- Investment Management net revenues increased 17% reflecting
strong carried interest and higher fee revenues. AUM exceeded $500
billion.
AUM ($ billions)12
$507
$471
Long-term net flows ($ billions)13
$4.2
$3.0
Institutional Securities
Institutional Securities reported net revenues for the current
quarter of $5.0 billion compared with $4.9 billion a year ago.
Pre-tax income was $1.3 billion compared with $1.6 billion a year
ago.8
Investment Banking revenues up 5% from
a year ago:
($ millions)
3Q
2019
3Q
2018
- Advisory revenues increased reflecting the impact of higher
M&A fees on an increase in the volume of transactions.
Net Revenues
$5,023
$4,929
- Equity underwriting revenues decreased from a year ago driven
by lower volumes in IPOs and follow-on offerings, partially offset
by an increase in convertible issuances.
Investment Banking
$1,535
$1,459
Advisory
$550
$510
- Fixed income underwriting revenues increased from a year ago on
higher bond and loan issuance volumes.
Equity underwriting
$401
$441
Fixed income underwriting
$584
$508
Sales and Trading net revenues up 10%
from a year ago:
- Equity sales and trading net revenues were essentially
unchanged from a year ago with lower revenues in the derivatives
business being offset by solid performance across all other
businesses.
Sales and Trading
$3,455
$3,130
Equity
$1,991
$2,019
- Fixed Income sales and trading net revenues increased 21% from
a year ago reflecting strong client activity in the credit and
rates businesses, partially offset by a decline in foreign
exchange.
Fixed Income
$1,430
$1,179
Other
$34
$(68)
- Other sales and trading net revenues increased from a year ago
driven by lower costs from changes in funding mix and gains on
economic hedges associated with corporate lending activity and
certain of the Firm’s borrowings.
Investments and Other
$33
$340
Investments
$(18)
$96
Investments and Other:
Other
$51
$244
- Investment revenues decreased from a year ago driven by
mark-to-market losses on remaining holdings subsequent to certain
investments’ initial public offerings.
Total Expenses
$3,716
$3,373
- Other revenues decreased from a year ago primarily reflecting
lower revenues from corporate lending activities.
Compensation
$1,768
$1,626
Non-compensation
$1,948
$1,747
Total Expenses:
- Compensation expense increased on higher revenues and salaries,
resulting in a compensation ratio of 35.2%.
- Non-compensation expenses increased from a year ago on higher
volume-related expenses and litigation costs.
Wealth Management
Wealth Management net revenues for the current quarter of $4.4
billion were essentially unchanged from a year ago. Pre-tax income
of $1.2 billion8 in the current quarter resulted in a pre-tax
margin of 28.4%.7
Net revenues relatively unchanged from
a year ago:
($ millions)
3Q
2019
3Q
2018
- Asset management revenues increased from a year ago reflecting
higher asset levels with continued positive flows.
Net Revenues
$4,358
$4,399
- Transactional revenues14 decreased from a year ago reflecting
losses on investments associated with certain employee deferred
compensations plans.
Asset management
$2,639
$2,573
- Net interest income decreased 3% compared with a year ago
primarily driven by higher costs due to changes in funding mix,
partially offset by growth in bank lending. Wealth Management
client liabilities15 were $86 billion at quarter end compared with
$83 billion a year ago.
Transactional14
$595
$698
- Other revenues increased from a year ago driven by higher
realized gains on available for sale securities.
Net interest
$1,043
$1,070
Other
$81
$58
Total Expenses:
Total Expenses
$3,120
$3,205
- Compensation expense decreased from a year ago primarily driven
by decreases in the fair value of deferred compensation plan
referenced investments and retention note expense, partially offset
by increases in compensable revenues.
Compensation
$2,340
$2,415
Non-compensation
$780
$790
Investment Management
Investment Management reported net revenues of $764 million
compared with $653 million a year ago. Pre-tax income was $165
million compared with $102 million a year ago.8
Net revenues up 17% from a year
ago:
($ millions)
3Q
2019
3Q
2018
- Asset management revenues increased from a year ago driven by
higher levels of assets under management and a non-recurring
realized performance fee.
Net Revenues
$764
$653
Asset management
$664
$604
- Investment revenues increased from a year ago reflecting gains
on carried interest primarily from the private equity
businesses.
Investments
$105
$40
Other
$(5)
$9
Total Expenses:
Total Expenses
$599
$551
- Compensation expense increased from a year ago principally due
to an increase in deferred compensation associated with carried
interest.
Compensation
$319
$269
Non-compensation
$280
$282
Other Matters
3Q
2019
3Q
2018
- The Firm repurchased $1.5 billion of its outstanding common
stock during the quarter as part of its Share Repurchase
Program.
Capital16
Common Equity Tier 1
capital17
16.2%
16.7%
- The Board of Directors declared a $0.35 quarterly dividend per
share, payable on November 15, 2019 to common shareholders of
record on October 31, 2019.
Tier 1 capital17
18.4%
19.0%
Tier 1 leverage18
8.2%
8.2%
- The effective tax rate for the quarter was 18.2% which includes
an intermittent net discrete tax benefit of $89 million associated
with the filing of the 2018 federal tax return and the
remeasurement of reserves.
Supplementary leverage
ratio19
6.3%
6.4%
Common Stock
Repurchases
Repurchases ($ millions)
$1,500
$1,180
Number of Shares (millions)
36
24
Average Price
$41.92
$49.33
Common Shares Outstanding -
period end (millions)
1,624
1,726
Tax Rate
18.2%
24.4%
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 41 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.
NOTICE:
The information provided herein and in the financial supplement
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 may contain forward-looking statements,
including the attainment of certain financial and other targets,
objectives and goals. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the
date on which they are made, which reflect management’s current
estimates, projections, expectations, assumptions, interpretations
or beliefs and which are subject to risks and uncertainties that
may cause actual results to differ materially. The Firm does not
undertake to update the forward-looking statements to reflect the
impact of circumstances or events that may arise after the date
such forward-looking statements were made. For a discussion of
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
Risk” in Part II, Item 7A in the Firm’s Annual Report on Form 10-K
for the year ended December 31, 2018 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 Includes preferred dividends related to the calculation of
earnings per share for the third quarter of 2019 and 2018 of
approximately $113 million and $93 million, respectively.
2 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 analysts, investors and other stakeholders 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.
3 Net revenues of $10.0 billion represents the highest third
quarter in a decade for a reported quarterly period after excluding
the impact of debt valuation adjustments (DVA), which were
previously reflected in net revenues in periods prior to March 31,
2016, and reflecting the current reporting structure of the Firm
(i.e. exclusive of discontinued operations). Net revenues excluding
the impact of DVA, are non-GAAP financial measures in those prior
periods that were reconciled to the comparable GAAP financial
measures in the respective quarterly reports filed on Form
10-Q.
4 Book value per common share represents common equity divided
by period end common shares outstanding.
5 Tangible book value per common share is a non-GAAP financial
measure that the Firm considers to be a useful measure of capital
adequacy for analysts, investors and other stakeholders. Tangible
book value per common share represents tangible common equity
divided by period end common shares outstanding. Tangible common
equity, also a non-GAAP financial measure, represents common equity
less goodwill and intangible assets net of allowable mortgage
servicing rights deduction.
6 Annualized return on average common equity and annualized
return on average tangible common equity are non-GAAP financial
measures that the Firm considers useful for analysts, investors and
other stakeholders to allow better comparability of
period-to-period operating performance and capital adequacy. The
calculation of return on average common equity and return on
average tangible common equity represents annualized net income
applicable to Morgan Stanley less preferred dividends as a
percentage of average common equity and average tangible common
equity, respectively. Tangible common equity, also a non-GAAP
financial measure, represents common equity less goodwill and
intangible assets net of allowable servicing rights deduction.
7 Pre-tax margin is a non-GAAP financial measure that the Firm
considers useful for analysts, investors and other stakeholders to
assess operating performance. Pre-tax margin represents income
(loss) before taxes divided by net revenues.
8 Pre-tax income is a non-GAAP financial measure that the Firm
considers useful for analysts, investors and other stakeholders to
assess operating performance. Pre-tax income represents income
(loss) before taxes.
9 The Firm expense efficiency ratio represents total
non-interest expenses as a percentage of net revenues.
10 Wealth Management fee-based client assets represent the
amount of assets in client accounts where the basis of payment for
services is a fee calculated on those assets.
11 Wealth Management fee-based asset flows include net new
fee-based assets, net account transfers, dividends, interest, and
client fees and exclude institutional cash management related
activity.
12 AUM is defined as assets under management.
13 Long-term net flows include the Equity, Fixed Income and
Alternative/Other asset classes and exclude the Liquidity asset
class.
14 Transactional revenues include investment banking, trading,
and commissions and fee revenues.
15 Wealth Management client liabilities reflect U.S. Bank
Subsidiaries’ lending and broker-dealer margin activity. U.S. Bank
refers to the Firm’s U.S. Bank operating subsidiaries Morgan
Stanley Bank, N.A. and Morgan Stanley Private Bank, National
Association.
16 Capital ratios are estimates as of the press release date,
October 17, 2019.
17 The Firm’s risk-based capital ratios for purposes of
determining regulatory compliance are the lower of the capital
ratios computed under the (i) standardized approaches for
calculating credit risk and market risk risk-weighted assets
(“RWAs”) (the “Standardized Approach”); and (ii) applicable
advanced approaches for calculating credit risk, market risk and
operational risk RWAs (the “Advanced Approach”). At September 30,
2019 and September 30, 2018, the Firm’s ratios are based on the
Standardized Approach. 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 2018 Form 10-K.
18 The Tier 1 leverage ratio is a non-risk based capital
requirement that measures the Firm’s leverage. Tier 1 leverage
ratio utilizes Tier 1 capital as the numerator and average adjusted
assets as the denominator.
19 The Firm must maintain a Tier 1 supplementary leverage ratio
of 5% inclusive of a capital buffer of at least 2% in order to
avoid limitations on capital distributions, including dividends and
stock repurchases, and discretionary bonus payments to executive
officers. The Firm’s Supplementary Leverage Ratio utilizes a Tier 1
capital numerator of approximately $73.1 billion and $70.3 billion,
and supplementary leverage exposure denominator of approximately
$1.16 trillion and $1.10 trillion, for the third quarter of 2019
and 2018, respectively.
Morgan Stanley Consolidated Income Statement
Information (unaudited, dollars in millions)
Quarter Ended Percentage Change From: Nine Months
Ended Percentage Sep 30, 2019 Jun 30, 2019
Sep 30, 2018 Jun 30, 2019 Sep 30, 2018 Sep
30, 2019 Sep 30, 2018 Change Revenues: Investment
banking
$
1,635
$
1,590
$
1,567
3%
4%
$
4,467
$
4,994
(11%)
Trading
2,608
2,732
2,752
(5%)
(5%)
8,781
9,815
(11%)
Investments
87
441
136
(80%)
(36%)
801
409
96%
Commissions and fees
990
979
932
1%
6%
2,935
3,144
(7%)
Asset management
3,363
3,220
3,251
4%
3%
9,632
9,632
--
Other
131
253
298
(48%)
(56%)
685
748
(8%)
Total non-interest revenues
8,814
9,215
8,936
(4%)
(1%)
27,301
28,742
(5%)
Interest income
4,350
4,506
3,627
(3%)
20%
13,146
9,781
34%
Interest expense
3,132
3,477
2,691
(10%)
16%
9,885
6,964
42%
Net interest
1,218
1,029
936
18%
30%
3,261
2,817
16%
Net revenues
10,032
10,244
9,872
(2%)
2%
30,562
31,559
(3%)
Non-interest expenses: Compensation and benefits
4,427
4,531
4,310
(2%)
3%
13,609
13,845
(2%)
Non-compensation expenses: Occupancy and equipment
353
353
351
--
1%
1,053
1,033
2%
Brokerage, clearing and exchange fees
637
630
559
1%
14%
1,860
1,795
4%
Information processing and communications
557
538
513
4%
9%
1,627
1,487
9%
Marketing and business development
157
162
152
(3%)
3%
460
471
(2%)
Professional services
531
537
570
(1%)
(7%)
1,582
1,660
(5%)
Other
660
590
566
12%
17%
1,803
1,888
(5%)
Total non-compensation expenses
2,895
2,810
2,711
3%
7%
8,385
8,334
1%
Total non-interest expenses
7,322
7,341
7,021
--
4%
21,994
22,179
(1%)
Income (loss) from continuing operations before taxes
2,710
2,903
2,851
(7%)
(5%)
8,568
9,380
(9%)
Income tax provision / (benefit) from continuing operations
492
657
696
(25%)
(29%)
1,636
2,050
(20%)
Income (loss) from continuing operations
2,218
2,246
2,155
(1%)
3%
6,932
7,330
(5%)
Gain (loss) from discontinued operations after tax
0
0
(1
)
--
*
0
(5
)
*
Net income (loss)
$
2,218
$
2,246
$
2,154
(1%)
3%
$
6,932
$
7,325
(5%)
Net income applicable to nonredeemable noncontrolling interests
45
45
42
--
7%
129
108
19%
Net income (loss) applicable to Morgan Stanley
2,173
2,201
2,112
(1%)
3%
6,803
7,217
(6%)
Preferred stock dividend / Other
113
170
93
(34%)
22%
376
356
6%
Earnings (loss) applicable to Morgan Stanley common shareholders
$
2,060
$
2,031
$
2,019
1%
2%
$
6,427
$
6,861
(6%)
_______________________________________________________ The End
Notes are an integral part of this presentation. Refer to the
Financial Supplement on pages 12 - 17 for Definition of U.S. GAAP
to Non-GAAP Measures, Definition of Performance Metrics and Terms,
Supplemental Quantitative Details and Calculations and Legal Notice
for additional information.
8
Morgan Stanley
Consolidated Financial Metrics, Ratios and Statistical Data
(unaudited) Quarter Ended Percentage Change
From: Nine Months Ended Percentage Sep 30,
2019 Jun 30, 2019 Sep 30, 2018 Jun 30,
2019 Sep 30, 2018 Sep 30, 2019 Sep 30,
2018 Change Financial Metrics:
Earnings per basic share
$
1.28
$
1.24
$
1.19
3%
8%
$
3.94
$
3.99
(1%)
Earnings per diluted share
$
1.27
$
1.23
$
1.17
3%
9%
$
3.89
$
3.92
(1%)
Return on average common equity
11.2
%
11.2
%
11.5
%
11.8
%
13.1
%
Return on average tangible common equity
12.9
%
12.8
%
13.2
%
13.5
%
15.1
%
Book value per common share
$
45.49
$
44.13
$
40.67
$
45.49
$
40.67
Tangible book value per common share
$
39.73
$
38.44
$
35.50
$
39.73
$
35.50
Excluding intermittent net discrete tax provision / benefit
Adjusted earnings per diluted share
$
1.21
$
1.23
$
1.17
(2%)
3%
$
3.77
$
3.87
(3%)
Adjusted return on average common equity
10.7
%
11.2
%
11.5
%
11.5
%
13.0
%
Adjusted return on average tangible common equity
12.3
%
12.8
%
13.2
%
13.1
%
14.9
%
Financial Ratios: Pre-tax profit margin
27
%
28
%
29
%
28
%
30
%
Compensation and benefits as a % of net revenues
44
%
44
%
44
%
45
%
44
%
Non-compensation expenses as a % of net revenues
29
%
27
%
27
%
27
%
26
%
Firm expense efficiency ratio
73
%
72
%
71
%
72
%
70
%
Effective tax rate from continuing operations
18.2
%
22.6
%
24.4
%
19.1
%
21.9
%
Statistical Data: Period end common
shares outstanding (millions)
1,624
1,659
1,726
(2%)
(6%)
Average common shares outstanding (millions) Basic
1,604
1,634
1,697
(2%)
(5%)
1,632
1,719
(5%)
Diluted
1,627
1,655
1,727
(2%)
(6%)
1,653
1,749
(5%)
Worldwide employees
60,532
59,513
59,835
2%
1%
_______________________________________________________ The End
Notes are an integral part of this presentation. Refer to the
Financial Supplement on pages 12 - 17 for Definition of U.S. GAAP
to Non-GAAP Measures, Definition of Performance Metrics and Terms,
Supplemental Quantitative Details and Calculations and Legal Notice
for additional information.
9
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191017005415/en/
Media Relations: Wesley McDade 212-761-2430 Investor
Relations: Sharon Yeshaya 212-761-1632
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