10-KPeriod: FY2013

MORGAN STANLEY Annual Report, Year Ended Dec 31, 2013

Filed February 25, 2014For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley's (MS) 2013 10-K filing reveals a year of significant financial recovery and strategic repositioning. The company reported a substantial increase in net income, reaching $2.93 billion, a marked improvement from the $68 million recorded in 2012. This turnaround was driven by strong performance across its core business segments, particularly Institutional Securities, which saw net revenues climb to $15.44 billion, largely due to a recovery in trading revenues and improved investment banking activity. Wealth Management also demonstrated resilience, with net revenues increasing to $14.21 billion, benefiting from higher client asset flows and fee-based revenues. The filing highlights Morgan Stanley's proactive management of its financial resources and regulatory environment. The company navigated the evolving landscape of post-financial crisis reforms, including the implementation of Basel III capital standards, and reported robust capital ratios well above regulatory requirements. Furthermore, Morgan Stanley continued to streamline its operations, notably in its commodities division, and manage its legal and regulatory exposures, which remained significant but were managed within the company's risk tolerance.

Financial Highlights

40 data points
Beta

Revenue

$32.49B

Net Income

$2.93B

9.0% Net Margin

EPS (Diluted)

$1.36

Total Assets

$832.70B

Cash & Equivalents

$59.88B

Free Cash Flow

$35.01B

Financial Statements
Beta
Revenue$32.49B
Operating Income$2.98B
Interest Expense$4.43B
Net Income$2.93B
EPS (Basic)$1.39
EPS (Diluted)$1.36
Shares Outstanding (Basic)1.91B
Shares Outstanding (Diluted)1.96B

Key Highlights

  • 1Morgan Stanley reported a net income of $2.93 billion for 2013, a significant increase from $68 million in 2012, indicating a strong financial recovery.
  • 2Net revenues increased to $32.42 billion in 2013, up from $26.10 billion in 2012, driven by improvements in both Institutional Securities and Wealth Management segments.
  • 3The Institutional Securities segment showed a substantial rebound, with income from continuing operations before taxes reaching $869 million, a significant improvement from a loss of $1,688 million in 2012.
  • 4Wealth Management continued its growth trajectory, with income from continuing operations before taxes increasing to $2.63 billion, up from $1.62 billion in 2012.
  • 5The company maintained strong capital ratios, with its Tier 1 capital ratio at 15.7% and Total capital ratio at 16.9% as of December 31, 2013, exceeding regulatory requirements.
  • 6Morgan Stanley continued to manage significant litigation and regulatory expenses, incurring approximately $1.95 billion in 2013, primarily related to residential mortgage-backed securities and credit crisis matters.
  • 7The company completed the purchase of the remaining 35% interest in its Wealth Management JV from Citi in June 2013, bringing its ownership to 100%.

Frequently Asked Questions

Morgan Stanley experienced a significant financial turnaround in 2013. Net income increased substantially to $2.93 billion, compared to only $68 million in 2012. Net revenues also grew to $32.42 billion in 2013 from $26.10 billion in 2012. This improvement was driven by stronger performance in its Institutional Securities and Wealth Management segments, as well as a reduction in losses related to certain financial instruments.

The Institutional Securities segment showed a strong recovery, with income from continuing operations before taxes turning positive at $869 million in 2013, a significant improvement from a loss of $1,688 million in 2012. This was supported by higher investment banking revenues and improved trading revenues. The Wealth Management segment also performed well, with income from continuing operations before taxes rising to $2.63 billion, up from $1.62 billion in 2012, benefiting from higher client asset flows and growth in fee-based revenues.

Morgan Stanley maintained a strong capital position as of December 31, 2013. Its Tier 1 capital ratio was 15.7% and its Total capital ratio was 16.9%, both significantly exceeding the regulatory well-capitalized requirements. The company also reported a Tier 1 leverage ratio of 7.6%. The filing indicates the company was preparing for the full implementation of Basel III capital standards, which began in January 2014, and reported being in compliance with all capital adequacy requirements.

The company continued to incur significant litigation expenses, totaling approximately $1.95 billion in 2013, primarily related to ongoing settlements and reserve additions for matters stemming from residential mortgage-backed securities and the credit crisis. Operationally, Morgan Stanley completed the acquisition of the remaining 35% interest in its Wealth Management joint venture with Citi, bringing its ownership to 100%.