01—Abstract
Summary
Summary of the 10-K filed February 27, 2020. Cited figures are marked; the original filing is the authoritative source.
Morgan Stanley's 2019 Form 10-K report details a solid financial year, with net revenues increasing to $41.4 billiona and net income applicable to Morgan Stanley reaching $9.04 billion.
The firm demonstrated resilience across its key business segments: Institutional Securities, Wealth Management, and Investment Management. Wealth Management saw revenue growth driven by an increase in fee-based client assets and transactional revenues. Investment Management experienced significant revenue growth primarily due to strong performance in private equity investments.
The Institutional Securities segment showed stable revenues, with mixed performance across its sub-segments, including investment banking and sales & trading. The report highlights Morgan Stanley's robust capital and liquidity position, with Common Equity Tier 1 capital ratios remaining strong and exceeding regulatory minimums. The firm actively managed its capital through share repurchases and dividend payments, reflecting its commitment to shareholder returns, which was supported by the Federal Reserve's non-objection to its 2019 Capital Plan.
Significant focus is placed on risk management across all business lines, with detailed discussions on market, credit, operational, liquidity, and legal/regulatory risks, including robust cybersecurity measures. The firm also provided updates on its ongoing transition from LIBOR and potential impacts of regulatory changes.
02—Key points
Key Highlights
- Net revenues increased to $41.4 billion in 2019, up from $40.1 billion in 2018.
- Net income applicable to Morgan Stanley was $9.04 billion in 2019, an increase from $8.75 billion in 2018.
- Wealth Management net revenues increased by 3% to $17.7 billion, driven by higher transactional revenues and growth in fee-based client assets.
- Investment Management net revenues surged by 37% to $3.8 billion, largely due to strong investment performance, particularly from an initial public offering within an Asia private equity fund.
- Common Equity Tier 1 capital ratio remained strong at 16.4% at year-end 2019, well above regulatory requirements.
- The firm returned capital to shareholders through share repurchases totaling $5.4 billion and dividends declared of $1.30 per share in 2019.
- Morgan Stanley is actively managing risks associated with the transition away from LIBOR, which is expected to be completed by the end of 2021.
- The report details significant legal proceedings, primarily related to residential mortgage and credit crisis matters, with potential financial implications that the firm is actively managing.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 27, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Interest Expense | $12.40B$10.09B | +23.0% |
| Net Income | $9.04B$8.75B | +3.4% |
| EPS (Basic) | $5.26$4.81 | +9.4% |
| EPS (Diluted) | $5.19$4.73 | +9.7% |
| Shares Outstanding (Basic) | 1.62B1.71B | −5.3% |
| Shares Outstanding (Diluted) | 1.64B1.74B | −5.6% |
05—Questions
Frequently Asked Questions
What were Morgan Stanley's key financial performance indicators for 2019?
In 2019, Morgan Stanley reported net revenues of $41.4 billion, a 3.3% increase from 2018. Net income applicable to Morgan Stanley was $9.04 billion, or $5.19 per diluted share, compared to $8.75 billion, or $4.73 per diluted share, in 2018. Key financial measures like Return on Equity (ROE) were 11.7% and Return on Tangible Common Equity (ROTCE) was 13.4%.
How did the different business segments perform in 2019?
The Wealth Management segment saw a 3% increase in net revenues to $17.7 billion, driven by higher transactional revenues and growth in fee-based client assets. The Investment Management segment experienced a significant 37% increase in net revenues to $3.8 billion, primarily due to strong investment performance from an initial public offering within an Asia private equity fund. The Institutional Securities segment's net revenues were relatively unchanged at $20.4 billion, reflecting mixed market conditions with lower equity sales and trading and investment banking revenues offset by higher fixed income revenues.
What is Morgan Stanley's capital and liquidity position?
Morgan Stanley maintained a strong capital position in 2019. Its Common Equity Tier 1 capital ratio was 16.4%, Tier 1 capital ratio was 18.6%, and Total capital ratio was 21.0%, all of which exceeded regulatory requirements. The firm also reported a Tier 1 leverage ratio of 8.3% and a Supplementary Leverage Ratio (SLR) of 6.4%. Liquidity remains robust, with the Global Liquidity Reserve (GLR) at $217.5 billion as of December 31, 2019, and compliance with the Liquidity Coverage Ratio (LCR) requirements.
What are the major risks identified in the report?
Morgan Stanley identified several key risks, including market risk, credit risk, operational risk, liquidity risk, and legal, regulatory, and compliance risk. Specific risks highlighted include exposure to market volatility, potential credit losses from borrowers and counterparties, cybersecurity threats, operational failures, the impact of evolving regulatory requirements, and significant legal proceedings, particularly those related to residential mortgage and credit crisis matters.
06—Continue