10-QPeriod: Q1 FY2003

MORGAN STANLEY Quarterly Report for Q1 Ended Feb 28, 2003

Filed April 11, 2003For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley's (MS) first-quarter 2003 results showed a solid performance, with net income increasing by 7% year-over-year to $905 million, or $0.82 per diluted share. This growth was driven by a strong performance in the Institutional Securities segment, particularly in fixed income sales and trading, which benefited from favorable market conditions amidst global geopolitical tensions and economic slowdowns. The company's diversified business model proved resilient, with the Credit Services segment also showing a 9% increase in net income. However, the Individual Investor Group and Investment Management segments experienced revenue declines due to challenging market conditions and lower assets under management, reflecting a broader trend of weakened investor confidence. Despite these pressures, Morgan Stanley demonstrated effective cost management and maintained robust capital ratios, positioning it to navigate the uncertain economic environment.

Key Highlights

  • 1Net income increased by 7% to $905 million for the quarter ended February 28, 2003, compared to the prior year period.
  • 2Diluted earnings per share rose to $0.82 from $0.76 in the comparable prior-year quarter.
  • 3The Institutional Securities segment showed strong performance, with net revenues up 13% and net income up 17%, largely driven by fixed income sales and trading.
  • 4Credit Services segment reported a 9% increase in both net revenues and net income.
  • 5Total assets grew to $559.4 billion from $529.5 billion at the end of the previous fiscal year, indicating expansion in financial instruments and receivables.
  • 6The company maintained strong capital adequacy, with its FDIC-insured financial institutions exceeding regulatory minimums for leverage, Tier 1 risk-weighted capital, and total risk-weighted capital ratios.

Frequently Asked Questions

The increase in net income was primarily driven by a strong performance in the Institutional Securities segment, particularly in fixed income sales and trading activities, which benefited from favorable market conditions. The Credit Services segment also contributed positively with increased revenues and income.

The Individual Investor Group and Investment Management segments experienced revenue declines. This was attributed to challenging market conditions, weakened investor confidence, and a decrease in assets under management in the Investment Management segment, reflecting the broader economic uncertainties and geopolitical tensions prevalent during the quarter.

Morgan Stanley implemented cost management measures, including a reduction in worldwide employees by 9% compared to the prior year. Non-interest expenses also saw decreases in some segments, and the company managed its compensation and benefits expenses effectively, particularly in the face of fluctuating revenues.

The company reported a healthy liquidity position with an average cash liquidity reserve of approximately $21 billion. Its capital adequacy remains strong, with all FDIC-insured financial institutions exceeding regulatory capital minimums, including leverage, Tier 1 risk-weighted, and total risk-weighted capital ratios.