10-QPeriod: Q2 FY2007

MORGAN STANLEY Quarterly Report for Q2 Ended May 31, 2007

Filed July 10, 2007For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley's filing for the quarter ending May 31, 2007, showcases robust financial performance with a significant increase in net income and diluted earnings per share, up 40% year-over-year. This growth was driven by strong performance across its business segments, particularly Institutional Securities, which reported record investment banking and sales & trading revenues. The Global Wealth Management Group and Asset Management segments also delivered solid income growth, benefiting from increased client assets and fee-based revenues. Discover, however, experienced a decline in income before taxes due to higher provisions for loan losses and increased expenses related to the upcoming spin-off and litigation, despite steady transaction volumes. The company's overall financial position strengthened, with total assets growing to $1.2 trillion. The filing highlights a significant increase in various financial instruments owned and securities received as collateral, indicating active trading and financing activities. Key strategic moves during the period included the continued integration of acquired businesses and preparations for the spin-off of Discover Financial Services, which was completed shortly after the quarter's end. Despite a challenging market environment that saw moderation in U.S. economic growth, Morgan Stanley demonstrated resilience and strategic execution, positioning itself for continued growth.

Key Highlights

  • 1Net income increased by 40% to $2,582 million for the quarter ended May 31, 2007, compared to the prior year.
  • 2Diluted earnings per share rose by 40% to $2.45 for the quarter, reflecting strong operational performance.
  • 3Institutional Securities segment revenue surged by 39% to a record $7,393 million, driven by strong investment banking, fixed income, and equity sales and trading.
  • 4Total assets grew to $1.2 trillion, primarily due to increases in financial instruments owned and securities received as collateral.
  • 5The company completed the spin-off of Discover Financial Services on June 30, 2007, which will be reflected in discontinued operations going forward.
  • 6Global Wealth Management Group saw a 67% increase in income before taxes, with total client assets reaching $728 billion.
  • 7Asset Management reported a 16% increase in income before taxes, driven by higher investment revenues and asset management fees, with assets under management reaching $560 billion.

Frequently Asked Questions

Morgan Stanley reported strong financial performance, with net income increasing by 40% to $2,582 million and diluted earnings per share rising by 40% to $2.45 compared to the same period in the prior year. This growth was driven by significant increases in revenues across most business segments, particularly Institutional Securities.

The Institutional Securities segment showed the strongest performance, achieving record revenues of $7,393 million due to robust investment banking and sales & trading activities. Global Wealth Management Group also performed well with a 67% increase in income before taxes, supported by growth in client assets and fee-based accounts.

The Discover segment experienced a decline in income before taxes by 38% due to increased provisions for loan losses and higher expenses related to litigation and the impending spin-off. Morgan Stanley completed the spin-off of Discover Financial Services on June 30, 2007, and its results will be reported as discontinued operations in future filings.

The company's total assets grew to $1.2 trillion, with notable increases in financial instruments owned and securities received as collateral. This reflects the company's active engagement in trading, financing, and market-making activities, which are core to its Institutional Securities business and contribute to its overall financial position.