10-QPeriod: Q1 FY2009

MORGAN STANLEY Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 7, 2009For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley reported a net loss of $177 million for the first quarter of 2009, a significant downturn from the $1.4 billion profit in the same period of 2008. This loss was driven by a 62% decrease in net revenues to $3.04 billion, largely attributed to a challenging global market and economic environment that continued from 2008. The Institutional Securities segment was particularly impacted, reporting a pre-tax loss of $434 million due to lower sales and trading results in equity and fixed income, compounded by losses from tightening credit spreads on the company's own borrowings. While non-interest expenses decreased by 33% due to lower compensation costs, the firm's overall performance reflects the ongoing pressures of the credit crisis. The company also announced a reduction in its quarterly common stock dividend from $0.27 to $0.05 per share to bolster its capital position.

Financial Highlights

26 data points
Beta

Revenue

$2.93B

Net Income

-$177.00M

-6.0% Net Margin

EPS (Diluted)

$-0.57

Cash & Equivalents

$48.54B

Free Cash Flow

-$32.52B

Financial Statements
Beta
Revenue$2.93B
Operating Income-$17.00M
Interest Expense$2.31B
Net Income-$177.00M
EPS (Basic)$-0.57
EPS (Diluted)$-0.57
Shares Outstanding (Basic)1.01B
Shares Outstanding (Diluted)1.01B

Key Highlights

  • 1Net loss of $177 million for Q1 2009, a substantial decline from a $1.4 billion profit in Q1 2008.
  • 2Net revenues decreased by 62% to $3.04 billion in Q1 2009 due to a challenging global market.
  • 3Institutional Securities segment reported a pre-tax loss of $434 million, impacted by lower sales and trading results and widening credit spreads on the company's borrowings.
  • 4Global Wealth Management Group's income before taxes fell to $119 million from $949 million in the prior year, partly due to the sale of a Spanish subsidiary in the prior year and lower client asset balances.
  • 5Asset Management reported a pre-tax loss of $559 million, significantly worsened from a $112 million loss in Q1 2008, driven by substantial investment losses.
  • 6Total assets decreased to $626.02 billion as of March 31, 2009, from $676.76 billion as of December 31, 2008.
  • 7The company announced a reduction in its quarterly common stock dividend from $0.27 to $0.05 per share to enhance its capital position.

Frequently Asked Questions

The primary driver of the net loss was a significant decrease in net revenues, down 62% year-over-year to $3.04 billion. This was largely due to the ongoing challenging global market and economic conditions, which severely impacted the Institutional Securities segment's sales and trading results, further exacerbated by losses from tightening credit spreads on the company's own borrowings.

The Institutional Securities segment reported a pre-tax loss of $434 million, a sharp decline from a pre-tax profit of $1.18 billion in the prior year. The Global Wealth Management Group's income before taxes dropped to $119 million from $949 million, affected by the prior year's sale of a Spanish subsidiary and lower client asset balances. The Asset Management segment incurred a pre-tax loss of $559 million, a significant increase from the $112 million loss in the prior year, primarily due to investment losses.

Morgan Stanley is taking several steps. Most notably, they announced a reduction in their quarterly common stock dividend from $0.27 to $0.05 per share, which is expected to enhance their capital position by approximately $1 billion annually. Additionally, the company is a participant in the U.S. Treasury's Capital Purchase Program (CPP), having sold preferred stock to the U.S. Treasury. They are also working towards combining their Global Wealth Management Group with Citigroup's Smith Barney business into a new joint venture, expected to close in the third quarter of 2009.

Total assets decreased to $626.02 billion as of March 31, 2009, from $676.76 billion as of December 31, 2008. This decrease was primarily driven by reductions in interest-bearing deposits with banks and various financial instruments held by the company.