10-QPeriod: Q1 FY2010

MORGAN STANLEY Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 7, 2010For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley's (MS) first quarter 2010 results show a significant turnaround from the prior year, driven by a substantial increase in net revenues and a return to profitability. The firm reported a net income applicable to Morgan Stanley of $1.78 billion, a stark contrast to a net loss of $177 million in Q1 2009. This improvement was largely fueled by a strong performance in the Institutional Securities segment, which saw net revenues surge to $5.34 billion from $1.60 billion year-over-year. The Global Wealth Management Group also showed robust growth, with net revenues increasing to $3.11 billion, benefiting significantly from the consolidation of Morgan Stanley Smith Barney (MSSB). Overall, the firm's return to profitability and substantial revenue growth indicate a strengthening operational performance and recovery from the challenging market conditions of the previous year.

Financial Highlights

42 data points
Beta

Revenue

$8.99B

Net Income

$1.78B

19.8% Net Margin

EPS (Diluted)

$0.99

Total Assets

$819.72B

Cash & Equivalents

$36.35B

Free Cash Flow

$21.10B

Financial Statements
Beta
Revenue$8.99B
Operating Income$1.84B
Interest Expense$1.37B
Net Income$1.78B
EPS (Basic)$1.07
EPS (Diluted)$0.99
Shares Outstanding (Basic)1.31B
Shares Outstanding (Diluted)1.63B

Key Highlights

  • 1Morgan Stanley reported a net income of $1.78 billion for Q1 2010, a substantial improvement from a net loss of $177 million in Q1 2009.
  • 2Net revenues increased significantly to $9.08 billion from $2.90 billion in the prior year quarter, driven by strong performance across all segments.
  • 3The Institutional Securities segment was the primary driver of revenue growth, with net revenues increasing to $5.34 billion, up from $1.60 billion in Q1 2009.
  • 4The Global Wealth Management Group's net revenues rose to $3.11 billion, benefiting from the consolidation of MSSB and increased client asset balances.
  • 5Diluted Earnings Per Share (EPS) improved to $0.99 from a loss of $(0.57) in the prior year quarter.
  • 6The firm's capital ratios remained strong, with a Tier 1 capital ratio of 15.1% and a Tier 1 leverage ratio of 6.1% at March 31, 2010.
  • 7The company announced the planned disposition of Revel Entertainment Group, LLC, recording a loss of $932 million in discontinued operations.

Frequently Asked Questions

The substantial increase in profitability was primarily driven by a significant rebound in net revenues, particularly within the Institutional Securities segment, which benefited from improved market conditions and trading activity. The Global Wealth Management Group also contributed positively due to the consolidation of MSSB and higher client asset levels. The firm also benefited from a widening in its credit spreads on certain borrowings, which positively impacted fair value adjustments, contrasting with tightening spreads in the prior year.

The GWMG segment showed strong growth, with net revenues rising to $3.11 billion in Q1 2010, a significant increase from $1.30 billion in Q1 2009. This improvement was largely due to the consolidation of Morgan Stanley Smith Barney (MSSB), which closed in May 2009. MSSB contributed to higher client asset balances and advisory fees, significantly boosting the segment's results.

Morgan Stanley authorized a plan of disposal for Revel Entertainment Group, LLC on March 31, 2010. The results of Revel have been reported as discontinued operations. The company recorded a loss of approximately $932 million in Q1 2010 in connection with this planned disposition, which impacted the discontinued operations line item.

Morgan Stanley maintained a strong capital position. At March 31, 2010, its Tier 1 capital ratio was 15.1%, and its Tier 1 leverage ratio was 6.1%. These ratios remained well above regulatory requirements, indicating a solid capital base to support its operations and growth.