10-QPeriod: Q1 FY2011

MORGAN STANLEY Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 9, 2011For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley's Q1 2011 report shows a significant year-over-year decline in net income, primarily due to a substantial pre-tax loss of $655 million from its Japanese securities joint venture (MUMSS) and negative revenue impacts from widening credit spreads on the company's borrowings. While net revenues decreased to $7.635 billion from $9.072 billion in Q1 2010, the firm's Institutional Securities segment experienced a sharp drop in income from continuing operations before income taxes, largely influenced by lower fixed income and commodities trading revenues and the MUMSS loss. Conversely, the Global Wealth Management Group demonstrated resilience with an increase in income from continuing operations before income taxes, driven by higher client activity and fee-based revenues. Despite these headwinds, the company maintained a strong capital position, with its Tier 1 capital ratio remaining robust.

Financial Highlights

44 data points
Beta

Revenue

$7.56B

Net Income

$968.00M

12.8% Net Margin

EPS (Diluted)

$0.50

Total Assets

$836.18B

Cash & Equivalents

$52.61B

Free Cash Flow

-$1.32B

Financial Statements
Beta
Revenue$7.56B
Operating Income$984.00M
Interest Expense$1.85B
Net Income$968.00M
EPS (Basic)$0.51
EPS (Diluted)$0.50
Shares Outstanding (Basic)1.46B
Shares Outstanding (Diluted)1.47B

Key Highlights

  • 1Net income applicable to Morgan Stanley decreased by 45% year-over-year to $968 million.
  • 2Net revenues declined 16% to $7.635 billion, impacted by lower fixed income and commodities trading and a significant loss from the Japanese joint venture (MUMSS).
  • 3Institutional Securities segment's income from continuing operations before taxes fell sharply to $397 million from $2.065 billion, heavily influenced by trading revenue declines and the MUMSS loss.
  • 4Global Wealth Management Group saw an increase in income from continuing operations before taxes to $348 million, up from $278 million, driven by higher client activity and fee-based revenues.
  • 5The company maintained a strong capital position with a Tier 1 capital ratio of 16.5% and a Tier 1 leverage ratio of 6.1%.
  • 6The company reported a significant tax benefit of $447 million in continuing operations due to the reversal of a deferred tax asset valuation allowance related to the disposal of Revel.
  • 7Liquidity remains strong, with a Global Liquidity Reserve of $172 billion.

Frequently Asked Questions

The primary drivers for the significant year-over-year decline in net income were a substantial pre-tax loss of $655 million from its Japanese securities joint venture (MUMSS) and negative revenue impacts of $189 million due to the widening of the company's credit spreads on certain borrowings.

The Institutional Securities segment experienced a significant decrease in income, largely due to lower trading revenues and the MUMSS loss. In contrast, the Global Wealth Management Group showed improvement, with higher income driven by increased client activity and fee-based revenues. The Asset Management segment saw a modest decline in income.

Morgan Stanley maintained a strong capital position, with a Tier 1 capital ratio of 16.5% and a Tier 1 leverage ratio of 6.1%. The company also reported a robust Global Liquidity Reserve of $172 billion, indicating ample liquidity to meet its obligations.

Yes, a notable one-time item was a $447 million net tax benefit recognized in continuing operations related to the reversal of a deferred tax asset valuation allowance. This was due to a change in circumstances regarding the disposal of Revel Entertainment Group, LLC.