10-QPeriod: Q2 FY2012

MORGAN STANLEY Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 6, 2012For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley's (MS) second-quarter 2012 report shows a net income of $591 million, or $0.29 per diluted share, on net revenues of $6.95 billion. This represents a significant decrease compared to the prior year's second quarter, which saw a net income of $1.19 billion on net revenues of $9.21 billion. The decline in net revenues was primarily driven by a substantial drop in investment banking and principal transactions (trading) revenues, exacerbated by a challenging market environment and reduced client activity. While Global Wealth Management Group showed resilience with slightly improved income from continuing operations and stable net revenues, the Institutional Securities segment experienced a significant revenue decline, particularly in fixed income and commodities trading. Despite the revenue headwinds, Morgan Stanley demonstrated strong expense management, with total non-interest expenses decreasing by 17% year-over-year, largely due to lower compensation expenses. The company also reported solid capital ratios, well above regulatory requirements, and maintained a strong liquidity position. The report highlights ongoing efforts to divest non-core assets, such as the sale of Quilter, and manage risk effectively, particularly in light of regulatory changes and market volatility.

Financial Highlights

41 data points
Beta

Revenue

$6.94B

Net Income

$591.00M

8.5% Net Margin

EPS (Diluted)

$0.29

Total Assets

$748.52B

Cash & Equivalents

$42.01B

Free Cash Flow

$7.87B

Financial Statements
Beta
Revenue$6.94B
Operating Income$483.00M
Interest Expense$1.48B
Net Income$591.00M
EPS (Basic)$0.30
EPS (Diluted)$0.29
Shares Outstanding (Basic)1.89B
Shares Outstanding (Diluted)1.91B

Key Highlights

  • 1Net income applicable to Morgan Stanley was $591 million for Q2 2012, down from $1.19 billion in Q2 2011.
  • 2Net revenues decreased to $6.95 billion from $9.21 billion year-over-year, primarily due to lower investment banking and trading revenues.
  • 3Institutional Securities segment saw a significant revenue decline, with investment banking down 40% and fixed income/commodities trading down 60% (excluding DVA).
  • 4Global Wealth Management Group's net revenues remained relatively stable at $3.31 billion, with income from continuing operations increasing to $245 million.
  • 5Total non-interest expenses decreased by 17% to $6.01 billion, driven by a 21% reduction in compensation and benefits.
  • 6The company's capital ratios remained strong, with a Tier 1 common capital ratio of 13.6% and a Tier 1 leverage ratio of 7.1%, both exceeding regulatory requirements.
  • 7The company is actively managing its liquidity, maintaining a Global Liquidity Reserve of $173 billion at June 30, 2012.

Frequently Asked Questions

Morgan Stanley reported a net income applicable to Morgan Stanley of $591 million for the second quarter of 2012.

Net revenues for the second quarter of 2012 were $6.95 billion, a decrease from $9.21 billion in the second quarter of 2011, primarily due to lower revenues in investment banking and trading activities.

The decrease in net revenues was primarily driven by weaker performance in the Institutional Securities segment, particularly in fixed income, commodities, and equity trading, as well as a decline in investment banking revenues. Challenging market conditions and reduced client activity were cited as key factors.

Morgan Stanley successfully managed its expenses, with total non-interest expenses decreasing by 17% year-over-year to $6.01 billion. This reduction was largely attributed to a 21% decrease in compensation and benefits expenses.

Morgan Stanley maintained strong capital ratios, with a Tier 1 common capital ratio of 13.6% and a Tier 1 leverage ratio of 7.1%, both comfortably exceeding regulatory requirements.