10-QPeriod: Q1 FY2014

MORGAN STANLEY Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 6, 2014For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley's first quarter 2014 results demonstrate a solid increase in profitability driven by growth across its key business segments. Net revenues rose to $8.9 billion, with income applicable to Morgan Stanley shareholders reaching $1.5 billion, a significant improvement from the prior year quarter. The Institutional Securities segment saw robust growth in investment banking and sales & trading activities, benefiting from positive valuation adjustments (DVA). Wealth Management reported higher net revenues driven by increased fee-based client assets and net interest income, while Investment Management also showed improved profitability due to higher net investment gains. The company maintained strong capital ratios, exceeding regulatory requirements under both the existing U.S. Basel I framework and the newly implemented U.S. Basel III transitional rules.

Financial Highlights

38 data points
Beta

Revenue

$9.00B

Net Income

$1.50B

16.7% Net Margin

EPS (Diluted)

$0.74

Total Assets

$831.38B

Cash & Equivalents

$55.42B

Free Cash Flow

$4.78B

Financial Statements
Beta
Revenue$9.00B
Operating Income$1.51B
Interest Expense$1.03B
Net Income$1.50B
EPS (Basic)$0.75
EPS (Diluted)$0.74
Shares Outstanding (Basic)1.92B
Shares Outstanding (Diluted)1.97B

Key Highlights

  • 1Net revenues increased to $8.93 billion, up from $8.15 billion in the prior year quarter.
  • 2Net income applicable to Morgan Stanley shareholders was $1.51 billion, a significant increase from $962 million in the prior year quarter.
  • 3Earnings per diluted common share were $0.74, up from $0.48 in the prior year quarter.
  • 4Institutional Securities segment income from continuing operations before taxes rose to $1.35 billion, driven by higher investment banking and sales & trading revenues.
  • 5Wealth Management segment income from continuing operations before taxes increased to $691 million, supported by higher fee-based client assets and net interest income.
  • 6Investment Management segment income from continuing operations before taxes grew to $263 million, driven by improved investment gains.
  • 7Capital ratios remained strong, with Common Equity Tier 1 ratio at 14.1% and Tier 1 leverage ratio at 7.6% under U.S. Basel III transitional rules, exceeding regulatory minimums.

Frequently Asked Questions

Net revenues increased to $8.93 billion primarily due to strong performance in the Institutional Securities segment, particularly in investment banking and sales & trading, which benefited from higher client activity and positive valuation adjustments (DVA). Wealth Management also contributed with higher fee-based client assets and net interest income, while Investment Management saw growth from increased net investment gains.

Morgan Stanley maintained a strong capital position, with its Common Equity Tier 1 ratio at 14.1% and Tier 1 leverage ratio at 7.6% under the transitional U.S. Basel III rules as of March 31, 2014. These ratios comfortably exceeded regulatory requirements, reflecting the company's robust capital management.

Morgan Stanley's capital plan for 2014, which received no objection from the Federal Reserve, includes a plan to repurchase up to $1 billion of outstanding common stock and an increase in the quarterly common stock dividend to $0.10 per share, demonstrating a commitment to returning capital to shareholders.

In Institutional Securities, higher investment banking revenues (advisory, equity, and fixed income underwriting) and stronger sales & trading revenues (equity and fixed income/commodities) were key drivers. For Wealth Management, growth in fee-based client assets, higher net interest income from increased deposit and lending balances, and robust fee-based asset flows were significant. Investment Management benefited from higher net investment gains, particularly in Merchant Banking and Traditional Asset Management.