10-QPeriod: Q2 FY2015

MORGAN STANLEY Quarterly Report for Q2 Ended Jun 30, 2015

Filed August 4, 2015For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley's filing for the quarter ending June 30, 2015, demonstrates a solid performance with a significant increase in net revenues year-over-year, driven primarily by strength in its Institutional Securities segment, particularly in Equity sales and trading. The Wealth Management segment also showed growth, benefiting from higher asset management fees. Despite an increase in non-interest expenses, primarily due to higher compensation and professional services costs, the firm maintained profitability. The company also saw positive developments in its capital management, with a capital plan approved by the Federal Reserve, including a share repurchase program and an increased quarterly dividend, signaling confidence in its financial health. Overall, the report indicates a stable financial position and strategic progress, though increased litigation and regulatory scrutiny remain a key area of focus.

Financial Highlights

37 data points
Beta

Revenue

$9.74B

Net Income

$1.81B

18.5% Net Margin

EPS (Diluted)

$0.85

Total Assets

$825.75B

Cash & Equivalents

$46.36B

Free Cash Flow

$4.60B

Financial Statements
Beta
Revenue$9.74B
Interest Expense$688.00M
Net Income$1.81B
EPS (Basic)$0.87
EPS (Diluted)$0.85
Shares Outstanding (Basic)1.92B
Shares Outstanding (Diluted)1.96B

Key Highlights

  • 1Net revenues increased by 13% to $9.74 billion compared to the prior year quarter, driven by strong performance in Institutional Securities, particularly Equity sales and trading.
  • 2Income from continuing operations applicable to Morgan Stanley was $1.81 billion, resulting in diluted earnings per share of $0.85, down slightly from $0.92 in the prior year quarter, but excluding certain one-time items, the performance showed improvement.
  • 3The Institutional Securities segment saw significant revenue growth, up 22% year-over-year, with Equity sales and trading and Fixed Income and Commodities showing strong gains.
  • 4Wealth Management revenues increased by 5% year-over-year, supported by higher asset management fees and net interest income.
  • 5Total non-interest expenses increased by 5%, driven by higher compensation and professional services costs.
  • 6Morgan Stanley received no objection from the Federal Reserve for its 2015 capital plan, which included an increase in the quarterly dividend to $0.15 per share and a share repurchase program of up to $3.1 billion.
  • 7The company maintained strong capital ratios under the U.S. Basel III framework, exceeding regulatory requirements across all key metrics.

Frequently Asked Questions

Net revenues increased by 13% to $9.74 billion compared to the prior year quarter. This growth was primarily driven by strong performance in the Institutional Securities segment, especially in Equity sales and trading across products and regions, and improved fixed income interest product revenues. The Wealth Management segment also contributed with higher asset management, distribution, and administration fees.

Net income applicable to Morgan Stanley was $1.81 billion for the quarter, a slight decrease from $1.90 billion in the prior year quarter. However, the prior year quarter benefited from a significant net discrete tax benefit. Excluding this benefit and the Debt Valuation Adjustment (DVA), net income showed an improvement year-over-year, indicating underlying operational strength.

Total non-interest expenses increased by 5% due to higher compensation costs (driven by higher revenues and changes in deferral rates) and increased professional services costs. In terms of capital management, Morgan Stanley received approval for its 2015 capital plan, including an increased quarterly dividend and a share repurchase program, demonstrating a commitment to returning capital to shareholders.

Institutional Securities saw strong revenue growth driven by trading activities, particularly in equities. Wealth Management experienced growth in fee-based revenues due to higher client balances and improved net interest income. Investment Management's revenues were relatively stable, with higher gains on investments in Merchant Banking and Real Estate Investing offsetting lower revenues from minority investments.