10-QPeriod: Q1 FY2017

MORGAN STANLEY Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 4, 2017For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley's first quarter of 2017 demonstrated significant year-over-year improvement, with net revenues increasing by 25% to $9.745 billion and net income applicable to Morgan Stanley soaring by 70% to $1.93 billion. This strong performance was driven by robust results across all key business segments: Institutional Securities, Wealth Management, and Investment Management. The Institutional Securities segment saw a substantial 39% rise in net revenues, largely fueled by strong performance in sales and trading, as well as investment banking activities. Wealth Management also contributed positively with an 11% increase in net revenues, benefiting from growth in net interest income and higher fee revenues. The Investment Management segment experienced a 28% revenue increase, primarily due to investment gains in private equity and real estate funds. The company's diluted earnings per share (EPS) more than doubled to $1.00, compared to $0.55 in the prior year quarter. Capital ratios remained strong, with the Common Equity Tier 1 capital ratio at 17.4%, comfortably exceeding regulatory requirements.

Financial Highlights

36 data points
Beta

Net Income

$1.93B

EPS (Diluted)

$1.00

Total Assets

$832.39B

Cash & Equivalents

$78.88B

Free Cash Flow

$90.00M

Financial Statements
Beta
Interest Expense$1.19B
Net Income$1.93B
EPS (Basic)$1.02
EPS (Diluted)$1.00
Shares Outstanding (Basic)1.80B
Shares Outstanding (Diluted)1.84B

Key Highlights

  • 1Net revenues surged by 25% year-over-year to $9.745 billion.
  • 2Net income applicable to Morgan Stanley increased by 70% to $1.93 billion.
  • 3Diluted earnings per share (EPS) more than doubled to $1.00 from $0.55.
  • 4Institutional Securities segment net revenues grew 39%, driven by strong sales & trading and investment banking.
  • 5Wealth Management segment net revenues increased by 11%, supported by net interest income and fee growth.
  • 6Investment Management segment net revenues rose 28%, boosted by investment gains in private equity and real estate funds.
  • 7Common Equity Tier 1 capital ratio stood at a strong 17.4%.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance in the Institutional Securities segment, particularly in sales and trading activities and investment banking. Wealth Management benefited from increased net interest income and higher transactional and asset management fees, while Investment Management saw growth from investment gains in private equity and real estate funds.

Profitability significantly improved. Net income applicable to Morgan Stanley increased by 70% to $1.93 billion, and diluted earnings per share more than doubled to $1.00 from $0.55 in the prior year quarter. This was supported by a recurring-type discrete tax benefit of $112 million.

Morgan Stanley maintained strong capital levels. The Common Equity Tier 1 capital ratio was 17.4%, the Tier 1 capital ratio was 19.9%, and the Total capital ratio was 22.9%. These ratios are well above the minimum regulatory requirements, indicating a solid capital position.

Total non-interest expenses increased by 14.5% to $6.937 billion. Compensation and benefits expenses rose 21% due to higher revenues and incentive compensation, while non-compensation expenses increased by 4% driven by litigation costs and volume-driven expenses.