10-QPeriod: Q2 FY2017

MORGAN STANLEY Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 3, 2017For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley reported strong financial performance for the second quarter and first half of 2017, with net revenues and net income showing significant year-over-year increases. Net revenues rose to $9.50 billion in Q2 2017 from $8.91 billion in Q2 2016, while net income applicable to Morgan Stanley reached $1.76 billion, up from $1.58 billion. Diluted EPS also improved to $0.87 from $0.75. The firm saw robust growth across all its business segments: Institutional Securities, Wealth Management, and Investment Management, with strong contributions from underwriting, equity sales and trading, and asset management fees. Key drivers for the improved performance include higher revenues in investment banking, particularly underwriting, and increased trading revenues in fixed income. Wealth Management benefited from growth in asset management fees and net interest income. Despite an increase in compensation and non-compensation expenses, partly due to a UK VAT provision, the firm maintained a stable expense efficiency ratio and demonstrated improved returns on equity. Capital ratios remained strong and well above regulatory requirements, supporting continued capital return initiatives like share repurchases and dividend increases.

Financial Highlights

34 data points
Beta

Net Income

$1.76B

EPS (Diluted)

$0.87

Total Assets

$841.02B

Cash & Equivalents

$74.83B

Free Cash Flow

-$14.25B

Financial Statements
Beta
Interest Expense$1.35B
Net Income$1.76B
EPS (Basic)$0.89
EPS (Diluted)$0.87
Shares Outstanding (Basic)1.79B
Shares Outstanding (Diluted)1.83B

Key Highlights

  • 1Net revenues increased to $9.50 billion in Q2 2017, up from $8.91 billion in Q2 2016.
  • 2Net income applicable to Morgan Stanley rose to $1.76 billion in Q2 2017, compared to $1.58 billion in Q2 2016.
  • 3Diluted Earnings Per Share (EPS) improved to $0.87 in Q2 2017, from $0.75 in Q2 2016.
  • 4Institutional Securities segment net revenues grew by 4% year-over-year, driven by stronger underwriting and equity trading.
  • 5Wealth Management segment net revenues increased by 9% year-over-year, supported by asset management fees and net interest income.
  • 6Investment Management segment net revenues saw a 14% increase, boosted by investment gains and asset management fees.
  • 7Return on Average Common Equity (ROE) improved to 9.1% in Q2 2017 from 8.3% in Q2 2016.

Frequently Asked Questions

Morgan Stanley reported a notable increase in net revenues, reaching $9.50 billion in the second quarter of 2017, up from $8.91 billion in the same period of the prior year. This growth was driven by strong performance across all business segments.

Profitability improved significantly. Net income applicable to Morgan Stanley increased to $1.76 billion in Q2 2017 from $1.58 billion in Q2 2016. This translated to a higher diluted Earnings Per Share (EPS) of $0.87 compared to $0.75 in the prior year quarter.

All three major business segments demonstrated growth. Institutional Securities saw a 4% increase, Wealth Management reported a 9% rise, and Investment Management experienced a 14% increase in net revenues year-over-year.

Total non-interest expenses increased primarily due to higher compensation and benefits expenses, driven by improved revenues and incentive compensation, as well as an 8% increase in non-compensation expenses. The latter was partly due to brokerage, clearing, and exchange fees, other volume-driven expenses, and a provision related to a UK VAT matter. Despite these increases, the expense efficiency ratio remained relatively stable at 72.2%.

Morgan Stanley's capital position remains strong, with capital ratios well above regulatory requirements. The firm's 2017 capital plan, which received no objection from the Federal Reserve, includes a significant share repurchase program of up to $5.0 billion and an increase in the quarterly common stock dividend to $0.25 per share, indicating a commitment to returning capital to shareholders.