MORGAN STANLEY Quarterly Report for Q3 Ended Sep 30, 2017

Summary

Morgan Stanley reported solid financial results for the third quarter and the first nine months of 2017, demonstrating growth across its key business segments. Net revenues increased to $9.20 billion for the quarter and $28.45 billion year-to-date, driven by strong performance in Wealth Management and Investment Management. Net income applicable to Morgan Stanley also saw a significant increase, reaching $1.78 billion for the quarter and $5.47 billion year-to-date, translating to diluted EPS of $0.93 and $2.79, respectively. The firm maintained strong capital ratios, with its Common Equity Tier 1 ratio at 16.9%. The Wealth Management segment showed robust growth in asset management fees and net interest income, while the Investment Management segment benefited from higher carried interest and asset management fees. While the Institutional Securities segment experienced a slight decline in net revenues for the quarter due to lower fixed income sales and trading, it showed an increase year-to-date, driven by higher underwriting and fixed income trading revenues. The firm highlighted ongoing investments in technology and infrastructure, contributing to a 5% increase in non-compensation expenses for the quarter. Despite some legal and regulatory matters, Morgan Stanley appears to be on track with its strategic initiatives, including its Return on Equity target. Investors will likely focus on continued revenue growth, expense management, and the firm's ability to navigate the evolving regulatory landscape.

Key Highlights

• 1Net revenues increased by 3% year-over-year to $9.20 billion in Q3 2017, and by 11% year-over-year to $28.45 billion for the first nine months of 2017.
• 2Net income applicable to Morgan Stanley rose by 11% year-over-year to $1.78 billion in Q3 2017, and by 27% year-over-year to $5.47 billion for the first nine months of 2017.
• 3Diluted Earnings Per Share (EPS) improved to $0.93 in Q3 2017 from $0.81 in the prior year quarter, and to $2.79 year-to-date from $2.11 in the prior year period.
• 4Wealth Management net revenues increased by 9% year-over-year for both the quarter and the year-to-date period, driven by asset management fees and net interest income.
• 5Investment Management net revenues grew by 22% year-over-year for the quarter and 21% year-over-year year-to-date, primarily due to higher carried interest and asset management fees.
• 6The firm maintained a strong Common Equity Tier 1 capital ratio of 16.9% as of September 30, 2017.
• 7Return on average common equity (ROE) improved to 9.6% for the quarter and 9.8% year-to-date, compared to 8.7% and 7.7% in the prior year periods.

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