10-QPeriod: Q2 FY2018

MORGAN STANLEY Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 3, 2018For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley reported strong financial results for the quarter ended June 30, 2018, with net revenues of $10.61 billion, an increase of 12% year-over-year, and net income of $2.44 billion, a significant 39% increase. Diluted EPS also saw a substantial rise to $1.30 from $0.87 in the prior year quarter. The company's performance was driven by robust growth across its key segments. Institutional Securities saw a 20% increase in net revenues, primarily due to higher sales, trading, and investment banking activities. Wealth Management experienced a 4% increase in net revenues, supported by asset management growth, while Investment Management also reported a 4% increase in net revenues, driven by higher asset management fees. Morgan Stanley demonstrated solid capital positioning with a Common Equity Tier 1 capital ratio of 15.8% and a Tier 1 leverage ratio of 8.2% as of June 30, 2018. The firm also continued its capital return initiatives, including share repurchases and dividend payments, reflecting its commitment to enhancing shareholder value.

Financial Highlights

34 data points
Beta

Net Income

$2.44B

EPS (Diluted)

$1.30

Total Assets

$875.88B

Cash & Equivalents

$81.59B

Free Cash Flow

-$12.73B

Financial Statements
Beta
Interest Expense$2.39B
Net Income$2.44B
EPS (Basic)$1.32
EPS (Diluted)$1.30
Shares Outstanding (Basic)1.72B
Shares Outstanding (Diluted)1.75B

Key Highlights

  • 1Net revenues increased by 12% year-over-year to $10.61 billion.
  • 2Net income applicable to Morgan Stanley rose by 39% to $2.44 billion.
  • 3Diluted Earnings Per Share (EPS) increased significantly to $1.30, up from $0.87 in the prior year quarter.
  • 4Institutional Securities segment revenue grew by 20%, driven by strong performance in sales, trading, and investment banking.
  • 5Wealth Management segment revenue increased by 4%, with asset management revenues showing growth.
  • 6Investment Management segment revenue grew by 4%, also benefiting from higher asset management fees.
  • 7The Common Equity Tier 1 capital ratio remained strong at 15.8% as of June 30, 2018.

Frequently Asked Questions

Morgan Stanley's revenue growth was primarily driven by strong performance in its Institutional Securities segment, which saw a 20% increase in net revenues due to higher sales, trading, and investment banking activities. Growth in asset management fees also contributed to improved revenues in both the Wealth Management and Investment Management segments.

Morgan Stanley's profitability saw a significant improvement. Net income applicable to Morgan Stanley increased by 39% to $2.44 billion, and diluted Earnings Per Share (EPS) rose to $1.30 from $0.87 in the prior year quarter, indicating enhanced profitability.

Morgan Stanley maintained a strong capital position, with a Common Equity Tier 1 capital ratio of 15.8% and a Tier 1 leverage ratio of 8.2% as of June 30, 2018. The company is actively returning capital to shareholders through its share repurchase program and dividend payments, with plans to repurchase up to $4.7 billion of common stock and increase its quarterly dividend to $0.30 per share in the upcoming year.

Yes, Morgan Stanley adopted the accounting update 'Revenue from Contracts with Customers' effective January 1, 2018, which impacted revenue recognition policies, particularly for investment banking, commissions, fees, and asset management. They also adopted targeted improvements to accounting for hedging activities, which resulted in a cumulative catch-up adjustment.