10-QPeriod: Q1 FY2021

MORGAN STANLEY Quarterly Report for Q1 Ended Mar 31, 2021

Filed May 3, 2021For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley reported a strong first quarter of 2021, with net revenues soaring by 61% to $15.7 billion and net income increasing by 143% to $4.1 billion, or $2.19 per diluted share. This robust performance was driven by significant contributions across all three business segments: Institutional Securities, Wealth Management, and Investment Management. The acquisitions of E*TRADE and Eaton Vance were successfully integrated and positively impacted results, particularly in Wealth Management and Investment Management, respectively. The firm's ROTCE (Return on Tangible Common Equity) reached 21.1%, highlighting improved profitability. Despite a notable $644 million loss related to a single client credit event in the Institutional Securities segment, the overall financial health and operational performance remained strong, supported by a solid Common Equity Tier 1 capital ratio of 16.7%. Management also authorized a $10 billion share repurchase program for 2021, signaling confidence in future performance and commitment to shareholder returns.

Financial Highlights

35 data points
Beta

Net Income

$4.12B

EPS (Diluted)

$2.19

Total Assets

$1.16T

Cash & Equivalents

$118.12B

Free Cash Flow

$26.88B

Financial Statements
Beta
Interest Expense$409.00M
Net Income$4.12B
EPS (Basic)$2.22
EPS (Diluted)$2.19
Shares Outstanding (Basic)1.79B
Shares Outstanding (Diluted)1.82B

Key Highlights

  • 1Net revenues increased by 61% year-over-year to $15.7 billion.
  • 2Net income applicable to Morgan Stanley surged by 143% to $4.1 billion.
  • 3Diluted earnings per share rose to $2.19 from $1.01 in the prior year quarter.
  • 4The Institutional Securities segment saw net revenues increase by 66%, driven by strong client engagement and higher volumes, despite a single client credit event loss.
  • 5Wealth Management delivered strong results with a pre-tax profit margin of 26.9% and significant net new assets of $105 billion.
  • 6Investment Management benefited from the Eaton Vance acquisition, with net revenues up 90% due to higher AUM and positive flows.
  • 7The firm's Common Equity Tier 1 capital ratio stood at a strong 16.7% as of March 31, 2021.

Frequently Asked Questions

Morgan Stanley's strong performance was driven by robust client activity across all business segments, particularly in Institutional Securities, fueled by constructive market conditions. The successful integration of the E*TRADE and Eaton Vance acquisitions significantly boosted results in Wealth Management and Investment Management, respectively. Higher asset management fees and positive flows also contributed to the strong revenue growth.

The acquisitions of E*TRADE and Eaton Vance were accreted into Morgan Stanley's results during the quarter. E*TRADE integration positively impacted Wealth Management's net revenues and net interest. Eaton Vance's acquisition significantly boosted Investment Management's net revenues through increased Assets Under Management (AUM) and higher asset management fees. Both acquisitions contributed to higher compensation and non-compensation expenses due to integration costs and expanded operations.

The Institutional Securities segment reported a loss of $644 million related to a credit event for a single client, with an additional $267 million in subsequent trading losses. Despite this significant impact, the segment's net revenues still increased by 66% year-over-year due to overall strength in equity and fixed income businesses and higher client engagement.

Morgan Stanley maintained a strong Common Equity Tier 1 capital ratio of 16.7%, well above regulatory requirements. The firm repurchased $2.1 billion of its outstanding common stock during the quarter and announced a $0.35 per share common stock dividend to be paid in May 2021. Additionally, the Board of Directors authorized a $10 billion share repurchase program for 2021, signaling confidence in its financial position and commitment to shareholder returns.