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Last Update: 18-Apr-13 07:39 ET
Morgan Stanley shares fall 1% following miss on revenues
Morgan Stanley (MS $21.25 -0.22) reported first quarter earnings of $0.61 per share, $0.05 better than the Capital IQ Consensus Estimate of $0.56; revenues rose 17.8% year/year to $8.16 bln vs the $8.34 bln consensus. Results for the current quarter included negative revenue related to changes in Morgan Stanley's debt-related credit spreads and other credit factors (Debt Valuation Adjustment, DVA) of $317 million, compared with negative revenue of $2.0 bln a year ago. Excluding DVA, net revenues for the current quarter were $8.5 billion compared with $8.9 billion a year ago and income from continuing operations applicable to Morgan Stanley was $1.2 billion, or $0.61 per diluted share, compared with income of $1.4 billion, or $0.71 per diluted share a year ago. Compensation expense was $4.2 billion compared with $4.4 billion a year ago. Non-compensation expenses of $2.3 billion were essentially unchanged from a year ago. James P. Gorman, Chairman and Chief Executive Officer, said, "In Global Wealth Management, our operating pre-tax profit was the highest in our history, and we look forward to completing the acquisition of the remaining 35% of our wealth management joint venture once we have obtained full regulatory approval... The program to reduce non-strategic risk-weighted assets in our Fixed Income and Commodities businesses remains on schedule. Our joint ventures with Mitsubishi UFJ Financial Group present exciting opportunities -- across the globe and specifically in Japan, given the economic policy changes taking place in that country. Looking forward, while the global environment continues to have moments of fragility, we believe the broad economic outlook for the next several years is stronger than in the recent past." Institutional Securities reported a pre-tax gain from continuing operations of $830 million compared with a pre-tax loss of $329 million in the first quarter of last year. Net revenues for the current quarter were $4.1 billion compared with $3.1 billion a year ago. DVA resulted in negative revenue of $317 million in the current quarter compared with negative revenue of $2.0 billion a year ago.
Excluding DVA, net revenues for the current quarter were $4.4 billion compared with $5.1 billion a year ago. Advisory revenues were $251 million compared with $313 million a year ago, primarily reflecting lower levels of market activity. Equity underwriting revenues of $283 million increased from $172 million a year ago reflecting higher market volume. Fixed income underwriting revenues were $411 million compared with $366 million a year ago reflecting a favorable debt underwriting environment. Fixed Income & Commodities sales and trading net revenues were $1.5 billion compared with $2.6 billion a year ago reflecting declines in commodities and rates, partly offset by higher results in securitized products and relative strength in corporate credit. Equity sales and trading net revenues of $1.6 billion compared with $2.0 billion in the prior year quarter primarily reflecting lower market volumes, partly offset by strength in prime brokerage. Compensation expense for the current quarter was $1.9 billion compared with $2.2 billion in the prior year quarter driven in part by lower headcount. Non-compensation expenses of $1.4 billion increased from $1.3 billion a year ago reflecting higher volume driven expenses. Morgan Stanley's average trading Value-at-Risk (VaR) was $72 million compared with $78 million in the fourth quarter of 2012. Global Wealth Management Group reported pre-tax income from continuing operations of $597 million compared with $403 million in the first quarter of last year. Net revenues for the current quarter were $3.5 billion compared with $3.3 billion a year ago. Capital Tier 1 capital ratio under Basel I was approximately 13.9% Tier 1 common ratio was approximately 11.5% at March 31, 2013. Book value and tangible book value per common share were $31.22 and $27.39, respectively.
Excluding DVA, net revenues for the current quarter were $4.4 billion compared with $5.1 billion a year ago. Advisory revenues were $251 million compared with $313 million a year ago, primarily reflecting lower levels of market activity. Equity underwriting revenues of $283 million increased from $172 million a year ago reflecting higher market volume. Fixed income underwriting revenues were $411 million compared with $366 million a year ago reflecting a favorable debt underwriting environment. Fixed Income & Commodities sales and trading net revenues were $1.5 billion compared with $2.6 billion a year ago reflecting declines in commodities and rates, partly offset by higher results in securitized products and relative strength in corporate credit. Equity sales and trading net revenues of $1.6 billion compared with $2.0 billion in the prior year quarter primarily reflecting lower market volumes, partly offset by strength in prime brokerage. Compensation expense for the current quarter was $1.9 billion compared with $2.2 billion in the prior year quarter driven in part by lower headcount. Non-compensation expenses of $1.4 billion increased from $1.3 billion a year ago reflecting higher volume driven expenses. Morgan Stanley's average trading Value-at-Risk (VaR) was $72 million compared with $78 million in the fourth quarter of 2012. Global Wealth Management Group reported pre-tax income from continuing operations of $597 million compared with $403 million in the first quarter of last year. Net revenues for the current quarter were $3.5 billion compared with $3.3 billion a year ago. Capital Tier 1 capital ratio under Basel I was approximately 13.9% Tier 1 common ratio was approximately 11.5% at March 31, 2013. Book value and tangible book value per common share were $31.22 and $27.39, respectively.
