Morgan Stanley earnings are out, and not surprisingly the company announced a big fall in revenue (thanks to weak trading revenue). The top-line did beat estimates somewhat.
One big piece of news: The company officially announced the spinoff of its hedge fund FrontPoint:
…the Firm announced today a restructuring of its ownership of FrontPoint Partners LLC (FrontPoint) whereby FrontPoint senior management and portfolio managers will own a majority equity stake in FrontPoint and Morgan Stanley will retain a minority stake. FrontPoint will replace Morgan Stanley affiliates as the investment advisor and general partner of the FrontPoint funds. The restructuring is expected to close in the fourth quarter of 2010.
We originally reported in August that Morgan Stanley would be spinning out this fund and that the venture would mark a loss for the firm.
Here’s some commentary on the trading business:
- Fixed income sales and trading net revenues were $846 million compared with net revenues of $2.0 billion in last year’s third quarter. DVA resulted in negative revenue of $464 million in the current quarter compared with negative revenue of $546 million a year ago. The decrease in net revenues from last year’s strong third quarter reflected lower trading results across our businesses.
- Equity sales and trading net revenues were $925 million compared with net revenues of $1.2 billion in last year’s third quarter. DVA resulted in negative revenue of $196 million in the current quarter compared with negative revenue of $206 million a year ago. Net revenues declined from a year ago primarily reflecting lower results in the cash and derivatives businesses driven by reduced levels of both client activity and volatility.
- Other sales and trading losses were $341 million compared with net revenues of $668 million in the third quarter of last year.3 Results for the current quarter primarily reflected funding costs, including costs related to the amount of liquidity held by the Firm’s U.S. subsidiary banks, while net revenues in the prior year primarily reflected net gains on loans and lending commitments and other hedging activities.