Morgan Stanley just reported a noisy earnings beat for Q4 2013 with earnings per share of $US0.50 ex tax benefits and one-time legal expenses of about $US1.2 billion.
Analysts expected an earnings per share of $US0.44.
Revenue came in at $US8.2 billion — analysts on average expected earnings of $US8.0 billion.
A couple things to note in this report — trading (especially in fixed income), wealth management and compensation.
On trading — last quarter banks got completely smacked in this sector, this quarter it wasn’t as bad, but it wasn’t pretty either.
Analysts expected fixed income trading revenue to come in around $US800 million, but Morgan missed on that one bringing in $US694 million citing “weakness in interest rate products.” Equity sales and trading fared much better, coming in at $US1.5 billion compared to $US1.4 billion at the same time the year before.
Onto wealth management. This is key because it’s the crux of Gorman’s business model for the bank. So far it has served them well — it’s what had Morgan beating its arch rival Goldman Sachs last quarter.
Morgan Stanley made a net revenue of $US3.7 billion on its wealth management business in Q4 2013, compared to $US3.3 billion at the same time the year before.
Compensation expense in the sector increased from $US1.9 billion to $US2.1 billion of the same period.
In fact compensation was up at Morgan Stanley in general, from $US3.6 billion in Q4 2012, to $US4.0 billion in 2013.
Morgan Stanley Reports Fourth Quarter and Full Year 2013:
- Fourth Quarter Net Revenues of $US7.8 Billion and Earnings per Diluted Share from Continuing Operations of $US0.07
- Excluding DVA,1 Net Revenues were $US8.2 Billion and Earnings per Diluted Share from Continuing Operations of $US0.202,3
- Earnings per Share Amounts for the Fourth Quarter Included Legal Expenses of $US1.2 Billion, or $US0.40 per Diluted Share4
- Fourth Quarter Results Reflect Strong Investment Banking Performance with Top Three Rankings in Global Announced and Completed M&A, Global Equity and Global IPOs;5 Continued Strength in Equity Sales & Trading and Wealth Management; Strong Performance in Investment Management
- Full Year Net Revenues of $US32.4 Billion and Earnings per Diluted Share from Continuing Operations of $US1.43; Excluding DVA, Net Revenues were $US33.1 Billion and Earnings per Diluted Share from Continuing Operations of $US1.663
NEW YORK, January 17, 2014 — Morgan Stanley (NYSE: MS) today reported net revenues of $US7.8 billion for the fourth quarter ended December 31, 2013 compared with $US7.0 billion a year ago. For the current quarter, income from continuing operations applicable to Morgan Stanley was $US192 million, or $US0.07 per diluted share,6 compared with income of $US661 million, or $US0.33 per diluted share,6 for the same period a year ago. Results for the current quarter included pre-tax legal expenses of $US1.2 billion or $US0.40 per diluted share.4 The current quarter also included a discrete tax benefit of $US192 million or $US0.10 per diluted share.4
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)1 of $US368 million, compared with $US511 million a year ago.
Excluding DVA, net revenues for the current quarter were $US8.2 billion compared with $US7.5 billion a year ago. Income from continuing operations applicable to Morgan Stanley was $US433 million including elevated legal expenses, or $US0.20 per diluted share, compared with income of $US982 million, or $US0.49 per diluted share, a year ago.3,7
Compensation expense of $US4.0 billion in the fourth quarter increased from $US3.6 billion a year ago. Non- compensation expenses of $US3.9 billion increased from $US2.5 billion in the prior year driven by higher legal expenses. The current quarter includes $US1.2 billion of additions to legal reserves for mortgage-related matters, specifically litigation and investigations related to residential mortgage-backed securities and the credit crisis.
For the current quarter, net income applicable to Morgan Stanley, including discontinued operations, was $US0.07 per diluted share,6 compared with net income of $US0.29 per diluted share in the fourth quarter of 2012.