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Investment banking giant Morgan Stanley just announced its Q3 financial results. The bank earned $562 million or $0.28 per share from continuing operations excluding debt valuation adjustment (DVA). Net revenue came in at $5.3 billion.The report includes lots of noise. As such, the reported EPS number may not be comparable to the $0.25 per share analysts were looking for.
“Fixed Income & Commodities sales and trading net revenues were $1.5 billion compared with $1.1 billion a year ago,” according to the release. “The increase in net revenues from last year’s third quarter reflected higher results in interest rate products and gains in credit products compared to losses in the prior year quarter.”
More to come…
Here’s an excerpt from the press release:
Morgan Stanley (MS) today reported net revenues of $5.3 billion for the third quarter ended September 30, 2012 compared with $9.8 billion a year ago. For the current quarter, the loss from continuing operations applicable to Morgan Stanley was $1.0 billion, or a loss of $0.55 per diluted share,7 compared with income of $2.2 billion, or $1.14 per diluted share,7 for the same period a year ago.
Results for the quarter included negative revenue of $2.3 billion compared with positive revenue of $3.4 billion a year ago related to changes in Morgan Stanley’s debt-related credit spreads and other credit factors (Debt Valuation Adjustment, DVA).1
Excluding DVA, net revenues for the current quarter were $7.6 billion compared with $6.4 billion a year ago and income from continuing operations applicable to Morgan Stanley was $561 million, or $0.28 per diluted share, compared with income of $64 million, or $0.02 a year ago.3, 7, 8
Compensation expense of $3.9 billion increased from $3.6 billion a year ago. Non-compensation expenses of $2.8 billion increased from $2.5 billion a year ago primarily due to litigation costs reported in Institutional Securities and non-recurring expenses associated with the Morgan Stanley Wealth Management (MSWM)9 integration.
For the current quarter, the net loss applicable to Morgan Stanley, including discontinued operations, was $0.55 per diluted share, compared with net income of $1.15 per diluted share in the third quarter of 2011.
(1) Represents income (loss) from continuing operations applicable to Morgan Stanley common shareholders less preferred dividends.
(2) Net revenues for 3Q 2012, 2Q 2012 and 3Q 2011 exclude positive (negative) revenue from DVA of $(2,262) million, $350 million and $3,410 million, respectively.
(3) Earnings / (loss) from continuing operations applicable to Morgan Stanley common shareholders for 3Q 2012, 2Q 2012 and 3Q 2011 excludes after-tax DVA impact of $(1,568) million, $225 million and $2,114 million, respectively, and includes a related allocation of earnings to Participating Restricted Stock Units of $2 million, $(1) million and $(21) million, respectively.
- Global Wealth Management Group net revenues were $3.3 billion and global fee based asset flows were $7.5 billion.
- Institutional Securities net revenues excluding DVA were $3.6 billion compared with $3.0 billion a year ago with higher revenues in Fixed Income & Commodities sales and trading and Investment Banking. The Firm ranked #1 in global IPOs, #2 in global announced M&A and #3 in global Equity.10
- Asset Management reported net revenues of $631 million with assets under management or supervision of $331 billion.
James P. Gorman, Chairman and Chief Executive Officer, said, “Our third quarter results show a balanced, strategically focused franchise that has attained stronger revenues and executed on key goals. The rebound in Fixed Income & Commodities sales and trading indicates that clients have re-engaged after the uncertainty of the rating review in the previous quarter. We are beginning to unlock the full potential of the Global Wealth Management franchise, having increased our ownership of, and agreed on a purchase price for the rest of, Morgan Stanley Wealth Management. I am confident in our potential to enhance profitability and increase value for our shareholders in the quarters ahead.”
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