We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Morgan Stanley (MS) Q1 Earnings Beat on Trading Rebound
Read MoreHide Full Article
Trading rebound, higher interest income and improvement in advisory fees drove Morgan Stanley’s (MS - Free Report) first-quarter 2018 earnings of $1.45 per share, which handily surpassed the Zacks Consensus Estimate of $1.28. The reported figure was 45% above the prior-year quarter.
Shares of Morgan Stanley have gained more than 2.5% in pre-market trading. It appears that investors are encouraged with its solid trading revenues and a decent investment banking performance. Nonetheless, the stock’s price performance after the full day’s trading will give a better indication about investors’ sentiments.
As expected, both equity trading income (up 27%) and fixed income, currency and commodities income (up 8%) supported revenue growth. Further, equity underwriting fees (up 8%), advisory income (up 16%) and net interest income acted as tailwinds. Also, the company’s capital ratios remained strong.
However, lower debt underwriting fees (down 2%) was an undermining factor. Moreover, operating expenses recorded a rise.
Net income applicable to Morgan Stanley was $2.7 billion, up 38% year over year.
Rise in Trading Income Aids Revenues, Costs Rise
Net revenues amounted to $11.1 billion, a rise of 14% from the prior-year quarter. In addition, it surpassed the Zacks Consensus Estimate of $10.5 billion.
Net interest income was $975 million, jumping 26% from the year-ago quarter. This was largely driven by a rise in interest income.
Also, total non-interest revenues of $10.1 billion grew 13% year over year, primarily supported by improvement in trading.
Total non-interest expenses were $7.7 billion, up 10% year over year.
Quarterly Segmental Performance
Institutional Securities: Pre-tax income from continuing operations was $2.1 billion, increasing 22% year over year. Net revenues of $6.1 billion grew 18% from the prior-year quarter. The rise was mainly driven by higher trading income, advisory revenues and equity underwriting revenues, partially offset by lower debt underwriting income.
Wealth Management: Pre-tax income from continuing operations totaled $1.2 billion, up 19% on a year-over-year basis. Net revenues were $4.4 billion, increasing 8% from the prior-year quarter, driven by higher asset management fee revenues and net interest income, partly offset by a decline in transactional revenues.
Investment Management: Pre-tax income from continuing operations was $148 million, surging 44% from the year-ago quarter. Net revenues were $718 million, a rise of 18% year over year. The increase reflected higher asset management fees, partly offset by fall in investment revenues.
As of Mar 31, 2018, total assets under management or supervision were $469 billion, up 11% on a year-over-year basis.
Strong Capital Position
As of Mar 31, 2018, book value per share was $39.19, up from $37.48 as of Mar 31, 2017. Tangible book value per share was $34.04, up from $32.49 as of Mar 31, 2017.
Morgan Stanley’s Tier 1 capital ratio Advanced (Fully Phased-in) was 18.4% compared with 19.0% in the year-ago quarter. Tier 1 common equity ratio Advanced (Fully Phased-in) was 16.1% compared with 16.6% in the prior-year quarter.
Share Repurchases
During the reported quarter, Morgan Stanley bought back around 22 million shares for nearly $1.25 billion. This was part of the company's 2017 capital plan.
Our Take
Morgan Stanley’s initiatives to offload its non-core assets to lower balance-sheet risks and shift focus on less capital-incentive operations like wealth management are commendable. Further, rebound in trading activities will likely support top-line growth.
However, dismal investment banking performance is a concern. This is expected to have an adverse impact on the company’s revenues.
Among banking giants, JPMorgan (JPM - Free Report) , Bank of America (BAC - Free Report) and Citigroup (C - Free Report) have already come out with first-quarter results. Performance of these companies was impressive, given the rebound in trading activities, modest loan growth, higher interest rates and lower tax rates.
Can Hackers Put Money INTO Your Portfolio?
Earlier this year, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Image: Bigstock
Morgan Stanley (MS) Q1 Earnings Beat on Trading Rebound
Trading rebound, higher interest income and improvement in advisory fees drove Morgan Stanley’s (MS - Free Report) first-quarter 2018 earnings of $1.45 per share, which handily surpassed the Zacks Consensus Estimate of $1.28. The reported figure was 45% above the prior-year quarter.
Shares of Morgan Stanley have gained more than 2.5% in pre-market trading. It appears that investors are encouraged with its solid trading revenues and a decent investment banking performance. Nonetheless, the stock’s price performance after the full day’s trading will give a better indication about investors’ sentiments.
As expected, both equity trading income (up 27%) and fixed income, currency and commodities income (up 8%) supported revenue growth. Further, equity underwriting fees (up 8%), advisory income (up 16%) and net interest income acted as tailwinds. Also, the company’s capital ratios remained strong.
However, lower debt underwriting fees (down 2%) was an undermining factor. Moreover, operating expenses recorded a rise.
Net income applicable to Morgan Stanley was $2.7 billion, up 38% year over year.
Rise in Trading Income Aids Revenues, Costs Rise
Net revenues amounted to $11.1 billion, a rise of 14% from the prior-year quarter. In addition, it surpassed the Zacks Consensus Estimate of $10.5 billion.
Net interest income was $975 million, jumping 26% from the year-ago quarter. This was largely driven by a rise in interest income.
Also, total non-interest revenues of $10.1 billion grew 13% year over year, primarily supported by improvement in trading.
Total non-interest expenses were $7.7 billion, up 10% year over year.
Quarterly Segmental Performance
Institutional Securities: Pre-tax income from continuing operations was $2.1 billion, increasing 22% year over year. Net revenues of $6.1 billion grew 18% from the prior-year quarter. The rise was mainly driven by higher trading income, advisory revenues and equity underwriting revenues, partially offset by lower debt underwriting income.
Wealth Management: Pre-tax income from continuing operations totaled $1.2 billion, up 19% on a year-over-year basis. Net revenues were $4.4 billion, increasing 8% from the prior-year quarter, driven by higher asset management fee revenues and net interest income, partly offset by a decline in transactional revenues.
Investment Management: Pre-tax income from continuing operations was $148 million, surging 44% from the year-ago quarter. Net revenues were $718 million, a rise of 18% year over year. The increase reflected higher asset management fees, partly offset by fall in investment revenues.
As of Mar 31, 2018, total assets under management or supervision were $469 billion, up 11% on a year-over-year basis.
Strong Capital Position
As of Mar 31, 2018, book value per share was $39.19, up from $37.48 as of Mar 31, 2017. Tangible book value per share was $34.04, up from $32.49 as of Mar 31, 2017.
Morgan Stanley’s Tier 1 capital ratio Advanced (Fully Phased-in) was 18.4% compared with 19.0% in the year-ago quarter. Tier 1 common equity ratio Advanced (Fully Phased-in) was 16.1% compared with 16.6% in the prior-year quarter.
Share Repurchases
During the reported quarter, Morgan Stanley bought back around 22 million shares for nearly $1.25 billion. This was part of the company's 2017 capital plan.
Our Take
Morgan Stanley’s initiatives to offload its non-core assets to lower balance-sheet risks and shift focus on less capital-incentive operations like wealth management are commendable. Further, rebound in trading activities will likely support top-line growth.
However, dismal investment banking performance is a concern. This is expected to have an adverse impact on the company’s revenues.
Morgan Stanley Price, Consensus and EPS Surprise
Morgan Stanley Price, Consensus and EPS Surprise | Morgan Stanley Quote
Morgan Stanley carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among banking giants, JPMorgan (JPM - Free Report) , Bank of America (BAC - Free Report) and Citigroup (C - Free Report) have already come out with first-quarter results. Performance of these companies was impressive, given the rebound in trading activities, modest loan growth, higher interest rates and lower tax rates.
Can Hackers Put Money INTO Your Portfolio?
Earlier this year, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Download the new report now>>