Morgan Stanley (MS: Quote) reported Thursday higher earnings for its first quarter, excluding a hefty debt valuation adjustment charge, surpassing analysts' estimates by a wide margin. Top line also increased on strong equity sales and trading revenues. The company's shares rose 6 percent in pre-market activity on the NYSE.
Chairman and Chief Executive Officer James Gorman stated that the latest quarter is further evidence that the company has rebounded from the financial crisis of 2008 and is in a significantly stronger position.
First quarter net earnings from continuing operations, excluding the DVA (debt valuation adjustment) impact, were $1.38 billion or $0.71 per share, higher than $1.10 billion or $0.59 in the year-ago quarter.
On average, 17 analysts polled by Thomson Reuters were expecting just $0.44 per share in earnings. Analysts' estimates typically exclude special items.
The DVA charge impacted the results to the tune of $1.45 billion or $0.76 per share. It stemmed from the tightening of Morgan Stanley's debt-related credit spreads and other credit factors in the Institutional Securities segment. In the prior-year quarter, DVA charge was just $116 million or $0.08 per share.
Including the charge, Morgan Stanley reported a loss of $119 million or $0.06 per share, compacted to net profit of $736 million or $0.50 per share last year. Loss per share from continuing operations was $0.05, compared to earnings per share of $0.51 a year ago.
Segment-wise, Institutional Securities slipped to a loss in the quarter. Income from asset management division plunged 63 percent, while Global Wealth Management's income increased 6 percent.
Quarterly net revenues fell 8 percent to $6.94 billion from $7.57 billion a year ago, but it climbed 22 percent sequentially. Excluding the DVA impact, net revenues climbed to $8.91 billion from $7.76 billion in the prior year. Wall Street analysts were looking for revenues of $7.31 billion for the quarter.
The revenue growth was driven by broad based strength across products and geographic regions in fixed income & commodities and equity sales and trading as well as solid results in asset management, the company noted.
Net revenues in the Global Wealth Management segment were essentially unchanged from last year as higher asset management and net interest revenues were mostly offset by lower commissions.
In the asset management segment, net revenues declined from last year primarily reflecting lower gains on principal investments in the Merchant Banking business.
Further, the company declared a $0.05 quarterly dividend per share, payable on May 15 to common shareholders of record on April 30.
Looking ahead, the company said, "On the near horizon, we are intensely focused on completing the transition of Morgan Stanley Smith Barney to the new, state-of-the-art technology platform this summer, as well as maintaining a conservative capital and liquidity profile as we navigate global markets."
Morgan Stanley owns 51 percent of the Morgan Stanley Smith Barney joint venture, while the remaining 49 percent interest is retained by Citigroup Inc. (C).
Morgan Stanley shares are currently trading at $18.70 in pre-market activity, up $1.04 or 5.89 percent.
by RTT Staff Writer
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