Investment bank Morgan Stanley (MS) Thursday reported profit in its first quarter reflecting significantly lower impact from debt valuation adjustment as well as higher revenues with growth in all segments. Looking forward, the company believes the broad economic outlook for the next several years is stronger than in the recent past, even as the global environment continues to have moments of fragility.
Chairman and Chief Executive Officer James Gorman said, "Morgan Stanley demonstrated solid momentum across the Firm this quarter, consistent with the strategic objectives we laid out at the beginning of the year. In Global Wealth Management, our operating pre-tax profit was the highest in our history... Our institutional businesses continue to rebound from the lows of 2012."
In its first quarter, Morgan Stanley's net earnings applicable to common shareholders were $958 million or $0.49 per share, compared with a loss of $119 million or $0.06 per share in the prior year.
The latest-quarter results included $201 million or $0.11 per share negative impact from the tightening of Morgan Stanley's debt-related credit spreads and other credit factors, known as Debt Valuation Adjustment, or DVA, compared to last year's negative impact of $1.45 billion or $0.76 per share.
Income from continuing operations $1.0 billion or $0.50 per share, compared with a loss of $79 million or $0.05 per share a year ago.
Excluding DVA, income from continuing operations was $0.61 per share, compared to $0.71 per share a year ago.
On average, 20 analysts polled by Thomson Reuters expected the company to report earnings of $0.57 per share for the quarter. Analysts' estimates typically exclude special items.
Net revenues rose 18 percent to $8.16 billion from last year's $6.92 billion. Seventeen analysts had consensus revenue estimate of $8.35 billion for the quarter. Excluding DVA, net revenues were $8.48 billion, lower than $8.90 billion a year ago.
Segment-wise, global wealth management revenues increased 5 percent with growth in asset management fee revenues primarily reflecting an increase in fee-based assets and positive flows. Transactional revenues were essentially unchanged with higher investment banking revenues, offset by a decrease in trading revenues.
In the institutional securities segment, revenues climbed 30 percent, while it declined excluding DVA as strength in underwriting revenues and Equity sales and trading were offset by lower results in Fixed Income and Commodities sales and trading.
In the quarter, asset management segment's revenues grew 21 percent reflecting higher results in the Traditional Asset Management business and gains on investments in the Merchant Banking and Real Estate Investing businesses.
As of March 31, assets under management or supervision was $341 billion, higher than $304 billion a year ago primarily reflecting market appreciation and positive flows.
Further, the company said it declared a $0.05 quarterly dividend per share, payable on May 15 to common shareholders of record on April 30.
Morgan Stanley shares closed Wednesday's trading at $21.47, down 1.74 percent. In pre-market, the shares dropped 1.86 percent, to trade at $21.07.
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