April 19, 2012

Morgan Stanley Tops Estimates; Loses 300 Advisors

Morgan Stanley Smith Barney advisors have average production of $787,000 and assets of $101 million

Morgan Stanley CEO James Gorman. (Photo: AP) Morgan Stanley CEO James Gorman. (Photo: AP)

Morgan Stanley (MS) reported a first-quarter loss of $119 million, or 6 cents a share, compared with last year’s profit of $736 million, or 50 cents a share, on Thursday. The loss was due mainly to a debt valuation adjustment.

Excluding that adjustment, the operating income attributable to the bank was $1.4 billion, or 71 cents a share – topping earnings estimates of 44 cents.  

The number of Morgan Stanley Smith Barney advisors dropped 2% from last quarter and 5% from last year to 17,193, while total assets under management hit nearly $1.75 trillion, a jump of 7% from the previous quarter and a 2% increase from last year. (It had 17,512 advisors in the fourth quarter of 2011 and 18,124 in the first quarter of 2011.)

Click for more of AdvisorOne's 1Q 2012 earnings coverage.These reps produced average trailing-12-month fees and commissions of $787,000 and managed average client assets of $101 million; these figures were both up about 5% from the same year-ago period.  

"This quarter is further evidence that Morgan Stanley has rebounded from the financial crisis of 2008 and is in a significantly stronger position,” said Chairman and CEO James P. Gorman, in a statement. “Revenues of $8.9 billion, excluding the impact of [the $2 billion debt valuation adjustment], were higher on both a year-over-year and a quarter-over-quarter basis.”

As for the wealth-management unit, “We are intensely focused on completing the transition of Morgan Stanley Smith Barney to the new, state-of-the-art technology platform this summer …,” Gorman said.

Morgan Stanley's global wealth management business, which includes the MSSB joint venture, reported net revenue of $3.4 billion. Its pre-tax profit margin of 11% was up slightly from a year ago and from the previous quarter.

Net income, which excludes Citi’s 49% stake in the MSSB venture, was $193 million, up 5% from last year and a jump of 45% from the previous quarter.

One analyst said last month that Citi could move to sell more than the scheduled 14% stake in the venture if Morgan Stanley was interested. Morgan Stanley has the option to buy this additional stake in the venture in May and can purchase the business outright over the next two years. On a conference call Monday, though, Citi CEO Vikram Pandit said, “the capital numbers we are at and the progress we’re making in the business suggest that there is not a need to sell, either, which is important to appreciate and understand.”

Morgan Stanley has let lower-producing advisors go over the past few years. However, it’s facing stiff pressure when it comes to retaining existing advisors.

RBC Wealth Management, for instance, said Thursday that it had hired five MSSB advisors with a total yearly production level of $2.4 million and combined assets of close to $500 million.

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