Morgan Stanley Tops Earnings Estimates, Boosts Asset Flows

Its advisor count, though, drops by 5% from last year; average production is up but trails that of Merrill Lynch

Morgan Stanley CEO James Gorman on Fox Business Network in April. (Photo: AP) Morgan Stanley CEO James Gorman on Fox Business Network in April. (Photo: AP)

Morgan Stanley’s third-quarter results came in ahead of estimates on Wednesday, and its advisors—though down 832 from last year—continue to boost assets and sales.

The company said its third-quarter loss from continuing operations was $1 billion, or $0.55 per diluted share, compared with income of $2.2 billion, or $1.14 per diluted share, for the same period a year ago.

The company also reported negative revenue of $2.3 billion vs. positive revenue of $3.4 billion a year ago due to changes in Morgan Stanley's debt-related credit spreads and other credit factors, such as the now mandatory debt valuation adjustment (DVA).

Excluding the adjustment, 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 (MS) was $561 million, or $0.28 per diluted share, compared with income of $64 million, or $0.02 a year ago—topping estimates of $0.24 per share for the quarter.

"Our third-quarter results show a balanced, strategically focused franchise that has attained stronger revenues and executed on key goals,” said CEO James Gorman in a press release. “The rebound in fixed income and commodities sales and trading indicates that clients have re-engaged after the uncertainty of the rating review in the previous quarter.”

As for the results of its advisors, “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." Gorman said. "I am confident in our potential to enhance profitability and increase value for our shareholders in the quarters ahead."

Wealth Management

The number of financial advisors stood at 16,829—down 1% from 16,934 in the second quarter and 5% from 17,661 a year ago.

Average yearly fees and commissions (or production) per rep, though, rose 2% from the second quarter and 9% from a year ago to $790,000.

This figure falls below the $910,000 average of Merrill Lynch’s advisors, which number 16,076 (excluding those in consumer and business banking) as of Sept. 30. (Merrill's GDC level, though, is down slightly from the previous quarter and last year.)

When it comes to asset flows, Morgan Stanley reps had $7.5 billion of positive movement (up 83% from the second quarter and down 23% for a year ago) vs. $3.83 billion for Merrill Lynch in Q3.

Total client assets for Morgan Stanley were $1.77 trillion—close to the $1.86 trillion in AUM of Merrill’s advisors but below the $2.3 trillion of Bank of America’s wealth unit.

Revenues for the Morgan Stanley’s Global Wealth Management Group were $3.34 billion, a 1 % rise from $3.23 billion in the second quarter and a 3% increase from $3.19 in the second quarter of 2012.

The division had pretax income from continuing operations of $239 million compared with $356 million in the third quarter of last year and $393 million in the previous quarter.

In the third quarter, the company had $193 million of non-recurring costs associated with the integration of Smith Barney and the purchase of an additional 14% stake in the joint venture. This increased its stake to 65% from 51%, with the remaining 35% share held by Citigroup.

Reprints Discuss this story
This is where the comments go.