In what has been a lackluster earnings season so far, Morgan Stanley (MS) on Thursday reported a complicated second-quarter story that included a disappointing 53% drop in profits, which totaled $563 million, compared with profits of $1.19 billion a year ago.
Earnings per share came to 28 cents for income from continuing operations versus last year’s loss of 36 cents a share. The loss included a negative adjustment of about $1.7 billion, or $1.02 per diluted share, related to the conversion of preferred stock held by Mitsubishi UFJ Financial Group. Morgan Stanley in its Q2 release also reported net revenues of $7 billion for the quarter compared with $9.2 billion a year ago. Analysts polled by Thomson Reuters had expected earnings per share of $0.43 on revenue of $7.7 billion.
The number of Morgan Stanley Smith Barney (MSSB) advisors in the Global Wealth Management Unit dropped 2% from last quarter and 6% from last year to 16,934, while total assets under management stood at $1.71 trillion, 2% lower from the previous quarter but 1% higher than a year ago. MSSB counted 17,193 advisors in the previous quarter and 17,987 advisors a year ago.
These global reps produced average trailing-12-month fees and commissions of $775,000, 2% higher than revenues last year of $762,000. They managed average client assets of $101 million, unchanged from last quarter but 7% higher than last year’s figure of $94,000.
Other banks also struggled during the quarter, with both JPMorgan Chase & Co. and Goldman Sachs reporting a drop in earnings as trading losses, market volatility and the eurozone sovereign debt crisis cut into profits. But Morgan Stanley’s performance was especially weak.
“There’s a lot here, and generally, the results were disappointing,” said Shannon Stemm, a finance sector analyst at Edward Jones, in a phone interview. “Trading revenues were expected to be weak, because the environment was weak, but Morgan Stanley’s came in well below what many of their peers were able to post, and I think that’s driving the underperformance in the stock today.”
Morgan Stanley’s stock fell in morning trading and by noon was down 64 cents per share, or 4.58% lower, at $13.35 versus the prior day’s close of $13.99.
Morgan Stanley’s Global Wealth Management Group, which includes the MSSB joint venture, reported net revenue of $3.3 billion, with a pretax profit margin of 12% versus 11% in the prior quarter and 9% a year ago.