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Morgan Stanley Q3 Profits Jump 87%; Wealth Unit Improves Margins to 22%

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Morgan Stanley (MS) nearly doubled its net income in the third quarter, the company said early Friday. It had a profit of $1.65 billion, or $0.84 per share, up 87% from a year ago, when it reported a profit of $880 billion, or $0.45 per share.

Revenue expanded 12% year over year to $8.9 billion, a 3% improvement from the prior period. Both sales and net income beat analysts’ estimates for Q3’14.

“Morgan Stanley has delivered another quarter of earnings growth and strong performance based on consistent execution for our clients,” said Chairman and CEO James Gorman in a statement. “We are well positioned to create superior returns for our shareholders, particularly as the U.S. economy continues to strengthen.”

The Institutional Securities unit had net revenues, excluding debt-valuation adjustment, of $4.3 billion, which the company says reflected “continued strength in Investment Banking and Equity sales and trading and improved results in Fixed Income and Commodities sales and trading.”

Wealth Results

Wealth Management net revenues were nearly $3.8 billion in the third quarter, a 9% jump from a year ago and a 2% increase from the prior quarter. Net income improved 17% year over year and 6% from Q2’14 to $501 million.

This bumped the group’s pretax margin up to 22% vs. 21% in Q2’14 and 19% in Q3’14.

As for advisor headcount, Morgan Stanley had 16,162 registered reps as of Sept. 30, a slight drop from 16,316 in Q2’14 and 16,517 in Q3’13.

Advisors have an average asset level of $124 million. Their average yearly production level (or fees and commissions) stands at $932,000 vs. $908,000 as of June 30 and $848,000 a year earlier.

Fee-based asset flows for the quarter were $6.5 billion, down nearly 50% from the prior quarter and almost 60% from last year. Securities-based lending, though, grew close to 50% from last year to $20.3 billion in Q3’14, while residential real estate loans improved roughly 60% year over year to $14.3 billion.

Morgan Stanley advisors’ fee-based assets of $768 billion represented about 38% of total client assets, which topped $2.0 trillion at quarter-end.

Many of Morgan Stanley’s wealth management figures continue to improve; however, it still has a way to go versus rival Bank of America-Merrill Lynch (BAC). That group’s pretax margin was 27.4% in the third quarter, while its asset flows topped $11 billion.

BofA says it has some 15,868 advisors. Excluding advisors in the consumer and business-banking segments, the Merrill Lynch group includes 14,000 registered reps, who had average yearly fees and commissions of $1.08 million. 

Check out ThinkAdvisor’s 2014 Q3 Earnings Calendar for the Finance Sector.