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Morgan Stanley Misses Earnings Target; Gorman Highlights Wealth Results

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Morgan Stanley said its fourth-quarter net income jumped to $1.04 billion, or $0.47 per share, from $84 million, or $0.02 a share, a year earlier, a gain of more than 1,100%. However, adjusted profits were $0.39 a share, missing estimates, according to Bloomberg.

Income from continuing operations was $903 million, or $0.40 per share, compared with income of $336 million, or $0.15 per share, a year ago. Revenue was flat at $7.8 billion in both Q4’14 and Q4’13; adjusted sales, though, in the most-recent period were $7.5 billion, down from $8.2 billion a year earlier.

Problem areas for the firm included Institutional Securities, which reported a pretax loss from continuing operations of $863 million vs. a pretax loss of $1.2 billion in the fourth quarter of 2013; the unit’s fixed-income and commodities trading revenue, for instance, dropped 14% year over year to $599 million, excluding the onetime items. Investment Management had a pretax loss from continuing operations of $6 million vs. a pretax profit of $331 million in Q4’13.

On the plus side, though, Wealth Management net revenues were $3.8 billion, an 8% jump from the prior quarter and a 2% increase from last year. Net income for the group was $736 million, which was down 8% sequentially but up 3% year over year, giving it a 19% pretax margin for Q4’14.

For the year 2014, though, the pretax profit margin was 20% on net income of about $3.2 billion compared with a pretax margin of 18% in 2013 on net income of roughly $1.5 billion. Revenue for the unit grew 5% to $14.9 billion.

“Wealth Management continues to improve,” said CEO James Gorman on an analysts call, according to Reuters, and is “on a clear path” to hit 22%-25%.

(Merrill Lynch’s wealth unit had a 2014 pretax margin of 25%, according to its recent earnings report, and a 23% margin in Q4’14.)

Fee-based asset flows at Morgan Stanley in the period ending Dec. 31 were $20.8 billion. Total client assets stand at $2.025 trillion, of which $785 billion — or 39% — are in fee-based accounts.

Average assets per advisor are $126 million as of Dec. 31, and advisors had average quarterly fees and commissions of $944,000 in Q4’14, slightly below the average production of $1.07 million achieved by Merrill’s thundering herd.

The number of reps at Morgan Stanley dropped to 16,076 in Q4’14, down from 16,162 in Q3’14 and 16,456 in Q4’13. 

— Check out ThinkAdvisor’s 2014 Q4 Earnings Calendar for the Finance Sector.