Morgan Stanley (MS) said Monday its net revenues were up to $9.7 billion in the second quarter, up 13% from $8.6 billion a year ago. Also in the quarter, net income was $1.8 billion, or $0.85 per share, compared with net income of $1.9 billion, or $0.92 per share, in Q2 ’15.
The company beat earnings estimates with these results. (Last year’s performance included a tax benefit of $609 million or $0.31 per share). In Wealth Management, after-tax income was $561 million — a jump of 20% from a year ago and 5% from Q1’15.
“We delivered a strong quarter across each of our businesses, through client-focused execution, expense discipline and prudent risk management. We remain focused on delivering the long-term value of this franchise,” said Chairman & CEO James P. Gorman, in a statement.
During a call with equity analysts, Gorman seemed to brush off the idea of buying another firm as a way to further boost Wealth Management results. He also dismissed the notion that recruiting competition is affecting compensation costs and negated a suggestion that the firm could trim advisor payouts to improve financial performance measures.
The number of advisors was 15,771 as of June 30, down from 15,916 in Q1’15 and 16,316 in Q2’15. Average annualized revenue per representative (or fees and commissions) were $978,000, up 8% compared with the prior-year quarter.
(Merrill Lynch said last week that its 16,419 advisors had production of $1.04 million on average as of June 30.)
Total client assets were $2.03 trillion at quarter end, or roughly $203 million per rep. As of June 30, the transfer of deposits from Citigroup was completed, totalling $4 billion. Wealth Management bank deposits were $132 billion as of Q2.
Morgan Stanley’s Wealth Management unit reported pretax income from continuing operations of $885 million compared with $763 million in the second quarter of last year. The quarter’s pretax margin was 23%, vs. 22% in the prior quarter and 21% a year ago.
When asked by an equity analyst during a conference call if the firm was considering an acquisition to help push margins up further, Gorman avoided answering the question directly but hinted that such a move wasn’t needed for further performance improvement.