Morgan Stanley reported net revenues of $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. 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 boost its Wealth Management business. 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 CEO said: “… I admire the question, but … obviously I wouldn’t talk about deals on a call or corporate strategy like that. But suffice to say we’re very conformable with business we’ve got and the size of the business, and we think the opportunity to improve margin with the business we have, particularly by building out the bank and by organic growth within the businesses, is extremely attractive to us. We had a desire to get to scale, and we are well and truly at scale. So we feel good about that.”
Wealth Management
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 rep (or fees and commissions) rose 8% from a year ago to $978,000, behind the production level of both Merrill Lynch and UBS.
Total client assets were $2.03 trillion, or roughly $203 million per rep. As of June 30, the transfer of deposits from Citigroup was completed, totaling $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.