Improved advisory fees and efficient cost control drove Morgan Stanley’s (MS –Analyst Report) second-quarter 2016 earnings from continuing operations of 75 cents per share, which handily outpaced the Zacks Consensus Estimate of 60 cents. However, this shows a 5% decline from the prior-year quarter, which excludes DVA.
Shares of Morgan Stanley gained more than 3% in early market trading, implying a positive market reaction to the earnings beat. However, as the challenging operating backdrop persisted, the company’s top line witnessed a decline. Hence, the stock’s price performance after the full day’s trading will give a better indication about the investors’ sentiments.
Prudent cost management was one of the driving factors behind the earnings beat. However, though the quarter witnessed improvement in net interest income and advisory fees, it wasn’t sufficient to ward-off trading weakness that largely led to the revenue fall.
Morgan Stanley recorded lower fixed-income, currency and commodities (“FICCâ€) trading income in this quarter as well. Further, equity trading and underwriting income depicted weakness.
Morgan Stanley (MSÂ -Â Analyst Report) EPS BNRI & Surprise Percent – Last 5 Quarters | FindTheCompany
Net income applicable to Morgan Stanley was $1.58 billion, down 12% year over year.
Revenue Decline Offset by Lower Costs
Net revenue amounted to $8.91 billion, a decrease of 9% from the prior-year quarter. However, it surpassed the Zacks Consensus Estimate of $8.34 billion.
Net interest income was $913 million, up 31% from the year-ago quarter. This was driven by a 10% fall in interest expenses and 20% growth in interest income. Meanwhile, total non-interest revenue of $8 billion fell 12% year over year, as all components witnessed deterioration.
Total non-interest expenses were $6.43 billion, down 8% year over year. The fall is attributable to an 8% decline in non-compensation expenses and a 9% reduction in compensation and benefits.
Quarterly Segmental Performance
Institutional Securities (IS):Â Pre-tax income from continuing operations was $1.51 billion, down 7% year over year. Net revenue was $4.58 billion, a decline of 11% from the year-ago quarter. The fall was primarily due to lower FICC income, underwriting fees, and equity sales and trading net revenues partly offset by higher advisory revenues.
Wealth Management (WM):Â Pre-tax income from continuing operations totaled $859 million, a dip of 3% on a year over year basis. Net revenue was $3.81 billion, down 2% year over year, due to a fall in transactional revenues and asset management fee revenue. These were, nevertheless, partially offset by a rise in net interest income.
Investment Management (IM):Â Pre-tax income from continuing operations was $118 million, down 46% from the year-ago quarter. Net revenue was $583 million, a fall of 22% year over year. The decrease reflected lower investment gains and carried interest in infrastructure and private equity investments.
As of Jun 30, 2016, total assets under management or supervision were $406 billion, up 1% on a year over year basis.
