Banking, finance, and taxes

How Morgan Stanley Won on This Earnings Report

Chris Lange

Published: July 20, 2016 9:15 am

Last Updated: January 13, 2020 5:31 am

Morgan Stanley (NYSE: MS) reported its second-quarter financial results before the markets opened on Wednesday. Like many of the other major banks, Morgan Stanley made a splash in the markets with beats on both the top and bottom lines, despite declining numbers year over year. However in this report the good far outweighed the bad, showing that like the other major banks Morgan Stanley is fundamentally sound.

The company said that it had $0.75 in earnings per share (EPS) on $8.9 billion in revenue. Consensus estimates from Thomson Reuters had called for $0.59 in EPS on revenue of $8.3 billion. In the same period of last year, it posted EPS of $0.79 and $9.6 billion in revenue.

At the end of June, the firm’s Common Equity Tier 1 and Tier 1 risk-based capital ratios under U.S. Basel III Advanced Approach transitional provisions were roughly 16.9% and 18.8%, respectively.

In the same time, book value and tangible book value per common share were $36.29 and $31.39, respectively, based on about 1.9 billion shares outstanding.

The company reported its revenue streams’ quarterly numbers as follows:

• Investment Banking revenues totaled $1.22 billion.
• Trading revenues totaled $2.75 billion.
• Investment revenues totaled $126 million.
• Commission and Fee revenues totaled $1.02 billion.
• Asset Management, Distribution and administrative fee revenues totaled $2.64 billion.
• Interest Income totaled $1.67 billion, while interest expense was $754 million.

James P. Gorman, chair and chief executive of Morgan Stanley, commented:

Our results this quarter reflect solid performance in an improved but still fragile environment. In the midst of market uncertainty, we maintained our leadership positions across our core franchises and continued our focus on prudent risk management and judicious expense control. We remain committed to executing for our clients and delivering on our strategic priorities for our shareholders.

During this quarter, the firm repurchased about 23 million shares. It further announced a share repurchase of up to $3.5 billion of common stock beginning in the third quarter of 2016 through the end of second quarter of 2017. At the same time, the board of directors declared a $0.20 quarterly dividend per share, payable on August 15, to common shareholders of record on July 29.

Shares of Morgan Stanley closed Tuesday at $28.19, with a consensus analyst price target of $31.37 and a 52-week trading range of $21.16 to $40.74. Following the release of the earnings report the stock was up about 3% at $29.05 in early trading indications Wednesday.