The Banking and Strategy Initiative

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Bank Results Season: Morgan Stanley still bright and sprightly?

Morgan Stanley's office on Times Square

Image via WIts european exposure was not mentioned in the press release. the analyst conference is another couple of hours later with a very busy results calendar..ikipedia

Let’s Try..

Morgan Stanley still bright and sprightly,

Trading, yes but not very quietly

was up last june on new “accounting gain”

Asset sales too, caught on europe

Morgan Stanley I don’t know what you got

$9.8 bln topline and an industry wide scare

$1.14 EPS and a $1.12 DVA adjustment

Isn’t that the same as a 5c loss last year?

Net of the ubiquitous DVA which Morgan stanley introduced in dollops in June 2011, the bank still made a profit of 2 cents per share on revenues of $6.7 bln

The trading units reported dwindling revenues with FICC $1.1. bln, Equities $1.4 bln and a DVA of $2.1 bln and $620 mln respectively. Trading VaR at $130 billion is still 30% higher than that of Goldman Sachs but compensation expense was limited at $1.6 bln or 24% of Net revenues

Investment Banking reported $860 mln in revenues ahead of Citi but behind GS and JP Morgan. Underwriting was down 29% over last year at below $500 mln but other year on year comparisons seem meaningless from the 8k/Press release.

The Uridashi bonds offered by the bank netted JPY 46.5 bln or $600 mln to add to Capital. Morgan Stanley results are notable in its exceptionally strong wealth management revenues of $3.3 bln against Asset management revenues / income of $215 mln where both GS and JPM ride a billion in each unit as at BofA

Q2 comparisons show a 33% decrease in Comp expenses from $2.3 bln in Client Services (Trading) while comp was higher at 61% in Wealth Management and other units to another $2.1 bln. Trading revenues were stable QOQ but DVA jumps showed up as a quarterly improvement in double digits. European exposure has not been separately outlined in the press release and the analyst conference is due after another couple of hours in the middle of a very busy results calendar

Goldman Sachs was the only one which had mostly hedged its credit and trading books to net DVA (CVA) only from its CDS bets. Read our follow up analysis on quality of bank earnings here

A Reuters update from the conference:

Morgan Stanley said on Wednesday that its gross exposure to Greece, Ireland, Italy, Spain and Portugal was $5.69 billion at September 30, or $2.1 billion including hedges. The bank’s equity, a measure of its net worth as a company, was about $60 billion as of June 30.

The bank said its exposure to France at September 30 was $1.53 billion, or a negative $286 million including hedges. A report on the financial blog Zero Hedge on September 22 pegged the bank’s exposure to France at $39 billion at the end of 2010, which sparked fears about losses it might incur.


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