The Banking and Strategy Initiative

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Bank Results Season: Morgan Stanley in the fire (Q2 2012 Report)

English: Morgan Stanley Building

English: Morgan Stanley Building (Photo credit: Wikipedia)

Trading income is down 37% on year for Institutional Clients even as it maintains Q1 revenue watermarks more or less in both Institutional  Clients and Wealth Management but DVA claimed its toll on Q2 revenue as Q1 had reported $1.4B in positive DVA which is conspicuous by its absence in the June quarter. Morgan Stanley thus sits to the adage of when it rains it pours, reporting a profit of just $0.28 cents per share.

Next quarter could also see  a further squeezing of profits as its borrowing operations are hampered by the quick deratin gof the firm in the market even as Goldman Sachs also runs to the safety of low cost Deposits with a Private Bank effort instead of a mutual fund / investment management led Wealth management operation

Surprisingly, Morgan Stanley is also alone in the Big Four to have lost most of its Asset management revenues , ticking down by 28% to $450 M. As Non Comp expenses stabilised at $2.4B, still down 10% from Q1 the bank shut out compensation expense by a further 25% to $3.6 B . The profit split is 2:1 for the measly Net income of $560 M between Institutional securities and Asset management

Even within Institutional Securities, investment Banking is down to $884 M after having led with Facebook’s $100B offering, its degrowth keeping pace with degrowth in tradin. Apart from negative revenues from lending the bread and butter business reported $3.8B of the $6.6 Bln revenues and of this almost $3 B came from the Trading room

As a result the division got to a less than 40% comp ratio for the Division spending $1.425 B for it all time low on that data. The firm competes ith highly capitalised BofA for a Return on Equity of just 5% to BofA’s even lower 4% Advisory revenues were just $263 m lower than that at Wells Fargo earned from Debt underriting this quarter even though it leads in the debilitated equities business.



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This entry was posted on July 19, 2012 by in Amitonomics, Banking, US and tagged , , , , , , , .


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