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Morgan Stanley Second Quarter 2021 Earnings Results | National Business

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NEW YORK–(BUSINESS WIRE)–Jul 15, 2021–

Morgan Stanley (NYSE: MS) today reported net revenues of $14.8 billion for the second quarter ended June 30, 2021 compared with $13.7 billion a year ago. Net income applicable to Morgan Stanley was $3.5 billion, or $1.85 per diluted share, 1 compared with net income of $3.2 billion, or $1.96 per diluted share, 1 for the same period a year ago. The comparisons of current year results to prior periods were impacted by the acquisitions of E*TRADE Financial Corporation (“E*TRADE”), reported in the Wealth Management segment, and Eaton Vance Corp. (“Eaton Vance”), reported in the Investment Management segment.

James P. Gorman, Chairman and Chief Executive Officer, said, “The Firm delivered another very strong quarter, with contributions from all of our businesses. Our Wealth and Investment Management businesses attracted $120 billion in flows and Institutional Securities generated over $7 billion in revenues. With our transformed business model providing more stable and durable earnings, we have doubled our dividend and announced a $12 billion buyback as we move to return our excess capital to shareholders. Our global franchise is very well positioned to drive further growth.”

Financial Summary 2,3,4

Highlights

Firm ($ millions, except per share data)

2Q 2021

2Q 2020

 

 

 

 

  • Firm net revenues of $14.8 billion and net income of $3.5 billion reflect strong performance with contributions across each of our business segments and geographies.
  • The Firm delivered ROTCE of 18.6% or 19.0% excluding the impact of integration-related expenses. 5,6
  • The Firm expense efficiency ratio was 69% or 68% excluding the impact of integration-related expenses. 6,7
  • Common Equity Tier 1 capital standardized ratio was 16.7%.
  • The Firm doubled its quarterly common stock dividend to $0.70 per share and increased its share repurchase authorization of outstanding common stock up to $12 billion, over the next 12 months.
  • Institutional Securities net revenues of $7.1 billion reflect strong results as clients remained active across Investment Banking and Equity.
  • Wealth Management delivered a pre-tax margin of 26.8% or 27.8% excluding integration-related expenses. 6,8 Results reflect higher asset management fees, growth in bank lending, as well as net new assets and fee-based flows of $71 billion and $34 billion, respectively.
  • Investment Management results reflect strong asset management fees on AUM of $1.5 trillion which includes $13.5 billion of positive long-term net flows across all asset classes.

 

Net revenues

$14,759

$13,660

Provision for credit losses

$73

$239

Compensation expense

$6,423

$6,035

Non-compensation expenses

$3,697

$3,031

Pre-tax income 9

$4,566

$4,355

Net income app. to MS

$3,511

$3,196

Expense efficiency ratio 7

69%

66%

Earnings per diluted share

$1.85

$1.96

Book value per share

$54.04

$49.57

Tangible book value per share

$40.12

$43.68

Return on equity

13.8%

15.7%

Return on tangible equity 5

18.6%

17.8%

Institutional Securities

 

 

Net revenues

$7,092

$8,199

Investment Banking

$2,376

$2,051

Equity

$2,827

$2,627

Fixed Income

$1,682

$3,041

Wealth Management

 

 

Net revenues

$6,095

$4,704

Fee-based client assets ($ billions) 10

$1,680

$1,236

Fee-based asset flows ($ billions) 11

$33.7

$11.1

Net new assets ($ billions) 12

$71.2

$20.4

Loans ($ billions)

$114.7

$85.2

Investment Management

 

 

Net revenues

$1,702

$886

AUM ($ billions) 13

$1,524

$665

Long-term net flows ($ billions) 14

$13.5

$15.4

Institutional Securities

Institutional Securities reported net revenues for the current quarter of $7.1 billion compared with $8.2 billion a year ago. Pre-tax income was $2.5 billion compared with $3.0 billion a year ago. 9

Investment Banking revenues up 16% from a year ago:

 

  • Advisory revenues increased from a year ago on higher M&A completed transactions.
  • Equity underwriting increased from a year ago driven by higher volumes in traditional IPOs partially offset by lower revenues from convertible issuance and follow-on offerings.
  • Fixed income underwriting revenues decreased from a year ago primarily due to lower investment grade and non-investment grade bond issuances partially offset by strength in non-investment grade loans.

 

Equity net revenues up 8% from a year ago:

 

  • Equity net revenues increased from a year ago driven by high levels of client activity with particular strength in Asia. Results reflect higher revenues in prime brokerage partially offset by declines in cash equities and derivatives driven by lower volatility and volumes compared to a year ago.

 

Fixed Income net revenues down 45% from a year ago:

 

  • Fixed Income net revenues declined versus the prior year due to lower bid-offer spreads and volatility as well as tighter credit spreads.

 

Other:

 

  • Other revenues decreased from a year ago primarily reflecting lower mark-to-market gains associated with corporate lending activity.

($ millions)

2Q 2021

2Q 2020

 

Net Revenues

$7,092

$8,199

 

 

 

 

 

Investment Banking

$2,376

$2,051

 

Advisory

$664

$462

 

Equity underwriting

$1,072

$882

 

Fixed income underwriting

$640

$707

 

 

 

 

 

 

Equity

$2,827

$2,627

 

Fixed Income

$1,682

$3,041

 

Other

$207

$480

 

 

 

 

 

Provision for credit losses

$70

$217

 

 

 

 

 

Total Expenses

$4,524

$4,989

 

Compensation

$2,433

$2,952

 

Non-compensation

$2,091

$2,037

 

 

 

 

 

 

Provision for credit losses:

  • Provision for credit losses decreased from a year ago on loans held for investment as a result of an improved macroeconomic environment.

 

Total Expenses:

  • Compensation expense decreased from a year ago on lower revenues.
  • Non-compensation expenses were essentially unchanged from a year ago.

Wealth Management

Wealth Management reported net revenues for the current quarter of $6.1 billion compared with $4.7 billion from a year ago. Pre-tax income of $1.6 billion 9 in the current quarter resulted in a reported pre-tax margin of 26.8% or 27.8% excluding the impact of integration-related expenses. 6,8 The comparisons of current year results to prior periods were impacted by the acquisition of E*TRADE.

 

Net revenues increased 30% from a year ago:

  • Asset management revenues increased from a year ago reflecting higher asset levels driven by market appreciation and positive fee-based flows.
  • Transactional revenues 15 increased 49% excluding the impact of lower mark-to-market gains on investments associated with certain employee deferred compensation plans. Results reflect incremental revenues as a result of the E*TRADE acquisition and strong client activity.
  • Net interest income (NII) increased from a year ago driven by incremental NII as a result of the E*TRADE acquisition and higher bank lending partially offset by the impact of lower rates and an increase in mortgage securities prepayment amortization expense.

 

($ millions)

2Q 2021

2Q 2020

 

Net Revenues

$6,095

$4,704

 

Asset management

$3,447

$2,507

 

Transactional 15

$1,172

$1,075

 

Net interest income

$1,255

$1,030

 

Other

$221

$92

 

Provision for credit losses

$3

$22

 

Total Expenses

$4,456

$3,540

 

Compensation

$3,275

$2,729

 

Non-compensation

$1,181

$811

 

 

 

 

 

 

 

Total Expenses:

  • Compensation expense increased from a year ago driven by higher compensable revenues and incremental compensation as a result of the E*TRADE acquisition 6 partially offset by decreases in the fair value of certain deferred compensation plan referenced investments.
  • Non-compensation expenses increased from a year ago primarily driven by incremental expenses as a result of the E*TRADE acquisition. 6

Investment Management

Investment Management reported net revenues of $1.7 billion compared with $886 million a year ago. Pre-tax income was $430 million compared with $216 million a year ago. 9 The comparisons of current year results to prior periods were impacted by the acquisition of Eaton Vance.

 

Net revenues increased 92% from a year ago:

  • Asset management and related fees increased from a year ago driven by incremental revenues as a result of the Eaton Vance acquisition and higher AUM on continued strong performance and positive net flows.
  • Performance-based income and other revenues increased from a year ago primarily on higher accrued carried interest across our funds, particularly in private equity and infrastructure.

 

 

($ millions)

2Q 2021

2Q 2020

 

Net Revenues

$1,702

$886

 

Asset management and related fees

$1,418

$684

 

Performance-based income and other

$284

$202

 

Total Expenses

$1,272

$670

 

Compensation

$715

$354

 

Non-compensation

$557

$316

 

 

 

 

 

 

 

Total…

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