Market Overview

Morgan Stanley Conference Call Highlights


Shares of Morgan Stanley (NYSE: MS) are neutral following its second-quarter earnings release.

Below are some highlights and key takeaways from the company's conference call.

Key Six Points:

• The fruits of our strategy were evident with the stability of our wealth and Asset Management businesses providing significant ballast.
• Our role as a strategic advisor for clients across our franchise including M&A, prime brokerage, credit research and other deep, content-rich businesses positions us to benefit significantly from accelerating positive trends.
• First, we continue to improve wealth management margins through cost discipline and revenue growth.
• We've achieved a-greater-than-20 percent margin in our wealth management business and record earnings since the inception of the Joint Venture.
• We continue to expect to drive our margin to the 22 percent to 25 percent target set for the end of 2015.
• Second, we have improved our ROE in fixed income and commodities and continue to optimize that business to be appropriate sized for this firm.
• Our objective remains to deliver a global offering to the firm's clients and an attractive return for shareholders
• Third, we're driving additional expense reductions in improvements in our expense ratios.
• In the first half of 2014 we grew our expenses by 3 percent - grew our revenues by 3 percent while keeping expenses flat.
• Our non-compensation expenses have declined while the firm-wide compensation ratio is also lower.
• In aggregate, overall expense ratios have improved from 79 percent to 76 percent compared to the first half of 2013.
• Fourthly, we continue to make progress regarding Morgan Stanley's specific growth opportunities, most notably in the bank.
• In the last several months we drove new production records in both mortgages and securities-based lending.
• Turning to the fifth point. We continue to steadily increase capital returns to shareholders.
• Finally, we're working towards achieving returns in excess of our cost of capital and of course subject to our capital returns.
• We did achieve our target of 10 percent this quarter that was obviously flatted by the discrete tax.
Financials and Results:

• Earnings from continuing operations applicable to Morgan Stanley common shareholders excluding DVA were $1.8 billion.
• Earnings from continuing operations per diluted share, excluding DVA, were $0.91 after preferred dividends.
• On a GAAP basis including the impact of DVA firm wide revenues for the quarter were $8.6 billion.
• Earnings from continuing operations applicable to Morgan Stanley common shareholders were $1.9 billion.
• Reported earnings from continuing operations per diluted share were $0.94 after preferred dividends.
• Turning to the balance sheet, our total assets were $827 billion at June 30 down modestly from $831 billion at the end of the first quarter.
• Deposits as of quarter end were $118 billion up $1 billion versus Q1.
• Our liquidity reserve at the end of the quarter was $192 billion compared with $203 billion at the end of the first quarter.
• Equity sales and trading revenues, excluding DVA, were $1.8 billion, an increase of 5 percent from last quarter.

Posted-In: Earnings News Guidance


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