* Q2 adj profit $0.60/shr vs est $0.55 - Thomson Reuters
* Wealth management pretax margin 21 pct vs 18.5 pct
* FICC revenue falls 12.3 pct
* Shares edge down
(Adds investor quote, details about results and company
By Lauren Tara LaCapra and Tanya Agrawal
July 17 Morgan Stanley's second-quarter income
more than doubled, helped by rising revenue in its retail
brokerage business as it won more assets to manage from clients,
the investment bank said on Thursday.
A onetime tax break and the ending of a joint venture with
Citigroup in wealth management gave the bank its biggest
income gains for the quarter. But even excluding those items,
the bank posted better results in businesses including merger
advisory, stock and bond underwriting and investment management.
The results beat forecasts, and Morgan Stanley's shares
edged 0.24 percent higher to $32.58 as the broader market fell.
"The businesses that are going well are firing on all
cylinders," said John Thompson, chief executive of Vilas Capital
Management, whose second largest holding is Morgan Stanley
Morgan Stanley has been reshaping its business after coming
close to failing during the financial crisis. The second-largest
stand-alone investment bank, long a powerhouse in areas like
bond trading and commodities trading, has been increasing its
reliance on its retail brokerage and investment management
businesses. Its current CEO, James Gorman, previously headed the
wealth management businesses.
These businesses tend to generate more stable earnings and
are less likely to unravel during market calamities. Investment
management and retail brokerage accounted for about 30 percent
to 40 percent of the bank's quarterly revenue in 2007, but the
share grew to more than half in the second quarter of 2014.
Retail clients' assets rose by $59 billion to $2 trillion in
the second quarter, due in part to clients bringing money to the
bank. Morgan Stanley managed to win those assets without
expanding its broker force: it ended June with 16,316 financial
advisers compared with 16,321 a year ago.
Revenue from wealth management rose 5 percent to $3.72
billion from the year-ago quarter, and the bank's pretax margin
from the business widened to 21 percent from 18.5 percent, close
to its target of 22-25 percent by the end of 2015.
Overall, net income for shareholders rose to $1.86 billion,
or 94 cents per share, in the second quarter from $803 million,
or 41 cents per share, in the year-ago quarter.
According to adjusted figures calculated by Thomson Reuters
I/B/E/S, the company earned 60 cents per share, beating
analysts' average estimate of 55 cents.
The quarter included a $609 million tax benefit. The bank
also received 100 percent of the income from its wealth
management business during the quarter, unlike the second
quarter of 2013, when it shared that income with its joint
venture partner, Citigroup. Morgan Stanley bought out
Citigroup's remaining 35 percent stake in the wealth management
business on June 28, 2013.
Revenue from fixed-income, currency and commodity trading
fell 12.3 percent to $1 billion as a lack of volatility
discouraged trading during the quarter. Those results exclude
accounting adjustments linked to the value of the company's
That decline is about in line with the drops posted by
rivals including JPMorgan Chase & Co, Citigroup Inc
, and No. 1 standalone investment bank Goldman Sachs Group
Investors' concerns about the future of the bank's bond
trading business have weighed on its valuation. Morgan Stanley
shares trade at about their book value, or the net accounting
value of the company's assets. When the bank's earnings start
rising in the coming years, as equity markets rise, said Vilas
Capital's Thompson, the bank's shares could trade at 1.5 to 2
times book value.
Morgan Stanley, ranked No. 2 globally in
mergers-and-acquisitions, benefited from a strong equities
market in the quarter. Advisory revenue rose 26 percent to $418
Separately, Chief Financial Officer Ruth Porat said in an
interview that management does not believe that U.S. sanctions
announced on Wednesday against Russian oil company Rosneft
would affect a deal between the two companies.
(Reporting by Lauren Tara LaCapra and Tanya Agrawal; Editing by
Dan Wilchins, Ted Kerr, Jonathan Oatis and Richard Chang)