NEW YORK, April 21, 2011 – Morgan Stanley (NYSE: MS) today reported income of $966 million, or $0.50 per diluted share,1 from continuing operations applicable to Morgan Stanley for the first quarter ended March 31, 2011 compared with income of $1.8 billion, or $1.03 per diluted share, for the same period a year ago. Net revenues were $7.6 billion for the current quarter compared with $9.1 billion a year ago. Results for the current quarter included a pre-tax loss of $655 million (after-tax loss of $425 million or $0.26 per diluted share) arising from the Firm’s 40% stake in a Japanese securities joint venture (Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. or MUMSS) controlled and managed by our partner, Mitsubishi UFJ Financial Group, Inc. (MUFG). The current quarter also included a net tax benefit of $447 million, or $0.30 per diluted share, from the remeasurement of a deferred tax asset and the reversal of a related valuation allowance that are both associated with the sale of Revel Entertainment Group, LLC (Revel).2
Compensation expenses of $4.3 billion decreased from $4.4 billion a year ago. The Firm’s current quarter compensation to net revenue ratio was adversely affected by the aforementioned MUMSS loss, which reduced net revenues by $655 million. This ratio for the current quarter was 57% (or 52% excluding the MUMSS loss) compared with 49% a year ago.3 Non-compensation expenses were $2.4 billion compared with $2.1 billion a year ago reflecting higher levels of business activity and increased legal and technology-related expenses.
For the current quarter, net income applicable to Morgan Stanley, including discontinued operations, was $0.50 per diluted share, compared with net income of $0.99 per diluted share in the first quarter of 2010.
Business Highlights
Sales and trading net revenues were $3.0 billion and included negative revenue of $189 million related to Morgan Stanley’s debt-related credit spreads (DVA)4, 5 in the current quarter. Equity sales and trading reported net revenues of $1.7 billion, the highest reported quarter since 2008, reflecting higher levels of client activity. Fixed income and commodities sales and trading results improved significantly from the fourth quarter of 2010.
Investment Banking revenues were $1.0 billion and reflected an increase in both advisory and underwriting activity from a year ago. The Firm ranked #1 in global announced and completed M&A and #3 in global Equity.6
Global Wealth Management Group delivered net revenues of $3.4 billion, with client assets of $1.7 trillion and 17,800 global representatives. Net new assets for the quarter were $11.4 billion.
Asset Management reported net revenues of $626 million and positive net flows of $1.4 billion. During the quarter, Morgan Stanley also completed the restructuring of its ownership of FrontPoint Partners LLC (FrontPoint).
James P. Gorman, President and Chief Executive Officer, said, "We continued to strengthen our client franchise and delivered solid results across many of our businesses. Our premier investment banking franchise remains a clear industry leader – maintaining our #1 ranking in global M&A in a robust deal market. We also made gains in key areas of focus – with our best results in equities since the financial crisis; significant improvement in fixed income and commodities from last quarter; and positive flows across wealth management and asset management. While the loss at our joint venture with MUFG is disappointing, we remain strongly committed to the Japanese market and our strategic partners at MUFG. Further, this loss does not impact the progress we are making in pursuing our own strategic priorities. I am confident that Morgan Stanley is well-positioned to seize the opportunities presented by today’s market environment and deliver long-term value to our clients, shareholders and employees."
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