Morgan Stanley (MS) reported fourth-quarter 2009 net income of $413 million or 14 cents per share, compared to net income of $498 million or 48 cents per share in the prior quarter and net loss of $10.5 million or $10.92 per share a year ago. The results missed the Zacks Consensus Estimate of 36 cents per share. Morgan Stanley marked the second consecutive quarter of income this year.
Results were aided by robust underwriting revenues in the investment banking operation, resulting from higher levels of market activity, prime brokerage and wealth management business, which offset losses in fixed income sales and trading along with commodities and the negative impact of the improvement in Morgan Stanley’s debt-related credit spreads. These credit spreads reduced the quarter’s revenue by $0.6 billion and earnings per share by 27 cents.
Net revenues for the quarter were $6.8 billion, down 19% sequentially but up 153% year-over-year compared with negative revenue of $13.0 billion in the fourth quarter of 2008. Segmental revenues are as follows:
Institutional Securities
Institutional Securities revenues were $3.2 billion, sequentially down 35% but up 123% from the prior-year quarter. Strong growth from underwriting revenues (up 288% year-over-year to $950 million), advisory revenues (up 44% year-over-year to $530 million) and investment gains were partially offset by sales and trading revenues on low levels of market activity. Sales and trading net revenues also reflected a loss of $5.5 billion due to the significant improvement in Morgan Stanley’s debt-related credit spreads.
Global Wealth Management
Global Wealth Management revenues were $3.1 billion, up 146% year-over-year and 4% sequentially, primarily due to strong revenue growth from Morgan Stanley Smith Barney. Total client assets were $1.6 trillion at year-end. Client assets in fee-based accounts were $370 billion and represent 24% of total client assets. At quarter-end, the 18,135 global representatives achieved average annualized revenue per global representative of $692,000 and total client assets per global representative of $86 million.
Asset Management
Asset Management revenues were $510.0 million, significantly up from negative revenues of $438.0 million in fourth quarter of 2008. Sequentially, revenues were up 14%, primarily due to an increase in core revenues to $357 million from $31 million in the year-ago quarter and investment gains compared to losses in the year-ago quarter. The merchant banking business also improved to $153 million compared to negative revenue of $469 million in the year-ago quarter.
During the reported quarter, total interest expense declined by 13% sequentially and by 72% year-over-year to $412.0 million. Total non-interest expenses declined 175% year-over-year but increased 11% sequentially to $6.2 billion.
For full year 2009, total revenues increased 28% to $23.4 billion. Net income came in at $1.15 billion compared to loss of $807 million in 2008, while diluted loss per share was 93 cents compared to $1.26 per share in 2008. Results were negatively impacted by improvement in Morgan Stanley’s debt-related credit spreads. This reduced full-year revenues by $5.5 billion and earnings per share by $2.84.
During the quarter, Morgan Stanley was ranked #1 in global announced and completed M&A. As of December 31, 2009, the company did not repurchase any shares of its common stock during 2009 as part of its capital management share repurchase program. Book value per common share was $27.26, based on 1.4 billion shares outstanding.
Morgan Stanley also declared a quarterly dividend of $0.05 per common share. The dividend is payable on Feb 12, 2010 to common shareholders of record on Jan 29, 2010.
Although Morgan Stanley’s growth has been negatively impacted by the after-effects of the financial crisis, it has been improving at a steady pace, given its strong fundamentals and its industry leader position, along with a strong balance sheet and vast market share. As the economy rebounds over the long term, we believe the company can realize the full benefits of its strategic initiatives by disciplined risk-taking, addition of new talent, the continued integration of the Morgan Stanley Smith Barney joint venture and the execution of the Mitsubishi UFJ (MTU) alliance.
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