Morgan Stanley Reports 42% Jump in Q2 Net Income

Morgan Stanley (MS) reported its second-quarter earnings results early Thursday, beating analysts’ expectations.

Net income attributable to common shareholders was $802 million, or $0.41 per share, vs. $564 million, or $0.29 per share, in the year-ago period.

Excluding special items, Morgan Stanley earned $0.45 per share, which topped Wall Street expectations of $0.43 cents. The Q2’13 results included a gain related to the bank’s debt valuation and a charge tied to its purchase of Citigroup's remaining share of the Morgan Stanley Smith Barney joint venture.

Total revenue jumped 22% from last year and 4% from the previous quarter to $8.5 billion, while expenses increased roughly 12% year over year and 2% quarter over quarter to $6.73 billion.

“This quarter, we saw significant year-over-year revenue growth in each of our five major business units and higher year-over-year profitability,” said Chairman and CEO James P. Gorman (left), in a press release. “Of particular note, equity sales and trading results were strong across all products and regions … In addition, we look forward to the full benefits of the recently completed Wealth Management acquisition. We continue to work as one firm to realize the advantages specific to our business model.”

Wealth Management

The Wealth Management unit had net revenues of $3.5 billion, up 10% from last year and 2% from a year ago. The group’s pretax margin was roughly 19%, up from 17% in Q1’13 and 13% in Q2’12. Net income was $326 million, representing a jump of 41% over the year-ago period and an increase of 28% from the prior quarter.

The headcount of Morgan Stanley advisors is 16,321, an increase of 37 reps from the prior quarter and a decrease of 157 reps from the year-ago period.

The Morgan Stanley financial advisors had average fees and commissions (also known as production) of $866,000 in Q2’13, up 2% from $851,000 in Q1’13 and up 12% from $770,000 in Q2’12.

Fee-based asset flows for the quarter were $10 billion, down 35% from the prior quarter’s $15 billion but up 233% from $3 billion in the year-ago quarter.

Total client assets were $1.78 trillion at quarter end versus $1.79 trillion in the earlier quarter and $1.64 trillion last year. Fee-based assets currently represent 35% of total assets, according to the company.

The bank's buoyant results follow a first quarter that garnered it the No. 2 spot in ThinkAdvisor's 12 Best & Worst Broker-Dealers ranking.

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Check out AdvisorOne’s 2013 Q2 Earnings Calendar for the Finance Sector.