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Wed, Feb. 3, 10:25 AM
- This just in: The financial sector is having a worse go it this year than energy, with the XLF lower by 13.6% YTD vs. the XLE's 9% decline.
- Leading a big reversal from this morning higher open is the XLF's 2% decline. The S&P 500 is now off 1%, and the XLE "just" 0.85%.
- Among the issues for the financials are two items: 1) Hopes for a sustained rate hike cycle have been dashed, with the 10-year yield tumbling all the way to 1.82% currently from about 2.30% when the Fed hiked in mid-December. Fed speakers are all-of-a-sudden sounding very dovish (Dudley is the latest), and short-term rate futures are now pricing in just a 50% chance of even one Fed rate increase this year; 2) For lenders specifically, there's worry over their exposure to the crashing energy sector. No doubt better capitalized today than 10 years ago, losses are still losses even if they don't threaten the viability of the bank.
- JPMorgan (JPM -2.6%), Wells Fargo (WFC -3.6%), Morgan Stanley (MS -3.5%), KeyCorp (KEY -3.1%), PNC Financial (PNC -2%), Comerica (CMA -2.7%), Schwab (SCHW -3.8%), MetLife (MET -2.5%)
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, BTO, IAT, SEF, IYG, FXO, FNCL, KBWB, FINU, QABA, KRU, KBWR, RWW, RYF, PSCF, FINZ, KRS, XLFS
Tue, Jan. 19, 9:36 AM
- The bank achieved a 7% return on equity in 2015 - three hundred basis points below target. The path to target? Among the steps is return of capital - Morgan Stanley's (MS +2%) CET 1 ratio of 14.1% at year-end compares to the 10% required by 2019. Its supplementary leverage ratio of 5.8% compares to 5% required in 2018.
- Also helping will be the bank's major cuts in FICC. Wanting to bring RWA to under $180B by year-end, Morgan cut it to $136B. The new target is under $110B at some point after 2017.
- Then there's expense reductions, and the next phase (2016-17) is named Project Streamline. Ex-DVA, the bank's efficiency ratio fell to 77% in 2015, and $1B in planned cuts should bring that number down to 74% by 2017 (assuming just flat revenues).
- Strategic Update
- Previously: Morgan Stanley on the move after earnings beat (Jan. 19)
Tue, Jan. 19, 7:52 AM
- Q4 net income (after DVA) of $9986M vs. a loss of $1.775B a year ago (last year's result included - among other one-time items - a $2.9B after-tax litigation charge).
- Institutional Securities pretax income (after DVA) of $672M on revenue of $3.419B (vs. $3.43B a year ago). Advisory revenue of $516M vs. $488M year ago. Equity sales and trading net revenue of $1.8B vs. $1.6B. FICC revenue of $550M down from $599M. Excluding adjustments, compensation expense of $1.2B fell from $1.5B.
- Wealth Management pretax income of $768M up from $736M a year ago. Pretax margin of 20%, or 21% excluding severance costs. Asset management fee revenue of $2.1B flat from a year ago. Transactional revenues of $861M down from $976M. Net interest income of $779M up from $625M. Loans of $64B up from $51B.
- Previously: Morgan Stanley beats by $0.10, beats on revenue (Jan. 19)
- MS +3.3% premarket
Wed, Jan. 13, 1:14 PM
- It wasn't supposed to be this way after the Fed embarked on a rate hike cycle as these yield-starved names could finally look forward to earning a better spread on their money.
- Since the Fed hiked last month, however, the long bond yield has tumbled about 20 basis points, further narrowing the yield curve.
- With today's 1.3% decline, the XLF is lower by 7.6% YTD, about 200 basis points worse than the S&P 500 (but about 250 basis points better than the energy sector).
- TBTFs: Morgan Stanley (MS -3.9%), Goldman Sachs (GS -2.3%), Citigroup (C -1.8%)
- Regionals: U.S. Bancorp (USB -2%), Regions Financial (RF -3.4%), New York Community Bancorp (NYCB -2.2%)
- Mortgage-related names like Ocwen (OCN -6.2%), Nationstar (NSM -5.3%), Walter Investment (WAC -13.9%), and New Residential (NRZ -5.3%) have come in for particular punishment this day and this year. The mortgage REITs too: Hatteras Financial (HTS -4.4%), Western Asset (WMC -3.6%), New York Mortgage (NYMT -2.3%), Five Oaks (OAKS -5.2%), PennyMac (PMT -2.6%)
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, BTO, SEF, IYG, FXO, FNCL, FINU, RWW, RYF, FINZ, XLFS
Wed, Jan. 6, 5:04 PM
- Morgan Stanley (MS -2.5%) is naming Colm Kelleher its new president, CEO James Gorman disclosed in a staff memo.
- That promotion, to become Gorman's top lieutenant, means that Gregory Fleming, who headed wealth management for the firm, is electing to leave the company to pursue other interests.
- Fleming, who was Morgan Stanley's president, was considered a rising star and Gorman's heir apparent by many sources.
- Kelleher reportedly passed Fleming last year as the bank's second-highest paid employee, after a $2M bonus.
Mon, Jan. 4, 5:39 PM
Oct. 19, 2015, 9:48 AM
- "We've said what we want to say about this," says a becoming-irritated Morgan Stanley (MS -5.7%) CEO James Gorman, taking yet another earnings call question about the bank's lame trading revenue results in Q3. "It is what it is."
- Morgan earlier reported a 41% Y/Y decline in FICC revenue, helping the bank to a big earnings miss. Goldman Sachs, by comparison, posted a 33% decline, and while a sizable gain in equities trading revenue helped offset at Goldman, Morgan Stanley reported a flat result there.
- It's been Morgan Stanley's strategy to lean on wealth management as a source of stability, and that unit produced income of $824M vs. $800M a year earlier (though revenue slipped $200M to $3.6B).
- Webcast and financial supplement
- Previously: Morgan Stanley tumbles premarket after big earnings miss (Oct. 19)
- Previously: Morgan Stanley misses by $0.29, misses on revenue (Oct. 19)
Oct. 19, 2015, 9:13 AM
Oct. 19, 2015, 7:24 AM
- Excluding DVA, net income of $740M or $0.34 per share compared to $1.3B and $0.64 one year ago. Revenue of $7.3B dropped from $8.7B. Both numbers missed consensus by a mile. Annualized ROE of 3.9%.
- Institutional Securities pretax income of $688M vs. $1.2B a year ago. Advisory levels rose - to $557M from $392M, but FICC revenue plunged to $583M from $997M.
- Wealth Management pretax income of $824M vs. $800M a year ago, with net revenue of $3.6B slipping from $3.8B. Pretax margin of 23%.
- Investment Management pretax loss of $38M vs. a profit of $193M a year ago, mostly thanks to a reversal of previously accused carried interest associated with Asia P-E business.
- Total compensation expense of $3.4B falls from $4.2B a year ago.
- Fully phased-in CET 1 ratio of 12.4%. Tangible book value per share of $29.99 vs. Friday's close of $33.94.
- Conference call at 8:30 ET
- Previously: Morgan Stanley misses by $0.29, misses on revenue (Oct. 19)
- MS -5.7% premarket
Oct. 7, 2015, 9:30 AM
- It's all about growth in the wealth management business, says RBC Capital's Fiona Swaffield, upgrading Morgan Stanley (NYSE:MS) to Outperform. Her $39 price target is 20% above last night's close.
- The key revenue driver for wealth management has been net interest income, and there's room for plenty more given the bank's ample funding to support loan growth, and its low loan to deposit ratio.
- Morgan Stanley is targeting $200B in deposits vs. the current $132B, and the penetration of mortgages in its client base to 5% from 2%.
- There's also the chance of higher interest rates, and Swaffield sees a 100 basis points increase boosting pretax earnings by $750M - a benefit, but hardly game-changing as the bank can probably be expected to earn somewhere in the area of $11B over the next year.
- Shares +1.9%
Sep. 28, 2015, 2:48 PM
- It isn't just Glencore (OTCPK:GLCNF, OTCPK:GLNCY) who is tanking, as at least one measure of raw materials producers plunges to seven-year lows following the company's woes and data that showed weakening Chinese industrial profits.
- Shares of Glencore plunged 29% to close at just 69 pence, an all-time low, exaggerated by a damning report that said future earnings are so uncertain that the company may need to direct all of its efforts to repay debt.
- Freeport McMoRan (FCX -10.2%) is hit hard after breaking below support at $10/share, and global mining peers Rio Tinto (RIO -4.1%), BHP Billiton (BHP -4.5%) and Vale (VALE -9.4%) also are smacked down.
- A number of other firms also are in situations not that much different from Glencore, says DTN analyst Darin Newsom, noting that Caterpillar (CAT -2.2%) and Deere (DE -1.6%) have been struggling and adding that pressure on Glencore may “create a vacuum those other struggling companies could get sucked into."
- Along with oil and gas producers and precious metals miners, even financial stocks are affected, with Morgan Stanley (MS -3.6%) and Goldman Sachs (GS -3.4%) underperforming their banking peers, perhaps as investors grow nervous about the potential for any of Glencore's problems possibly blowing back on other commodity trading operations.
Jul. 31, 2015, 7:52 AM
- According to Reuters, the value of merger and acquisition deals through July 30 was $436.4B, including 14 deals worth over $5B apiece. Although down from June's torrid pace of $546.8B, it still ranks as the seventh busiest month on record. Leading the pack was Teva's $40.5B purchase of Allergan's generic drugs business.
- The top investment bank in terms of the total value of transactions was Goldman Sachs (NYSE:GS), involved in 35 deals worth $148.8B, including half of the top ten. JP Morgan (NYSE:JPM) was second with 30 deals worth $116.1B while Morgan Stanley (NYSE:MS) was third with 33 deals valued at $95.9B.
- Global M&A so far this year is $2.64T, up 41% from last year. The action in the U.S. is up 66%.
- Energy and healthcare are the leading sectors. There have been 1,557 deals in energy worth $407B. Healthcare is close behind with 1,577 deals worth $395B.
- ETFs: UNG, USO, OIL, UGAZ, UCO, DGAZ, UWTI, BIB, SCO, BNO, BOIL, GAZ, DBO, DWTI, DTO, UGA, KOLD, USL, GRX, UNL, IRY, BIS, IXJ, DNO, BME, UHN, DBE, OLO, SZO, DCNG, GRN, RJN, FUE, OLEM, JJE, ONG, UBN
Jul. 20, 2015, 7:16 AM
- Q2 net income (excl. DVA) of $1.7B or $0.79 per share vs. $1.2B and $0.58 one year ago. ROE (excl. DVA) of 9.1%.
- Institutional Securities pre-tax income of $1.44B on revenue of $4.99B vs. $873M and $4.161B a year ago. Advisory revenue of $423M, equity underwriting revenue of $489M and fixed income underwriting revenue of $528M all roughly flat Y/Y. Equity sales and trading revenue of $2.3B vs. $1.8B a year ago. FICC revenue of $1.3B up from $1B - this as most other banks saw Y/Y decline.
- Wealth Management pre-tax income of $885M on revenue of $3.875B vs. $763M and $3.702B a year ago. Asset management fee revenue of $2.2B vs. $2.1B. Transactional revenue of $8872M vs. $991M. Net interest income of $737M vs. $577M. Total client assets of $2T. Client assets in fee-based accounts of $813B up 7% Y/Y. Average annualized revenue per representative of $978K up 8% Y/Y.
- Investment Management pre-tax income of $220M on revenue of $751M vs. $209M and $705M a year ago.
- CET 1 ratio of 12.5%. Tangible book value per share of $29.54.
- Conference call at 8:30 ET
- Previously: Morgan Stanley beats by $0.05, beats on revenue (July 20)
- MS +3.8% premarket
Jun. 3, 2015, 11:01 AM
- For regulatory reasons (pressure to counter money laundering), Morgan Stanley (MS +1.6%) recently shifted coverage of Caribbean and Latin American clients out of wealth management and into its institutional business, according to the company.
- As a result, Morgan's The Americas Group, led by Don d'Adesky, moved its practice and $2.4B in client assets to Raymond James (RJF +2%). While brokerages typically go to the mattresses to retain such business, a Morgan spokeswoman simply said the bank was no longer able to accommodate the team's business model.
- Raymond James pronounces itself "very comfortable with the team's business model."
- Source: WSJ
Apr. 20, 2015, 11:10 AM
- While Evercore ISI's Glenn Schorr calls Morgan Stanley's (MS +1.2%) Q1 results a "Bo Derek" - otherwise known as a "10" - JMP's Devin Ryan is somewhat more measured.
- After stripping out a sizable tax benefit, "core" EPS still beat estimates, but not by nearly as gaudy an amount as the headlines suggest. The outperformance - however - was driven by FICC action, and one wonders how sustainable that is. Wealth Management revenues, on the other hand, were 3% less than what Ryan had modeled.
- "We suspect investors will initially view results favorably, but given the trading-heavy outperformance, we believe the focus will also be on sustainability, which could temper the upside."
- Speaking on the earnings call, Google-bound CFO Ruth Porat - applauding some of the regulatory measures aimed at banks since the crisis - calls for a "time out" to "pause, digest, and assess" what's working and what's not.
- Previously: Morgan Stanley +2% after strong Q1. (April 20)
Apr. 20, 2015, 7:47 AM
- Q1 income from continuing operations (excluding DVA) of $2.3B or $1.14 per share vs. $1.4B and $0.70 one year ago. Company realized a net tax benefit of $564M or $0.29 per share thanks to repatriation of non-U.S. earnings at a lower than expected rate, so the earnings beat was closer to $0.07. Annualized ROE of 10.1%.
- Institutional Securities pre-tax income (excl. DVA) of $1.688B on revenue of $5.333B vs. $1.290B and $4.551B a year ago. FICC revenue of $1.9B vs. $1.7B. Advisory revenue of $471M vs. $336M. Equity sales and trading revenue of $2.3B vs. $1.7B.
- Wealth Management pre-tax income of $855M vs. $686M a year ago on revenue of $3.834B vs. $3.609B. Pre-tax margin of 22%.
- Investment Management pre-tax income of $187M vs. $268M a year ago.
- CET1 ratio of 13.7%. Tangible book value per share of $28.91.
- Firm repurchased about $250M of stock during quarter, or roughly 7M shares.
- Previously: Morgan Stanley beats by $0.36, beats on revenue (April 20)
- MS +2% premarket
Morgan Stanley through its subsidiaries and affiliates, provides financial products and services to a diversified group of clients and customers, including corporations, governments, financial institutions and individuals.
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