Lower than expected Q4 profit and revenue pushed Morgan Stanley [MorganStan] shares down.
Image: London, UK - November 29, 2014: The facade of modern bank building from Morgan Stanley in London. iStock © ginton
Forecast: earnings per share of $0.48 on $8.08 billion in revenue (Thomson Reuters).
Actual: earnings per share of $0.47 on $7.8 billion in revenue.
Morgan Stanley Investment Banking Ranked #1 in Global IPOs and #2 in Global Announced M&A through continued strength in equity sales & trading. However, net revenues of $7.8 billion for the fourth quarter ended December 31, 2014 compared with $7.8 billion a year ago. For the current quarter, income from continuing operations applicable to Morgan Stanley was $1.0 billion, or $0.47 per diluted share, compared with income of $95 million, or $0.02 per diluted share, for the same period a year ago.
Institutional Securities net revenues excluding DVA were $3.2 billion reflecting challenging market conditions in Fixed Income & Commodities sales and trading and the impact of implementing funding valuation adjustments [FVA]. Institutional Securities reported a pre-tax loss from continuing operations of $863 million compared with a pretax loss of $1.2 billion in the fourth quarter of last year.
Wealth Management did better and reported pre-tax income from continuing operations of $736 million compared with $715 million in the fourth quarter of last year. The quarter’s pre-tax margin was 19%, which included the impact of compensation expense deferral adjustments. Net revenues for the current quarter were $3.8 billion compared with $3.7 billion a year ago.
Investment Management reported pre-tax losses from continuing operations of $6 million, inclusive of the compensation expense deferral adjustments compared with pre-tax income of $331 million in the fourth quarter of last year. Income after the noncontrolling interest allocation and before taxes was a loss of $18 million.
Full year net revenues were strong at $34.3 billion compared with $32.5 billion a year ago. Income from continuing operations applicable to Morgan Stanley for the current year was $6.2 billion, or $2.96 per diluted share, compared with income of $3.0 billion, or $1.38 per diluted share, a year ago.
Future forecasts: To appease many investors, the bank repurchased approximately $271 million of its common stock or approximately 8 million shares during the last quarter. But now investors will be asking what the next move for Morgan Stanley will be regarding the new FED legislation on meeting higher capital charges.
In the meantime, analysts from CNN Money see Morgan Stanley as gaining 24% annual growth in 5 years if the firm’s plans work out to generate higher trading volumes from its dealings in fixed income commodities and currencies.
MT4 chart: MorganStan
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