Morgan Stanley (NYSE:MS)’s second-quarter net income rose 66%, beating analyst estimates, as the investment bank bounced back from a slump in trading revenue a year earlier.
Revenues rose 22% to $8.5bn in the three months to July. Adjusted earnings per share, which strip out the effect of an acquisition and an accounting quirk, were 45 cents a share – just above the 43 cents expected by analysts.
The bank also surprised investors by announcing it had received the go-ahead from regulators to buy back $500m worth of its shares. The news sent Morgan Stanley (NYSE:MS) stock sharply higher in pre-market trading – up almost 6% to $28.10. The firm also announced that it had completed the purchase of its remaining 35% stake in the Morgan Stanley-Smith Barney joint venture, but the acquisition was a modest drag on its bottom line.
Morgan Stanley segment performance
Institutional Securities (IS) reported pre-tax income from continuing operations of $960 million, surging 97% from the prior-year quarter. Net revenue was $4.3 billion, up 30% from $3.3 billion in the year-ago quarter. Further, excluding DVA, net revenue was $4.2 billion, rising 40% on a year-over-year basis.
Global Wealth Management (GWM) pre-tax income from continuing operations was $655 million, increasing 60% from the year-ago quarter. Net revenue was $3.5 billion, improving 10% from $3.2 billion in the year-ago quarter, reflecting higher asset management fees and transactional revenues.
Asset Management (AM) pre-tax income from continuing operations was $160 million, up significantly from 43 million in the year-ago quarter. Net revenue for the reported quarter was $673 million, up 48% from $456 million in the year-ago quarter. The rise was driven by robust results in the Traditional Asset Management business, along with gains on investments in the Merchant Banking business.
As of Jun 30, 2013, total assets under management or supervision were $347 billion, up 12% from $311 billion as of Jun 30, 2012. The rise primarily reflected positive net customer flows and market appreciation.
Morgan Stanley capital ratios
As of Jun 30, 2013, book value per share was $31.48, up from $31.02 as of Jun 30, 2012. Tangible book value per share was $26.27, down from $27.70 as of Jun 30, 2012.
Morgan Stanley (NYSE:MS)’s Tier 1 capital ratio, under Basel I, was 14.1% and Tier 1 common ratio was 11.8% compared with 17.2% and 13.6%, respectively in the year-ago quarter.
Earnings of other major banks
Morgan Stanley (NYSE:MS)’s results capped a strong quarter on Wall Street, with banks including Goldman Sachs Group Inc (NYSE:GS) and JPMorgan Chase & Co. (NYSE:JPM) reporting higher than expected profits. Big banks so far appear to have largely shrugged off the volatility that intermittently rocked markets in May and June as investors fretted over higher interest rates.