Shares down in pre-market after the firm reports a net loss.
But has the market realised the loss is largely due to improvements in the company’s credit spreads? Oh, and the bank also had a Goldman-esque ‘orphan month’.
From the press release. (emphasis ours).
Net Revenues of $3.0 Billion and a Net Loss of $0.57 per Diluted Share
Firm Delivered Strong Results in Commodities, Interest Rates, Credit Products as well as Investment Banking, Where We Ranked #1 Announced M&A; Solid Performance in Global Wealth Management
Improvements in Morgan Stanley’s Debt-Related Credit Spreads, as well as Industry- Wide Decline in Commercial Real Estate Market Negatively Impacted Revenues
Expenses Reduced 33%;Firm on Track to Achieve Annual Savings Target of $2 Billion Firm
Continues to Maintain Strong Capital and Balance Sheet Positions:
• Tier 1 Capital Ratio (Basel I) of 16.4%1
• Tangible Common Equity2 to Risk Weighted Assets Ratio of 9.3%1
• Tangible Common Equity to Tangible Assets Ratio of 4.3%
• Enhances Capital by Reducing Dividend to $0.05 per Share.
NEW YORK, April 22, 2009 – Morgan Stanley (NYSE: MS) today reported a net loss applicable to Morgan Stanley for the first quarter ended March 31, 2009 of $177 million, or $0.57 per diluted share (reflective of preferred dividends),3 compared with net income applicable to Morgan Stanley of $1,413 million, or $1.26 per diluted share, a year ago. Net revenues were $3.0 billion, 62 percent below last year’s first quarter. Non-interest expenses of $3.9 billion decreased 33 percent from a year ago. Compensation expenses of $2.1 billion decreased 46 percent from a year ago, primarily reflecting lower revenues. Non-compensation expenses decreased 9 percent, reflecting lower levels of business activity and firm-wide initiatives to reduce costs.
The Firm delivered solid results in many of its businesses during the first quarter – though these results were negatively impacted by the $1.5 billion decrease in net revenues related to the tightening of Morgan Stanley’s credit spreads on certain of its long-term debt (MS debt-related credit spreads)4 and net losses of $1.0 billion on investments in real estate, amidst the industrywide decline in this market.
Investment banking delivered strong results – with net revenues of $0.8 billion, despite the challenging market environment. Morgan Stanley ranked first in global announced M&A in the first quarter,6 and has advised on most of the major deals so far this year, including Pfizer/Wyeth, Merck/Schering-Plough and Rio Tinto/Aluminum Corporation of China, among others.
• Fixed income sales and trading delivered net revenues of $1.3 billion reflecting strong results in commodities, interest rates and credit products.
• Equity sales and trading delivered net revenues of $0.9 billion reflecting lower net revenues in derivatives and the cash businesses, including prime brokerage.
The Company announces that its Board of Directors reduced the quarterly dividend per common share covering the period from January 1, 2009 to March 31, 2009 to $0.05 per common share.
As a result of the change in the Company’s fiscal year end from November 30th to December 31st, the Company had a December 2008 fiscal month transition period. The results for this period, which reflected a net loss applicable to Morgan Stanley of $1.3 billion, are presented on page 19 of the financial supplement accompanying this release.
John J. Mack, Chairman and CEO, said, “While challenging markets continued to impact our results this quarter, we saw improved performance across most of our businesses during the past three months. The Firm delivered strong results in investment banking, commodities, interest rates and credit products as well as solid performance in global wealth management. In fact, Morgan Stanley would have been profitable this quarter if not for the dramatic improvement in our credit spreads – which is a significant positive development, but had a near-term negative impact on our revenues.
“In this volatile environment, we have focused on prudent stewardship of our balance sheet, capital and risk profiles, as evidenced by our exceptional capital ratios. We have also moved quickly to realize attractive new opportunities including the creation of a new industry leader in wealth management with the Morgan Stanley Smith Barney joint venture as well as our new securities joint venture with MUFG. Although the near-term environment remains challenging, we remain confident about the value we can deliver to our clients and shareholders over the long term.”
The results for the quarter include a tax benefit of $331 million, or $0.33 per diluted share, resulting from the anticipated repatriation of non-U.S. earnings at lower than previously estimated tax rates.
Related links:
Bank of America in Q1 happy bank club – FT Alphaville
Dissecting bank results – FT Alphaville
The IBs of March – FT Alphaville
The return of the IB capital call – FT Alphaville
On Wells Fargo and banks’ well-being – FT Alphaville