Morgan Stanley Reports Third Quarter Results; Quarterly EPS from Continuing Operations Up 61% to $1.75; ROE Increases to 23 Percent in Quarter.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Best Third Quarter Ever in Revenues, Net Income and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. ; First Nine Months of FY06 Best Ever in Revenues, Net Income and EPS Morgan Stanley  To comply with Wikipedia's , the introduction of this article needs a complete rewrite. (NYSE NYSESee: New York Stock Exchange : MS) today reported income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the third quarter ended August 31, 2006 of $1,851 million, an increase of 59 percent from $1,166 million in the third quarter of 2005. The annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on average common equity from continuing operations was 22.7 percent in the current quarter, compared with 17.1 percent in the third quarter of 2005. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of from continuing operations were $1.75 compared with $1.09 a year ago. Net revenues (total revenues less interest expense and the provision for loan losses) were $8.0 billion, 15 percent above last year's third quarter. Non-interest expenses of $5.3 billion increased 2 percent from last year. For the first nine months of 2006, income from continuing operations was $5,291 million, a 54 percent increase from $3,446 million a year ago. The annualized return on average common equity from continuing operations was 22.7 percent compared with 17.0 percent a year ago. Diluted earnings per share from continuing operations were $5.01 compared with $3.19 last year. Net income for the quarter, including discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , was $1,851 million, compared with $144 million in the third quarter of 2005. For the first nine months of 2006, net income, including discontinued operations, was $5,266 million, a 113 percent increase from $2,474 million a year ago. Results for the third quarter and first nine months of 2005 include an after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. charge of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1 billion for discontinued operations related to the sale of the Company's aircraft financing business.(1) Diluted earnings per share, including discontinued operations, were $1.75 for the quarter, compared with $0.13 in the third quarter of 2005, and the annualized return on average common equity, including discontinued operations, for the third quarter was 22.7 percent compared with 2.0 percent a year ago. For the first nine months, diluted earnings per share, including discontinued operations, were $4.99 compared with $2.29 a year ago and the annualized return on average common equity, including discontinued operations, was 22.6 percent compared with 11.6 percent last year. Business Highlights --Institutional Securities delivered its best third quarter results ever, with net revenues of $5.0 billion and income before taxes of $2.0 billion, up 55 percent from last year. --Equities sales and trading revenues of $1.5 billion included record results in Prime Brokerage Prime Brokerage A special group of services that many brokerages give to special clients. The services provided under prime brokering are securities lending, leveraged trade executions, and cash management, among other things. . Fixed Income sales and trading revenues of $2.2 billion reflected record third quarter results in commodities and credit products. --The Firm reached agreements on several "bolt-on" acquisitions, including the acquisition of TransMontaigne TransMontaigne (NYSE: TMG) is a Fortune 500 oil pipeline and terminal company based in Denver, Colorado. External link
Any member of a Germanic people who lived along the Baltic coast in ancient times and later migrated west as far as the British Isles. The Saxons became pirates in the North Sea during the decline of the Roman empire, and in the early 5th century they spread through Capital in our residential mortgage business. --Global Wealth Management Group achieved record average annualized revenue and total client assets per global representative of $675,000 and $81 million, respectively, and it recorded $5.4 billion in net new domestic assets during the quarter. --Asset Management continued to expand its product offerings with the launch of 23 new products primarily targeted at the Company's institutional and non-US client bases, including 10 in Alternatives, 10 in Equities and 3 in Fixed Income. --Discover achieved record third quarter net revenues and income before taxes and continued its strategy of broadening broad·en tr. & intr.v. broad·ened, broad·en·ing, broad·ens To make or become broad or broader. broad acceptance of the Discover Card through agreements with merchant acquirers First Data, Global Payments, Inc. and RBS RBS Royal Bank of Scotland RBS Role Based Security RBS Rollback Segment RBS Rare Book School (University of Virginia) RBS Rural Business Cooperative Service RBS Ribosome Binding Site (genetics) Lynk. Discover also entered a strategic partnership with JCB JCB Noun trademark, Brit a large machine used in building, that has a shovel on the front and a digger arm on the back [initials of Joseph Cyril Bamford, its manufacturer] JCB® n abbr , the leading card issuer in Japan. John J. Mack John J. Mack (1944 - ) (born Machoul) is the CEO and Chairman of the Board of investment bank Morgan Stanley. He returned to the company on June 30, 2005 to replace Phil Purcell, who had become CEO after the 1997 merger of Morgan Stanley and Dean Witter, of which Purcell was , Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , said, "Despite challenging market conditions, Morgan Stanley achieved its best third quarter ever, demonstrating the continued progress we're we're Contraction of we are. we're we are making in executing on our plan to improve financial performance. Building on our positive momentum in recent quarters, the people of Morgan Stanley delivered record revenues and earnings in the first nine months of 2006 and an ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. of more than 20% for the fourth quarter in a row. Just as important, we have made substantial progress strengthening key businesses and investing in key areas where we see significant opportunities to further improve our performance and create additional shareholder value." INSTITUTIONAL SECURITIES Institutional Securities posted income before taxes(2) of $2.0 billion, up 55 percent from $1.3 billion in the third quarter of 2005. Net revenues of $5.0 billion were 20 percent higher, driven by strong results across all businesses. The quarter's pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta margin was 40 percent, compared with 31 percent in last year's third quarter. The quarter's return on average common equity was 30 percent compared with 24 percent a year ago. --Advisory revenues were $461 million, a 19 percent increase from last year's third quarter. --Underwriting revenues were $548 million, a 7 percent increase from last year's third quarter. Equity underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. revenues increased 19 percent to $237 million and fixed income underwriting revenues were virtually unchanged at $311 million. --Fixed income sales and trading net revenues were $2.2 billion, a 13 percent increase over the third quarter of 2005. The increase was driven by strong results in commodities and credit products, partially offset by lower results in interest rate & currency products. The increase in commodities was driven by strong results in oil liquids, electricity and natural gas due to strong client activity including revenues recognized on a few large structured transactions as a result of increased visibility of market value. Credit products had a record third quarter benefiting from activity in structured products, particularly in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). . Interest rate & currency products were
adversely affected by a less favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. environment as customer driven flow and volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the declined and the yield curve flattened flat·ten v. flat·tened, flat·ten·ing, flat·tens v.tr. 1. To make flat or flatter. 2. To knock down; lay low: The boxer was flattened with one punch. . In addition, emerging markets revenues were significantly lower due to slower customer flow and market conditions. These factors more than offset an increase in revenues recognized on structured transactions in interest rate & currency products. --Equity sales and trading net revenues of $1.5 billion were a record third quarter and increased 18 percent from last year's third quarter. Increased client flows across both the cash and derivatives markets The derivatives markets are the financial markets for derivatives. The market can be divided into two, that for exchange traded derivatives and that for over-the-counter derivatives. and record results in Prime Brokerage drove revenues higher. --Investment revenues were $188 million compared with $69 million in the third quarter of last year and included significant gains from investments in the Company's real estate funds, IntercontinentalExchange and Grifols S.A. --The Company's aggregate average trading VaR Var, department (1990 pop. 828,300), SE France, in Provence. Draguignan is the capital. (Value Added Reseller) An organization that adds value to a system and resells it. measured at the 95% confidence level(3) was $56 million compared with $52 million in the third quarter of 2005 and $63 million in the second quarter of 2006. Total aggregate average trading and non-trading VaR was $66 million compared with $58 million in the third quarter of 2005 and $70 million in the second quarter of 2006. At quarter end, the Company's aggregate trading VaR was $61 million, and the aggregate trading and non-trading VaR was $75 million. --Non-interest expenses were $3.0 billion, a 4 percent increase from a year ago. Non-compensation expenses increased as a result of higher levels of business activity and charges for legal and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. matters. Compensation costs declined slightly from a year ago reflecting the Company's current estimate of 2006 full year compensation based on forecasted full year performance and market conditions. In addition, the prior year included charges for senior management severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and new hires. For the first eight months of calendar 2006, the Company ranked first in global IPOs with an 11 percent market share, third in global equity and equity-related issuances with a 9 percent market share, third in global completed M&A with a 26 percent market share, fourth in global announced M&A with a 25 percent market share and fifth in global debt issuance with a 6 percent market share.(4) GLOBAL WEALTH MANAGEMENT GROUP Global Wealth Management Group's pre-tax income for the third quarter was $158 million compared with $30 million in the third quarter of last year. The quarter's pre-tax margin was 12 percent compared with 2 percent in last year's third quarter. The quarter's return on average common equity was 14 percent compared with 2 percent a year ago. --Net revenues of $1.4 billion were up 9 percent from a year ago, reflecting higher net interest revenue primarily resulting from the bank deposit sweep Sweep The act of using all available cash flow for the repayment of debt service. sweep To automatically move cash balances into an interest-earning money market fund. program, an increase in revenues from fee-based products and higher investment banking revenues. These increases were partially offset by a decline in commissions. --Non-interest expenses declined 1 percent to $1.2 billion, reflecting a significant reduction in legal and regulatory costs, which more than offset increased compensation expense due in part to higher revenues. --Total client assets were $652 billion, a 5 percent increase from last year's third quarter. Client assets in fee-based accounts rose 14 percent to $193 billion over the last 12 months and increased as a percentage of total assets to 30 percent from 27 percent. --The 8,069 global representatives at quarter-end achieved record average annualized revenue and total client assets per global representative of $675,000 and $81 million, respectively. ASSET MANAGEMENT Asset Management reported pre-tax income of $125 million, 23 percent lower than last year's $162 million. The quarter's pre-tax margin was 20 percent compared with 24 percent a year ago and the return on average common equity was 13 percent compared with 24 percent in last year's third quarter. Net revenues fell 7 percent to $634 million primarily reflecting lower Private Equity revenues. Higher management and administration fees, driven by higher assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. , were offset by a decline in distribution and other fees. Non-interest expenses decreased 2 percent to $509 million. Excluding results from the Private Equity business, pre-tax income declined by 8 percent from last year and the pre-tax margin was 21 percent compared with 22 percent a year ago. Assets under management or supervision at August 31, 2006 were $448 billion, up $20 billion, or 5 percent, from a year ago. The increase resulted from market appreciation partly offset by customer out-flows. The percent of the Company's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. fund assets Fund assets The total value of a portfolio's securities, cash, and other holdings, minus any outstanding debts. performing in the top half of the Lipper Business Description Lipper, Inc., a subsidiary of Reuters provides mutual and hedge fund information, analytical tools, data and commentary. Lipper's benchmarking provides a guidepost to asset managers, fund companies, financial intermediaries, traditional media, rankings was 39 percent over one year, 58 percent over three years, 74 percent over five years and 81 percent over 10 years. DISCOVER Discover's third quarter pre-tax income was $368 million on a managed basis, up 54 percent from $239 million in the third quarter of 2005. Net revenues of $1,047 million were 15 percent higher than last year's third quarter. The quarter's pre-tax margin was 35 percent compared with 26 percent a year ago. The quarter's return on average common equity was 19 percent compared with 13 percent a year ago. The current quarter includes the results of the Goldfish credit card business. --Net sales volume was a record $25.7 billion, a 15 percent increase from a year ago, reflecting increased cardmember usage and the acquisition of the Goldfish credit card business. --Managed credit card loans of $49.6 billion were up 5 percent from a year ago and up 2 percent from the end of the second quarter. --Managed merchant, cardmember and other fees were $579 million, up 9 percent from a year ago. The increase was primarily due to higher merchant discount and other revenues, partially offset by higher cardmember rewards. The increase in merchant discount revenue was primarily driven by record sales activity. --The provision for consumer loan losses on a managed basis was $496 million, down 16 percent from last year, reflecting significantly lower bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most charge-offs and improved credit quality. --Managed net interest income declined $35 million from a year ago, reflecting a narrowing of the interest rate spread as a higher yield was more than offset by a higher cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. , partially offset by higher average loans. --Non-interest expenses increased 1 percent to $679 million, primarily due to higher operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. associated with the Goldfish credit card business, partially offset by lower compensation. --The credit card net charge-off Eliminate or write off. The term charge-off is used to describe the process of removing from the records of a company something that was once regarded as an asset but has subsequently become worthless. rate was 3.81 percent, 131 basis points lower than last year's third quarter, but 51 basis points higher than this year's second quarter. The managed credit card over- over- pref. 1. Above or upon in position: overpass; overcoat. 2. Superior in rank or importance: overlord. 3. 30-day delinquency delinquency Criminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. rate was 3.41 percent, a decrease of 50 basis points from the third quarter of 2005. The managed credit card over-90-day delinquency rate was 1.59 percent, 21 basis points lower than a year ago. OTHER MATTERS The quarter's results reflect a decrease in the Company's annual effective tax rate from 35.0 percent in the second quarter to 33.5 percent, primarily due to the estimated impact of overseas tax planning Tax planning Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer. strategies on the full year. The Company has adjusted its opening financial position for fiscal 2006 and its financial results for the first two quarters of 2006 to reflect a change in its hedge accounting Why is hedge accounting necessary? Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). under SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 133, Accounting for Derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. Instruments and Hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. Activities. The change is being made following a recent technical clarification Clarification The removal of small amounts of fine, particulate solids from liquids. The purpose is almost invariably to improve the quality of the liquid, and the removed solids often are discarded. by the U.S. Securities and Exchange Commission (SEC) of its interpretation of SFAS No. 133 related to the accounting for fair value hedges of fixed-rate trust preferred securities. The same periods noted also reflect the adjustment of two cumulative compensation and benefit accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. . The Company has elected e·lect v. e·lect·ed, e·lect·ing, e·lects v.tr. 1. To select by vote for an office or for membership. 2. To pick out; select: elect an art course. early application of Staff Accounting Bulletin 108 that was recently released by the SEC (refer to page 24 of the Financial Supplement available online in the Investor Relations Investor relations The process by which the corporation communicates with its investors. section at www.morganstanley.com). As of August 31, 2006, the Company repurchased approximately 39 million shares of its common stock since the end of fiscal 2005. The Company also announced that its Board of Directors declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a $0.27 quarterly dividend per common share. The dividend is payable on October October: see month. 31, 2006 to common shareholders of record on October 13, 2006. Total capital as of August 31, 2006 was $150.0 billion, including $38.0 billion of common shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. , preferred equity and junior subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". issued to capital trusts. Book value per common share Book Value Per Common Share A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Formula: was $31.24, based on 1.1 billion shares outstanding. Morgan Stanley is a leading global financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. firm providing a wide range of investment banking, securities, investment management, wealth management and credit services. The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 600 offices in 30 countries. For further information about Morgan Stanley, please visit www.morganstanley.com. A financial summary follows. Financial, statistical and business-related information, as well as information regarding business and segment trends, is included in the Financial Supplement. Both the earnings release and the Financial Supplement are available online in the Investor Relations section at www.morganstanley.com. The information above contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management's current estimates, projections, expectations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of additional risks and uncertainties that may affect the future results of the Company, please see "Forward-Looking Statements" immediately preceding Part I, Item 1, "Competition" and "Regulation" in Part I, Item 1, "Risk Factors" in Part I, Item 1A and "Certain Factors Affecting Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended November November: see month. 30, 2005, "Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations" in the Company's 2006 Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. and in other items throughout the Form 10-K, the Forms 10-Q and the Company's 2006 Current Reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. . (1)The actual after-tax loss upon finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of the sale was approximately $400 million. (2)Represents income from continuing operations before losses from unconsolidated investees, taxes and cumulative effect of an accounting change. (3)The Company has changed the confidence level at which VaR is utilized for limit and other management purposes from a 99% confidence level to a 95% confidence level. The Company believes this change will facilitate comparisons to other companies in the financial services industry. Under the 99% confidence level the aggregate average trading VaR and aggregate average trading and non-trading VaR would have been $91 million and $103 million, respectively. Under the 99% confidence level the quarter end aggregate trading VaR and aggregate trading and non-trading VaR would have been $97 million and $108 million, respectively. Going forward the Company will report VaR under the 95% confidence level. (4)Source: Thomson Financial Thomson Financial A major provider of information, analytical tools, and consulting services to the financial community. The firm, a division of Thomson Corporation, is best known to investors for its First Call segment, which publishes consensus earnings -- for the period January January: see month. 1, 2006 to August 31, 2006.
MORGAN STANLEY
Quarterly Financial Summary
(unaudited, dollars in millions)
Quarter
Ended
----------------- %
Aug 31, Aug 31, Change
2006 2005
------------------------
Net revenues
Institutional Securities $4,989 $4,164 20%
Global Wealth Management Group 1,371 1,255 9%
Asset Management 634 679 (7%)
Discover 1,047 911 15%
Intersegment Eliminations (53) (62) 15%
------------------
Consolidated net revenues $7,988 $6,947 15%
==================
Income before taxes (1)
Institutional Securities $2,001 $1,288 55%
Global Wealth Management Group 158 30 *
Asset Management 125 162 (23%)
Discover 368 239 54%
Intersegment Eliminations 15 23 (35%)
------------------
Consolidated income before taxes $2,667 $1,742 53%
==================
Earnings per basic share:
Income from continuing operations $1.83 $1.12 63%
Discontinued operations $- $(0.98) *
Cumulative effect of accounting change (2) $- $- --
Earnings per basic share $1.83 $0.14 *
Earnings per diluted share:
Income from continuing operations $1.75 $1.09 61%
Discontinued operations $- $(0.96) *
Cumulative effect of accounting change (2) $- $- --
Earnings per diluted share $1.75 $0.13 *
Average common shares outstanding
Basic 1,010.5 1,045.9
Diluted 1,055.7 1,072.0
Period end common shares outstanding 1,058.7 1,082.7
Return on average common equity
from continuing operations 22.7% 17.1%
Return on average common equity 22.7% 2.0%
--------------------------
(1) Represents consolidated income from continuing operations
before losses from unconsolidated investees, taxes,
gain/(loss) from discontinued operations and cumulative effect
of accounting change.
(2) Represents the effects of the adoption of SFAS 123R in the
first quarter of fiscal 2005.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Quarterly Financial Summary
(unaudited, dollars in millions)
Quarter
Ended
----------------- %
Aug 31, May 31, Change
2006 2006 (1)
------------------------
Net revenues
Institutional Securities $4,989 $5,545 (10%)
Global Wealth Management Group 1,371 1,402 (2%)
Asset Management 634 723 (12%)
Discover 1,047 1,191 (12%)
Intersegment Eliminations (53) (98) 46%
------------------
Consolidated net revenues $7,988 $8,763 (9%)
==================
Income before taxes (2)
Institutional Securities $2,001 $2,087 (4%)
Global Wealth Management Group 158 157 1%
Asset Management 125 224 (44%)
Discover 368 541 (32%)
Intersegment Eliminations 15 (13) *
------------------
Consolidated income before taxes $2,667 $2,996 (11%)
==================
Earnings per basic share:
Income from continuing operations $1.83 $1.81 1%
Discontinued operations $- $0.01 *
Cumulative effect of accounting change (3) $- $- --
Earnings per basic share $1.83 $1.82 1%
Earnings per diluted share:
Income from continuing operations $1.75 $1.74 1%
Discontinued operations $- $0.01 *
Cumulative effect of accounting change (3) $- $- --
Earnings per diluted share $1.75 $1.75 --
Average common shares outstanding
Basic 1,010.5 1,013.2
Diluted 1,055.7 1,054.7
Period end common shares outstanding 1,058.7 1,071.8
Return on average common equity
from continuing operations 22.7% 23.6%
Return on average common equity 22.7% 23.7%
--------------------------
(1) As adjusted, refer to page 24 of the Financial Supplement
available online in the Investor Relations section at
www.morganstanley.com.
(2) Represents consolidated income from continuing operations
before losses from unconsolidated investees, taxes,
gain/(loss) from discontinued operations and cumulative effect
of accounting change.
(3) Represents the effects of the adoption of SFAS 123R in the
first quarter of fiscal 2005.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Quarterly Financial Summary
(unaudited, dollars in millions)
Nine Months
Ended
----------------- %
Aug 31, Aug 31, Change
2006 (1) 2005
------------------------
Net revenues
Institutional Securities $16,007 $11,519 39%
Global Wealth Management Group 4,057 3,721 9%
Asset Management 2,052 2,017 2%
Discover 3,327 2,758 21%
Intersegment Eliminations (210) (199) (6%)
------------------
Consolidated net revenues $25,233 $19,816 27%
==================
Income before taxes (2)
Institutional Securities $5,863 $3,178 84%
Global Wealth Management Group 338 501 (33%)
Asset Management 521 624 (17%)
Discover 1,388 856 62%
Intersegment Eliminations 21 72 (71%)
------------------
Consolidated income before taxes $8,131 $5,231 55%
==================
Earnings per basic share:
Income from continuing operations $5.21 $3.26 60%
Discontinued operations $(0.02) $(0.97) 98%
Cumulative effect of accounting change (3) $- $0.05 *
Earnings per basic share $5.19 $2.34 122%
Earnings per diluted share:
Income from continuing operations $5.01 $3.19 57%
Discontinued operations $(0.02) $(0.95) 98%
Cumulative effect of accounting change (3) $- $0.05 *
Earnings per diluted share $4.99 $2.29 118%
Average common shares outstanding
Basic 1,014.8 1,056.2
Diluted 1,055.8 1,080.3
Period end common shares outstanding 1,058.7 1,082.7
Return on average common equity
from continuing operations 22.7% 17.0%
Return on average common equity 22.6% 11.6%
--------------------------
(1) As adjusted, refer to page 24 of the Financial Supplement
available online in the Investor Relations section at
www.morganstanley.com.
(2) Represents consolidated income from continuing operations
before losses from unconsolidated investees, taxes,
gain/(loss) from discontinued operations and cumulative effect
of accounting change.
(3) Represents the effects of the adoption of SFAS 123R in the
first quarter of fiscal 2005.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
---------------------------------------------------------------------
MORGAN STANLEY
Quarterly Consolidated Income Statement Information
(unaudited, dollars in millions)
Quarter
Ended
----------------- %
Aug 31, Aug 31, Change
2006 2005
------------------------
Investment banking $1,138 $992 15%
Principal transactions:
Trading 2,824 2,150 31%
Investments 202 103 96%
Commissions 888 804 10%
Fees:
Asset management, distribution
and administration 1,326 1,249 6%
Merchant, cardmember and other 312 357 (13%)
Servicing and securitizations income 565 398 42%
Interest and dividends 12,670 6,998 81%
Other 130 106 23%
------------------
Total revenues 20,055 13,157 52%
Interest expense 11,835 5,986 98%
Provision for consumer loan losses 232 224 4%
------------------
Net revenues 7,988 6,947 15%
------------------
Compensation and benefits 3,149 3,165 (1%)
Occupancy and equipment 255 239 7%
Brok., clearing and exchange fees 339 267 27%
Info processing and communications 371 349 6%
Marketing and business development 292 276 6%
Professional services 549 505 9%
Other 366 404 (9%)
September 11th
related insurance recoveries, net - - --
------------------
Total non-interest expenses 5,321 5,205 2%
------------------
Income from continuing operations
before losses from unconsolidated
investees, taxes and cumulative
effect of accounting change 2,667 1,742 53%
Losses from unconsolidated investees 2 105 (98%)
Provision for income taxes 814 471 73%
------------------
Income from continuing operations 1,851 1,166 59%
------------------
Discontinued operations
Gain/(loss) from discontinued operations - (1,700) *
Income tax benefit/(provision) - 678 *
------------------
Gain/(loss) from discontinued operations - (1,022) *
Cumulative effect of accounting change (1) - - --
------------------
Net income $1,851 $144 *
==================
Return on average common equity
from continuing operations 22.7% 17.1%
Return on average common equity 22.7% 2.0%
Pre-tax profit margin (2) 33% 25%
Compensation and benefits
as a % of net revenues 39% 46%
--------------------------
(1) Represents the effects of the adoption of SFAS 123R in the
first quarter of fiscal 2005.
(2) Income before taxes, excluding losses from unconsolidated
investees, as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Quarterly Consolidated Income Statement Information
(unaudited, dollars in millions)
Quarter
Ended
----------------- %
Aug 31, May 31, Change
2006 2006 (1)
------------------------
Investment banking $1,138 $1,132 1%
Principal transactions:
Trading 2,824 3,565 (21%)
Investments 202 690 (71%)
Commissions 888 1,005 (12%)
Fees:
Asset management, distribution
and administration 1,326 1,333 (1%)
Merchant, cardmember and other 312 277 13%
Servicing and securitizations income 565 651 (13%)
Interest and dividends 12,670 10,114 25%
Other 130 123 6%
------------------
Total revenues 20,055 18,890 6%
Interest expense 11,835 9,997 18%
Provision for consumer loan losses 232 130 78%
------------------
Net revenues 7,988 8,763 (9%)
------------------
Compensation and benefits 3,149 3,723 (15%)
Occupancy and equipment 255 237 8%
Brok., clearing and exchange fees 339 340 0%
Info processing and communications 371 365 2%
Marketing and business development 292 298 (2%)
Professional services 549 538 2%
Other 366 266 38%
September 11th
related insurance recoveries, net - - --
------------------
Total non-interest expenses 5,321 5,767 (8%)
------------------
Income from continuing operations
before losses from unconsolidated
investees, taxes and cumulative
effect of accounting change 2,667 2,996 (11%)
Losses from unconsolidated investees 2 103 (98%)
Provision for income taxes 814 1,060 (23%)
------------------
Income from continuing operations 1,851 1,833 1%
------------------
Discontinued operations
Gain/(loss) from discontinued operations - 14 *
Income tax benefit/(provision) - (6) *
------------------
Gain/(loss) from discontinued operations - 8 *
Cumulative effect of accounting change (2) - - --
------------------
Net income $1,851 $1,841 1%
==================
Return on average common equity
from continuing operations 22.7% 23.6%
Return on average common equity 22.7% 23.7%
Pre-tax profit margin (3) 33% 34%
Compensation and benefits
as a % of net revenues 39% 43%
--------------------------
(1) As adjusted, refer to page 24 of the Financial Supplement
available online in the Investor Relations section at
www.morganstanley.com.
(2) Represents the effects of the adoption of SFAS 123R in the
first quarter of fiscal 2005.
(3) Income before taxes, excluding losses from unconsolidated
investees, as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Quarterly Consolidated Income Statement Information
(unaudited, dollars in millions)
Nine Months
Ended
----------------- %
Aug 31, Aug 31, Change
2006 (1) 2005
------------------------
Investment banking $3,252 $2,627 24%
Principal transactions:
Trading 9,469 5,790 64%
Investments 1,206 482 150%
Commissions 2,822 2,452 15%
Fees:
Asset management, distribution
and administration 3,938 3,699 6%
Merchant, cardmember and other 878 983 (11%)
Servicing and securitizations income 1,812 1,315 38%
Interest and dividends 33,333 18,876 77%
Other 368 332 11%
------------------
Total revenues 57,078 36,556 56%
Interest expense 31,328 16,172 94%
Provision for consumer loan losses 517 568 (9%)
------------------
Net revenues 25,233 19,816 27%
------------------
Compensation and benefits 11,033 8,641 28%
Occupancy and equipment 724 803 (10%)
Brok., clearing and exchange fees 971 803 21%
Info processing and communications 1,083 1,040 4%
Marketing and business development 828 831 --
Professional services 1,521 1,322 15%
Other 942 1,396 (33%)
September 11th
related insurance recoveries, net - (251) *
------------------
Total non-interest expenses 17,102 14,585 17%
------------------
Income from continuing operations
before losses from unconsolidated
investees, taxes and cumulative
effect of accounting change 8,131 5,231 55%
Losses from unconsolidated investees 174 245 (29%)
Provision for income taxes 2,666 1,540 73%
------------------
Income from continuing operations 5,291 3,446 54%
------------------
Discontinued operations
Gain/(loss) from discontinued operations (42) (1,698) 98%
Income tax benefit/(provision) 17 677 (97%)
------------------
Gain/(loss) from discontinued operations (25) (1,021) 98%
Cumulative effect of accounting change (2) - 49 *
------------------
Net income $5,266 $2,474 113%
==================
Return on average common equity
from continuing operations 22.7% 17.0%
Return on average common equity 22.6% 11.6%
Pre-tax profit margin (3) 32% 26%
Compensation and benefits
as a % of net revenues 44% 44%
--------------------------
(1) As adjusted, refer to page 24 of the Financial Supplement
available online in the Investor Relations section at
www.morganstanley.com.
(2) Represents the effects of the adoption of SFAS 123R in the
first quarter of fiscal 2005.
(3) Income before taxes, excluding losses from unconsolidated
investees, as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
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