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Sunday, January 23, 2011

Morgan Stanley Reports Modest Q4 Improvement (Financial Charts, Review) *EPS $0.41* MS

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Morgan Stanley reported Q4 2010 financial results on Thursday, January 20, 2011


Morgan Stanley Reports Modest Fourth Quarter 2010 Improvement

Morgan Stanley reported quarterly financial results on Thursday, January 20 before the market opened. Morgan Stanley financial performance charts for Q4 2010 and prior quarters have been posted, along with commentary, on the Morgan Stanley Financial Performance page. The charts are:

Morgan Stanley Performance by the Quarters
Earnings per Share (Diluted)
Net Revenues, Operating Income, Net Income
Operating Margin, Net Margin
Capital to Assets and Tier 1 Capital Ratios
Income Statement Components
Net Revenues and Earnings per Share Growth Rates

In addition, a Bonus Chart has been included below in this post, Morgan Stanley Operating Expense Ratio. More charts have been posted on the Morgan Stanley Financial Performance page.

Summary Q4 2010 Morgan Stanley Q4 2010 financial results improved from the prior quarter Q3 2010 and from the prior year Q4 2009 but did not meet the performance achieved in the first half of 2010 (Q1 and Q2 2010).

Income Statement Q4 2010 Morgan Stanley reported net revenues of $7.8B, net income of $836M, and earnings per share of $0.41. From the prior quarter Q3 2010, net revenues were up +15.2%, net income up +538.2%, and earnings per share up +685.7%. From the prior year Q4 2009, net revenues were up +14.1%, net income up +35.5%, and earnings per share up +41.4%, respectively. Both the operating margin of 15.15% and net margin of 10.71% increased QoQ and and YoY.

Balance Sheet Q4 2010 Tier 1 capital was 16.0% which was adequate. More commentary will be posted about the Morgan Stanley financial position, including asset mix, at a later date.


Morgan Stanley Performance by the Quarters (Operating Expense Ratio)


Morgan Stanley Operating Expense Ratio (Chart) Below is a chart of the operating expense ratio for Morgan Stanley. The operating expense ratio is NonInterest Expense divided by Total Revenues which are NonInterest Income and Interest Income. Overall, the operating expense ratio is high and has been historically, especially compared to Morgan Stanley's peers. The Q4 2010 operating expense ratio of 69.73% is significantly higher than Goldman Sachs 49.82%, JPMorgan 54.18%, Wells Fargo 57.01%, and Citigroup 51.03%. A higher share of each dollar of revenues is being spent on operating expenses. This negatively affects profitability and already has as an ongoing drag on earnings. The chart covers the past 8 quarters, from March 2009 through the latest quarter reported, December 2010. More charts have been posted on the Morgan Stanley Financial Performance page. Recent chart data is:
Quarter, Operating Expense Ratio
Dec09: 77.17%
Mar10: 62.82%
Jun10: 65.49%
Sep10: 70.07%
Dec10: 69.73%




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