Sunday, January 27, 2013

Morgan Stanley Earnings Review: Up and Down They Go

Morgan Stanley reported QE December 2012 financial results on January 18

Morgan Stanley earnings per share were $0.25. Though meager, this is a major rebound of +145% from the prior quarter (-$0.55 loss per share) and whopping +267% spike from the prior year (-$0.15 loss per share). In the past 16 quarters, the average earnings per share has been $0.15, consisting of 7 quarters of losses and 9 quarters of earnings. This has ranged from a low of -$1.10 in June 2009 to a high of +$1.15 in September 2011. Therefore, from a historical perspective, Morgan Stanley actually had an above average quarter!

Financial performance, or lack thereof, is flat with a return on assets just above break-even at +0.08% for 2012. Financial position is weak and capital is marginal. Risk management has been ineffective.

Morgan Stanley does this to themselves and to their clients. CEO James Gorman noted 4 quarters ago that MS continues "addressing a number of outstanding strategic and legacy issues." I guess that's one way to say it. Another way to say it is: we lie, cheat, and steal. The general public is not as familiar with Morgan Stanley as they are Goldman Sachs, JPMorgan, Bank of America, Citigroup, et al. in the Wall Street Banksters syndicate. They are just as criminally inclined if not more so.

At QE 12-31-12, I have rated Morgan Stanley a "G" on a scale of A+ to G-. This is a downgrade from "E-" at the prior QE 9-30-12. The median rating is "D" and the average rating at QE 9-30-12 was "C". Financial position is weighted more than financial performance. The QE 9-30-12 bank ratings review is here and the QE 12-31-12 bank ratings will be posted soon.

James P. Gorman, Chairman and Chief Executive Officer, said, "After a year of significant challenges, Morgan Stanley has reached a pivot point. We demonstrated meaningful progress in our Wealth Management Joint Venture, reaching the highest pre-tax margin since the inception of the JV. We charted a path to acquire the remainder of the JV. We are ahead of our risk-weighted asset reduction targets for Fixed Income and Commodities, while continuing to focus on our strengths within business and strategic linkages across the Firm and investing for the evolving regulatory environment. We continued to demonstrate leadership in Investment Banking and Equity sales and trading. Our Firm is now poised to reach the returns of which it is capable on behalf of our shareholders."


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