Morgan Stanley reported its first profit in a year on Wednesday, with third-quarter earnings of $757 million, or $0.38 per diluted share, beating analyst estimates for earnings per share of $0.30. The company’ results were boosted by higher underwriting fees and trading revenue, as well as the firm’s acquisition of Smith Barney. Morgan Stanley ranked #1 in both global M&A and IPOs for the quarter.
While third quarter earnings were above consensus estimates, they were down 94 percent from the year ago quarter. Net revenues, meanwhile, were down 52 percent from the year-ago quarter to $8.7 billion. In the second quarter of this year, the firm posted a loss of $159 million, or $1.37 per diluted share on $5.4 billion in revenue.
The global wealth management unit posted pre-tax income of $280 million, versus a pre-tax loss of $1 million in the third quarter of last year, due in part to its acquisition of Smith Barney, which closed on May 31 of this year. Net revenues for the division totaled $3 billion, up 91 percent versus the year ago quarter, again reflecting the results of the acquisition, the company reported.
Client assets in the wealth management group totaled $1.5 trillion at quarter-end, with $365 billion, or 24 percent, in fee-based accounts. The firm had 18,160 FAs at quarter-end, with average annualized revenue per advisor of $662,000 and client assets per advisor of $84 million. Compensation expenses were $1.9 billion, up from $0.9 billion a year ago. Non-compensation expenses totaled $0.8 billion, compared with $0.6 billion a year ago.
In the year ago quarter, Morgan Stanley alone had total client assets of $707 billion and client assets in fee-based accounts of $186 billion, or 26 percent of total client assets. The firm had 8,500 FAs with average annualized revenue per advisor of $741,000 and average client assets per advisor of $83 million.
Morgan Stanley announced the sale of its retail asset management operations, including Van Kampen Investments, to Invesco, but will take a minority stake in the combined firm.