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Morgan Stanley's Wealth Unit Slips

Morgan Stanley's Wealth Unit Slips

Morgan Stanley's performance took a dive during the third quarter, with the firm reporting Monday a 6 percent quarterly decline in revenues and a 7 percent decline in profits for its wealth management business.

Overall, the New York-based investment bank reported a profit of $1 billion, or $0.34 a share, down from the $1.7 billion in profits reported a year ago. The performance missed analysts estimates by $0.29, according to Seeking Alpha.

Revenues also missed by $1.21 billion, with Morgan Stanley reporting $7.8 billion for the third quarter compared with $8.9 billion a year ago.

CEO James Gorman said the quarter was “obviously disappointing,” due to volatility in global markets. The difficult environment significantly affected the firm’s fixed income business and the Asia merchant banking business.

Additionally, Gorman said the firm’s increased legal costs, which grew $250 million from last year, played a role in the depressed results.

Morgan Stanley’s wealth management, usually a bright spot for the firm, also took a hit during the third quarter. Gorman blamed the poor performance on a lack of new issued products and retail investors taking a step back because of increased volatility in the markets, but added the unit continued to provide stability and consistency. 

Here are the highlights:

  • Morgan Stanley Wealth Management reported net revenues of $3.6 billion, down 6 percent from last quarter and down about 4 percent from a year ago. But the unit’s revenues accounted for 46.9 percent of the bank's overall revenue, compared with 42.4 percent in the same quarter last year.
  • Profits for the quarter were $824 million, a decrease of 7 percent sequentially, but grew by 3 percent from $800 million reported a year prior.
  • Total client assets within the unit came in at $1.9 trillion, down 5 percent sequentially and down 4 percent from a year ago.
  • Fee-based asset flows were $7.7 billion for the third quarter, compared to $13.9 billion sequentially and $6.5 billion a year ago.
  • The unit reported a pretax profit margin of 23 percent, flat sequentially and up from the 21 percent a year ago on reduced compensation.
  • Advisor headcount for the quarter was up by 36 reps to 15,807. But that’s down 355 advisors who were with the firm a year ago.
  • Revenue per advisor was $922,000 down 6 percent from the second quarter and down 1 percent from a year ago. Average advisor assets also took a hit. The firm reported assets of $122 million per advisor, down 5 percent sequentially and down 2 percent from a year ago.
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