Morgan Stanley posts $958 million profit as wealth management grows

NEW YORK, Thu Apr 18, 2013 — Morgan Stanley reported a stronger-than-expected first-quarter profit of $958 million, compared with a year-earlier loss of $119 million, as its wealth management business grew.

The sixth-largest U.S. bank by assets said on Thursday it earned 49 cents per share on a consolidated basis in the first three months of the year, compared with a loss of 6 cents per share a year earlier.

Excluding a charge related to debt value adjustment, or changes in the value of the company’s debt, Morgan Stanley earned $1.2 billion, or 61 cents per share.

On the same basis, analysts had expected earnings of 57 cents, according to Thomson Reuters I/B/E/S.

However, revenue from fixed income and commodities trading fell to $1.5 billion from $2.6 billion a year earlier, reflecting declines in commodities and rates.

Shares of the bank, which has reported a profit excluding items in every quarter since the first quarter of 2012, were down 2.3 percent at $20.98 before the bell.

Excluding items, total revenue fell 4.8 percent to $8.48 billion, beating the average analyst forecast of $8.35 billion.

Revenue in the wealth management group, which had been expected to drive earnings, rose 5.4 percent to $3.47 billion, making up about 41 percent of total revenue.

 

Morgan Stanley to cut jobs, may signal more pain ahead

NEW YORK, Thu Jan 10, 2013 — Morgan Stanley plans to slash 1,600 jobs in what may be just the beginning of a new round of layoffs at large investment banks, this time driven by a deeper reassessment of Wall Street businesses in the face of new regulations and capital standards.

Morgan Stanley, the sixth-largest U.S. bank by assets, plans to begin letting go of the employees, many of whom work in its securities unit, starting this week, two people familiar with the matter said on Wednesday.

A third person who has been involved with plans to cut staff at Morgan Stanley and other large banks said that Morgan Stanley’s cuts had been in the works for months, and that more are expected in the future.

Large global investment banks have been cutting staff for the better part of five years, when the financial crisis pegged to the U.S. housing market began to seize up markets.

Firms previously focused their job cuts on areas where activity had screeched to a halt, such as securitization of mortgages, or that were explicitly banned by new regulations, such as proprietary trading.

But banks are now making strategic decisions about businesses in grey areas where management teams do not see major profit potential, or realize that their individual banks are not competitive, the third source said.

“It’s hard to look at yourself in the mirror, and say: ‘I’m not good at this,’” said the source. But now that management teams are coming to those realizations, he said, they are beginning to make strategic decisions to exit businesses and cut more staff.

Top Morgan Stanley broker departs for J.P. Morgan

NEW YORK, Mon Oct 1, 2012 – A top Morgan Stanley broker who last year managed about $2 billion in client assets left the company’s brokerage division on Friday to join J.P. Morgan Securities.

Adviser Jonathan Madrigano, who worked out of Morgan Stanley Wealth Management’s Midtown Manhattan office, generated annual revenue of between $8 million and $10 million, according to sources with knowledge of the move.

“That level of production is eye-opening,” because only a handful of broker teams with more than $1 billion in assets under management leave any big brokerage each year, said New York-based financial services recruiter Danny Sarch, who has worked in the industry for nearly three decades. “There aren’t that many guys out there of that size at any firm across the country.”

Madrigano managed more than $2 billion in client assets, according to a 2011 Barron’s ranking of top financial advisers in New York.

He was a director of wealth management and a private wealth adviser at Morgan Stanley Private Wealth Management, the company’s ultra-high-net-worth group catering to clients with at least $20 million in assets.

Madrigano was a legacy Citigroup Smith Barney broker. He started at New York-based investment bank D.H. Blair & Co in 1989 and moved to Citigroup Inc. in 2000, according to regulatory filings.

Ex-Morgan Stanley executive gets prison time in bribery case

NEW YORK, Fri Aug 17, 2012 – A former Morgan Stanley real estate dealmaker was sentenced to nine months in prison on Thursday for skirting the bank’s internal controls in an effort to enrich himself and a Chinese government official.

Garth Peterson, 43, had pleaded guilty in April to conspiring to evade internal accounting controls that Morgan Stanley was required to maintain under the U.S. Foreign Corrupt Practices Act, an anti-bribery law.

Peterson, a managing director in Morgan Stanley’s real estate investment and fund advisory business in Shanghai, was fired in 2008 amid a probe into a suspect real estate deal, court records showed.

While federal investigators have increased efforts in recent years to enforce the FCPA, which is intended to thwart illicit payments to foreign officials, Peterson’s case is among the first related to the financial services industry.

The sentence, imposed by U.S. District Judge Jack Weinstein in Brooklyn, New York, was much shorter than the 51- to 60-month term sought by prosecutors.

A spokesman for U.S. Attorney Loretta Lynch in Brooklyn declined to comment.

During Thursday’s sentencing hearing, Peterson apologized to his family and his former employer, saying he went down “the wrong track” when he entered a suspect real estate deal with an unnamed official from Yongye, a state-owned real estate investment corporation in Shanghai.

Prosecutors accused Peterson of helping the official and a Canadian lawyer they did not identify secretly buy a stake, at a discounted price, in a valuable Shanghai property owned by a Morgan Stanley fund.

Morgan Stanley considers shutting offices, cutting staff: sources

NEW YORK, Tue Aug 7, 2012 – Morgan Stanley, under fire to boost profit margins in its retail brokerage arm, is considering closing brokerage offices, laying off support staff and requiring some branch managers also to generate revenue as advisers under a cost-cutting drive, three people briefed on internal discussions said.

Morgan Stanley, which controls the Morgan Stanley Smith Barney venture owned jointly with Citigroup, last week reduced the number of regions to 12 from 16, eliminating four manager jobs. Only about eight months earlier the firm had consolidated its regional manager ranks from 19.

Recruiters, citing conversations with advisers and managers at the firm, say additional cost cutting measures are expected to be announced in the coming weeks.

Among the changes under discussion, they said, is a 10 percent cut in the venture’s 120 branch “complexes”, which are groups of branch offices in a city or region that share compliance and administrative staff.

Morgan Stanley spokeswoman Christine Jockle declined to comment.

Morgan Stanley is eager to slash spending in the brokerage division after all of its nearly 17,000 brokers were transferred last month onto a common technology platform. Redundant offices from Morgan Stanley’s and Smith Barney’s nationwide networks will be closed, and support jobs will be eliminated.

Citi may take $6 billion charge on MSSB valuation: Barclays

NEW YORK, Tue Aug 7, 2012 – Citigroup Inc. may have to a take a charge of almost $6 billion in the current quarter on a markdown of its valuation of the retail brokerage business it owns with Morgan Stanley, Barclays Capital said.

The third-largest U.S. bank said last month that Morgan Stanley estimates the business, known as Morgan Stanley Smith Barney, is worth less than half as much Citi believes it is.

The disagreement came as Morgan Stanley tried to buy another 14 percent of the joint venture, beyond the 51 percent it owns.

Citi estimates the business is worth $22 billion, while Morgan Stanley pegs it at $9 billion.

The bank’s valuation reflected an extremely optimistic view of the future of Wall Street profits, setting up the possibility of a multi-billion charge.

A third-party appraiser will help set the final price in a process set to conclude at the end of August, with the sale slated to close by Sept. 7.

Smith Barney became part of Citigroup in 1998 when former Chief Executive Sandy Weill turned the bank into a financial conglomerate. The subsequent joint venture was forged in the financial crisis in January 2009 when Citi looked to raise capital and Morgan Stanley sought a stable source of revenue.

Barclays analyst Jason Goldberg, in a note to clients, also said the charge, if taken, would reduce Citigroup’s earnings per share by $1.30 in the third quarter.

Goldberg is rated five stars for the accuracy of his earnings estimates on Citigroup, and ranks second out of 24 analysts covering the stock, according to Thomson Reuters StarMine.

Analysts on average currently expect Citigroup to earn 97 cents per share, excluding items, according to Thomson Reuters I/B/E/S.

Goldberg, however, maintained an “overweight” rating and a price target of $46 on the stock.

Citigroup’s stock closed at $28.56 on Monday on the New York Stock Exchange.

Morgan Stanley swings to second-quarter profit

NEW YORK Thu Jul 19, 2012 – Morgan Stanley swung to a profit in the second quarter, though revenue declined 24 percent due to a slowdown in trading and dealmaking.
The investment bank reported earnings of $564 million, or 29 cents per share, compared with a loss of $558 million, or 38 cents per share, in the year-ago quarter. Morgan Stanley also lost money in the first quarter.
The latest results included a $350 million gain from changes in Morgan Stanley’s credit spreads, but earnings generally beat what many analysts had been expecting.
Revenue fell to $6.95 billion from $9.21 billion a year earlier. Revenue from merger advisory dropped 51 percent to $263 million, revenue from underwriting fell 34 percent to $621 million, and equity trading revenue fell 34 percent to $1.22 billion. Wealth management and asset management revenue also fell.
Morgan Stanley said as a result of its credit ratings being downgraded in June, it posted $2.9 billion of extra collateral with trading counterparties in derivatives. Its counterparties were entitled to ask for $6.3 billion under its agreements with them. Moody’s Investors Service cut its ratings on the bank to “Baa1,” three steps above junk, on June 21 as part of a broad re-evaluation of banks exposed to capital markets businesses like stock and bond trading.
Morgan Stanley’s 2011 second-quarter results included a charge linked to the bank’s conversion of preferred stock owned by Japan’s Mitsubishi UFJ Financial Group into common stock.

Morgan Stanley faces Facebook fallout, limits damage

NEW YORK, Wed Jun 27, 2012 – Morgan Stanley was quick to dismiss suggestions its status as the king of initial public offerings for Silicon Valley was under threat because of the botched Facebook Inc. IPO last month. And that confidence may be warranted.

While Morgan Stanley has been snubbed by some technology companies, the repercussions for the Wall Street investment bank have been limited, according to sources familiar with the situation.

Just a week after the Facebook debut, Ruckus Wireless chose Goldman Sachs Group Inc. over Morgan Stanley as the lead underwriter for its IPO, sources familiar with the matter said.

One of the sources said the company’s decision had nothing to do with the social networking website’s debacle, but a second said Facebook had at least some influence on the decision.

Ruckus, which supplies WiFi products to mobile operators, chose Goldman primarily because it liked the firm’s banker and the pitch, the sources said. Morgan Stanley is now one of the bookrunners on the IPO.

Some companies and rivals have railed against Morgan Stanley’s tendency to monopolize IPOs – a practice that is not uncommon on Wall Street. The bank retained tight control over information, decisions and the allocation of Facebook shares, even though there were 33 bookrunners on the offering, other underwriters have said.

In fact, the bank has long argued it is right to do so, telling clients it offers them “one throat to choke” if something goes wrong, sources familiar with the situation said.

But at least one client, Palo Alto Networks, which has hired Morgan Stanley as its lead bookrunner, is no longer buying into that argument. The security software maker has asked its other underwriters, which include Goldman and Citigroup Inc., to be more active in its IPO, which is planned for later this summer, sources familiar with the company said. That will likely mean having more of a voice in book-building, as well as pricing discussions.

Morgan Stanley faces Facebook fallout, limits damage

NEW YORK, Wed Jun 27, 2012 – Morgan Stanley was quick to dismiss suggestions its status as the king of initial public offerings for Silicon Valley was under threat because of the botched Facebook Inc. IPO last month. And that confidence may be warranted.

While Morgan Stanley has been snubbed by some technology companies, the repercussions for the Wall Street investment bank have been limited, according to sources familiar with the situation.

Just a week after the Facebook debut, Ruckus Wireless chose Goldman Sachs Group Inc. over Morgan Stanley as the lead underwriter for its IPO, sources familiar with the matter said.

One of the sources said the company’s decision had nothing to do with the social networking website’s debacle, but a second said Facebook had at least some influence on the decision.

Ruckus, which supplies WiFi products to mobile operators, chose Goldman primarily because it liked the firm’s banker and the pitch, the sources said. Morgan Stanley is now one of the bookrunners on the IPO.

Some companies and rivals have railed against Morgan Stanley’s tendency to monopolize IPOs – a practice that is not uncommon on Wall Street. The bank retained tight control over information, decisions and the allocation of Facebook shares, even though there were 33 bookrunners on the offering, other underwriters have said.

In fact, the bank has long argued it is right to do so, telling clients it offers them “one throat to choke” if something goes wrong, sources familiar with the situation said.

But at least one client, Palo Alto Networks, which has hired Morgan Stanley as its lead bookrunner, is no longer buying into that argument. The security software maker has asked its other underwriters, which include Goldman and Citigroup Inc., to be more active in its IPO, which is planned for later this summer, sources familiar with the company said. That will likely mean having more of a voice in book-building, as well as pricing discussions.

Deal or no deal, Morgan Stanley commodity trade shrinks

NEW YORK, Thu Jun 7, 2012 – The hard core of Morgan Stanley’s commodities trading empire, once the mightiest on Wall Street famed for its powerful union of paper and physical deals, is shrinking.

Even as the bank is reported to be considering selling a stake in its billion-dollar commodities unit, its physical trading activity in key U.S. markets is contracting in the face of abruptly changing market dynamics as well as diminishing risk appetite due to growing regulations and capital constraints.

In the power markets, it is trading only one-fifth as much electricity as five years ago. In oil, its imports to the United States fell last year to the lowest since 2004, while exports remain negligible. It barely makes the top 100 list of U.S. natural gas traders, with activity slipping from 2010.

Even the bank’s prized subsidiary TransMontaigne, a Denver-based refined petroleum products supply and distribution company it bought for $630 million six years ago, hasn’t helped it cash in on the boom in domestic U.S. crude oil trading this year. Its 2011 revenues were $152 million, up just 16 percent from 2007.

The data, based on government figures, port intelligence, securities filings and market sources, casts in sharp relief a trend that commodity traders say has been apparent for some time: Morgan Stanley is losing its edge in the opaque, over-the-counter cash commodity markets it once ruled.