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Morgan Stanley reports significant increase in wealth management and investment management profits


Morgan Stanley has reported net revenues of USD9.2 billion for the third quarter ended September 30, 2017 compared with USD8.9 billion a year ago. Wealth management net revenues were USD4.2 billion and pre-tax margin was 26.5 per cent, while investment management net revenues were USD675 million with assets under management of USD447 billion.

The company’s wealth management business reported pre-tax income from continuing operations of USD1.1 billion compared with USD901 million in the third quarter of last year. The quarter’s pre-tax margin was 26.5 per cent. Net revenues for the current quarter were USD4.2 billion compared with USD3.9 billion a year ago.
Asset management fee revenues of USD2.4 billion increased from USD2.1 billion a year ago reflecting higher asset levels and positive flows. 

Transactional revenues of USD739 million decreased from USD791 million a year ago driven by lower fixed income trading revenues and a decrease in commission and fees. 

Net interest income of USD1.0 billion increased from USD885 million a year ago driven by growth in bank lending and higher interest rates. Wealth Management client liabilities were USD78 billion at quarter end compared with USD70 billion in the prior year quarter.9 

Compensation expense for the current quarter of USD2.3 billion increased from USD2.2 billion a year ago primarily driven by higher revenues. Non-compensation expenses of USD775 million were essentially unchanged from a year ago. 

Total client assets were USD2.3 trillion and client assets in fee-based accounts were USD1.0 trillion at the end of the quarter. Fee-based asset flows for the quarter were USD15.8 billion.
Wealth Management representatives of 15,759 produced average annualised revenue per representative of USD1.1 million in the current quarter.
Morgan Stanley’s investment management business reported pre-tax income from continuing operations of USD131 million compared with USD97 million in the third quarter of last year. Net revenues of USD675 million increased from USD552 million in the prior year.
Asset management fee revenues of USD568 million increased from USD508 million in the prior year quarter on higher levels of assets under management. 

Investment revenues of USD114 million increased from USD51 million in the prior year quarter reflecting higher investment gains and carried interest in Infrastructure investments. 

Compensation expense for the current quarter of USD311 million increased from USD237 million a year ago driven by higher deferred compensation associated with increased revenues. Non-compensation expenses of USD233 million increased from USD218 million a year ago on higher brokerage and clearing expenses. 

Assets under management or supervision at September 30, 2017 were USD447 billion compared with USD417 billion a year ago.
James P Gorman (pictured), Morgan Stanley Chairman and Chief Executive Officer, says: “Our third quarter results reflected the stability our Wealth Management, Investment Banking and Investment Management businesses bring when our Sales and Trading business faces a subdued environment. Our balanced business model and the consistent performance of our franchise enabled us to deliver solid returns for our shareholders.”

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