Zacks Analyst Blog Highlights: Morgan Stanley, Bank of America, JPMorgan, Goldman Sachs and Citigroup

For Immediate Release

Chicago, IL – July 22, 2010 – Zacks.com Analyst Blog features: Morgan Stanley (MS - Analyst Report), Bank of America (BAC - Analyst Report), JPMorgan Chase & Co. (JPM - Analyst Report), Goldman Sachs (GS - Analyst Report) and Citigroup (C - Analyst Report).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Wednesday’s Analyst Blog:

Morgan Stanley Tops, Profit Soars

Morgan Stanley (MS - Analyst Report) second quarter earnings came in at 80 cents per share, substantially ahead of the Zacks Consensus Estimate of 47 cents. This also compares much favorably with the loss of $1.36 in the year-ago quarter.

This represents Morgan Stanley’s fourth consecutive quarter of income from continuing operations, post-economic crisis.

Including discontinued operations, net income for the reported quarter came in at $1.09 per share, compared with a net loss of $1.10 in the year-ago quarter.

Results for the reported quarter include Morgan Stanley Smith Barney (MSSB) results effective the closure of the deal on May 31, 2009. Morgan Stanley owns 51% of MSSB. Results were aided by robust top-line growth, resulting from higher trading revenue, commissions, asset management fees and improved interest income. Net revenues for the reported quarter were positively impacted by Morgan Stanley’s debt-related credit spreads. However, higher compensation and non-compensation expenses were the downside.

Behind the Headlines

Including discontinued operations, net income for the reported quarter was $1.9 billion, up from $149 million in the year-ago quarter. Discontinued operations included an after-tax gain of $514 million related to the sale of its retail asset management business, including Van Kampen Investments.

Net revenues for the quarter increased 53% year-over-year to $8.0 billion. Net revenues included $750 million related to Morgan Stanley’s debt-related credit spreads compared with negative $2.3 billion in the year-ago quarter.

Net interest income was $152 million compared to a loss of $197 million in the year-ago quarter.

Total compensation and benefits expense increased only 2% year-over-year to $3.9 billion, while total non-compensation expense increased 21% year-over-year to $2.4 billion. Compensation expenses included a charge of $361 million related to the U.K. government’s payroll tax on 2009 discretionary bonuses. Higher compensation costs related to MSSB were partially offset by lower compensation costs in Institutional Securities.

Segment Results

Institutional Securities’ pre-tax income from continuing operations was $1.6 billion compared with a loss of $298 million in the prior-year quarter. Net revenues in this segment were $4.5 billion, up 50% from $3.0 billion in the year-ago quarter.??

Global Wealth Management’s pre-tax income from continuing operations was $207 million compared with a loss of $71 million a year ago. Results for the reported quarter benefited from the results of MSSB. Net revenues were $3.1 billion compared with $1.9 billion in the year-ago quarter.

Asset Management’s pre-tax loss from continuing operations was $86 million compared with a loss of $210 million in the year-ago quarter. Net revenues for the reported quarter were $410 million, up 15% from $358 million a year ago.

As of June 30, 2010, total assets under management were $251 billion, up from $242 billion as of June 30, 2009, reflecting market appreciation partly offset by net customer outflows, primarily in Morgan Stanley’s money market funds.

During the quarter, Morgan Stanley was ranked #2 in global announced and completed M&A and #1 in global IPOs.

At June 30, 2010, Book value per common share was $29.65, up fro $27.21 at June 30, 2009. Morgan Stanley’s Tier 1 capital ratio, under Basel I, was approximately 16.4% and Tier 1 common ratio was approximately 9.2%. 

Dividend Update

Concurrent with the earnings release, Morgan Stanley declared a quarterly dividend of $0.05 per common share. The dividend will be paid on August 13, 2010 to common shareholders of record on July 30, 2010.

However, there are concerns related to the impact of the upcoming financial reform bill which will be signed by President Obama today. Following the approval, the financial reform bill would partially restrict proprietary trading of commercial banks. Also, derivatives trading would be restricted, which are used to hedge risk or speculate the future value of assets. As a result, a significant impact on profitability is expected for the big commercial banks including Morgan Stanley, Bank of America (BAC - Analyst Report), JPMorgan Chase & Co. (JPM - Analyst Report), Goldman Sachs (GS - Analyst Report) and Citigroup (C - Analyst Report).

Though continuing pressure on trading revenues will hurt the profitability of Morgan Stanley in the upcoming quarters, a slowdown in loan loss reserves like other large banks will support the bottom-line.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Read the full analyst report on MS

Read the full analyst report on BAC

Read the full analyst report on JPM

Read the full analyst report on GS

Read the full analyst report on C