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Morgan Stanley With Huge Q2 Miss, Posts Abysmal Results
Morgan Stanley reported earnings this morning, and showed that unless one has massive loan loss reserves to release, US banks are in big trouble. The firm just reported $0.28 EPS including DVA benefit, on expectations of $0.29. But it was the top line that got blown out, with the firm reporting $7.0 billion in revenue including the DVA fudge, but more importantly $6.6 billion. The expectations was for a $7.58 billion top line: a 14% miss. The top line number plunged over 25% compared to a year ago. The main reason for the collapse in profit: the virtual disappearance of any cash from combined fixed income, commodity and equity sales and trading, which imploded from $3.7 billion a year ago, to just $1.9 billion this quarter. And while the company slashed comp in Q2 as was to be expected following such horrible results, by over 33% to $1.4 billion from $2.2 billion, here is what most are focused on: "As a result of a rating agency downgrade of the Firm's long-term credit rating in June, the amount of additional collateral requirements or other payments that could be called by counterparties, exchanges or clearing organizations under the terms of certain OTC trading agreements and certain other agreements was approximately $6.3 billion, of which $2.9 billion was called and posted at June 30, 2012." In other words, the company has yet to post more than half of its contractually required collateral. In the aftermath of these atrocious earnings, we wish them all the best in getting access to this cash.
More details:
- Advisory revenues were $263 million compared with $533 million a year ago on lower levels of market activity. Fixed income and equity underwriting revenues were $621 million compared with $940 million a year ago primarily reflecting lower market volume.
- Fixed income and commodities sales and trading net revenues were $770 million compared with $1.9 billion a year ago. The decrease in net revenues from last year's second quarter reflected reduced levels of client activity across geographies and most products.
- Equity sales and trading net revenues were $1.1 billion compared with $1.8 billion in the prior year quarter primarily reflecting lower results in the derivatives and cash businesses.
- Other sales and trading net losses were $11 million compared with losses of $507 million in last year's second quarter reflecting gains on hedges associated with corporate lending activity and the net positive impact of $76 million representing an out of period gain of $300 million on the incorrect application of hedge accounting on certain derivative contracts previously designated as net investment hedges of certain foreign, non-U.S. dollar denominated subsidiaries, partially offset by a loss of $224 million resulting from fair value changes within the quarter of the related derivative positions not qualifying for net investment hedge accounting.
- Compensation expense was $1.4 billion compared with $2.2 billion a year ago. The current quarter reflects an adjustment of approximately $160 million to reduce previously accrued discretionary above base compensation due to an updated 2012 financial outlook. The reported compensation to net revenue ratio was 44%; excluding DVA, this ratio was 49%. Non-compensation expenses were $1.3 billion compared with $1.5 billion a year ago.
- Morgan Stanley's average trading Value-at-Risk measured at the 95% confidence level was $91 million compared with $84 million in the first quarter of 2012 and $145 million in the second quarter of the prior year.
Gorman's take on this abysmal quarter:
“Although global economic uncertainty remains a headwind, we are proactively positioning the Firm for success. Our businesses showed resilience in key areas during the quarter, and we made progress against strategic goals. Despite muted volumes, Investment Banking maintained its industry-leading rankings. In Global Wealth Management, we increased our pre-tax margin to 12 percent in an environment marked by investor caution, and we integrated substantially all of our technology systems, which should bring additional value to our clients. We continue to be focused on taking the necessary steps to deliver strong returns for our shareholders.”
Just plain ugly, which is to be expected with ZIRP, and even more to be expected when nobody has any interest in trading.
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Suckerberged.
Didn't see that coming.......ergo......Suckerberged!
meanwhile at Bloomberg
Sara Eisen lifts her dress on camera
http://www.youtube.com/watch_popup?v=iWWW0PqkSHU#t=1m10s
..and exposes her giant reptillian electroshock-cock.
Meanwhile in the real world.....I'm actually trying to do my job.
I realize that might seem shocking.
WTH was that?
It was a novelty item.
Shares sold off for about 2 minutes before everyone raced in to BTFD. It's clearly on sale here.
A lot of pink slips are coming, going to be an ugly year end at MS, this year.
Faceplanted
net interest margins for all banks has been going down .. the free money from depositors is lossing its benefit http://research.stlouisfed.org/fred2/series/USNIM
now I know why those CEO's are worth every penny paid. pity them..the system is defunct world wide, they know it, and in our hearts we know it ( those on ZH)..the FED will not help MS, then Jamie and Bankfine will carve it up I see them drooling today.
Clearly bullish. How lOng before uncle Warren come to the rescue with an investment in this "valuable franchise "?
Exactly - Might be good for 200 on the Dow today. Good news is good - bad news is good.
I hope he buys the entire float on margin. Cunt.
Yeah, I'm sure he and Obama will work out a sweetheart deal to buy it up at $6.66 a share. Time to fill up the bathtub!
Hand that boy a Nobel Prize......again.
Layoffs in 3..2..1..
Counterparties declining to take collateral because they are supposed to pay interest on the cash, but it actually costs them to hold it?
As a long-time FX trader, I am frighteningly amused and confused by this un-tradable market. I have watched other struggle, as I am, to comprehend the logic of all of these bizarre movements.
It is like going to a graveyard where the ground has been electrified.
That is why, if you can, it's time to take your money and run. I will not come back untill the reset has happened. Untill then I stack, prepare, relax, enjoy the family, enjoy a beer, and laugh as much as possible.
i hear ya beetle.. everyone does. This is beyond compreshension. This makes the internet bubble bust look like preschool. The Fed has literally hijacked an entire global market. The goal i wonder every day. to make a disaster look good? To chase away every trader ? This goes on any longer there will nothing but tumble weeds. This is just scary ..Im lost for words every day. Its so blatently manipulated. They dont even try to hide it.
> This goes on any longer there will nothing but tumble weeds.
We're going to Westworld!
The last thing I expected to do was commiserate with other traders Mee......
I urged clients to take profits back in March of 2000 - and suffered the cat-calls from the perma-bulls for months.....
The ONLY solace I have is knowing how that turned out; a 1/3 listened - 2/3 didn't - and in time, I heard "damn, I wish I would have listened to you a year ago".
One month ago, I yanked clients money out of the market, and bought gold and silver (ETF'S, coins) and advised clients to prepare and brace themselves for a market down-turn, as I see nothing but lousy data, millions unemployed, and divisiveness worldwide.
Deja Vu?
That the markets going up in response to this is truly bizarre - .......it has me re-thinking lots of things.
I was a great trader; this year - not so much at all.
To big to fail and that is a fact. To much derivative exposure and they know the almighty printer will keep them afloat!
No collateral, eh? I smell a Lehman moment coming in the not too distant future.
I love the way the MSM spins stuff.
Yahoo News (Reuters): Morgan Stanley swings to second-quarter profit
http://www.zerohedge.com/news/morgan-stanley-huge-q2-miss-posts-abysmal-...
I think things are about to get exciting over the next few months. Surprises to the downside.
SP500 is up over 6 points on this bullish news.
They just need a *FG
Instant cashola
This is the next Lehman almost zero doubt.
jobless claims up? doesnt matter. the fed has made data utterly pointless. means nothing. thanks ben. one man destroys an entire global market. hope your happy and your masters are to.
Employees at Morgan are trying to make like Ahnold and Get to The Choppa!!!
bonus time!
What is this TBTF stuff? Things are only TBTF until it isn't. Every empire that has passed was TBTF at the time, but they did.
Goldman's trading bots are much better. It's been a game of one trading house vs another. The loosers are apparent.
Hasn t MS always been a GS wannabe? Sort of like the dumb brother?