NEW YORK CITY (dpa-AFX) - Investment bank Morgan Stanley (MS) and rival Goldman Sachs Group Inc. (GS) on Thursday reported results for the first quarter, that beat analysts' estimates.
Morgan Stanley reported a 55 percent increase in profit for the first quarter from last year, reflecting higher revenues at all its three segments, particularly institutional securities segment. Both earnings per share and revenue beat analysts' estimates.
Revenues at Morgan Stanley's fixed-income trading business increased 13 percent. The company also boosted its quarterly dividend.
Goldman Sachs reported 11 percent decline in profit for the first quarter from last year, reflecting lower net revenues in fixed-income trading. The company has bigger exposure to fixed-income trading than its rivals.
However, both earnings per share and quarterly revenues topped analysts' expectations, helped by strong performance at the company's investment banking business.
New York-based Morgan Stanley reported first-quarter net earnings applicable to common shareholders of $1.45 billion or $0.74 per share, up from $936 million or $0.48 per share in the prior-year quarter.
The latest quarter's results included positive revenue related to changes in Morgan Stanley's debt-related credit spreads and other credit factors, known as debt valuation adjustment or DVA, of $126 million. This compares with negative revenue of $317 million a year ago.
Excluding DVA, income from continuing operations was $1.39 billion or $0.68 per share, compared with income of $1.18 billion or $0.60 per share in the year-ago quarter.
On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $0.60 per share for the quarter. Analysts' estimates typically exclude one-time items.
Net revenues for the quarter rose 10 percent to $8.93 billion from $8.15 billion in the same period last year. Excluding DVA, revenues increased to $8.80 billion from $8.47 billion in the same quarter last year. Analysts had a consensus revenue estimate of $8.52 billion.
Quarterly revenues at Morgan Stanley's institutional securities segment rose 13 percent from the year-ago period to $4.61 billion. Stripping out DVA, the segment's revenues grew 2 percent to $4.48 billion. The institutional securities segment includes investment banking as well as sales and trading results.
Advisory revenues rose 34 percent from the year-ago period to $336 million. Equity underwriting revenues grew 11 percent to $315 million, reflecting higher IPO volumes.
Fixed income underwriting revenues grew 18 percent from the year-ago period to $485 million, reflecting an increase in loan fees. Fixed income and commodities sales and trading net revenues increased 13 percent to $1.7 billion, helped by strong performance in commodities as well as solid results in credit and securitized products.
Meanwhile, equity sales and trading net revenues increased 6 percent to $1.7 billion, reflecting higher levels of client activity across products and strong performance in prime brokerage.
Net revenues at Morgan Stanley's global wealth management segment rose 4 percent from the year-ago period to $3.62 billion, while investment management revenues grew 15 percent to $740 million.
As at March 31, Morgan Stanley's assets under management or supervision rose 12 percent to $382 billion from last year, reflecting market appreciation and positive flows. The business recorded net flows of $6.0 billion in the latest quarter.
Morgan Stanley increased its quarterly dividend to $0.10 per share from $0.05 per share, payable on May 15 to shareholders of record on April 30.
Goldman Sachs reported net earnings applicable to common shareholders for the first quarter of $1.95 billion or $4.02 per share, down from $2.19 billion or $4.29 per share in the prior-year quarter.
On average, 23 analysts polled by Thomson Reuters expected the company to report earnings of $3.45 per share for the quarter. Analysts' estimates typically exclude special items.
Net revenues for the quarter, including net interest income, declined 8 percent to $9.33 billion from $10.09 billion in the same period last year. Analysts' had a consensus revenue of $8.70 billion for the quarter.
Total non-interest revenues declined 10 percent from the year-ago period to $8.29 billion, while net interest income rose 12 percent to $1.04 billion.
Lloyd Blankfein, Chairman and Chief Executive Officer of Goldman Sachs, said, 'Investment Banking and Investment Management generated solid results, while market sentiment shifted throughout the quarter, constraining client activity in various parts of our franchise.'
Segment-wise, the company's investment banking business recorded 13 percent growth in net revenues from the year-ago period to $1.78 billion. The company noted that it was the highest quarterly performance since 2007.
Net revenues in financial advisory grew 41 percent to $682 million, primarily reflecting an increase in client activity in Europe. However, net revenues in underwriting were $1.10 billion, almost unchanged from last year.
Net revenues in the institutional client services business declined 13 percent to $4.45 billion, reflecting 11 percent decrease in fixed income, currency and commodities or FICC client execution revenues, as well as a 17 percent decline in equities revenue.
The decline in fixed income revenues was primarily due to lower net revenues in interest rate products, currencies and mortgages, as well as lower net revenues in credit products.
Net revenues in investing & lending declined 26 percent to $1.53 billion. However, investment management revenues increased 20 percent to $1.57 billion, reflecting significantly higher incentive fees as well as higher management and other fees, primarily due to higher average assets under supervision.
Assets under supervision increased 12 percent from last year to $1.08 trillion, including record quarterly net inflows in long-term assets under supervision of $40 billion.
Goldman Sachs' board recommended a dividend of $0.55 per common share, payable on June 27 to common shareholders of record on May 30.
MS is currently trading at $35.15, up $1.26 or 4.22 percent on a volume of 13.21 million shares. GS is trading at $158.42, up $1.20 or 0.76 percent on a volume of 2.25 million shares.
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