It has been a tough year so far for Morgan Stanley. So the news that the investment banking firm’s net income for the second quarter rose by 45 percent from the previous quarter came as welcome news, according to the firm’s Q2 earnings report released Wednesday.
Morgan Stanley reported net income of $1.6 billion in Q2, up from $1.1 billion in Q1. So far this year, the firm has endured a $3.2 billion settlement reached in February to resolve claims of “deceptive” mortgage-backed securities practices. Then, in late June toward the end of Q2, Morgan Stanley ran into trouble with its capital planning process; while the Federal Reserve did not reject Morgan Stanley’s capital plan, the Fed still asked the firm to resubmit its plan to address some weaknesses that were found.
The firm’s earnings per share in Q2 were 75 cents per share with overall revenues of $8.9 billion, which beat analysts’ expectations of 59 cents per share and revenues of $8.3 billion.
“Our results this quarter reflect solid performance in an improved but still fragile environment,” said James Gorman, Chairman and CEO of Morgan Stanley. “In the midst of market uncertainty, we maintained our leadership positions across our core franchises and continued our focus on prudent risk management and judicious expense control. We remain committed to executing for our clients and delivering on our strategic priorities for our shareholders.”
Morgan Stanley’s common equity tier 1 capital ratio—a measure of the firm’s financial strength that compares its core equity capital and its total risk-weighted assets—under U.S. Basel III Advanced Approach transitional provisions was approximately 16.9 percent as of the end of Q2. to be 12 percent at the end of the fourth quarter in 2015. By comparison, the Fed estimated in the recent Dodd-Frank Act Stress Tests that Morgan Stanley’s common equity tier 1 capital ratio in a severely adverse economic scenario would be 16.4 percent (as of the end of Q4 2015).
Click here to view Morgan Stanley’s complete Q2 earnings report.