U.S. investment banking giant Morgan Stanley (MS) announced the fiscal 2012 first quarter financial statements, showing the company realized adjusted earnings per share of 71 cents for the 2012 first quarter, far exceeding Wall Street’s expectations. Analysts polled by Bloomberg on average estimated Morgan Stanley’s adjusted earnings per share would be 44 cents during the reporting period.
Morgan Stanley’s earnings report also shows that taking account of the debt valuation adjustment items, Morgan Stanley realized net sales of $6.94 million for the first quarter; excluding the items, Morgan Stanley realized net sales of $8.9 million during the reporting period, outperforming the average estimate of $7.94 billion of the Wall Street analysts.
Morgan Stanley posted a net loss of $119 million, or 6 cents per share for the first quarter, compared to a net profit of $736 million, or 50 cents per share a year ago. The debt valuation adjustment had a tremendous impact on the performance of Morgan Stanley. Morgan Stanley said that the debt valuation adjustments resulted in a $2 billion loss in the first quarter of 2012, which is substantially higher than $189 million in the same period last year.
Morgan Stanley CEO James Gorman said that the recovery of sales and trading business was the main reason for the better-than-expected Q1 financial results. Morgan Stanley generated $1.8 billion from equity sales and trading business in the first quarter of 2012, an increase of 6% over the same period in 2011.
MS stock price increased 2.32 percent, or $0.41, to end at $18.07 per share. MS stock price edged up 0.11 percent in the after-hours trading.
Ariel Investments Vice Chairman Charlie Bobrinskoy said in an interview with CNBC that if a new financial crisis assaults, as in 2008, Morgan Stanley will be the first one to fall, which is the traditional view of Wall Street. Everyone is worried whether MS stock will be downgraded by Moody’s, while MS stock price is relatively cheap. The current MS stock price is $18.07 per share and the net asset value per share is $ 31.42 (according to Yahoo finance data), which is extremely rare for an investment bank.
(Moody’s had said on February 15, Morgan Stanley’s rating may be lowered three grades.)