Morgan Stanley’s Expanding Investment Management Segment

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Investment Management segment

Morgan Stanley’s Investment Management segment reported pretax income of $80 million in 4Q17 compared to $28 million in 4Q16. Its net revenue of $637 million in 4Q17 rose from $500 million in 4Q16.

This high jump in revenue was the result of rises in the segment’s asset management and investment revenues. Its asset management revenue rose ~$50 million to $572 million compared to a year ago on account of higher assets under management. Its investment revenue was $112 million in 4Q17 compared to -$24 million a year ago. The previous year’s loss accounted for a markdown in legacy assets. The segment’s other revenues reported a loss of $46 million on account of the impairment of noncontrolling interest.

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Compensation expenses

The segment’s compensation expenses for the current quarter stood at $303 million, a rise of $54 million compared to a year ago, due a rise in compensation and carried interest. Its noncompensation expenses rose $31 million to $254 million on account of higher brokerage and clearing expenses.

The segment’s assets under management were $482 billion on December 31, 2017, compared to $417 billion a year ago.

Dividends and share repurchases

MS announced a dividend of $0.25 per share for 4Q17 and repurchased 25 million shares amounting to $1.3 billion. During 2017, MS repurchased a total of $3.8 billion worth of its common stock—80 million shares.

Morgan Stanley’s expected EPS (earnings per share) for 1Q18 are expected to be $1.22. Among its peers, Bank of America (BAC) has expected EPS of $0.58, Citigroup (C) has expected EPS of $1.60, JPMorgan Chase (JPM) has expected EPS of $2.22, and Goldman Sachs (GS) has expected EPS of $5.36. MS makes up 2.3% of the iShares U.S. Financial Services ETF (IYG).

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