Morgan Stanley Homes In on ROE Target -- Earnings Preview

By Liz Hoffman 

Morgan Stanley is scheduled to report third-quarter results Tuesday morning. Here's what you should watch:

1. Flat Earnings

Analysts expect Morgan Stanley to earn 81 cents a share, flat from the third quarter of last year. A lower share count is expected to offset a small decline in profits.

2. Lower Revenue

Analysts are projecting revenue of $9.02 billion, up slightly from $8.9 billion a year ago. Higher wealth and asset-management revenue should compensate for a decline in trading likely to mirror those reported by other Wall Street firms this quarter.

3. Return on Equity

Morgan Stanley has been homing in on its year-end target of 9% to 11% return on equity. It is the last unmet major target laid out by chief James Gorman. The noted listmaker has previously checked off others, including a 25% profit margin in the firm's giant wealth-management business and a minimum $1 billion quarterly revenue in fixed-income trading.

4. Deposit Growth

Morgan Stanley's bank deposits have been flat to down in recent quarters. Tax season likely explains a 7% drop in the second quarter, but the broader stagnation raises questions about the prospects for Morgan Stanley's effort to become a primary or secondary bank for its 3.5 million wealth-management clients. J.P. Morgan Chase & Co. and Citigroup Inc. last week respectively reported 5% and 3% increases in deposits in the third quarter.

5. Fees

Morgan Stanley has pushed wealth-management clients toward accounts that charge fees as a percentage of assets, rather than those based on trading commissions. Fee-based assets hit a record $962 million last quarter, 43% of the firm's total. Look for that number to rise.

Write to Liz Hoffman at [e-mail]

(END) Dow Jones Newswires

October 16, 2017 12:34 ET (16:34 GMT)

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