Morgan Stanley Smith Barney saw its total broker head count decline slightly in the third quarter — but their combined clients’ assets managed to increase significantly during the three-month period, according to the earnings announcement the brokerage made today.
Morgan Stanley had 18,160 registered representatives at the end of the September, a 2% drop from the end of June. At the same time, Morgan Stanley’s reps now have a total of $1.5 trillion in total client assets under management, an 11%, or $112 billion, spike from the end of the second quarter. Assets in fee-based accounts were $365 billion, or about 25% of Morgan Stanley reps‘ total client assets.
Part of the rise in assets is attributable to a sharp increase in assets among Morgan Stanley’s wealthiest clients. Clients with $10 million or more had $438 billion with Morgan Stanley at the end of the third quarter, a 13% increase from the $389 million held there by this client segment at the end of June.
Overall, Morgan Stanley returned to profitability for the first time in a year as income from its investment banking operations offset losses in commercial real estate.
Morgan Stanley said Wednesday that stock and debt underwriting from investment banking, and rising profits from the retail brokerage business, which includes the Morgan Stanley Smith Barney joint venture with
Citigroup Inc., more than balanced out $400 million in real estate losses.
The New York-based bank earned $498 million in the July-September period, after losing $13.18 billion during the last three quarters combined.
Investors sent Morgan Stanley stock up sharply in afternoon trading, brushing off any concerns about the bank's commercial real estate exposure. Shares jumped $2.25, or 6.9 percent, to $34.77.
Still, the commercial real estate losses are a reminder that the broader economy continues to struggle even as financial companies profit from their investment banking and trading operations. Morgan Stanley has invested more heavily in commercial real estate than some competitors like
Goldman Sachs Group Inc.
The value of commercial real estate has tumbled in many parts of the country as many small companies shut down due to the
recession, leaving a growing amount of office building and shopping center space empty. Moreover, commercial real estate rents are falling, cutting into the income landlords get from their properties.
Colm Kelleher, Morgan Stanley's chief financial officer, said the commercial real estate business will continue to be a drag on earnings into 2010, as the sector usually is one of the last to bounce back during an economic recovery.
The Associated Press contributed to this article
