Financial Times is reporting that James Gorman, CEO of Morgan Stanley (NYSE:MS), told a securities industry conference today that the bank is now "capital flush" and would like to start returning some of that excess capital to "long suffering" shareholders. A nice thought, but is it realistic?
Reason for pause
A quick glance at the bank's balance sheet shows about $592 billion in cash and $392 billion in debt. On the surface, that looks fine, and squares with Gorman's comments about Morgan being capital flush. But a closer look at the bank's income statement and balance sheet shows some items that otherwise give pause:
- Return on equity trailing 12 months, a classic measure of bank health, is -0.35%.
- Profit margin TTM is -3.11%.
- Year-over-year quarterly revenue contracted by 46.1%.
It's been a tough couple of years on Wall Street. All of the big banks, in the wake of increased domestic and international regulation, are trying to figure out new ways to make money: ways that are safer, more stable, and less likely to blow up themselves and the economy along with them. Some are doing quite well at it and, as such, are rewarding their investors:
- JPMorgan Chase (NYSE:JPM) is currently paying a dividend of 2.9%.
- Goldman Sachs (NYSE:GS) is paying 1.7%.
Of course, both Goldman and JPMorgan are currently operating in the black. Naturally, Gorman would like to be paying more of a dividend, which is typically a help to share price. But instead, maybe he ought to stay focused on making Morgan profitable first.
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Fool contributor John Grgurich owns shares of Goldman Sachs. Follow John's dispatches from the bleeding edge of capitalism on Twitter @TMFGrgurich. The Motley Fool owns shares of JPMorgan Chase. Motley Fool newsletter services have recommended buying shares of Goldman Sachs. The Motley Fool has a delightful disclosure policy.