Earnings Results:
- Strong quarter with $15B revenue, 71% efficiency ratio, $2.02 EPS and 20% ROTCE
- Wealth Management delivered record revenues of $6.9B, driven by record asset management fees. Pretax margin was 26.3%. Net new assets strong at $95B.
- Investment Banking revenues up 16% YoY to $1.4B. Equity and fixed income underwriting offset decline in advisory.
- Equity trading revenues up 4% YoY to $2.8B on strong derivatives and cash performance
- Fixed Income trading revenues of $2.5B, down slightly YoY
Guidance:
- Wealth Management NII expected to be roughly flat in Q2 compared to Q1, assuming current rate curve and client behavior
- 2024 tax rate expected to be ~23%
Themes/Trends:
- Increasing boardroom confidence and positive tone from institutional and wealth clients
- Investment banking momentum building in M&A and underwriting pipelines; early innings of multi-year M&A cycle expected
- Wealth Management focused on driving growth and delivering differentiated offerings; on track toward $10T client asset goal
- Continued focus on efficiency, resource management and judicious capital allocation
Market Conditions:
- Constructive environment overall with higher asset prices and improved economic backdrop
- Strong equity markets globally, especially in Japan
- Reemergence of IPO market and event financing in leveraged finance
- Geopolitical and macro uncertainty remain, though strong U.S. economy a positive
Sentiment: The tone of the call was quite optimistic. Management struck a bullish tone on the outlook for investment banking and capital markets activity, expecting a sustained multi-year upcycle after a few slow years. While acknowledging some macro/geopolitical risks, they see the strength of the U.S. economy, high corporate cash levels and the need for business model transformation driving robust deal-making.
Wealth management momentum also contributes to the positive sentiment, with record revenues and strong flows indicating the value proposition is resonating with clients. The continued focus on efficiency and financial discipline enables investing for growth from a position of strength.
Overall, a tone of confidence and optimism in Morgan Stanley’s competitive position and ability to capitalize on the expected upturn in the business environment. Management seems to view current market conditions as an inflection point toward a period of strong and sustained growth ahead.