Morgan Stanley Reports Net Revenues of $15.1 Billion, EPS of
$2.02 and ROTCE of 19.7%
Morgan Stanley (NYSE: MS) today reported net revenues of
$15.1 billion for the first quarter ended March 31, 2024 compared
with $14.5 billion a year ago. Net income applicable to Morgan
Stanley was $3.4 billion, or $2.02 per diluted share,1 compared
with net income of $3.0 billion, or $1.70 per diluted share,1 for
the same period a year ago.
Ted Pick, Chief Executive Officer,
said, “In the first quarter of 2024 Morgan Stanley generated net
revenues of $15 billion and earnings of $2.02 per share for a 20%
return on tangible equity. As a result of strong net new asset
growth, the Firm has reached $7 trillion of client assets across
Wealth and Investment Management. Institutional Securities also saw
strength across the markets and underwriting businesses. The Morgan
Stanley Integrated Firm model is delivering durable results.”
Financial Summary2,3
Highlights
Firm ($ millions, except per share
data)
1Q
2024
1Q
2023
- The Firm reported net revenues of $15.1 billion and net income
of $3.4 billion with contributions across each of our
businesses.
- The Firm delivered strong ROTCE of 19.7%.2,4
- The Firm expense efficiency ratio was 71% demonstrating
operating leverage in an improving market environment.3,8
- Standardized Common Equity Tier 1 capital ratio was
15.1%.17
- Institutional Securities net revenues of $7.0 billion reflect
strong performance across the broad franchise, with particular
strength in Equity as well as underwriting revenues, partially
offset by lower results in Advisory.
- Wealth Management delivered a pre-tax margin of 26.3% for the
quarter.7 Net revenues were $6.9 billion, on record asset
management revenues driven by the positive market environment. Net
new assets for the quarter were $95 billion.11
- Investment Management results reflect net revenues of $1.4
billion on higher average AUM of $1.5 trillion.12 The quarter
included positive long-term net flows of $7.6 billion.13
Net revenues
$15,136
$14,517
Provision for credit losses
$(6)
$234
Compensation expense
$6,696
$6,410
Non-compensation expenses
$4,051
$4,113
Pre-tax income6
$4,395
$3,760
Net income app. to MS
$3,412
$2,980
Expense efficiency ratio8
71%
72%
Earnings per diluted share1
$2.02
$1.70
Book value per share
$55.60
$55.13
Tangible book value per share4
$41.07
$40.68
Return on equity
14.5%
12.4%
Return on tangible common equity4
19.7%
16.9%
Institutional Securities
Net revenues
$7,016
$6,797
Investment Banking
$1,447
$1,247
Equity
$2,842
$2,729
Fixed Income
$2,485
$2,576
Wealth Management
Net revenues
$6,880
$6,559
Fee-based client assets ($ billions)9
$2,124
$1,769
Fee-based asset flows ($ billions)10
$26.2
$22.4
Net new assets ($ billions)11
$94.9
$109.6
Loans ($ billions)
$147.4
$143.7
Investment Management
Net revenues
$1,377
$1,289
AUM ($ billions)12
$1,505
$1,362
Long-term net flows ($ billions)13
$7.6
$(2.4)
First Quarter Results
Institutional Securities
Institutional Securities reported net revenues for the current
quarter of $7.0 billion compared with $6.8 billion a year ago.
Pre-tax income was $2.4 billion compared with $1.9 billion a year
ago.6
Investment Banking revenues up 16% from
a year ago:
- Advisory revenues decreased from a year ago on lower completed
M&A transactions.
- Equity underwriting revenues increased significantly from a
year ago reflecting higher revenues from IPOs and
follow-ons.
- Fixed income underwriting revenues increased from a year ago
primarily driven by higher bond issuances.
Equity net revenues up 4% from a year
ago:
- Equity net revenues increased from a year ago reflecting solid
results across business lines and regions, with notable strength in
derivatives against a constructive market backdrop.
Fixed Income net revenues down 4% from
a year ago:
- Fixed Income net revenues decreased from a year ago on lower
client activity in macro and credit, partially offset by higher
revenues in commodities.
Other:
- Other revenues for the quarter were relatively unchanged from a
year ago. Results were primarily driven by revenues from corporate
loans net of the impact of hedges and our Japanese securities joint
venture.
Provision for credit losses:
- Provision for credit losses decreased on improvements in the
macroeconomic outlook from a year ago.
($ millions)
1Q
2024
1Q
2023
Net Revenues
$7,016
$6,797
Investment Banking
$1,447
$1,247
Advisory
$461
$638
Equity underwriting
$430
$202
Fixed income underwriting
$556
$407
Equity
$2,842
$2,729
Fixed Income
$2,485
$2,576
Other
$242
$245
Provision for credit losses
$2
$189
Total Expenses
$4,663
$4,716
Compensation
$2,343
$2,365
Non-compensation
$2,320
$2,351
Total Expenses:
- Compensation expense was relatively unchanged from a year ago
on lower expenses related to stock-based compensation and reduced
headcount, offset by increased discretionary compensation on higher
revenues.
- Non-compensation expenses were relatively unchanged from a year
ago primarily driven by lower legal expenses, partially offset by
higher transaction-related expenses and technology costs.
Wealth Management
Wealth Management reported net revenues of $6.9 billion in the
current quarter compared with $6.6 billion a year ago. Pre-tax
income of $1.8 billion6 in the current quarter resulted in a
pre-tax margin of 26.3%.7 Net new assets for the quarter were $95
billion of which a little more than half represented inflows from
our family office offering.11
Net revenues up 5% from a year
ago:
- Asset management revenues increased from a year ago reflecting
higher asset levels and the cumulative impact of positive fee-based
flows.
- Transactional revenues increased 9% excluding the impact of
mark-to-market on investments associated with DCP.5,15 The increase
was driven by increased volumes in structured products commensurate
with equity markets.
- Net interest income decreased from a year ago driven by changes
in deposit mix, partially offset by the impact of interest
rates.
Provision for credit losses:
- Provision for credit losses decreased on improvements in the
macroeconomic outlook from a year ago.
Total Expenses:
- Compensation expense increased from a year ago on higher
compensable revenues and higher expenses related to outstanding
deferred compensation.
- Non-compensation expenses decreased from a year ago on lower
legal, marketing and business development costs, partially offset
by the incremental FDIC special assessment.14
($ millions)
1Q
2024
1Q
2023
Net Revenues
$6,880
$6,559
Asset management
$3,829
$3,382
Transactional15
$1,033
$921
Net interest
$1,856
$2,158
Other
$162
$98
Provision for credit losses
$(8)
$45
Total Expenses
$5,082
$4,802
Compensation
$3,788
$3,477
Non-compensation
$1,294
$1,325
Investment Management
Investment Management net revenues were $1.4 billion compared
with $1.3 billion a year ago. Pre-tax income was $241 million
compared with $166 million a year ago.6
Net revenues up 7% from a year
ago:
- Asset management and related fees increased from a year ago on
higher average AUM driven by higher market levels.
- Performance-based income and other revenues decreased from a
year ago primarily due to reductions in accrued carried interest in
our private funds, primarily in Asia.
Total Expenses:
- Non-compensation expenses increased from a year ago, primarily
driven by higher distribution expenses on higher average AUM.
($ millions)
1Q
2024
1Q
2023
Net Revenues
$1,377
$1,289
Asset management and related fees
$1,346
$1,248
Performance-based income and other
$31
$41
Total Expenses
$1,136
$1,123
Compensation
$565
$568
Non-compensation
$571
$555
Other Matters
- The Firm repurchased $1.0 billion of its outstanding common
stock during the quarter as part of its Share Repurchase
Program.
- The Board of Directors declared a $0.85 quarterly dividend per
share, payable on May 15, 2024 to common shareholders of record on
April 30, 2024.
- The effective tax rate for the current quarter was 21.2%,
reflecting a lower benefit associated with employee share-based
payments compared to a year ago.
1Q
2024
1Q
2023
Common Stock Repurchases
Repurchases ($MM)
$1,000
$1,500
Number of Shares (MM)
12
16
Average Price
$86.79
$95.16
Period End Shares (MM)
1,627
1,670
Tax Rate
21.2 %
19.3 %
Capital16
Standardized Approach
CET1 capital17
15.1 %
15.1 %
Tier 1 capital17
17.0 %
17.0 %
Advanced Approach
CET1 capital17
15.3 %
15.6 %
Tier 1 capital17
17.2 %
17.5 %
Leverage-based capital
Tier 1 leverage18
6.7 %
6.7 %
SLR19
5.4 %
5.5 %
Morgan Stanley (NYSE: MS) is a leading global financial services
firm providing a wide range of investment banking, securities,
wealth management and investment management services. With offices
in 42 countries, the Firm’s employees serve clients worldwide
including corporations, governments, institutions and individuals.
For further information about Morgan Stanley, please visit
www.morganstanley.com.
A financial summary follows. Financial, statistical and
business-related information, as well as information regarding
business and segment trends, is included in the financial
supplement. Both the earnings release and the financial supplement
are available online in the Investor Relations section at
www.morganstanley.com.
NOTICE:
The information provided herein and in the financial supplement,
including information provided on the Firm’s earnings conference
calls, may include certain non-GAAP financial measures. The
definition of such measures or reconciliation of such measures to
the comparable U.S. GAAP figures are included in this earnings
release and the financial supplement, both of which are available
on www.morganstanley.com.
This earnings release may contain forward-looking statements,
including the attainment of certain financial and other targets,
objectives and goals. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the
date on which they are made, which reflect management’s current
estimates, projections, expectations, assumptions, interpretations
or beliefs and which are subject to risks and uncertainties that
may cause actual results to differ materially. For a discussion of
risks and uncertainties that may affect the future results of the
Firm, please see “Forward-Looking Statements” preceding Part I,
Item 1, “Competition” and “Supervision and Regulation” in Part I,
Item 1, “Risk Factors” in Part I, Item 1A, “Legal Proceedings” in
Part I, Item 3, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in Part II, Item 7 and
“Quantitative and Qualitative Disclosures about Risk” in Part II,
Item 7A in the Firm’s Annual Report on Form 10-K for the year ended
December 31, 2023 and other items throughout the Form 10-K, the
Firm’s Quarterly Reports on Form 10-Q and the Firm’s Current
Reports on Form 8-K, including any amendments thereto.
1 Includes preferred dividends related to the calculation of
earnings per share for the first quarter of 2024 and 2023 of
approximately $146 million and $144 million, respectively.
2 The Firm prepares its Consolidated Financial Statements using
accounting principles generally accepted in the United States (U.S.
GAAP). From time to time, Morgan Stanley may disclose certain
“non-GAAP financial measures” in the course of its earnings
releases, earnings conference calls, financial presentations and
otherwise. The Securities and Exchange Commission defines a
“non-GAAP financial measure” as a numerical measure of historical
or future financial performance, financial position, or cash flows
that is subject to adjustments that effectively exclude, or include
amounts from the most directly comparable measure calculated and
presented in accordance with U.S. GAAP. Non-GAAP financial measures
disclosed by Morgan Stanley are provided as additional information
to analysts, investors and other stakeholders in order to provide
them with greater transparency about, or an alternative method for
assessing our financial condition, operating results, or capital
adequacy. These measures are not in accordance with, or a
substitute for U.S. GAAP, and may be different from or inconsistent
with non-GAAP financial measures used by other companies. Whenever
we refer to a non-GAAP financial measure, we will also generally
define it or present the most directly comparable financial measure
calculated and presented in accordance with U.S. GAAP, along with a
reconciliation of the differences between the non-GAAP financial
measure we reference and such comparable U.S. GAAP financial
measure.
3 Our earnings releases, earnings conference calls, financial
presentations and other communications may also include certain
metrics which we believe to be useful to us, analysts, investors,
and other stakeholders by providing further transparency about, or
an additional means of assessing, our financial condition and
operating results.
4 Tangible common equity is a non-GAAP financial measure that
the Firm considers useful for analysts, investors and other
stakeholders to allow comparability of period-to-period operating
performance and capital adequacy. Tangible common equity represents
common equity less goodwill and intangible assets net of allowable
mortgage servicing rights deduction. The calculation of return on
average tangible common equity, also a non-GAAP financial measure,
represents full year or annualized net income applicable to Morgan
Stanley less preferred dividends as a percentage of average
tangible common equity. The calculation of tangible book value per
common share, also a non-GAAP financial measure, represents
tangible common shareholder’s equity divided by common shares
outstanding.
5 “DCP” refers to certain employee deferred cash-based
compensation programs. Please refer to "Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Other
Matters – Deferred Cash-Based Compensation” in the Firm’s Annual
Report on Form 10-K for the year ended December 31, 2023.
6 Pre-tax income represents income before provision for income
taxes.
7 Pre-tax margin represents income before provision for income
taxes divided by net revenues.
8 The expense efficiency ratio represents total non-interest
expenses as a percentage of net revenues.
9 Wealth Management fee-based client assets represent the amount
of assets in client accounts where the basis of payment for
services is a fee calculated on those assets.
10 Wealth Management fee-based asset flows include net new
fee-based assets (including asset acquisitions), net account
transfers, dividends, interest, and client fees, and exclude
institutional cash management related activity.
11 Wealth Management net new assets represent client asset
inflows, inclusive of interest, dividends and asset acquisitions,
less client asset outflows, and exclude the impact of business
combinations/divestitures and the impact of fees and
commissions.
12 AUM is defined as assets under management or supervision.
13 Long-term net flows include the Equity, Fixed Income and
Alternative and Solutions asset classes and excludes the Liquidity
and Overlay Services asset class.
14 Following the failures of certain banks and resulting losses
to the FDIC’s Deposit Insurance Fund in the first half of 2023, the
FDIC adopted a final rule on November, 16 2023 to implement a
special assessment to recover the cost associated with protecting
uninsured depositors. We recorded the cost of the special
assessment of $286 million in the fourth quarter of 2023. We
recorded an additional estimated cost of $42 million during the
current quarter based on the February notification received from
the FDIC which contained revised estimated losses as well as the
estimated recoveries from its receivership residual interest from
those bank failures.
15 Transactional revenues include investment banking, trading,
and commissions and fee revenues.
16 Capital ratios are estimates as of the press release date,
April 16, 2024.
17 CET1 capital is defined as Common Equity Tier 1 capital. The
Firm’s risk-based capital ratios are computed under each of the (i)
standardized approaches for calculating credit risk and market risk
risk‐weighted assets (RWAs) (the “Standardized Approach”) and (ii)
applicable advanced approaches for calculating credit risk, market
risk and operational risk RWAs (the “Advanced Approach”). For
information on the calculation of regulatory capital and ratios,
and associated regulatory requirements, please refer to
"Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Liquidity and Capital Resources –
Regulatory Requirements" in the Firm’s Annual Report on Form 10-K
for the year ended December 31, 2023.
18 The Tier 1 leverage ratio is a leverage-based capital
requirement that measures the Firm’s leverage. Tier 1 leverage
ratio utilizes Tier 1 capital as the numerator and average adjusted
assets as the denominator.
19 The Firm’s supplementary leverage ratio (SLR) utilizes a Tier
1 capital numerator of approximately $79.1 billion and $77.9
billion, and supplementary leverage exposure denominator of
approximately $1.46 trillion and $1.42 trillion, for the first
quarter of 2024 and 2023, respectively.
Morgan Stanley
Consolidated Income Statement Information (unaudited,
dollars in millions) Quarter Ended Percentage
Change From: Mar 31, 2024 Dec 31, 2023 Mar 31,
2023 Dec 31, 2023 Mar 31, 2023 Revenues:
Investment banking
$
1,589
$
1,415
$
1,330
12
%
19
%
Trading
4,852
3,305
4,477
47
%
8
%
Investments
137
189
145
(28
%)
(6
%)
Commissions and fees
1,227
1,110
1,239
11
%
(1
%)
Asset management
5,269
5,041
4,728
5
%
11
%
Other
266
(61
)
252
*
6
%
Total non-interest revenues
13,340
10,999
12,171
21
%
10
%
Interest income
12,930
12,830
9,980
1
%
30
%
Interest expense
11,134
10,933
7,634
2
%
46
%
Net interest
1,796
1,897
2,346
(5
%)
(23
%)
Net revenues
15,136
12,896
14,517
17
%
4
%
Provision for credit losses
(6
)
3
234
* * Non-interest expenses: Compensation and benefits
6,696
5,951
6,410
13
%
4
%
Non-compensation expenses: Brokerage, clearing and exchange
fees
921
865
881
6
%
5
%
Information processing and communications
976
987
915
(1
%)
7
%
Professional services
639
822
710
(22
%)
(10
%)
Occupancy and equipment
441
528
440
(16
%)
--
Marketing and business development
217
224
247
(3
%)
(12
%)
Other
857
1,420
920
(40
%)
(7
%)
Total non-compensation expenses
4,051
4,846
4,113
(16
%)
(2
%)
Total non-interest expenses
10,747
10,797
10,523
--
2
%
Income before provision for income taxes
4,395
2,096
3,760
110
%
17
%
Provision for income taxes
933
555
727
68
%
28
%
Net income
$
3,462
$
1,541
$
3,033
125
%
14
%
Net income applicable to nonredeemable noncontrolling interests
50
24
53
108
%
(6
%)
Net income applicable to Morgan Stanley
3,412
1,517
2,980
125
%
14
%
Preferred stock dividend
146
134
144
9
%
1
%
Earnings applicable to Morgan Stanley common shareholders
$
3,266
$
1,383
$
2,836
136
%
15
%
__________________________ Notes:
-
In the first quarter of 2024, the Firm implemented certain
presentation changes that impacted interest income and interest
expense but had no effect on net interest income. These changes
were made to align the accounting treatment between the balance
sheet and the related interest income or expense, primarily by
offsetting interest income and expense for certain prime
brokerage-related customer receivables and payables that are
currently accounted for as a single unit of account on the balance
sheet. The current and previous presentation of these interest
income and interest expense amounts are acceptable and the change
does not represent a change in accounting principle. These changes
were applied retrospectively to the income statement in 2023 and
accordingly, prior period amounts were adjusted to conform with the
current presentation.
-
Firm net revenues excluding mark-to-market gains and losses
on deferred cash-based compensation plans (DCP) were: 1Q24: $14,949
million, 4Q23: $12,527 million, 1Q23: $14,364 million.
-
Firm compensation expenses excluding DCP were: 1Q24: $6,447
million, 4Q23: $5,597 million, 1Q23: $6,217 million.
-
The End Notes are an integral part of this presentation.
Refer to pages 12 - 17 of the Financial Supplement for Definition
of U.S. GAAP to Non-GAAP Measures, Definitions of Performance
Metrics and Terms, Supplemental Quantitative Details and
Calculations, and Legal Notice.
Morgan Stanley
Consolidated Financial Metrics, Ratios and Statistical Data
(unaudited) Quarter Ended Percentage Change
From: Mar 31, 2024 Dec 31, 2023 Mar 31,
2023 Dec 31, 2023 Mar 31, 2023
Financial Metrics: Earnings per basic share
$
2.04
$
0.86
$
1.72
137
%
19
%
Earnings per diluted share
$
2.02
$
0.85
$
1.70
138
%
19
%
Return on average common equity
14.5
%
6.2
%
12.4
%
Return on average tangible common equity
19.7
%
8.4
%
16.9
%
Book value per common share
$
55.60
$
55.50
$
55.13
Tangible book value per common share
$
41.07
$
40.89
$
40.68
Financial Ratios: Pre-tax profit margin
29
%
16
%
26
%
Compensation and benefits as a % of net revenues
44
%
46
%
44
%
Non-compensation expenses as a % of net revenues
27
%
38
%
28
%
Firm expense efficiency ratio
71
%
84
%
72
%
Effective tax rate
21.2
%
26.5
%
19.3
%
Statistical Data: Period end common shares
outstanding (millions)
1,627
1,627
1,670
--
(3
%)
Average common shares outstanding (millions) Basic
1,601
1,606
1,645
--
(3
%)
Diluted
1,616
1,627
1,663
(1
%)
(3
%)
Worldwide employees
79,610
80,006
82,266
--
(3
%)
__________________________ The End Notes are an integral
part of this presentation. Refer to pages 12 - 17 of the Financial
Supplement for Definition of U.S. GAAP to Non-GAAP Measures,
Definitions of Performance Metrics and Terms, Supplemental
Quantitative Details and Calculations, and Legal Notice.
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