• Revenue: $17.7 billion.
• Earnings Per Share (EPS): $2.60.
• Return on Tangible Common Equity (ROTCE): 23%.
• Net New Assets in Wealth Management: $94 billion, bringing total to $7.7 trillion.
• Institutional Securities Revenue: $9 billion, up 28% year-over-year.
• Equity Revenue: $4.1 billion, up 45% year-over-year.
• Investment Banking Revenue: $1.6 billion.
• Fixed Income Underwriting Revenue: $677 million.
• Advisory Revenue: $563 million.
• Wealth Management Revenue: $7.3 billion.
• Wealth Management Margin: 27%.
• Asset Management Revenue: $4.4 billion, up 15% year-over-year.
• Total Assets Under Management (AUM): $1.6 trillion.
• Net Interest Income: $1.9 billion.
• Total Deposits: $375 billion.
• Common Equity Tier 1 (CET1) Ratio: 15.3%.
• Efficiency Ratio: 68%.

• Warning! GuruFocus has detected 4 Warning Sign with MS.

Release Date: April 11, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Morgan Stanley (NYSE:MS) reported a strong quarter with $17.7 billion in revenue and $2.60 in EPS, achieving a 23% return on tangible equity.
• The firm added $94 billion in net new assets, bringing total assets to $7.7 trillion, demonstrating strong client engagement and asset growth.
• Equities had a record quarter with over $4 billion in revenue, showcasing the strength of Morgan Stanley's institutional securities division.
• Morgan Stanley's CET1 ratio of 15.3% indicates a strong capital position, providing flexibility to support clients and shareholders.
• The wealth management division delivered robust results with $7.3 billion in revenue and a 27% margin, highlighting the firm's strong advisory capabilities.

Negative Points

• The economic outlook remains uncertain, with increased risks of recession and unpredictable trade policies affecting market conditions.
• Inflation continues to fluctuate, creating uncertainty in pricing along the supply chain, which could impact future financial performance.
• Some clients are deferring strategic activities due to geopolitical and trade uncertainties, potentially affecting future deal flow.
• The investment banking pipeline remains sensitive to market conditions, with potential delays in deal execution due to volatility.
• Morgan Stanley incurred $144 million in severance charges related to performance management and business alignment, impacting overall efficiency.

Q & A Highlights

Q: Ted, could you discuss the factors supporting the recent strength in equities trading and any potential risks that could derail this momentum? A: Edward Pick, CEO, highlighted that client activity across all regions and products was strong, driven by investments in technology and client relationships. The business is fundamentally activity-based, and while a weaker economy could pose risks, current client engagement remains high. The firm continues to consolidate market share with the right technology and client focus.

Q: Sharon, could you elaborate on the durability of net new assets (NNA) given recent market conditions? A: Sharon Yeshaya, CFO, noted that NNA growth was broad-based across workplace, self-directed, and advisor-led channels. Investments in the self-directed platform have shown positive results, and advisor-led flows are supported by recruiting trends. The firm has seen encouraging growth in securities-based lending, indicating a potential equilibrium in transactional levels.

Q: How is Morgan Stanley managing risk amid increased market volatility, particularly in trading? A: Edward Pick, CEO, stated that client interaction remains high, and the firm is managing risk by maintaining strong market-making functions. The prime brokerage business continues to lead, and clients are actively engaging in market opportunities. The firm is prepared for potential slowdowns but remains optimistic about continued client engagement.

Q: What is Morgan Stanley's outlook on its international business, particularly in Asia, amid potential deglobalization trends? A: Edward Pick, CEO, expressed bullishness on the firm's international business, emphasizing the importance of a global presence. The partnership with MUFG in Japan and significant operations in India and Greater China are key strengths. The firm is committed to expanding its international footprint and believes in the long-term potential of its global operations.

Q: How does Morgan Stanley view the potential impact of changes to the Supplementary Leverage Ratio (SLR) on its business? A: Sharon Yeshaya, CFO, explained that SLR reform could provide additional capital deployment opportunities by shifting constraints to CET1. However, she emphasized the need for a holistic review of the entire capital regime, including GSIB and CET1 metrics, to ensure they work effectively together. The firm welcomes regulatory reform in this area.

Q: How is Morgan Stanley approaching expense management and efficiency in light of recent severance charges? A: Edward Pick, CEO, stated that the firm reduced headcount by 3% following a rigorous performance review. The focus is on investing in automation and AI while regularly reviewing workforce needs. The firm aims for disciplined expense management, prioritizing the right allocation of human capital for future growth.

Q: What is the outlook for Morgan Stanley's investment banking pipeline amid current market uncertainties? A: Edward Pick, CEO, noted that while some clients have paused strategic activities, others continue to engage. The firm remains cautiously optimistic about the investment banking cycle, with a strong pipeline ready to execute when market conditions stabilize. Stability, rather than valuation recovery, is seen as key to reactivating the market.

Q: How does Morgan Stanley view the potential for growth in alternative investments within its wealth management channel? A: Sharon Yeshaya, CFO, highlighted that the firm has over $200 billion in private alternatives, with significant growth potential. The firm is focused on expanding its offerings and democratizing access to alternative investments for retail clients, aligning with the global investment committee's recommendations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.