10-QPeriod: Q3 FY2023

MORGAN STANLEY Quarterly Report for Q3 Ended Sep 30, 2023

Filed November 3, 2023For Securities:MSMS-PKMS-POMS-PQMS-PAMS-PFMS-PIMS-PLMS-PPMS-PEMSTLW

Summary

Morgan Stanley's third quarter 2023 results demonstrated resilience with net revenues of $13.3 billion and net income of $2.4 billion, translating to a Return on Equity (ROE) of 10.0% and a Return on Tangible Common Equity (ROTCE) of 13.5%. While overall net revenues saw a modest increase year-over-year, the performance across business segments varied. The Institutional Securities segment experienced a decrease in net revenues primarily due to lower Investment Banking and Fixed Income results, although Equity trading showed improvement. Conversely, Wealth Management delivered strong results with a 5% increase in net revenues driven by higher asset management fees and continued positive fee-based flows of $22.5 billion. Investment Management also saw a 14% increase in net revenues, benefiting from higher asset management and related fees on increased Assets Under Management (AUM). The firm maintained a solid capital position with a Standardized Common Equity Tier 1 capital ratio of 15.6%. The provision for credit losses increased, notably due to conditions in the commercial real estate sector, particularly office properties.

Financial Highlights

34 data points
Beta

Net Income

$2.41B

EPS (Diluted)

$1.38

Total Assets

$1.17T

Cash & Equivalents

$108.40B

Free Cash Flow

$3.75B

Financial Statements
Beta
Interest Expense$11.33B
Net Income$2.41B
EPS (Basic)$1.39
EPS (Diluted)$1.38
Shares Outstanding (Basic)1.62B
Shares Outstanding (Diluted)1.64B

Key Highlights

  • 1Net revenues of $13.3 billion and net income of $2.4 billion for the quarter.
  • 2ROE of 10.0% and ROTCE of 13.5%, indicating solid profitability.
  • 3Wealth Management net revenues increased 5% to $6.4 billion, driven by higher asset management fees and $22.5 billion in positive fee-based flows.
  • 4Investment Management net revenues grew 14% to $1.3 billion, supported by higher asset management fees and an AUM of $1.4 trillion.
  • 5Institutional Securities net revenues decreased 3% to $5.7 billion, impacted by lower Investment Banking and Fixed Income activity.
  • 6Provision for credit losses increased to $134 million, primarily due to deteriorating conditions in the commercial real estate sector.
  • 7Standardized Common Equity Tier 1 capital ratio remained strong at 15.6%.

Frequently Asked Questions

Morgan Stanley's Institutional Securities segment saw a 3% decrease in net revenues to $5.7 billion, mainly due to lower Investment Banking and Fixed Income results. Wealth Management was a strong performer, with net revenues up 5% to $6.4 billion, driven by higher asset management revenues and consistent fee-based flows. The Investment Management segment also showed growth, with net revenues increasing 14% to $1.3 billion, benefiting from increased asset management fees and a higher AUM.

The report indicates that Investment Banking continues to operate in a market environment characterized by reduced completed M&A activity and underwriting activity amidst inflationary pressures and uncertainty regarding interest rates. Advisory revenues decreased due to fewer completed M&A transactions, while equity underwriting saw higher volumes in secondary offerings but lower revenues from initial public offerings. Fixed income underwriting decreased primarily due to lower non-investment grade loan issuances.

Morgan Stanley maintains a strong capital position, with a Standardized Common Equity Tier 1 capital ratio of 15.6% as of September 30, 2023. However, the provision for credit losses increased significantly to $134 million for the quarter, compared to $35 million in the prior year quarter. This increase is primarily attributed to deteriorating conditions in the commercial real estate sector, particularly within the office portfolio, which warrants investor attention.

Total non-interest expenses increased by 5% to $10.0 billion for the quarter, driven by higher compensation and benefits (up 6% to $5.9 billion) and non-compensation expenses (up 3% to $4.1 billion). The increase in compensation was mainly due to higher discretionary incentive compensation and formulaic payouts in Wealth Management, while non-compensation expenses were primarily driven by increased technology spend and higher occupancy costs.