01—Abstract
Summary
Summary of the 8-K filed July 16, 2024. Cited figures are marked; the original filing is the authoritative source.
Morgan Stanley reported second-quarter 2024 results (quarter ended June 30, 2024) with net revenues of $15.0 billiona, up 12% from $13.5 billion a year earlier, and diluted EPS of $1.82 versus $1.24.
Net income applicable to Morgan Stanley was $3.1 billionb, up 41% year over year, and return on tangible common equity (ROTCE) was 17.5% versus 12.1%. Results were driven by a strong Institutional Securities segment, where net revenues rose 23% to $7.0 billion on higher Investment Banking (up 51%), Equity (up 18%), and Fixed Income (up 16%) revenues. Wealth Management was broadly flat-to-up at $6.8 billion, supported by record asset management revenues, while Investment Management grew 8% to $1.4 billion.
Profitability improved meaningfully: the firm's expense efficiency ratio fell to 72% from 78%, and pre-tax income rose 45% to $4.1 billionc. Provision for credit losses dropped to $76 million from $161 million. Capital remained strong, with a standardized CET1 ratio of 15.2% (versus 15.5% a year ago), and the firm accreted $1.5 billion of CET1 capital during the quarter.
Management also raised the quarterly dividend to $0.925d per share from $0.85 and reauthorized a multi-year buyback of up to $20 billion, while repurchasing $0.8 billion of stock during the quarter. For investors, the key points are the sharp recovery in investment banking and trading activity, improving operating leverage, and continued capital return. Watch-points include a decline in Wealth Management net interest income (down 17% year over year) as clients redeploy cash, a 9% sequential rise in non-compensation expenses, and sequentially lower net revenues versus the first quarter of 2024.
02—Key points
Key Highlights
- Net revenues of $15.0 billion, up 12% year over year, with Institutional Securities contributing $7.0 billion (up 23%) and Wealth Management $6.8 billion (up 2%).
- Diluted EPS of $1.82 versus $1.24 a year ago (up 47%); first-half 2024 diluted EPS of $3.85, up 31%.
- ROTCE of 17.5% versus 12.1% a year ago; first-half ROTCE of 18.6%.
- Expense efficiency ratio improved to 72% from 78%, reflecting higher revenues and disciplined expense management.
- Investment Banking revenues rose 51% to $1.6 billion, led by higher fixed income underwriting (up 71%) and equity underwriting (up 56%).
- Fee-based client assets reached $2.2 trillion and total client assets $7.2 trillion; fee-based asset flows were $26.0 billion in the quarter.
- Board raised the quarterly dividend to $0.925 per share (from $0.85), and the firm reauthorized a $20 billion multi-year share repurchase program; standardized CET1 ratio was 15.2%.
03—Questions
Frequently Asked Questions
How did Morgan Stanley's second-quarter 2024 earnings compare with the prior year?
Net revenues rose 12% to $15.0 billion and net income applicable to Morgan Stanley rose 41% to $3.1 billion. Diluted EPS increased to $1.82 from $1.24, and pre-tax income rose 45% to $4.1 billion, reflecting stronger capital markets activity and improved operating leverage.
What drove growth in the Institutional Securities segment?
Institutional Securities net revenues increased 23% to $7.0 billion. Investment Banking revenues rose 51%, Equity revenues rose 18% on strong performance across regions (particularly Asia), and Fixed Income revenues rose 16% on higher credit financing and foreign exchange activity.
Is Morgan Stanley's capital position still strong, and what is the capital return outlook?
Yes. The standardized CET1 ratio was 15.2% and the firm accreted $1.5 billion of CET1 capital in the quarter. The board increased the quarterly dividend to $0.925 per share and reauthorized a multi-year buyback of up to $20 billion with no set expiration; the firm repurchased $0.8 billion of stock in the quarter.
What are the main risks or weak spots in the results?
Wealth Management net interest income fell 17% year over year to $1.8 billion as clients moved cash into higher-yielding investments, and it declined sequentially from the first quarter. Non-compensation expenses rose 9% sequentially, driven by professional services and other costs. Net revenues were also slightly lower than the first quarter of 2024 ($15.1 billion).
What does the Wealth Management business look like?
Record asset management revenues of $4.0 billion (up 16% year over year) reflect higher asset levels and cumulative positive fee-based flows. Fee-based client assets grew 18% year over year to $2.2 trillion, and net new assets were $36.4 billion in the quarter, down from $89.5 billion a year earlier.
04—Continue