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MORGAN STANLEY 8-K Report, Financial Results (Oct 16, 2024)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed October 16, 2024
Period End
October 16, 2024
In the record · 2016–202610-K1110-Q328-K118

MS filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 118 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Jul ’19Jul ’19
  2. Leadership change8-K · Nov ’21Nov ’21
  3. Leadership change8-K · Dec ’23Dec ’23

01—Abstract

Summary

Summary of the 8-K filed October 16, 2024. Cited figures are marked; the original filing is the authoritative source.

Morgan Stanley reported third-quarter 2024 results (quarter ended September 30, 2024) that were strong across all three business segments.

Net revenues rose 16% year-over-year to $15.4 billiona, net income applicable to Morgan Stanley increased 32% to $3.2 billion, and diluted EPS was $1.88 versus $1.38 a year earlier. Return on tangible common equity (ROTCE) was 17.5% for the quarter and 18.2% year-to-date, and the expense efficiency ratio improved to 72% from 75%. Revenue growth was broad-based: Investment Banking rose 56%, Equity rose 21%, and Wealth Management hit record net revenues of $7.3 billion.

Pre-tax income of $4.2 billionb was up 34%. Capital generation remained robust. The Firm accreted $2.1 billion of CET1 capital, ending the quarter with a Standardized CET1 ratio of 15.1%, down modestly from 15.6% a year earlier but up from 15.2% in the prior quarter.

Management repurchased $0.8 billionc of common stock and declared a quarterly dividend of $0.925 per share, payable November 15, 2024. Book value per share rose to $58.25 and tangible book value per share to $43.76, both up year-over-year. Investors should note that part of the revenue and compensation swing reflects mark-to-market movements on deferred cash-based compensation (DCP) investments, which were a $239 million benefit to net revenues this quarter.

Excluding DCP, net revenues were $15.1 billiond, still up about 12% from the prior year. Net interest income declined 9% year-over-year in Wealth Management due to lower sweep deposit balances, a key watch item for earnings sensitivity. Client assets grew to nearly $6 trillion and fee-based assets to $2.3 trillion, supporting recurring asset management revenue.

02—Key points

Key Highlights

  1. Net revenues of $15.4 billion, up 16% year-over-year; Wealth Management posted record net revenues of $7.3 billion.
  2. Diluted EPS of $1.88 versus $1.38 a year ago (up 36%); net income applicable to Morgan Stanley of $3.2 billion, up 32%.
  3. ROTCE of 17.5% for the quarter and 18.2% year-to-date; expense efficiency ratio improved to 72% from 75%.
  4. Investment Banking revenues rose 56% to $1.5 billion, driven by higher fixed income and equity underwriting; Equity revenues rose 21% to $3.0 billion.
  5. Accreted $2.1 billion of CET1 capital; Standardized CET1 ratio of 15.1%, versus 15.6% a year ago.
  6. Returned capital through $0.8 billion of share repurchases and a $0.925 quarterly dividend payable November 15, 2024.
  7. Fee-based client assets reached $2.3 trillion with $35.7 billion of fee-based flows and $63.9 billion of net new assets; total client assets exceeded $6 trillion.

03—Questions

Frequently Asked Questions

  1. How strong were Morgan Stanley's Q3 2024 earnings compared with last year?

    Earnings were strong. Net revenues rose 16% to $15.4 billion, pre-tax income rose 34% to $4.2 billion, and diluted EPS increased to $1.88 from $1.38, up 36%. The expense efficiency ratio improved to 72% from 75%, indicating operating leverage.

  2. Did the mark-to-market impact on deferred compensation distort the results?

    Yes, partly. DCP mark-to-market movements added $239 million to net revenues this quarter and reduced compensation expense by $276 million, with most of the effect in Wealth Management. Excluding DCP, net revenues were $15.1 billion, up about 12% year-over-year, so the underlying growth is still solid but smaller than the reported figure.

  3. Is Morgan Stanley's capital position sound, and is it returning capital to shareholders?

    Capital remains strong. The Firm accreted $2.1 billion of CET1 capital in the quarter and ended with a Standardized CET1 ratio of 15.1%, above the 15.2% of the prior quarter and modestly below 15.6% a year ago. It repurchased $0.8 billion of stock, and the Board declared a $0.925 quarterly dividend per share payable November 15, 2024.

  4. What are the main risks or weak spots in the quarter?

    Net interest income in Wealth Management fell 9% year-over-year to $1.8 billion because of lower average sweep deposit balances, partly offset by higher investment portfolio yields and lending growth. Institutional Securities net revenues dipped 2% sequentially, and Fixed Income was essentially flat year-over-year as commodities lagged. The effective tax rate also rose to 23.6% from 22.6%.

  5. What drove the growth in Institutional Securities?

    Investment Banking revenues rose 56% to $1.5 billion, with fixed income underwriting up significantly on higher non-investment grade and investment grade issuance, and equity underwriting up on more IPOs, follow-ons and blocks. Equity net revenues rose 21% to $3.0 billion on higher client activity in the Americas and Asia. Segment pre-tax income rose to $1.9 billion from $1.2 billion.

04—Continue

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