Morgan Stanley (MS) Q1 2023 Earnings Call Transcript

For the period ending March 31, 2023

April 19, 2023 8:30 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning. On behalf of Morgan Stanley, I will begin the call with the following disclaimer. This call is being recorded. During today’s presentation, we will refer to our earnings release and financial supplement copies of which are available at morganstanley.com.

Today’s presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our notices regarding forward-looking statements and non-GAAP measures that appear in the earnings release. This presentation may not be duplicated or reproduced without our consent.

I will now turn the call over to Chairman and Chief Executive Officer, James Gorman.

James Gorman - Chairman and CEO

Good morning, everyone and thank you for joining us. The first quarter of 2023 was very eventful for our industry, but not so eventful for Morgan Stanley. Firm delivered strong results with revenues of over $14.5 billion, net income of $3 billion, ROTCE of 17% and net new asset flows of $110 billion. At the same time, we bought back $1.5 billion of stock while maintaining a CET ratio of 15.1%. In many ways, it was an excellent test to Morgan Stanley and the opportunity to show the strength and stability of our business model.

Let me just touch briefly on the turmoil and the banking sector. In my view, we are not in a banking crisis, but we have had and may still have a crisis among some banks. I believe strong regulatory intervention on both sides of the Atlantic led to the cauterization of the damage. I consider the current issues is not remotely comparable to 2008. I was pleased that Morgan Stanley, along with the other large U.S. banks, became part of the solution by providing an uninsured deposit line of $30 billion to First Republic Bank. Someone who lived through the darkest days of 2008 where Morgan Stanley was seen as part of the problem, it’s indeed rewarding to be here 14 years later as part of the solution.

Turning back to our own company, while the performance of the overall business was strong, the results reflected the impact of the environment. In Wealth Management, positive flows of $110 billion were a very strong result, reflect continued growth in the model together with the flight to quality. This obviously gives us a good start to our 1 trillion every 3 years target. Investment management also benefited from diversification as long-term outflows moderated and we saw strength in Parametric and also in the liquidity product. Overall margin in the Wealth Management business was 26%, impacted by modest increases in credit reserves, slightly lower growth of NII versus forecast and ongoing integration expenses. We continue to focus on the levers within our control with an eye towards expense management. In ISG, underwriting and M&A remain very subdued. As I have said previously, these are revenues delayed, not dead. Already, we are seeing a growing M&A pipeline and some spring-like signs of new issuance emerging. That said, it largely remains a back half 2023 and full year 2024 story.