Morgan Stanley (NYSE:MS) Morgan Stanley Annual U.S. Financials, Payments & Commercial Real Estate Conference June 10, 2024 12:00 PM ET Company Participants Ted Pick - CEO Conference Call Participants Unidentified Analyst Thank you very much, everybody. So first off, congratulations, Ted. We are thrilled to have Ted Pick with us, CEO of Morgan Stanley. Ted, I'm so thrilled to welcome you to the Morgan Stanley Financials Conference as CEO. It's a pleasure to be with you and thrilled with -- thrilled to be abl ...

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Core Insights - MSCI Inc. is identified as a wealth compounder, demonstrating a strong track record of 20% annual returns since its spin-off from Morgan Stanley, with a focus on diverse revenue streams and strong fundamentals [33][35]. - The company has a wide-moat business model, benefiting from significant demand for its index services, ESG solutions, and private asset data analysis, covering $15.6 trillion in assets [10][14]. Group 1: Company Overview - MSCI provides specialized services to help investors navigate global market complexities, leveraging its expertise in investment processes, research, data, and technology [9]. - The company serves nearly 7,000 clients across more than 95 countries, with BlackRock being its largest client, contributing approximately 10% to its operating revenue [12]. Group 2: Financial Performance - Since its spin-off in November 2007, MSCI has achieved an annual return of 19.5%, turning an initial investment of $10,000 into $219,750 [6]. - The company has compounded its revenue by 13% per year since 2019, with adjusted EPS growing at a rate of 20% per year during the same period [22]. Group 3: Growth Drivers - MSCI is experiencing strong demand for its ESG and climate solutions, with climate-related products accounting for nearly 20% of its total ESG run rate and showing 40% growth [27]. - The company is diversifying into the private asset market through the acquisition of Burgiss, enhancing its capabilities in providing private market portfolio coverage [27]. Group 4: Dividend and Valuation - MSCI has a dividend yield of 1.3%, with a five-year CAGR of 20.8%, reflecting aggressive dividend growth supported by a low payout ratio in the low-40% range [19][21]. - Currently trading at a blended P/E ratio of 35.2x, MSCI's valuation is considered premium compared to its normalized P/E ratio of 30.0x since the spin-off, with analysts projecting a 12% annual EPS growth from 2024 to 2026 [30][32].

Company Overview - Morgan Stanley (MS) is based in New York and operates in the Finance sector, with a year-to-date share price change of 6.08% [2] - The company currently pays a dividend of $0.85 per share, resulting in a dividend yield of 3.44%, significantly higher than the Financial - Investment Bank industry's yield of 0.45% and the S&P 500's yield of 1.58% [2] Dividend Performance - Morgan Stanley's annualized dividend of $3.40 has increased by 4.6% from the previous year [2] - Over the past 5 years, the company has raised its dividend 4 times, achieving an average annual increase of 29.33% [2] - The current payout ratio is 59%, indicating that the company distributes 59% of its trailing 12-month earnings per share as dividends [2] Earnings Growth - The Zacks Consensus Estimate for Morgan Stanley's earnings per share for 2024 is $6.83, reflecting a year-over-year growth rate of 25.09% [3] Investment Appeal - Dividends are favored by investors for various reasons, including enhancing stock investing profits and providing tax advantages [4] - Morgan Stanley is characterized as an attractive dividend play and a compelling investment opportunity, holding a Zacks Rank of 1 (Strong Buy) [4]

Core Viewpoint - Morgan Stanley's stock performance and upcoming earnings release are of significant interest to investors, with positive growth projections for both EPS and revenue compared to the previous year [1][2]. Group 1: Stock Performance - Morgan Stanley's stock closed at $100.74, reflecting a decrease of -0.78% from the previous day, which is less than the S&P 500's loss of 0.27% [1]. - Over the past month, Morgan Stanley's stock has increased by 8.29%, outperforming the Finance sector's gain of 5.74% and the S&P 500's gain of 7.34% [1]. Group 2: Earnings Projections - The upcoming earnings release is expected to show an EPS of $1.66, indicating a growth of 33.87% year-over-year [1]. - Revenue is projected to be $14.28 billion, representing a 6.09% increase compared to the same quarter last year [1]. - For the full year, earnings are estimated at $6.83 per share and revenue at $57.84 billion, reflecting changes of +25.09% and +6.82% respectively from the prior year [1]. Group 3: Analyst Estimates and Rankings - Recent revisions in analyst estimates indicate a favorable outlook on Morgan Stanley's business health and profitability, with a 0.99% upward shift in the Zacks Consensus EPS estimate over the past month [2]. - Morgan Stanley currently holds a Zacks Rank of 1 (Strong Buy), which has historically generated an average annual return of +25% since 1988 [2]. Group 4: Valuation Metrics - Morgan Stanley's Forward P/E ratio is 14.86, which is lower than the industry's Forward P/E of 18.37, indicating a valuation discount [3]. - The company has a PEG ratio of 1.24, compared to the Financial - Investment Bank industry's average PEG ratio of 1.15 [3]. - The Financial - Investment Bank industry is ranked 16 in the Zacks Industry Rank, placing it in the top 7% of over 250 industries [3].

Core Viewpoint - Mike Wilson from Morgan Stanley has raised the 12-month target price for the S&P 500 by 20%, from 4,500 to 5,400, indicating a significant shift in market outlook [1][4]. Group 1: Market Predictions - Morgan Stanley has abandoned previous predictions for a market pullback, which had been a consistent theme from Wilson over the past few years [1]. - The updated target is based on a projected earnings per share (EPS) of $283 by June 2026, applying a 19 times price-to-earnings (P/E) multiple [1]. - Earnings growth is expected to be 8% in 2024 and 13% in 2025, driven by revenue growth and margin expansion, particularly from advancements in AI [1]. Group 2: Sector Analysis - Key sectors expected to benefit from AI advancements include Software and Services, Consumer Services, Health Care, Financial Services, and Media and Entertainment [1]. - Morgan Stanley has upgraded Industrials to overweight and recommends maintaining long positions in defensive sectors like Consumer Staples and Utilities [2]. Group 3: Investment Strategy - Morgan Stanley updated their bull and bear case targets to 6,350 and 4,200, respectively, indicating a potential 20% upside or downside [2]. - A balanced investment approach is recommended, favoring quality cyclicals and growth stocks, with large caps expected to outperform small caps due to stronger earnings and healthier balance sheets [2]. Group 4: Current Market Status - The S&P 500 is currently at 5,303, which is 9% above Wall Street strategists' average year-end price target for 2024 of 4,861 [2][3]. - With more than six months remaining before year-end, the S&P 500 appears poised to exceed even the most bullish analyst expectations [3].

Core Viewpoint - Morgan Stanley's Q1 2024 earnings report showed strong performance, with earnings per share of $2.02, exceeding estimates and reflecting a year-over-year increase. The company experienced growth in its Institutional Securities division despite challenges in advisory fees and net interest income [2][3]. Financial Performance - Earnings per share for Q1 2024 were $2.02, surpassing the Zacks Consensus Estimate of $1.69 and up from $1.70 in the prior-year quarter [2]. - Total net revenues reached $15.14 billion, a 4% increase from the previous year, and exceeded the Zacks Consensus Estimate of $14.47 billion [4]. - Net income applicable to common shareholders was $3.27 billion, a 15% increase from the year-ago quarter, compared to an estimate of $2.69 billion [3]. Revenue Breakdown - Institutional Securities division reported net revenues of $7.02 billion, up 3% year over year, driven by increased underwriting and equity trading revenues [5]. - Wealth Management segment's net revenues were $6.88 billion, also up 5%, supported by higher asset management and transactional revenues [5]. - Investment Management segment saw net revenues of $1.38 billion, a 7% increase, attributed to rising asset management fees [6]. Expenses and Income - Net interest income (NII) was $1.8 billion, down 23% year over year, while total non-interest expenses rose to $10.74 billion, a 2% increase [4]. - A provision benefit of $6 million was recorded, contrasting with a provision expense of $234 million in the prior-year quarter [4]. Capital Position - As of March 31, 2024, the book value per share was $55.60, up from $55.13 a year ago, while the tangible book value per share increased to $41.07 from $40.68 [7]. Share Repurchase - In the reported quarter, Morgan Stanley repurchased 12 million shares for a total of $1 billion [8]. Future Outlook - Management anticipates stable NII in the Institutional Securities segment for Q2 2024 and expects wealth management segment pre-tax margins to be in the mid-20% range [9]. - Long-term objectives include achieving a return on tangible common equity (ROTCE) of 20% or more and maintaining an efficiency ratio of less than 70% [10]. Industry Comparison - Morgan Stanley's performance is compared to Goldman Sachs, which reported a 15.4% increase in stock price over the past month and a year-over-year revenue growth of 16.3% [13].

Core Insights - David Ellison, a seasoned fund manager with 41 years in the investment industry, manages the Hennessy Large Cap Financial Fund, which includes notable holdings like Coinbase [1][2] - The article highlights three financial stocks recommended by Ellison, showcasing his investment strategy and insights into the financial sector [2] Group 1: Morgan Stanley - Morgan Stanley is Ellison's 12th-largest holding, representing 4.81% of the fund [3] - Under former CEO James Gorman, Morgan Stanley's shares increased by 215%, which is lower than the S&P 500's 323% but higher than the Dow Jones U.S. Banks Index's 133% [3] - Revenue growth from $16.4 billion in 2010 to $54.14 billion in 2023, with nearly 50% of revenue coming from wealth management [3][4] Group 2: Berkshire Hathaway - Berkshire Hathaway is Ellison's 15th-largest holding, accounting for 4.29% of the fund [6] - The company reduced its Apple holdings by 13%, selling 117 million shares, while maintaining a cash position exceeding $188 billion [6] - Berkshire generates over $8 billion annually from its cash position, making it a significant asset [6] Group 3: Truist Financial - Truist Financial is Ellison's 21st-largest holding, with a 1.99% weighting, and its stock has risen nearly 41% over the past year [7] - The company sold its remaining stake in Truist Insurance Holdings, enhancing its financial profile and allowing for investment in core banking businesses [7][8] - Moody's downgraded Truist's long-term senior unsecured debt to Baa1 from A3, indicating concerns about revenue diversification following the sale [8]

Core Insights - The article discusses the largest banks in the US by consolidated asset size as of September 30, 2025, highlighting their product offerings and branch networks Bank Rankings - **Chase Bank** is the largest bank in the US with $3.8 trillion in assets, operating over 5,000 branches and 15,000 ATMs, offering a wide range of financial products [3] - **Bank of America** follows as the second-largest bank with $2.7 trillion in assets, providing various products for personal and business customers, and operates more than 3,600 branches and approximately 15,000 ATMs [3] - **Citibank** ranks third with $1.8 trillion in assets, operating 660 branches and over 2,300 ATMs, offering products such as deposit accounts and personal loans [4] - **Wells Fargo**, also with $1.8 trillion in assets, has been serving customers since 1852 and operates more than 4,100 branches and over 11,000 ATMs [4] - **U.S. Bank** is the fifth-largest bank with $680 billion in assets, operating more than 2,100 branches and offering a variety of banking products [5] - **Capital One** has $652 billion in assets, operates 258 branches, and offers a full suite of financial products [6][7] - **Goldman Sachs Bank** has $644 billion in assets, primarily known for its investment banking, operates two branches, and offers online banking services [8] - **PNC Bank** has $564 billion in assets, serving personal and business clients with over 2,300 branches [9] - **Truist Bank** has $536 billion in assets, operates nearly 2,000 branches, and offers a range of financial services [10] - **Bank of New York Mellon** has $367 billion in assets, primarily known for asset servicing and investment management, operating just one domestic branch [10] - **State Street Bank and Trust Company** has $366 billion in assets, serving as a global custodian bank with two domestic branches [11] - **TD Bank** has $351 billion in assets, serving over 10 million customers with 1,100 branches [12] - **Morgan Stanley Bank** has $250 billion in assets, providing financial services to individuals and institutions [13] - **BMO Bank** has $249 billion in assets, operating over 1,000 branches and offering various banking products [14] - **Morgan Stanley Private Bank** has $240 billion in assets, focusing on high-net-worth clients without any branches [16] - **First Citizens Bank** has $233 billion in assets, serving personal and business clients with about 500 branches [16] - **Citizens Bank** has $222 billion in assets, operating nearly 1,000 branches and offering a range of financial products [17] - **Fifth Third Bank** operates over 1,100 branches and has a network of more than 40,000 fee-free ATMs [18] - **American Express National Bank** has $211 billion in assets, focusing on high-yield savings accounts and personal loans [18] - **M&T Bank** also has $211 billion in assets, operating almost 1,000 branches and offering various banking services [19]

Company Overview - Morgan Stanley (MS) is based in New York and operates in the Finance sector, with a year-to-date share price change of 2.72% [2] - The company currently pays a dividend of $0.85 per share, resulting in a dividend yield of 3.55%, significantly higher than the Financial - Investment Bank industry's yield of 0.44% and the S&P 500's yield of 1.58% [2] Dividend Performance - Morgan Stanley's annualized dividend is $3.40, reflecting a 4.6% increase from the previous year [2] - Over the last 5 years, the company has increased its dividend 4 times year-over-year, achieving an average annual increase of 29.33% [2] - The current payout ratio is 59%, indicating that the company distributes 59% of its trailing 12-month earnings per share as dividends [2] Earnings Expectations - The Zacks Consensus Estimate for Morgan Stanley's earnings in 2024 is projected at $6.84 per share, with an expected increase of 25.27% compared to the previous year [3] Investment Appeal - Dividends are favored by investors for various reasons, including improving stock investing profits and providing tax advantages [4] - Established firms with secure profits are typically viewed as the best dividend options, while high-growth businesses often do not offer dividends [4] - Morgan Stanley is highlighted as an attractive dividend play and a compelling investment opportunity, currently holding a Zacks Rank of 1 (Strong Buy) [4]