Morgan Stanley(MS) - 2024 Q3 - Quarterly Results

Consolidated Financials Consolidated Financial Summary Morgan Stanley reported strong Q3 2024 performance with net revenues of $15.4 billion and net income of $3.2 billion, up 16% and 32% year-over-year respectively Q3 2024 Consolidated Financial Performance ($ in millions) | Financial Metric | Q3 2024 ($ millions) | Q3 2023 ($ millions) | YoY Change | Nine Months 2024 ($ millions) | Nine Months 2023 ($ millions) | YTD Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $15,383 | $13,273 | 16% | $45,538 | $41,247 | 10% | | Institutional Securities | $6,815 | $5,669 | 20% | $20,813 | $18,120 | 15% | | Wealth Management | $7,270 | $6,404 | 14% | $20,942 | $19,623 | 7% | | Investment Management | $1,455 | $1,336 | 9% | $4,218 | $3,906 | 8% | | Provision for credit losses | $79 | $134 | (41%) | $149 | $529 | (72%) | | Non-interest expenses | $11,083 | $9,994 | 11% | $32,699 | $31,001 | 5% | | Income before taxes | $4,221 | $3,145 | 34% | $12,690 | $9,717 | 31% | | Net Income | $3,188 | $2,408 | 32% | $9,676 | $7,570 | 28% | Consolidated Financial Metrics, Ratios and Statistical Data The firm's profitability metrics significantly improved in Q3 2024, with diluted EPS up 36% to $1.88 and ROE rising to 13.1% Key Financial Metrics & Ratios | Metric | Q3 2024 | Q3 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Earnings per diluted share | $1.88 | $1.38 | 36% | | Return on average common equity | 13.1% | 10.0% | +310 bps | | Return on avg. tangible common equity | 17.5% | 13.5% | +400 bps | | Book value per common share | $58.25 | $55.08 | +5.8% | | Tangible book value per common share | $43.76 | $40.53 | +8.0% | | Pre-tax margin | 27% | 24% | +300 bps | | Firm expense efficiency ratio | 72% | 75% | -300 bps | Consolidated and U.S. Bank Supplemental Financial Information As of September 30, 2024, total assets grew 8% year-over-year to $1.26 trillion, supported by increases in loans and deposits Consolidated Balance Sheet Highlights ($ in billions) | Item | Sep 30, 2024 ($ billions) | Sep 30, 2023 ($ billions) | YoY Change | | :--- | :--- | :--- | :--- | | Total assets | $1,258.0 | $1,169.0 | 8% | | Loans | $239.8 | $225.0 | 7% | | Deposits | $363.7 | $345.5 | 5% | | Long-term debt outstanding | $291.2 | $242.8 | 20% | | Common equity | $93.9 | $90.5 | 4% | | Tangible common equity | $70.5 | $66.6 | 6% | Consolidated Average Common Equity and Regulatory Capital Information The firm maintained robust regulatory capital ratios in Q3 2024, with a Standardized Approach CET1 ratio of 15.1% and stable average common equity allocation Regulatory Capital Ratios (Standardized Approach) | Ratio | Sep 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 15.1% | 15.6% | | Tier 1 capital ratio | 17.1% | 17.6% | Average Common Equity by Segment ($ in billions) | Segment | Q3 2024 ($ billions) | Q3 2023 ($ billions) | | :--- | :--- | :--- | | Institutional Securities | $45.0 | $45.6 | | Wealth Management | $29.1 | $28.8 | | Investment Management | $10.8 | $10.4 | | Firm Total | $92.7 | $90.8 | Business Segment Performance Institutional Securities The Institutional Securities segment delivered strong Q3 2024 results with net revenues up 20% to $6.8 billion, driven by a 56% rebound in Investment Banking Institutional Securities Performance ($ in millions) | Metric | Q3 2024 ($ millions) | Q3 2023 ($ millions) | YoY Change | | :--- | :--- | :--- | :--- | | Net Revenues | $6,815 | $5,669 | 20% | | Investment Banking | $1,463 | $938 | 56% | | Equity | $3,045 | $2,507 | 21% | | Fixed Income | $2,003 | $1,947 | 3% | | Income before taxes | $1,911 | $1,199 | 59% | | Net Income | $1,436 | $912 | 57% | Wealth Management Wealth Management achieved record net revenues of $7.3 billion in Q3 2024, up 14% year-over-year, with total client assets growing 25% to nearly $6.0 trillion Wealth Management Performance ($ in millions) | Metric | Q3 2024 ($ millions) | Q3 2023 ($ millions) | YoY Change | | :--- | :--- | :--- | :--- | | Net Revenues | $7,270 | $6,404 | 14% | | Asset management | $4,266 | $3,629 | 18% | | Transactional | $1,076 | $678 | 59% | | Net interest income | $1,774 | $1,952 | (9%) | | Income before taxes | $2,060 | $1,709 | 21% | | Net Income | $1,568 | $1,320 | 19% | Wealth Management Key Metrics ($ in billions) | Metric | Sep 30, 2024 ($ billions) | Sep 30, 2023 ($ billions) | YoY Change | | :--- | :--- | :--- | :--- | | Total client assets | $5,974 | $4,798 | 25% | | Net new assets (Q3) | $63.9 | $35.7 | 79% | | Deposits | $358 | $340 | 5% | Investment Management Investment Management reported Q3 2024 net revenues of $1.5 billion, up 9%, with total AUM growing 15% to $1.6 trillion due to strong net flows Investment Management Performance ($ in millions) | Metric | Q3 2024 ($ millions) | Q3 2023 ($ millions) | YoY Change | | :--- | :--- | :--- | :--- | | Net Revenues | $1,455 | $1,336 | 9% | | Asset management fees | $1,384 | $1,312 | 5% | | Performance-based income | $71 | $24 | 196% | | Income before taxes | $260 | $241 | 8% | | Net Income | $192 | $179 | 7% | AUM and Net Flows ($ in billions) | Metric | Sep 30, 2024 ($ billions) | Sep 30, 2023 ($ billions) | YoY Change | | :--- | :--- | :--- | :--- | | Total AUM | $1,598 | $1,388 | 15% | | Long-Term AUM | $1,095 | $907 | 21% | | Liquidity & Overlay | $503 | $481 | 5% | | Total Net Flows (Q3) | $16.6 | ($1.1) | N/A | Credit and Lending Consolidated Loans and Lending Commitments Total consolidated loans and lending commitments increased 10% year-over-year to $409.6 billion, with growth across both Institutional Securities and Wealth Management Loans and Lending Commitments by Segment ($ in billions) | Segment | Sep 30, 2024 ($ billions) | Sep 30, 2023 ($ billions) | YoY Change | | :--- | :--- | :--- | :--- | | Institutional Securities | $235.9 | $207.3 | 14% | | Total Loans | $84.0 | $78.6 | 7% | | Lending Commitments | $151.9 | $128.7 | 18% | | Wealth Management | $173.7 | $165.0 | 5% | | Total Loans | $155.3 | $145.9 | 6% | | Lending Commitments | $18.4 | $19.1 | (4%) | | Consolidated Total | $409.6 | $372.3 | 10% | Consolidated Loans and Lending Commitments Allowance for Credit Losses The total provision for credit losses significantly decreased in Q3 2024 to $79 million, with the total ACL for loans and commitments at $1.72 billion Allowance for Credit Losses (ACL) as of Sep 30, 2024 ($ in millions) | Category | Loans & Commitments (Gross) ($ millions) | ACL ($ millions) | ACL % | Q3 Provision ($ millions) | | :--- | :--- | :--- | :--- | :--- | | Loans: Held For Investment | $219,112 | $1,104 | 0.5% | $18 | | Institutional Securities - HFI | $63,539 | $782 | 1.2% | $7 | | Wealth Management - HFI | $155,573 | $322 | 0.2% | $11 | | Lending Commitments | $170,301 | $619 | 0.4% | $61 | | Consolidated Total | $410,658 | $1,723 | N/A | $79 | - The allowance for credit losses for loans and lending commitments decreased slightly from $1.730 billion at the end of Q2 2024 to $1.723 billion at the end of Q3 2024, reflecting net charge-offs of $98 million offset by a provision of $79 million[45] Supplemental Information Definition of U.S. GAAP to Non-GAAP Measures This section defines non-GAAP financial measures like Tangible Common Equity and ROTCE, and explains adjustments for Deferred Cash-based Compensation plans - Key non-GAAP measures are used to evaluate operating performance and capital adequacy. These include: - Tangible Common Equity: Common equity less goodwill and intangible assets - ROTCE: Annualized net income as a percentage of average tangible common equity - Tangible Book Value per Common Share: Tangible common equity divided by common shares outstanding[36] - The firm presents certain results excluding the impact of mark-to-market gains and losses on Deferred Cash-based Compensation (DCP) investments. This adjustment aims to improve comparability of period-to-period performance by removing volatility from investment fluctuations linked to compensation[36][40] Legal Notice This legal notice advises reading the financial supplement in conjunction with the firm's Q3 earnings press release issued on October 16, 2024 - This financial supplement should be read in conjunction with the official third-quarter earnings press release from October 16, 2024[46]