Morgan Stanley(US:MS)2021-04-16 16:30Financial Data and Key Metrics Changes - The company generated record revenues of $15.7 billion in Q1 2021, with a return on tangible common equity (ROTCE) of 21.4% and an efficiency ratio of 66% [3][10] - Pre-tax margin was reported at 27.9%, with expectations to exceed 30% as interest rates increase [4] - The provision for credit losses on held-for-investment loans and lending commitments is now presented as a separate line in the income statement [10][11] Business Line Data and Key Metrics Changes - Wealth Management generated approximately $6 billion in revenues, with net new assets of $105 billion, marking the best quarterly flows ever [3][18] - Institutional Securities revenues reached a record $8.6 billion, with fixed income and investment banking revenues also at record levels [5][12] - Investment Management reported pro forma assets under management (AUM) of $1.4 trillion, with pro forma net flows of $53 billion, indicating an annualized organic growth rate of 16% [6][25] Market Data and Key Metrics Changes - The first quarter of 2021 set new records in Asia and Europe for investment banking and fixed income performance, with strong client engagement across regions [12][13] - Equity revenues reached $2.9 billion, the strongest in a decade, driven by elevated global equity market volumes [14] - Fixed income revenues were reported at $3 billion, the highest for a first quarter in a decade, reflecting broad-based performance across products [15] Company Strategy and Development Direction - The company is focused on integrating the acquisitions of ETRADE and Eaton Vance, which are expected to drive growth in client assets and enhance service offerings [9][23] - The workplace business is seen as a significant growth engine, with a strong pipeline and record participant additions [22] - The company aims to achieve $10 trillion in assets under management, leveraging multiple growth verticals from recent acquisitions [72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the firm's ability to navigate complex situations, such as the Archegos collapse, and emphasized the importance of risk management [39][41] - The outlook for net interest income (NII) remains positive, driven by loan growth and funding synergies from the ETRADE acquisition [20][36] - Management highlighted the strong client engagement and market conditions as supportive of continued performance [66] Other Important Information - The company incurred a net loss of $644 million related to the Archegos situation, with an additional loss of $267 million from derisking positions [7][8] - The integration of Eaton Vance is progressing well, with strong momentum in net flows and AUM growth [25][26] Q&A Session Summary Question: How much of the Wealth Management growth was attributable to ETRADE? - Management indicated that while ETRADE contributed to growth, the core business also showed significant organic growth, with a target of 4% to 6% annual growth [30][33] Question: What were the learnings from the Archegos situation? - Management noted the importance of transparency and risk management, particularly regarding family office relationships, and emphasized that the incident would not change their view of the prime brokerage business [38][40] Question: What is the outlook for retail trading volumes post-pandemic? - Management expressed optimism about sustaining elevated trading volumes due to strong client engagement, although they acknowledged that market conditions could change [58][60] Question: What initiatives are in place to drive growth from E*TRADE and Eaton Vance? - Management highlighted the focus on deliberate integration, enhancing client experiences, and leveraging data analytics to improve service delivery [69][70]