Morgan Stanley(MS)2023-04-19 16:11Financial Data and Key Metrics Changes - The company reported revenues of over $14.5 billion for Q1 2023, with a net income of $3 billion and a ROTCE of 17% [3][7] - The efficiency ratio for the first quarter was 72%, impacted by deferred cash-based compensation plans and increased operational expenses [8][21] - Net interest income (NII) was $2.2 billion, reflecting a 40% year-over-year increase due to higher interest rates [16] Business Line Data and Key Metrics Changes - Institutional Securities revenues were $6.8 billion, an 11% decline year-over-year, with fixed income and equity partially offsetting weakness in banking [9] - Wealth Management revenues reached $6.6 billion, with net new asset growth of $110 billion, representing a 10% annualized growth rate [14][15] - Investment Management revenues declined 3% year-over-year to $1.3 billion, primarily due to lower AUM from declining asset values [18] Market Data and Key Metrics Changes - Asia delivered its third-highest quarter ever in terms of revenue, benefiting from policy dynamics in Japan and the reopening of China [9] - The company experienced a 3% decline in deposits to $341 billion, while cash and cash equivalents increased to 23% of adviser-led assets [15][51] Company Strategy and Development Direction - The company aims to reach $10 trillion in client assets, with a target of $1 trillion every three years [5][17] - Focus remains on expense management while continuing to invest in long-term growth opportunities across all client platforms [8][22] - The company is not pursuing private banking in Europe but is focused on growth in the U.S. and Asia [59] Management's Comments on Operating Environment and Future Outlook - Management believes the current environment is not indicative of a systemic banking crisis, contrasting it with the 2008 financial crisis [4][22] - The outlook for 2023 is uncertain, with expectations of potential rate increases and a modest recession [33][34] - Management remains optimistic about the second half of 2023, anticipating a pickup in banking and underwriting activities [34] Other Important Information - The company repurchased $1.5 billion of stock while maintaining a CET ratio of 15.1% [3][21] - The allowance for credit losses on ISG loans increased to $1.3 billion, driven by higher recessionary probabilities [13] Q&A Session Summary Question: Can you talk about adviser recruitment and retention in the current environment? - The adviser recruiting pipeline remains healthy, with the company being a destination of choice for new advisers and assets [24] Question: How do you think about wealth management margin expansion in this environment? - The company does not expect expansion of quarterly NII moving forward, but aims for a long-term margin goal of 30% [26] Question: What is the outlook for cash and cash equivalents in relation to deposits? - Cash and cash equivalents are at a historically high level, and as assets are deployed into different products, it will positively impact margins [28] Question: Can you dimensionalize the commercial real estate portfolio? - The portfolio is diversified, and the company has been reducing direct exposure to commercial real estate [31] Question: What is going right in Asia and what challenges are faced in investment management? - Asia had a strong quarter due to favorable market conditions, while investment management revenues are down due to lower AUM and market volatility [60]