On July 16, 2024, Morgan Stanley (MS, Financial) released its 8-K filing for the second quarter of 2024, reporting net revenues of $15.0 billion and earnings per share (EPS) of $1.82. This performance surpasses analyst estimates of $14.3 billion in revenue and $1.64 in EPS.
Morgan Stanley is a global investment bank whose history, through its legacy firms, can be traced back to 1924. The company operates in institutional securities, wealth management, and investment management segments, with approximately 45% of net revenue from its institutional securities business, 45% from wealth management, and 10% from investment management. About 30% of its total revenue is from outside the Americas. The company had over $5 trillion of client assets as well as around 80,000 employees at the end of 2023.
Performance and Challenges
Morgan Stanley's performance in Q2 2024 reflects a robust capital markets environment. The firm reported net revenues of $15.0 billion, up from $13.5 billion a year ago, and net income applicable to Morgan Stanley of $3.1 billion, or $1.82 per diluted share, compared to $2.2 billion, or $1.24 per diluted share, in the same period last year. The firm's return on tangible common equity (ROTCE) was 17.5%, indicating strong profitability.
However, the firm faces challenges such as fluctuating market conditions and regulatory pressures, which could impact future performance. The provision for credit losses decreased to $76 million from $161 million a year ago, reflecting lower provisions on corporate loans.
Financial Achievements
Morgan Stanley's financial achievements in Q2 2024 are significant for the capital markets industry. The firm delivered a return on equity (ROE) of 13.0%, up from 8.9% a year ago, and an expense efficiency ratio of 72%, benefiting from scale and intentional expense management. The firm's Common Equity Tier 1 (CET1) capital ratio stood at 15.2%, reflecting robust capital levels.
"The Firm delivered another strong quarter in an improving capital markets environment, resulting in first half 2024 revenues of $30.2 billion, EPS of $3.85 and an ROTCE of 18.6%. Total client assets grew to $7.2 trillion on our road to $10+ trillion," said Ted Pick, Chief Executive Officer.
Income Statement Highlights
| Firm ($ millions, except per share data) | 2Q 2024 | 2Q 2023 |
|---|---|---|
| Net revenues | $15,019 | $13,457 |
| Provision for credit losses | $76 | $161 |
| Compensation expense | $6,460 | $6,262 |
| Non-compensation expenses | $4,409 | $4,222 |
| Pre-tax income | $4,074 | $2,812 |
| Net income applicable to MS | $3,076 | $2,182 |
| Earnings per diluted share | $1.82 | $1.24 |
| Book value per share | $56.80 | $55.24 |
| Tangible book value per share | $42.30 | $40.79 |
| Return on equity | 13.0% | 8.9% |
| Return on tangible common equity | 17.5% | 12.1% |
Segment Performance
Institutional Securities reported net revenues of $7.0 billion, up from $5.7 billion a year ago, driven by strong performance in equity and investment banking. Wealth Management delivered net revenues of $6.8 billion, with a pre-tax margin of 26.8%. Investment Management reported net revenues of $1.4 billion, primarily driven by increased asset management revenues on higher long-term average assets under management (AUM).
Analysis
Morgan Stanley's Q2 2024 performance demonstrates its resilience and ability to capitalize on favorable market conditions. The firm's strong revenue growth, improved profitability, and robust capital position highlight its strategic execution and potential for long-term value creation for shareholders. However, ongoing market volatility and regulatory challenges remain key factors to monitor.
Explore the complete 8-K earnings release (here) from Morgan Stanley for further details.
