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MS

MORGAN STANLEY (MS)·Q4 2024 Earnings Summary

Executive Summary

  • Morgan Stanley delivered a strong quarter: net revenues of $16.22B (+5% q/q, +26% y/y), diluted EPS of $2.22 (+18% q/q, +161% y/y), pre-tax margin 30%, and ROTCE 20.2% .
  • Broad-based strength: Institutional Securities revenues rose to $7.27B on higher Equity (+51% y/y) and Fixed Income (+35% y/y), Investment Banking up 25% y/y; Wealth Management revenues reached $7.48B with record asset management fees of $4.42B .
  • Balance sheet/capital solid: Standardized CET1 ratio at 15.9%, quarterly repurchases of $0.75B, and quarterly dividend declared at $0.925 per share .
  • Pipeline/catalysts: Management cited the strongest global M&A pipeline in ~7 years and durable wallet share goals; sponsors’ activity and improving IPO follow-ons are expected to support capital markets momentum .
  • Estimates comparison: S&P Global consensus could not be retrieved due to a rate limit; comparison vs. Street was unavailable this cycle (see Estimates Context).

What Went Well and What Went Wrong

What Went Well

  • Institutional Securities outperformance: Equity net revenues +51% y/y ($3.33B) on Prime Brokerage and Asia strength; Fixed Income +35% y/y ($1.93B) with strong credit/securitization and commodities; Investment Banking +25% y/y ($1.64B) on higher advisory and equity underwriting .
    “We are in a leadership position and can offer trusted advice … the investment banking, new issue and M&A cycle … lies ahead.”
  • Wealth Management resilience: Net revenues +13% y/y to $7.48B with a 27.5% pre-tax margin, record asset management revenues ($4.42B), sequential improvement each quarter in 2024; fee-based flows $35.2B, NNA $56.5B .
    “Asset management revenues in the quarter set a new record … fee-based flows were $35 billion.”
  • Firm-level profitability and capital: EPS $2.22; ROTCE 20.2%; CET1 15.9%; efficiency ratio improved to 69%; continued buybacks ($0.75B) and dividend at $0.925 .

What Went Wrong

  • Credit costs and CRE charge-offs: Provision for credit losses rose to $115MM (q/q +46%); ISG net charge-offs were $62MM, largely in commercial real estate loans .
  • Transactional revenue softness: Wealth transactional revenues were $0.97B, down y/y; NII sensitivity remains a swing factor despite deposit stabilization .
  • DCP noise: Deferred cash-based compensation mark-to-market introduced volatility across net revenues and compensation, requiring non-GAAP views to assess underlying trends .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Revenues ($USD Billions)$15.019 $15.383 $16.223
Diluted EPS ($)$1.82 $1.88 $2.22
Pre-tax Margin (%)27% 27% 30%
ROTCE (%)17.5% 17.5% 20.2%
Effective Tax Rate (%)23.5% 23.6% 24.1%
Provision for Credit Losses ($MM)$76 $79 $115

Segment breakdown

Segment Metric ($USD Billions)Q2 2024Q3 2024Q4 2024
Institutional Securities Net Revenues$6.982 $6.815 $7.267
Investment Banking$1.619 $1.463 $1.641
Equity (ISG)$3.018 $3.045 $3.325
Fixed Income (ISG)$1.999 $2.003 $1.931
Wealth Management Net Revenues$6.792 $7.270 $7.478
WM Asset Management Revenues$3.989 $4.266 $4.417
WM Transactional Revenues$0.782 $1.076 $0.973
WM Net Interest Income$1.798 $1.774 $1.885
Investment Management Net Revenues$1.386 $1.455 $1.643
IM Asset Mgmt & Related Fees$1.342 $1.384 $1.555
IM Performance-Based & Other$0.044 $0.071 $0.088

KPIs

KPIQ2 2024Q3 2024Q4 2024
WM Total Client Assets ($USD Trillions)$5.690 $5.974 $6.194
WM Net New Assets ($USD Billions)$36.4 $63.9 $56.5
WM Fee-based Asset Flows ($USD Billions)$26.0 $35.7 $35.2
WM Deposits ($USD Billions)$343 $358 $370
U.S. Bank Loans ($USD Billions)$150.9 $155.2 $159.5
Standardized CET1 Ratio (%)15.2% 15.1% 15.9%
Common Stock Repurchases ($USD Billions per quarter)$0.75 $0.75 $0.75

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Income (WM)Q1 2025Q4 2024 NII to be “modestly down” vs Q3 2024 “First quarter NII should not fluctuate materially from our fourth quarter results” Raised vs prior caution
WM Pre-tax Margin TargetLong-term30% target reiterated (mid-20s to upper-20s trajectory) 30% target maintained; core margins near 29% per discussion Maintained
Effective Tax RateFY 2025n/a~24% expected (quarterly volatility possible) New disclosure
Dividend per ShareQuarterlyRaised to $0.925 in Q2 2024, maintained in Q3 Declared $0.925 payable Feb 14, 2025 (record Jan 31, 2025) Maintained
Capital/BuybacksFY cadenceOpportunistic buybacks; $0.75B in Q2 & Q3 $0.75B repurchased in Q4; full-year $3.3B Maintained pace

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Investment Banking Recovery“Early innings of multi-year recovery,” stronger DCM/ECM; global convertibles up; pipelines healthy M&A pipeline strongest in ~7 years; equity underwriting improved; advisory higher y/y Improving momentum
Trading Durability vs EnvironmentPrime brokerage balances at peaks; equities >$3B; fixed income macro solid Focus on durable share gains (not concentrated risk); equity/credit strength; commodities up y/y Durable gains emphasized
Deposits/Sweeps & NIIStabilizing sweeps post rate cuts; Q3 guided Q4 NII modestly down Deposits up to $370B; NII outlook steady into Q1 2025 Stabilizing
Wealth Fee-based FlowsSteady migration from brokerage to fee-based; flows >$20B/qtr Fee-based flows $35.2B; record asset mgmt fees; advisor-led/new clients drives NNA Strong/durable
Sponsors/IPO ActivitySponsors’ dry powder, convertibles leading cycle Sponsors evaluating exits; improved IPO/follow-ons; corporates raising capital Building
AI/Technology ModernizationTools aiding advisor productivity; OpenAI partnership Modernization/AI to support efficiency path Expanding
Bank Integration & LendingRWAs supporting lending; SBL/mortgage growth WM loans $159.5B; tailored lending and integrated risk lens Growing

Management Commentary

  • “An excellent fourth quarter with a 20% ROTCE … Institutional Securities saw strength across markets and continued improvement in Investment Banking … Total client assets grew to $7.9 trillion across Wealth and Investment Management.” — Ted Pick, CEO
  • “We will continue to invest heavily across the Firm … in E*TRADE and in Parametric, in our bank … and in the development of the Integrated Firm.” — Ted Pick
  • “For the fourth quarter, ROTCE was 20.2% and EPS was $2.22 … Improved efficiency … helped self-fund investments across infrastructure … modernization efforts focused on decommissioning legacy technologies … business-enabled innovation and process optimization with AI should support the Firm’s future efficiency path.” — Sharon Yeshaya, CFO
  • “Looking ahead to 2025, our M&A pipelines are healthy and diversified … CEO and boardroom confidence continues to improve … our business is well positioned for strong continued rebound.” — Sharon Yeshaya

Q&A Highlights

  • Durability vs environment in trading: Management emphasized durable wallet share gains without taking concentrated client/counterparty risk; equities basket across cash/derivatives/prime and stable fixed income performance .
  • AML/BSA and systems investments: Ongoing multi-year investments across processes, systems, data, and technology to support growth and regulatory standards; positioning for international wealth expansion .
  • Bank integration and deposits: Over 70% of deposits from WM clients; further integration via E*TRADE rails; deposit growth across FA, self-directed, and workplace channels, with checking/cash-plus offerings .
  • Loan growth drivers: Decline in SBL paydowns and increased line usage; tailored lending viewed through integrated firm risk lens; opportunity to raise household penetration .
  • Sweeps dynamics: Strong increase of flows from sweeps into markets with maturing >1yr fixed income sitting in sweeps awaiting deployment — transactional nature rising as rates normalize .
  • Pipeline strength: M&A pipeline highest in 7 years globally; expect broader corporate finance activity across ECM/DCM/M&A .

Estimates Context

  • S&P Global consensus estimates for EPS and revenue were unavailable due to a rate limit at the time of retrieval, so comparisons to Street estimates could not be provided this cycle. Future revisions may reflect stronger-than-expected results in Institutional Securities and record Wealth Management asset management fees (see segments above).

Key Takeaways for Investors

  • Operating leverage intact: Pre-tax margin expanded to 30% and ROTCE hit 20.2%; efficiency ratio improved to 69% — supports medium-term rerating on durable earnings quality .
  • Institutional momentum: Equity +51% y/y and Fixed Income +35% y/y; Investment Banking +25% y/y — strength across regions (notably Asia) and products points to continued earnings breadth .
  • Wealth durability: Record asset management fees; fee-based flows strong; NNA healthy — fee/asset mix increasingly resilient vs rate-sensitive NII .
  • Capital strength and returns: CET1 15.9%, buybacks of $0.75B in Q4, dividend maintained at $0.925 — supports ongoing capital return while funding growth .
  • Near-term trading implications: Improving ECM/DCM/M&A pipelines and prime brokerage engagement can sustain ISG revenue cadence; watch CRE credit costs (provisions/net charge-offs) as a modest headwind .
  • Medium-term thesis: Integrated Firm execution (Workplace, E*TRADE, Parametric) plus global ISG share gains and fee-based WM growth underpin path to 30% WM margin and 70% firm efficiency ratio .
  • Monitoring points: Deposit/sweep stabilization, NII trajectory (Q1 steady guide), CRE charge-off progression, Asia/EMEA activity, and M&A pipeline conversion into fees .

Other Relevant Q4 2024 Press Releases

  • Q4 earnings press release (results availability and call logistics) posted Jan 16, 2025 .
  • Wise Platform partnership (Dec 17, 2024) to enhance cross-border payments capabilities for corporate customers — complements institutional FX/payment offerings .