EX-99.1 2 a53381858_ex991.htm EXHIBIT 99.1
Exhibit 99.1


 
Morgan Stanley First Quarter 2023 Earnings Results

Morgan Stanley Reports Net Revenues of $14.5 Billion, EPS of $1.70 and ROTCE of 16.9%

NEW YORK, April 19, 2023 – Morgan Stanley (NYSE: MS) today reported net revenues of $14.5 billion for the first quarter ended March 31, 2023 compared with $14.8 billion a year ago.  Net income applicable to Morgan Stanley was $3.0 billion, or $1.70 per diluted share,1 compared with net income of $3.7 billion, or $2.02 per diluted share,1 for the same period a year ago.

James P. Gorman, Chairman and Chief Executive Officer, said, “The Firm delivered strong results with a ROTCE of 17% in a very unusual environment, demonstrating the strength of our business model. The investments we have made in our Wealth Management business continue to bear fruit as we added a robust $110 billion in net new assets this quarter. Equity and Fixed Income revenues were strong, although Investment Banking activity continued to be constrained. We maintained our strong capital levels and remain well positioned to provide long-term value to our shareholders.”
 

Financial Summary2,3
            
Firm ($ millions, except per share data)
  
1Q 2023
    
1Q 2022
  
             
Net revenues
  
$
14,517
    
$
14,801
  
Provision for credit losses
  
$
234
    
$
57
  
Compensation expense
  
$
6,410
    
$
6,274
  
Non-compensation expenses
  
$
4,113
    
$
3,882
  
Pre-tax income8
  
$
3,760
    
$
4,588
  
Net income app. to MS
  
$
2,980
    
$
3,666
  
Expense efficiency ratio5
    
72
%
    
69
%
Earnings per diluted share1
  
$
1.70
    
$
2.02
  
Book value per share
  
$
55.13
    
$
54.18
  
Tangible book value per share
  
$
40.68
    
$
39.91
  
Return on equity
    
12.4
%
    
14.7
%
Return on tangible equity4
    
16.9
%
    
19.8
%
Institutional Securities
                
Net revenues
  
$
6,797
    
$
7,657
  
Investment Banking
  
$
1,247
    
$
1,634
  
Equity
  
$
2,729
    
$
3,174
  
Fixed Income
  
$
2,576
    
$
2,923
  
Wealth Management
                
Net revenues
  
$
6,559
    
$
5,935
  
Fee-based client assets ($ billions)9
  
$
1,769
    
$
1,873
  
Fee-based asset flows ($ billions)10
  
$
22.4
    
$
97.2
  
Net new assets ($ billions)6
  
$
109.6
    
$
142.0
  
Loans ($ billions)
  
$
143.7
    
$
136.7
  
Investment Management
                
Net revenues
  
$
1,289
    
$
1,335
  
AUM ($ billions)11
  
$
1,362
    
$
1,447
  
Long-term net flows ($ billions)12
  
$
(2.4
)
  
$
(14.4
)
Highlights
  
•
The Firm reported net revenues of $14.5 billion and net income of $3.0 billion as our businesses navigated a volatile market environment.
   
•
The Firm delivered ROTCE of 16.9%.4
   
•
The Firm expense efficiency ratio was 72%.5 Expenses for the quarter include integration-related expenses of $77 million.
   
•
Standardized Common Equity Tier 1 capital ratio was 15.1%.15
   
•
Institutional Securities net revenues of $6.8 billion reflect strong performance in Equity and Fixed Income despite a less favorable market environment compared to a year ago and lower results in Investment Banking.
   
•
Wealth Management attracted significant net new assets of $110 billion during the quarter.6 Net revenues were $6.6 billion, positively impacted by mark-to-market gains on investments associated with certain employee deferred compensation plans compared to losses a year ago. The business delivered a pre-tax margin of 26.1%.7 Results reflect higher net interest income versus prior year primarily driven by higher interest rates, even as clients continue to redeploy sweep deposits. These results were partially offset by an increase in  expenses as well as higher provisions for credit losses.
   
•
Investment Management results reflect net revenues of $1.3 billion on AUM of $1.4 trillion amid declines in asset values from a year ago.



Media Relations: Wesley McDade   212-761-2430
 Investor Relations: Leslie Bazos   212-761-5352



Institutional Securities

Institutional Securities reported net revenues for the current quarter of $6.8 billion compared with $7.7 billion a year ago. Pre-tax income was $1.9 billion compared with $2.8 billion a year ago.8

Investment Banking revenues down 24% from a year ago:
 
 
•
Advisory revenues decreased from a year ago driven by fewer completed M&A transactions.
 
 
•
Equity underwriting revenues decreased from a year ago primarily driven by lower IPO volumes.
 
 
•
Fixed income underwriting revenues decreased from a year ago primarily driven by lower non-investment grade loan issuances.
 
 
Equity net revenues down 14% from a year ago:
 
 
•
Equity net revenues declined compared to a strong prior year quarter. The decrease was primarily due to lower volumes and declines in global equity markets compared to a year ago.
   
Fixed Income net revenues down 12% from a year ago:
   
• Fixed Income net revenues decreased from a year ago due to declines in commodities and foreign exchange as a result of lower volatility and client activity. The declines were partially offset by (1) higher revenues in rates supported by interest rate volatility across geographies and (2) increased credit products revenues supported by client engagement.
   
Other: 
   
• Other revenues increased primarily driven by higher revenues on corporate lending activity, net of losses on loan hedges, and mark-to-market gains on investments associated with certain employee deferred compensation plans compared to losses in the prior year quarter.
($ millions)
  
1Q 2023
    
1Q 2022
  
             
Net Revenues
  
$
6,797
    
$
7,657
  
                 
Investment Banking
  
$
1,247
    
$
1,634
  
Advisory
  
$
638
    
$
944
  
Equity underwriting
  
$
202
    
$
258
  
Fixed income underwriting
  
$
407
    
$
432
  
                 
Equity
  
$
2,729
    
$
3,174
  
Fixed Income
  
$
2,576
    
$
2,923
  
Other
  
$
245
    
$
(74
)
                 
Provision for credit losses
  
$
189
    
$
44
  
                 
Total Expenses
  
$
4,716
    
$
4,826
  
Compensation
  
$
2,365
    
$
2,604
  
Non-compensation
  
$
2,351
    
$
2,222
  

Provision for credit losses:

•
Increases in provisions for credit losses were primarily related to commercial real estate and deterioration in the macroeconomic outlook from a year ago.

Total Expenses:

•
Compensation expenses decreased on lower revenues, partially offset by higher expenses related to stock-based compensation plans and certain deferred compensation plans linked to investment performance.

•
Non-compensation expenses increased from a year ago primarily driven by higher litigation and marketing and business development costs.

2


Wealth Management

Wealth Management reported net revenues for the current quarter of $6.6 billion compared with $5.9 billion from a year ago. Pre-tax income of $1.7 billion8 in the current quarter resulted in a reported pre-tax margin of 26.1%.7

Net revenues increased 11% from a year ago:
 
 
•
Asset management revenues decreased from a year ago reflecting lower asset levels due to declines in the markets, partially offset by positive fee-based flows.
 
 
•
Transactional revenues13 decreased 12% excluding the impact of mark-to-market gains on investments associated with certain employee deferred compensation plans. The decrease was driven by fewer new issuance opportunities and reduced activity levels compared to the beginning of 2022.
 
 
•
Net interest income increased from a year ago on higher interest rates and bank lending growth, partially offset by lower brokerage sweep deposits as clients continue to redeploy balances.
   
Provision for credit losses: 
   
•
Increases in provisions for credit losses were related to deterioration in the macroeconomic outlook from a year ago.
($ millions)
  
1Q 2023
    
1Q 2022
  
             
Net Revenues
  
$
6,559
    
$
5,935
  
Asset management
  
$
3,382
    
$
3,626
  
Transactional13
  
$
921
    
$
635
  
Net interest income
  
$
2,158
    
$
1,540
  
Other
  
$
98
    
$
134
  
                 
Provision for credit losses
  
$
45
    
$
13
  
                 
Total Expenses
  
$
4,802
    
$
4,349
  
Compensation
  
$
3,477
    
$
3,125
  
Non-compensation
  
$
1,325
    
$
1,224
  

Total Expenses:

•
Compensation expense increased from a year ago driven by higher expenses related to certain deferred compensation plans linked to investment performance.

•
Non-compensation expenses increased from a year ago primarily driven by investments in technology, as well as higher marketing and business development costs.

Investment Management

Investment Management reported net revenues of $1.3 billion, down 3% from a year ago. Pre-tax income was $166 million compared with $228 million a year ago.8

Net revenues decreased 3% from a year ago:
 
 
•
Asset management and related fees decreased from a year ago driven primarily by lower AUM due to the decline in asset values and the cumulative effect of outflows.
 
 
•
Performance-based income and other revenues increased from a year ago due to mark-to-market gains on investments associated with certain employee deferred compensation plans and higher marks on public investments compared to losses in the prior year quarter, partially offset by lower accrued carried interest.
($ millions)
  
1Q 2023
    
1Q 2022
  
                 
Net Revenues
  
$
1,289
    
$
1,335
  
Asset management and related fees
  
$
1,248
    
$
1,388
  
Performance-based income and other
  
$
41
    
$
(53
)
                 
Total Expenses
  
$
1,123
    
$
1,107
  
Compensation
  
$
568
    
$
545
  
Non-compensation
  
$
555
    
$
562
  

Total Expenses:

•
Compensation expense increased from a year ago primarily driven by higher expenses related to certain deferred compensation plans linked to investment performance partially offset by lower compensation associated with carried interest.

3


Other Matters

•
Standardized Common Equity Tier 1 capital ratio was 15.1%, 180 basis points above the aggregate standardized approach CET1 requirement inclusive of buffers.
 
 
•
The Firm repurchased $1.5 billion of its outstanding common stock during the quarter as part of its Share Repurchase Program.
 
 
•
The Board of Directors declared a $0.775 quarterly dividend per share, payable on May 15, 2023 to common shareholders of record on May 1, 2023.
 
 
•
The effective tax rate for the quarter was 19.3%, which reflects a benefit associated with employee share-based payments.18
   
1Q 2023
    
1Q 2022
  
Capital14
            
  Standardized Approach
            
     CET1 capital15
    
15.1
%
    
14.5
%
     Tier 1 capital15
    
17.0
%
    
16.0
%
  Advanced Approach
                
     CET1 capital15
    
15.6
%
    
15.9
%
     Tier 1 capital15
    
17.5
%
    
17.6
%
  Leverage-based capital
                
     Tier 1 leverage16
    
6.7
%
    
6.8
%
     SLR17
    
5.5
%
    
5.5
%
   
Common Stock Repurchases
  
  Repurchases ($ millions)
  
$
1,500
    
$
2,872
  
  Number of Shares (millions)
    
16
      
30
  
  Average Price
  
$
95.16
    
$
95.20
  
                 
Period End Shares (millions)
    
1,670
      
1,756
  
                 
Effective Tax Rate18
    
19.3
%
    
19.0
%


4


Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in 42 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com.

A financial summary follows. Financial, statistical and business-related information, as well as information regarding business and segment trends, is included in the financial supplement. Both the earnings release and the financial supplement are available online in the Investor Relations section at www.morganstanley.com.


NOTICE:

The information provided herein and in the financial supplement, including information provided on the Firm’s earnings conference calls, may include certain non-GAAP financial measures. The definition of such measures or reconciliation of such measures to the comparable U.S. GAAP figures are included in this earnings release and the financial supplement, both of which are available on www.morganstanley.com.

This earnings release may contain forward-looking statements, including the attainment of certain financial and other targets, objectives and goals. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management’s current estimates, projections, expectations, assumptions, interpretations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of risks and uncertainties that may affect the future results of the Firm, please see “Forward-Looking Statements” preceding Part I, Item 1, “Competition” and “Supervision and Regulation” in Part I, Item 1, “Risk Factors” in Part I, Item 1A, “Legal Proceedings” in Part I, Item 3, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 and “Quantitative and Qualitative Disclosures about Risk” in Part II, Item 7A in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2022 and other items throughout the Form 10-K, the Firm’s Quarterly Reports on Form 10-Q and the Firm’s Current Reports on Form 8-K, including any amendments thereto.

5


1 Includes preferred dividends related to the calculation of earnings per share of $144 million and $124 million for the first quarter of 2023 and 2022, respectively.
 
2 The Firm prepares its Consolidated Financial Statements using accounting principles generally accepted in the United States (U.S. GAAP). From time to time, Morgan Stanley may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. The Securities and Exchange Commission defines a “non-GAAP financial measure” as a numerical measure of historical or future financial performance, financial position, or cash flows that is subject to adjustments that effectively exclude, or include amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. Non-GAAP financial measures disclosed by Morgan Stanley are provided as additional information to analysts, investors and other stakeholders in order to provide them with greater transparency about, or an alternative method for assessing our financial condition, operating results, or capital adequacy. These measures are not in accordance with, or a substitute for U.S. GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable U.S. GAAP financial measure.

3 Our earnings releases, earnings conference calls, financial presentations and other communications may also include certain metrics which we believe to be useful to us, analysts, investors, and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.

4 Return on average tangible common equity is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance and capital adequacy.  The calculation of return on average tangible common equity represents full year or annualized net income applicable to Morgan Stanley less preferred dividends as a percentage of average tangible common equity.  Tangible common equity, also a non-GAAP financial measure, represents common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.

5 The Firm expense efficiency ratio represents total non-interest expenses as a percentage of net revenues. For the quarter ended March 31, 2023, Firm results include pre-tax integration-related expenses of $77 million, of which $53 million is reported in the Wealth Management business segment and $24 million is reported in the Investment Management business segment.

6 Wealth Management net new assets represent client inflows, including dividends and interest, and asset acquisitions, less client outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions.

7 Pre-tax margin represents income before provision for income taxes divided by net revenues.

8 Pre-tax income represents income before provision for income taxes.

9 Wealth Management fee-based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.

10 Wealth Management fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest, and client fees, and exclude institutional cash management-related activity.

11 AUM is defined as assets under management.

12 Long-term net flows include the Equity, Fixed Income and Alternative and Solutions asset classes and excludes the Liquidity and Overlay Services asset class.

13 Transactional revenues include investment banking, trading, and commissions and fee revenues.
 
14 Capital ratios are estimates as of the press release date, April 19, 2023.

15 CET1 capital is defined as Common Equity Tier 1 capital.  The Firm’s risk-based capital ratios are computed under each of the (i) standardized approaches for calculating credit risk and market risk risk‐weighted assets (RWAs) (the “Standardized Approach”) and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”).  For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Form 10-K).

6


16 The Tier 1 leverage ratio is a leverage-based capital requirement that measures the Firm’s leverage.  Tier 1 leverage ratio utilizes Tier 1 capital as the numerator and average adjusted assets as the denominator.

17 The Firm’s supplementary leverage ratio (SLR) utilizes a Tier 1 capital numerator of approximately $77.9 billion and $80.1 billion, and supplementary leverage exposure denominator of approximately $1.42 trillion and $1.47 trillion, for the first quarter of 2023 and 2022, respectively.

18 The income tax consequences related to employee share-based payments are recognized in Provision for income taxes in the consolidated income statement, and may be either a benefit or a provision. The impacts of recognizing excess tax benefits upon conversion of awards are $149 million and $205 million for the first quarter of 2023 and 2022, respectively.


7


Consolidated Income Statement Information
                              
(unaudited, dollars in millions)
                              
                               
   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
Revenues:
                              
Investment banking
  
$
1,330
    
$
1,318
    
$
1,758
      
1
%
    
(24
%)
Trading
    
4,477
      
3,017
      
3,983
      
48
%
    
12
%
Investments
    
145
      
85
      
75
      
71
%
    
93
%
Commissions and fees
    
1,239
      
1,169
      
1,416
      
6
%
    
(13
%)
Asset management
    
4,728
      
4,803
      
5,119
      
(2
%)
    
(8
%)
Other
    
252
      
38
      
234
      
*
      
8
%
Total non-interest revenues
    
12,171
      
10,430
      
12,585
      
17
%
    
(3
%)
                                         
Interest income
    
10,379
      
9,232
      
2,650
      
12
%
    
*
  
Interest expense
    
8,033
      
6,913
      
434
      
16
%
    
*
  
Net interest
    
2,346
      
2,319
      
2,216
      
1
%
    
6
%
Net revenues
    
14,517
      
12,749
      
14,801
      
14
%
    
(2
%)
                                         
Provision for credit losses
    
234
      
87
      
57
      
169
%
    
*
  
                                         
Non-interest expenses:
                                        
Compensation and benefits
    
6,410
      
5,615
      
6,274
      
14
%
    
2
%
                                         
Non-compensation expenses:
                                        
Brokerage, clearing and exchange fees
    
881
      
851
      
882
      
4
%
    
--
  
Information processing and communications
    
915
      
933
      
829
      
(2
%)
    
10
%
Professional services
    
710
      
853
      
705
      
(17
%)
    
1
%
Occupancy and equipment
    
440
      
443
      
427
      
(1
%)
    
3
%
Marketing and business development
    
247
      
295
      
175
      
(16
%)
    
41
%
Other
    
920
      
878
      
864
      
5
%
    
6
%
Total non-compensation expenses
    
4,113
      
4,253
      
3,882
      
(3
%)
    
6
%
                                         
Total non-interest expenses
    
10,523
      
9,868
      
10,156
      
7
%
    
4
%
                                         
Income before provision for income taxes
    
3,760
      
2,794
      
4,588
      
35
%
    
(18
%)
Provision for income taxes
    
727
      
528
      
873
      
38
%
    
(17
%)
Net income
  
$
3,033
    
$
2,266
    
$
3,715
      
34
%
    
(18
%)
Net income applicable to nonredeemable noncontrolling interests
    
53
      
30
      
49
      
77
%
    
8
%
Net income applicable to Morgan Stanley
    
2,980
      
2,236
      
3,666
      
33
%
    
(19
%)
Preferred stock dividend
    
144
      
123
      
124
      
17
%
    
16
%
Earnings applicable to Morgan Stanley common shareholders
  
$
2,836
    
$
2,113
    
$
3,542
      
34
%
    
(20
%)
                                         
                                           
Notes: 
-
Firm net revenues excluding mark-to-market gains and losses on deferred cash-based compensation plans (DCP) were: 1Q23: $14,364 million, 4Q22: $12,555 million, 1Q22: $15,242 million.
-
Firm compensation expenses excluding DCP were: 1Q23: $6,217 million, 4Q22: $5,426 million, 1Q22: $6,562 million.                      
-
The End Notes are an integral part of this presentation. Refer to pages 12 - 17 of the Financial Supplement for Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.

8

Consolidated Financial Metrics, Ratios and Statistical Data
                              
(unaudited)
                              
   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
                               
Financial Metrics:
                              
                               
Earnings per basic share
  
$
1.72
    
$
1.28
    
$
2.04
      
34
%
    
(16
%)
Earnings per diluted share
  
$
1.70
    
$
1.26
    
$
2.02
      
35
%
    
(16
%)
                                         
Return on average common equity
    
12.4
%
    
9.2
%
    
14.7
%
                
Return on average tangible common equity
    
16.9
%
    
12.6
%
    
19.8
%
                
                                         
Book value per common share
  
$
55.13
    
$
54.55
    
$
54.18
                  
Tangible book value per common share
  
$
40.68
    
$
40.06
    
$
39.91
                  
                                         
Financial Ratios:
                                        
                                         
Pre-tax profit margin
    
26
%
    
22
%
    
31
%
                
Compensation and benefits as a % of net revenues
    
44
%
    
44
%
    
42
%
                
Non-compensation expenses as a % of net revenues
    
28
%
    
33
%
    
26
%
                
Firm expense efficiency ratio
    
72
%
    
77
%
    
69
%
                
Effective tax rate
    
19.3
%
    
18.9
%
    
19.0
%
                
                                         
Statistical Data:
                                        
                                         
Period end common shares outstanding (millions)
    
1,670
      
1,675
      
1,756
      
--
      
(5
%)
Average common shares outstanding (millions)
                                        
Basic
    
1,645
      
1,652
      
1,733
      
--
      
(5
%)
Diluted
    
1,663
      
1,679
      
1,755
      
(1
%)
    
(5
%)
                                         
Worldwide employees
    
82,266
      
82,427
      
76,541
      
--
      
7
%
                                         
                                           
The End Notes are an integral part of this presentation. Refer to pages 12 - 17 of the Financial Supplement for Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.


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