Morgan Stanley Results: Positive Profit Beat, Credit Metrics Solid. Awaiting The Call...

Morgan Stanley results beat on positive revenues across the IB and asset gathering businesses. Credit metrics appear solid. A jump in CRE lending in the period is a very interesting point of differentiation though – and from a historically “smart investor” of a bank. We see the profit beat as marginally credit positive but there are few laterals as this is the last of the “big 5” to report.

• Key credit metrics: CET1 ratio dropped 20bp from Dec-23 (to 15.3%) but this is inline with consensus, the T1 leverage ratio is flat and SLR is down 10bp (to 5.4%). Loans are down from Dec-23, apart from CRE and residential, which are 10% higher – an interesting view on bottom-fishing, perhaps? ACLs (credit provisions) are broadly flat.
• Broad operations: MS is much more of an equity business so posted one of the weaker primary revenue growth figures (+16% vs. peer avg of +25%) but this was still 8% ahead of consensus. Overall revenues beat by 5% with very strong net new assets in wealth. Costs were inline with consensus leading to a near-20% profit beat. Loan losses were a write-back.
• Outlook: MS is one of the least credit-geared of the Wall Street banks but that growth in CRE lending in 1Q24 is notable. There’s no outlook statement with results (we await the call).