The US bank has increased its issuance of structured product in the US domestic market by 50% in the second quarter of 2021 with US$2.7 billion in sales across 648 products, compared with US$1.8 billion/670 products in the same period a year prior.

Morgan Stanley’s structured product issuance steadily increased from the third quarter of 2020 with an initial sales volume of US$1.6 billion (541 products) to US$2.7 billion (643 products) in the final quarter and reached a record peak in Q1 21 with US$4 billion in sales for 839 products.

The most featured underlying on Morgan Stanley’s products during the second quarter of 2021 was the Russell 200 index which appeared in more that 300 products worth US$1.1 billion. The Nasdaq 100 and S&P 500 indices completed the top three underlyings of choice for the US bank at US$968m/288 products and US$828m/183 products.

The bank has also issued a higher volume of structured products tied to the Eurostoxx 50 underlying worth US$373m in Q2 21, compared to US$40m raised by Eurostoxx50-linked products in the second quarter of 2020.

The most utilized single stock on Morgan Stanley’s products in Q2 21 was the Tesla share which appeared on 19 products valued at US$117m.

Europe

Morgan Stanley has maintained its strong activity in the European structured products market in Q2 21 bringing to market 63 non-flow products, according to SRP data.

The bank’s European activities were focused on France (46/US$690m), the UK (12/US$25m), and Belgium (4/32.9m). In Germany, Morgan Stanley is a top 10 issuer of leverage products by issuance where popular asset classes include equities, interest rate, FX rate, and commodities.

Across Europe, the most dominant underlyings for non-flow structured products issued by Morgan Stanley in Q2 21 were TotalEnergies (12/US$217m), the Eurostoxx 50 index (nine/US$105m), Renault (seven/US$127m), and FTSE Custom 100 Synthetic 3.5% Fixed Dividend Index (seven/US$12.5m).

Payoff types deployed by the bank in Q2 21 include knock-out (58/US$715.8m), protected tracker (35/US$564.5m), reverse convertible (23/US$150m), and worst of option (20/US$248m).

Brazil

Morgan Stanley’s presence in the Brazilian structured products market has stumbled in Q2 21 with an issuance of 13 products worth BRL 103.5m (US$20m), compared with 25 products valued at BRL336m in Q2 20.

However, the bank’s proprietary indices gained visibility - five structured products tied to the Morgan Stanley MAP Trend 6% Vol Index and six products linked to the Morgan Stanley Global Opportunity 9% Index where launched in Q2 21.

The bank recently issued the MS MAP Trend-Bidirecional certificate of structured operations (COE) on the 30 June 2021. With a sales volume of BRL11m, the COE was distributed by XP Investimentos and will reach maturity in just over five years. The structure combines two payoff types (bull bear and shark fin) and is linked to the Morgan Stanley MAP Trend 6% Vol Index.

Business lines

The bank headed by James Gorman (pictured) reported net revenues of US$14.8 billion in Q2 21 reflecting an 8% increase from the same period of 2020 (US$13.7 billion).

Net incomes stand at US$3.5 billion in Q2 21, compared with US$3.2 billion in the second quarter of 2020.

Institutional Securities net revenues of US$7.1 billion represent a drop from US$8.2 billion in Q2 20 but reflect strong results as clients remained active across investment banking and equity.

Investment management results recorded asset management fees on AUM of US$1.5 trillion which includes US$13.5 billion of positive long-term net flows across all asset classes.

Equity net revenues have increased from a year ago driven by higher revenues in prime brokerage partially offset by declines in cash equities and derivatives driven by lower volatility and volumes compared to a year ago.

Click to view the bank’s earnings release.