The US investment bank retained a 8.2% market share in its domestic market in Q1 2024.

Morgan Stanley (MS) sold the largest ticket ever for its SEC-registered structured notes in Q1 24 – the cash-settled equity-linked note racked up US$275m .

The best-seller, Cash-Settled Equity-Linked Notes - Regeneron Pharmaceuticals (61771WZP6), was issued at a premium of 10.95% on the paper of Morgan Stanley Finance on 15 February, SRP data shows.

The last sales record posted by Morgan Stanley goes back to September 2010 when the bank's Callable Notes with Contingent Coupon - S&P 500 generated US$270m sales volume. Since then, the issuer’s best-selling structured notes registered with the US Securities and Exchange Commission (SEC) have hovered around US$100m, including the Callable Fixed Income Securities - Worst of Option (61775MP59) which sold US$124.9m last December.

Due on 18 February 2027, the best seller in Q1 24 is linked to the shares of US biotechnology firm Regeneron Pharmaceuticals (REGN) with an initial reference price of US$947.1418. The product offers 100% principal protection and a fixed interest of 1.10% pa. with its final payment subject to an exchange priced-based cash amount, which is determined by the sum of a 1.0 adjusting factor and the exchange premium at 7.75%.

The final reference price will be evaluated based on the closing price on three averaging dates from 10 February to 12 February 2027 and the payment at maturity will only reflect the appreciation of the underlying stock more than the exchange price.

The best-seller is also the only cash-settled structured note issued year-to-date by MS, according to SRP data.

In 2023, the issuer launched a total of seven cash-settled equity-linked notes, which often cater to institutional investors, including the Cash-Settled Equity-Linked Notes - RTX Corporation (61775MVX1) with the highest traded notional of US$101.7m.

Cash-settled structured notes, also known as convertible notes, have gained traction since last year. In Q1 24, J.P. Morgan took a safe lead as the largest issuer of this product type by traded notional on the back of two cash-settled equity-linked notes, tied to the performance of Salesforce and Meta, respectively.

The combined principal amount of SEC-registered structured notes at Morgan Stanley reached a record high at US$3.17 billion on a quarterly basis in Q1 24, which was slightly higher than US$3.16 billion, the last peak seen in the first quarter of 2022.

MS's Q1 24 sales represent 8.2% of the entire traded notional (US$38.7 billion) in the market which are led by J.P. Morgan, Goldman Sachs, Citigroup, Barclays and UBS.

Earnings

For Q1 2024, Morgan Stanley reported net revenues of US$15.1 billion compared with US$14.5 billion a year ago. Net income was $3.4 billion, or US$2.02 per diluted share, compared with net income of US$3 billion, or US$1.70 per diluted share for the same period a year ago.

‘As a result of strong net new asset growth, the Firm has reached US$7 trillion of client assets across Wealth and Investment Management. Institutional Securities also saw strength across the markets and underwriting businesses,’ said CEO Ted Pick (pictured).   

By segment, institutional securities net revenues of US$7.0 billion reflect ‘strong performance across the broad franchise’, with strength in equity as well as underwriting revenues, partially offset by lower results in advisory.

Wealth management delivered a pre-tax margin of 26.3% for the quarter. Net revenues were US$6.9 billion, on record asset management revenues driven by the positive market environment. Net new assets for the quarter were US$95 billion.

Meanwhile, investment management results reflect net revenues of US$1.4 billion on higher average assets under management (AuM) of U$1.5 trillion. The quarter included positive long-term net flows of US$7.6 billion.

Click the links to read Morgan Stanley’s Q1 2024 earnings report and financial supplements.

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