MS improves US sales as EQD revenue rises in Q2

Morgan Stanley Finance, the issuance entity of Morgan Stanley (MS), traded US$3.14 billion notional from 1,103 structured notes registered with the US Securities and Exchange Commission (SEC) in the second quarter of 2024, according to SRP data.

This amount represents a 2.6% increase quarter-on-quarter (QoQ) as larger peer issuers have seen their sales decreasing, including J.P. Morgan, Goldman Sachs and Citigroup, which posted a respective quarterly decline of 11.6%, 4.8% and 4.0%.

Morgan Stanley : issuances and sales of registered structured notes by quarter

_{Source: SRP}

Compared to Q2 2023, MS' sales volume increased by 31.4%, in line with the overall market growth.  

The registered structured note market saw a total of US$33.0 billion principal traded for the period from April to June, which is at a stable level QoQ, but up 33% year-on-year (YoY).

However, MS remains in seventh place by sales volume in the second quarter of the year from a quarter ago despite the recent growth, after J.P. Morgan (US$4.6 billion,13.9%), Goldman Sachs (US$4.0 billion,12.1%), Barclays (US$3.6 billion,10.9%), Citigroup (US$3.323 billion, 10.1%), UBS (US$3.318 billion, 10.1%), and Bank of America (US$3.16 billion, 9.6%).

The Callable Fixed Income Securities - Worst of Option (61776LQZ3), traded on 19 April was the best-seller during the three months with US$111.1m notional. The one-year note with principal at risk is linked to the performance of a basket of indices comprising the S&P 500, Russell 2000 and Nasdaq 100.

Morgan Stanley: top five best-selling registered structured notes in Q2 2024

Product name	Initial valuation date	Sales volume (US$m)
Callable Fixed Income Securities - Worst of Option (61776LQZ3)	19-Apr	111.1
Callable Fixed Income Securities - Worst of Option (61776LSB4)	19-Apr	59.5
Trigger Callable Contingent Yield Notes (daily observation) - Worst of Option (61776K646)	03-Apr	45.2
Digital Index-Linked Notes - Topix Index (Tokyo) (61776LK48)	02-May	38.3
Digital Index-Linked Notes - S&P 500 (61776LZ75)	09-May	34.0

_{Source: SRP}

By underlying type, MS increased its use of single indices with the sales volume linked to single indices standing at US$1.0 billion, accounting for 33.5% of the total. Index basket continues to be the most favoured, although the amount on it dropped nearly one third to US$1.3 billion, forming 42.0% of the total.

Morgan Stanley: sales of registered structured notes by underlying type in Q2 2024 (US$m)

_{Source: SRP}

Approximately 53% of the newly-issued notes have a tenor of one to three years while 45.8% of them will mature in three to six years.

Across the globe, MS’ issuance in the second quarter of 2024 also included 27 SEC-registered callable zero coupon or fixed rate notes with combined notional of US$103.8m in the US; 1,199 structured notes in Taiwan, 268 listed structured products targeting retail investors in Hong Kong SAR; 152 structured notes or certificates in France; and 17 structured products in the UK.

Earnings

For the second quarter of 2024, MS reported net revenues of US$15.0 billion compared with US$13.5 billion a year ago. Net income was US$3.1 billion, or US$1.82 per diluted share, compared with net income of US$2.2 billion, or US$1.24 per diluted share YoY, according to the bank’s latest earnings report.

By segment, institutional securities net revenues of US$7.0 billion ‘reflect strong performance across the franchise, with notable strength in equity, driven by higher client activity, and in investment banking on robust debt underwriting results’, stated the bank headed by CEO Ted Pick (pictured).   

For equity, net revenues of US$3.0 billion in the quarter increased 18% YoY, primarily reflecting an increase in execution services and financing, particularly in Asia.

The execution services revenues increased on higher gains on inventory held to facilitate client activity and increased client activity in derivatives and cash equities.

Wealth management delivered a pre-tax margin of 26.8% for the quarter. Net revenues were US$6.8 billion on record asset management revenues driven by cumulative fee-based asset flows and a positive market environment.

Meanwhile, investment management results reflect net revenues of US$1.4 billion, primarily driven by increased asset management revenues on higher long-term average AUM.

Click the links to read Morgan Stanley’s Q2 2024 release, financial supplements and Form 10-Q filing.

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