Morgan Stanley structured note sales up 77.4% YoY

The amount was stable quarter-on-quarter (QoQ) despite an issuance increase to 720 from 664. During the same period, the whole US market of non-flow structured products dropped 6.8% to US$29.1 billion QoQ, translating to a 49.9% increase YoY.

The Q3 21 saw the number of payoff types fell to 11 from 13 YoY as the bear and accrual retreated – they were linked to two and one products in the prior-year period, respectively. 

The worst-of option took over the autocallable as the most popular choice by linking to 467 notes, SRP data shows. The callable, capped call, digital and bull bear all gained traction as the number of products deployed with these payoffs increased YoY while the reverse convertible, autocallable, protected tracker and enhanced tracker remain traditionally favoured choices.

Among the reverse convertible notes, 23 of them offered a snowball coupon with a notional of US$59.6m. There were additional three uncapped call notes sold at US$1.4m, which were linked to the performance of the Morgan Stanley MAP Trend Index, according to SRP data.

That underlying index, which debuted in the structured product market in August 2017, was also used for seven enhanced tracker notes in Q3 21, accumulating a volume of US$7.2m. As of October, it’s been linked to nearly 200 notes sold at US$149m in US, over half of which were autocallables.        

Along with the issuance surge, the variety of underliers expanded to 118 in Q3 21 from 79 YoY.

The top choices were still dominated by headline indices including Russell 2000, S&P 500, Nasdaq 100 and Dow Jones Average Industrial Index, but the issuance in Q3 21 offered more equity exposure to the European and emerging markets YoY, led by Eurostoxx 50, MSCI Emerging Markets Index, ishares MSCI Emerging Markets ETF and FTSE 100.

In addition, the Energy Select Sector SPDR Fund and Financial Select Sector SPDR ETF picked up the stream by linking to 31 and 16 notes in Q3 21, respectively. Meanwhile, there was no issuance tracking the Invesco S&P 500 Equal Weight ETF, which was linked to four products in Q3 20.

Europe

Morgan Stanley marketed 18 non-flow structured products in Europe, majority of which were medium-term notes in Q3 21. The number represented a plunge from 63 QoQ, but a stable level YoY, SRP data shows. 

They covered a total of 17 underlier names, driven by FTSE 100, Eurostoxx 50, S&P 500, TotalEnergies, a French oil and gas company, according to SRP data.

There was one product each tracking the performance of Euro iStoxx Ocean Care 40 Decrement 5% Index, Solactive Top 50 France Germany Benelux EW 5% AR Index, Euro iStoxx Environmental 50 Equal Weight NR Decrement 5% Index.

Featuring autocallables and reverse convertible, the issuance in Q3 21 also deployed worst-of option, protected tracker and snowball, which were linked to nine, eight and one product, respectively.

Launched in Italy, the five-year snowball note was distributed by Gold Grain Capital with a down barrier level of 40% and an annualised coupon of 16.28%. It tracked a basket of stocks including Enphase Energy, SolarEdge, Technologies, and Plug Power.

Earnings

The US investment bank reported net revenues of US$14.8 billion in Q3 21, reflecting a stable level QoQ, or a 25.9% increase YoY.

Net income stood at US$3.7 billion, or US$1.98 per diluted share during the three months, compared with US$2.7 billion YoY. 

‘We had standout performance of our integrated Investment Bank and record net new assets of US$135 billion in Wealth Management,’ said CEO James Gorman (pictured). ‘Year-to-date, our successful integrations of E-TRADE and Eaton Vance have supported growth of US$400 billion in net new client assets across Wealth and Investment Management, bringing our total combined client assets to US$6.2 trillion.’

By segment, institutional securities net revenues rose 22.3% to US$7.5 billion in Q3 21 YoY, on the back of record investment banking revenues at US$2.8 billion.    

Investment management delivered net revenues of US$2.9 billion, up 27.5% YoY, and a pre-tax margin of 25.8%, which reflected ‘record asset management revenues and continued growth in bank lending’.

Moreover, investment management net revenues reached US$1.5 billion, 37.6% higher YoY, showing ‘an increase in fee-based asset management revenues on AUM of US$1.5 trillion’.

Click the link to view Morgan Stanley’s earnings release in Q3 21.