Morgan Stanley Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Steven Chubak - Wolfe Research, LLC - Analyst : Hi. Good morning and thanks for taking my questions. So Ted, I wanted to start off with one on the equities trading outlook. Just given your experience overseeing the business, the recent strength has been pretty extraordinary, and the updates from you and the peers suggests the trading has actually been pretty orderly amid the recent volatility. Now I was hoping you could just speak to the factors that might support continued durability of the recent strength and some of the variables you're monitoring that could potentially derail some of the recent momentum as well.

Question: Steven Chubak - Wolfe Research, LLC - Analyst : No, thanks for that perspective, Ted. And maybe for my follow-up for Sharon, just on the NNA outlook. So the flows were certainly more durable than we and others had anticipated. The market deterioration admittedly was a bit more back-end-loaded and it has accelerated into April. So I REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 11, 2025 / 1:30PM, MS.N - Q1 2025 Morgan Stanley Earnings Call was hoping you could speak to the durability of the NNA strength just given some of the negative marks we've seen in both fixed income and equities. And you noted cash has been much more resilient in April, but I was hoping you could also speak to what you are seeing across lending and margin, particularly margin, which is more equity or beta sensitive.

Question: Christian Bolu - Autonomous Research - Analyst : So to follow up on Steven's question around maybe more broadly on trading, just exceptional results here. Clearly, the markets are very volatile, and that volatility has stepped up in April. So maybe talk about how you're managing risk. And then, are you taking down exposures or are you still playing offense? And any then, sort of color on prime brokerage balances in April and what you're seeing from hedge fund clients.

Question: Christian Bolu - Autonomous Research - Analyst : Very helpful. Maybe a question on Asia, and kudos to the team for doing a good job on building our strength across regions, particularly in Asia. I'm guessing a lot of that is Japan and the MUFG partnership. But bigger picture, if we are deglobalizing and there is a decoupling of US from Asia broadly, how do you think about the prospects of your international business?

Question: Ebrahim Poonawala - BofA Global Research (US) - Analyst : Hey, good morning. I guess maybe, Ted -- so maybe it's just me, but you sound fairly constructive given what we've come through over the last month, your comments on -- both on the trading side and how clients have behaved and what we've seen in wealth. It doesn't seem to be the case that we've seen a marked deterioration in the last week or the last couple of weeks relative to super strength earlier in the quarter. Is that a fair assessment? I don't want to put words in your mouth, but it goes to the fact that if that's the case, the business is a lot more resilient than investors probably give credit for. So just want to make sure we're thinking about it in the right way. You mentioned things about like if folks go into hibernation, et cetera -- I'm surprised that they haven't already. So just want to make sure so far given all what we've seen in the market, you've not really felt any negative adverse impacts on trading or on the wealth side.

Question: Ebrahim Poonawala - BofA Global Research (US) - Analyst : That's helpful color. Thank you. And maybe, Sharon, for you, there's obviously a lot of discussion around changes to the SLR ratio. Just remind us how impactful could that be for how you manage the balance sheet and just how you manage the business. Is it a needle mover standalone, or how do you think about that? Thank you.

Question: Daniel Fannon - Jefferies LLC - Analyst : Good morning. Question on just the adviser business. In the market backdrop like this with the last few weeks in terms of volatility, what does that mean for recruitment and retention trends? And also, does that change the appetite for fee-based flows as you think about going forward and your goals around increasing that metric?

Question: Daniel Fannon - Jefferies LLC - Analyst : Great. And then just as a follow-up sticking with wealth, the opportunity for alternatives in the wealth channel is clearly a focus for the large alternative managers. Can you talk about your own proprietary alternative products that you might be able to sell within this channel, or is that something you could think about inorganically wanting to get bigger in terms of your own proprietary products?

Question: Glenn Schorr - Evercore ISI Institutional Equities - Analyst : Good morning. So we've all applauded all the great trading, which is actually awesome. I'm very curious; when you guys are going through the pretty draconian stress tests, the stress test will always spit out pretty bad answers for what any big investment bank does on the trading side. You're doing literally the opposite of that right now. So I'm curious, when you look at the composition of those tests, and then you look at the reality of how you perform -- and I know it's not like every day, and you can't predict the future -- but I'm curious on what's different about the setup, how you might suggest tweaking it, because I know every June when we go through the results, they're way different than reality.

Question: Glenn Schorr - Evercore ISI Institutional Equities - Analyst : Thank you for all that. I have a much more answerable question for a follow-up and relates to just lending in general. What did you take the reserve on? I know it's small. Is that as of 3/31 or is that as of kind of now? And then, what did you sell to [produce the] gain in other revenue? Just curious on those moving parts.

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Hi, Ted. Quick question. You guys, obviously, have your fingers on the pulse of the markets very well, and there's been some discussions around in the fixed income trading area with treasuries, the so-called bias trade, that there's some stresses out there. Are you guys -- have any sense of where the -- are there any stresses going on in the market today and where are you keeping extra attention in case the stresses do pop up?

Question: Gerard Cassidy - RBC Capital Markets Wealth Management - Analyst : Very good. And Sharon, you obviously talked about the wealth management business in your prepared remarks, and you've got the Workplace channel as well as the self-directed and the traditional Morgan Stanley full service channel. In these markets that we're in where they're very volatile and choppy, of those three channels, which is the one that you think will do best and which is the one that might slow down in activity?

Question: Devin Ryan - Citizens JMP Securities, LLC - Analyst : Hey, good morning, Ted. Good morning, Sharon. A question on expenses. Would be great to just get a bit of background on the recent initiative that drove some of the severance in the quarter. I know, not a huge number, but just what did you accomplished there. And then just more broadly, thoughts on opportunities to drive more efficiency at the firm in different revenue environments and just whether you know this current uncertainty will slow any investments or drive any change in kind of the expense growth plans overall.

Question: Devin Ryan - Citizens JMP Securities, LLC - Analyst : Got it. Thanks, Ted. And then just on the investment banking conversation, great to hear about the pipelines. Uncertainty has been a challenge. The other thing though is valuations are down a lot, right? The S&P is down mid-teens. A lot of these growth stocks are down 30%, 40%. So I'm just curious for the new issue market or the M&A market to really turn back on, do you think we need to see kind of the recovery in asset prices because that's where people's expectations are anchored, or do you think this is just much more about just some stability and people are going to try to execute on things once we get that, like it's not just about valuations bouncing back to where we came from?

Question: Michael Mayo - Wells Fargo Securities, LLC - Analyst : Hey, Ted. Pause not delete, that's my key question. You sound more upbeat than, I'd say, the average manager, and I'm just trying to -- maybe what you're seeing or what you've seen historically or what gives you a little bit more optimism than some others and -- on the fourth-quarter call, you said mergers, backlog, the best in seven years. You said the DCM is kind of a domino effect, activity in the CFO level, and sponsors are going to harvest. And the pipelines are still the same, you said today. So I guess you could still paint a positive story, pause not delete. But I think the real question is -- first of all, if that's accurate. I'm still reflecting your views. But at some point, it's delete, not pause. And the question is, is that one month, two months? If we're in the next earnings call, we're still discussing what's going to happen with tariffs, is it kind of -- do you have to think about rightsizing and do we think about maybe this capital markets recovery, especially merger recovery maybe not happening? At what point does the uncertainty going on for so long as to kill off the recovery?