Morgan Stanley (NYSE:MS) reported first-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Operator
Good Morning. Welcome to Morgan Stanley’s first quarter 2026 earnings call on behalf of Morgan Stanley. I will begin the call with the following information and disclaimers. This call is being recorded during today’s presentation. We will refer to our earnings release and financial supplement, copies of which are available at morganstanley.com Today’s presentation may include forward looking statements that are subject to risks and uncertainties and that may cause actual results to differ materially. Morgan Stanley does not undertake to update the forward looking statements in this discussion. Please refer to our notices regarding forward looking statements and non-GAAP measures that appear in the earnings release. This presentation may not be duplicated or reproduced without our consent. I will now turn the call over to Chairman and Chief Executive Officer Ted Pick.
Ted Pick (Chairman and Chief Executive Officer)
Thank you and good morning. Thank you for joining us. Morgan Stanley entered 2026 from a position of strength amidst increased geopolitical uncertainty. The firm generated a record quarter with revenues of 20.6 billion and EPS of $3.43. The top and bottom line results are an ongoing demonstration of the capabilities of our integrated firm in periods when clients and markets are active. The first quarter’s return on tangible equity of 27% evidences the operating leverage of Morgan Stanley’s business model. A leading wealth and asset manager alongside a leading global investment bank. The consistent execution of the last two years plus is the proof of Morgan Stanley’s ability to deliver on a higher plane of performance against different mini and macro backdrops of uncertainty. Wealth management demonstrated continued momentum with growing durable fee based revenues and increasing margins. Our client acquisition funnel remains unrivaled in driving industry leading growth with $118 billion of net new assets and $54 billion of fee based flows. With long standing relationships across banking and markets, the investment bank was well positioned to serve clients around the world underscored by a record $10.7 billion in quarterly revenues and inclusive of $5 billion plus in equities. A well diversified investment management business continues to attract strong demand for parametric across wealth and investment management. Total client assets exceed 9 trillion on the road to 10 trillion plus in the first quarter. We deployed resources to support client activity and opportunistically bought back stock. Our reported CT1 ratio of 15.1% against a capital requirement of 11.8% translates into a capital buffer of over 300 basis points. We’re encouraged by this period of enhanced regulatory transparency and balance as we move through rulemaking Comments toward the finalization of Basel it’s worth noting that over the last nine quarters we’ve accreted 15 billion of capital during the quarter. We also closed our acquisition of of equity Zen. As discussed in our annual letter, we remain mindful of the known unknowns of 2026, the accelerating adoption of AI at the enterprise level, and the ongoing military conflict in the Middle East. Against this backdrop, our approach is one of measured confidence. Our institutional wealth clients demonstrate continued resilience and as much as ever, seek the depth and breadth of content and market access that Morgan Stanley provides. At the same time, we remain vigilant in the context of higher asset prices, tight credit spreads and interest rate path uncertainty. We will endeavor to navigate the upcoming period with the same level of intensity and execution that has defined our performance over the last nine quarters. The end of the end of history is now at hand and alongside accelerating AI development, we’re committed to staying in our strategic lane to execute with rigor, humility and partnership and to be prepared to tactically pivot when the ongoing military disruption or technology adaptation warrant Morgan Stanley’s strategy and client centric culture is set to raise, manage and allocate capital with excellence, to invest in our clients and technology across the integrated firm and to grow assets and compound earnings in a capital efficient way. Now I’ll turn it over to Sharon to discuss the quarter. Thank you Sharon,
Sharon Yeshaya (Chief Financial Officer)
thank you and good morning. The firm produced record revenues of $20.6 billion and record EPS of $3.43. Our Return on Tangible Common Equity (ROTCE) was very strong at 27.1%. The results this quarter demonstrated the strength of our integrated model and the scale of our global platform. Clients increasingly turned to our trusted advisors across the firm, particularly when market volatility became more pronounced. For the quarter, our efficiency ratio was 65% reflecting strong operating leverage and disciplined execution. As we continue to invest strategically across the firm, Improved efficiency includes $178 million of severance charges now to the businesses. Institutional securities delivered record revenues of $10.7 billion. Strength was broad base across asset classes in both banking and markets and in all regions. The year began with optimism supported by solid economic growth in the us significant strategic and financial assets waiting to transact and AI driven transformational opportunities. AI themes followed by geopolitical uncertainty and market dispersions continued to contribute to strong client engagement. Throughout our quarter, our global team across the integrated investment bank led as a trusted and long standing partner to advise clients in an increasingly complex environment. Investment banking revenues increased year over year to $2.1 billion led by growth in the Americas. Investments in our talent are yielding results and despite ongoing geopolitical volatility Capital market activity remains resilient and boardroom dialogue remains active accrued carried interest in our private funds. Long term net flows were $3.3 billion driven by ongoing demand for our parametric solutions and fixed income strategies which help offset equity flows. Total AUM now stands at $1.9 trillion. Turning to the balance sheet, total spot assets were $1.6 trillion. We strategically deployed leverage based capital this quarter to help facilitate client activity in our markets. Franchise standardized RWAs increased quarter over quarter as we actively supported clients. We ended the period with a standardized CET1 ratio of 15.1%. During the period we opportunistically bought back $1.75 billion of common stock. Our first quarter tax rate was 19.6%. The lower rate was driven by share based award conversions which largely take place in the first quarter. We continue to expect our 2026 tax rate to be between 22 and 23% which similar to prior years will exhibit some quarterly volatility. Our integrated firm has proven critical through this period. Clients are engaged, relying on our advice in an increasingly complex environment. We are well positioned to continue to support clients as they navigate fast moving markets and we have the capital and the resources to do so. With that, we will now open the lineups to to questions.
Operator
We are now ready to take in questions. To get in the queue, you may press STAR and the number one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the cue, you may press STAR and the number two on your touchtone telephone. You are allowed to ask one question and one follow up and then we’ll move on to the next person in the queue. Please stand by while we compile our Q and A roster. We’ll take our first question from Ibrahim Punawala with Bank of America.
Bank of America Analyst
Good morning, Ibrahim. Hey, good morning, Ted. So maybe I guess we can start with all things private credit. So heard your prepared remarks. There were two things given kind of where Morgan Stanley interacts with private credit. You had the fund that you talked about where we had some redemptions during the quarter. But just talk to us, Ted. Your perspective on what’s going on with the private credit market. How does that change or inform your view on how you deal with the business and specifically if it’s caused you to rethink how you distribute some of these products through the retail channel in wealth? Thanks.
Ted Pick (Chairman and Chief Executive Officer)
Well, I think what’s important over the last number of days is that there’s more balance in the conversation. As you know, private credit as a sub asset class has come of age over the last number of years as a new set of lenders has stepped in post the financial crisis in the place of Wall Street. While its still a growing class, its having a learning moment, we’ll call it an adolescent moment where both the lenders and the borrowers are being looked at carefully. But the reality is its credit. And credit is going to broadly perform when the economy is in the kind of good shape its in right now. And the fact that its called private credit has sort of taken on a bit of its. Took on a bit of a life of its own for a while. But now I think now we’re all seeing that there’s resiliency in the underlying product, that the structures and the terms on collateral are very well thought through and that this is a market that over the long term has extraordinary growth potential. It’s just a question of time and working through economic cycles. Our own participation in this is in line with the street as a distributor. Bear in mind, Ibrahim, as you know, alts are about 5% of our total FA facing wealth management pile, so quite small. That’s all alts that would include real estate, private equity, private credit infrastructure and then private credit is 1% so even smaller there. And in fact, as you’ve seen spreads widen a bit, there’s been an institutional bid and others from the highly sophisticated institutional community on the private wealth side have come in and stepped in and we’ve seen net buying across the sub asset classes in the first quarter. And then with respect to investment management, private credit is less than 1% of our total AUM well under 20 billion of a trillion 9. So our exposures are small, are modest, but it is an asset class that I think there was a lot of learning around over the last couple of weeks. I think that is very healthy. But we just need to sort of remember the headline point here, which is credit should perform during periods when the economy is performing. This will be no different. Some portfolios may be overloaded in a particular sector or in a particular type of name, in which case they’ll be winners and losers among asset managers. But credit generally is going to perform as the economy performs. And right now we’re not talking about the R word and that’s positive for broad credit.
Operator
We’ll move to our next question from Dan Fannin with Jefferies.
Jefferies Analyst
Morning, Dan. Good morning. Sharon was hoping you could expand around your comments on organic growth within the wealth channel. You highlighted Workplace, but any additional context around that strength would be helpful.
Sharon Yeshaya (Chief Financial Officer)
Sure. I think that that’s a fantastic question, mainly because I think what you’ve seen is quite encouraging over the course of this quarter. Sometimes we call out numbers over $100 billion of NNA and we talk about a single driver or something that’s really changed the profile of that particular quarter. In this quarter, there was no one single driver that you can really point out. You still had really high levels of engagement across the advisor led platform. But what I tried to point out in my prepared remarks is that workplace is becoming a bigger and bigger contributor and a more effective sort of thoughtful way of where we’re actually seeing new client engagement specifically with this quarter. You’ll see that often and not surprisingly that in the first quarter you’ll see unvested assets best and what we saw in workplace this quarter is greater retention of the assets that vested. So that’s the first step right in this kind of funnel concept of what’s going on with workplace. The first is we retain those assets and we’ll see in this particular quarter we saw greater asset retention from workplace which translated into NNA and then over time and this is what I was highlighting at the start sort of conclusion of my wealth management comments is we are seeing channel migration and that’s with technology and investment where those workplace assets are now actually seeking advice. And that migration is something that has helped to contribute to over $1 trillion of total assets in our advisor led strategy. Thanks, that’s helpful. And then sticking with wealth, there’s been a lot of discussion around client cash optimization and so longer term was hoping you guys could talk about how you think about your ability to earn NII on client cash as there are more tools available to move cash around more efficiently. Yeah, I think that’s a great question and certainly very topical. The wealth management team with Jed and Andy at the helm have always been there sort of thinking about ways to disrupt and continue to think about disrupting ourself. And what tools will be available in the new frontier do you know from for us? And as you think about the current client sweeps, balances, those sweeps we’ve largely said have behaved, there are certain places that are similar where they’re looking for yield seeking behavior but then there’s also a transactional nature to that cash itself and that’s what you’ve seen bottom out. So that’s right now in the near term, over the long term we’re moving towards thinking about ways that in this new world you actually have value of advice. So if you talk all you know, where do you work through a tokenized world, how do you think of an on chain world where you can move assets quickly? The same way you’d be able to move those liabilities quickly, we would be there to offer different types of products on the asset side. So what type, what kinds of things might exist on the lending side for on chain, you know, on chain advice. And then how do you …