Morgan Stanley's wealth segment posted record revenue of $7.27 billion, up 14% from last year and up 7% from the second quarter.
The firm's assets under management for its wealth and investment management arms stood at $7.67 trillion, with $6 trillion in wealth management alone, up 25% year over year.
During the firm's third-quarter earnings call, Morgan Stanley Chief Financial Officer Sharon Yeshaya said total deposits had grown to $358 billion, and the firm had seen signs of recent stabilization amid steep declines, particularly after lowering interest rates from the Federal Reserve in September, which she called “encouraging.”
However, net interest income fell slightly to $1.77 billion due to “lower average write-off deposits” supported by higher yields on the firm's investment portfolio. Yeshaya said the firm expected the fourth-quarter NII to be “modestly down” from this quarter's results “primarily due to lower rate expectations.”
However, Yeshaya urged investors to consider the context of the NII write-offs and downgrades, noting that the delta between the third quarter of the 2024 NII and a year ago was $175 million.
“The asset management fee-based income that rose this year is twice the decline in NII,” she said. “So we just have to gain some perspective now that we see where the cleanups are, that the markets are coming back, and that we continue to see asset management fee growth, and that's stable income and what we expect to see from this business model as we move forward.”
According to Morgan Stanley, the firm's new net assets in assets were $63.9 billion, up 76% and 79% from $36.4 billion in the previous quarter and $35.7 billion in the third quarter of 2023, respectively. Year-to-date net new assets were $195 billion, an annual increase of 5%, according to Yeshaya.
On the call, Yeshaya said growth came from the advisor-led and workplace channels, “with a notable contribution from new customers” in the advisor-led channel. Meanwhile, asset management revenue was $4.3 billion, up 18% year over year due to the “cumulative impact of positive fee-based flows.”
Although Yeshaya predicted that the NII would decrease in the fourth quarter, she declined to make predictions for next year, noting that while asset growth and the directional movement of the sweep made them optimistic, most of the year future will depend on the Fed's future moves.
“If we go back a quarter ago … it was a very low probability to see a rate cut of 50 basis points, and lo and behold, we had one,” she said. “So why don't we look at where we are after the November and December meetings and then restate where we think we'll be for the year just from a rate perspective?”
Analysts with JMP Securities were encouraged by the wealth segment's results, noting that low-cost brokerage clearing deposits rose 1.6% after notable declines in recent quarters.
“With deposits stabilizing and credit growing within (Global Wealth Management), we see a better medium-term NII story than previously modeled.” JMP report read.