Morgan Stanley (MS) CEO Ted Choose mentioned Monday that higher-for-longer rates of interest are “good for enterprise.”
“I do suppose it is actually good for our enterprise, as a result of we have now spent a lot time refining the technique,” Choose mentioned at a monetary companies convention hosted by Morgan Stanley Analysis.
Central financial institution policymakers have been cautioning buyers to anticipate charges to stay elevated following a string of sticky inflation readings through the first quarter and surprisingly sturdy financial information.
The Federal Reserve is expected this Wednesday to keep rates at a 23-year high and dial again the variety of cuts they anticipate for the rest of 2024.
The present charge path presents a conundrum for a lot of banks that rely closely on the unfold between what they pay for deposits and earn from their loans and banks which might be closely uncovered to sure sorts of troubled debtors.
However Choose mentioned the technique developed by his predecessor, James Gorman, protects Morgan Stanley from the dangers of an elevated charge surroundings.
“We all know we do not do unsecured credit score in rising markets, bank cards by a mortgage cycle,” he mentioned. “These are nice companies, however we all know [what] we do and that is why it’s so necessary, the self-discipline that James crystalized.”
Choose turned CEO originally of this yr after Gorman introduced his resolution to retire, making it clear Gorman’s blueprint would stay in place.
“Whereas there was a change in management, there isn’t a change in technique,” he wrote in his 2024 letter to shareholders.
Since that point, Morgan Stanley’s inventory has risen simply 3%, underperforming its huge Wall Avenue rivals. Its inventory was roughly flat Monday.
Earnings final quarter rose greater than analysts anticipated from the year-ago interval due to pickups in charges for funding banking, buying and selling, and asset administration.
Charges from funding banking rose 19% from a yr in the past, pushed largely by extra fairness and stuck earnings underwriting transactions for work on IPOs and company bond issuance.
Choose on Monday pointed to raised integration of Morgan Stanley’s funding banking, buying and selling, wealth, and asset administration as the important thing place for the agency’s future development.
He highlighted Morgan Stanley’s enterprise of inventory plan administration for company purchasers as a strategy to interact with different divisions of the agency like funding banking.
Choose additionally mentioned how synthetic intelligence would increase Morgan Stanley’s funding financial institution revenues.
“There’s an unlimited flywheel of exercise,” he mentioned, pointing to purchasers within the utilities, telecommunication, actual property, and know-how sectors who will face extra demand because the development takes off.
Morgan Stanley has a set of synthetic intelligence merchandise it gives purchasers inside its wealth and asset administration division referred to as AI at Morgan Stanley (AIMS). A few of the agency’s merchandise might already save its monetary advisers 10 to fifteen hours per week, based on Choose.
Morgan Stanley and different huge banks are ready this yr for a last ruling on new capital necessities that have been initially proposed practically a yr in the past.
Executives now anticipate the ultimate necessities to be much less onerous than the preliminary proposal. Which will imply banks might be freer to return to shareholders among the extra capital they’re at present holding.
With out saying what the agency plans to do, Choose admitted he cherished dividends as a means of rewarding shareholders.
“I actually care concerning the dividend as a stockholder … I believe it’s emblematic of our power, of our stability … in order that’s sacrosanct,” he mentioned, including that investments to develop the agency together with inventory buybacks have been additionally attainable makes use of of extra capital.
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