Morgan Stanley
Financials · Capital Markets
Structural: WM + IM now ~55% of revenue (vs ~50% IB-heavy pre-2020); fee-based recurring revenue smooths the cyclical IB/trading book and supports a higher P/E than $GS. E*TRADE ($1T+ self-directed) + Eaton Vance ($1.7T AUM) anchor the $5T+ client asset base.
- IB rebound cycle: M&A + ECM volumes off multi-year lows; backlog reaccelerating
- WM operating margin trending toward 30%+ on scale + rate tailwind on sweep deposits
- Eaton Vance + Parametric direct-indexing fee stream growing high-single-digits
- Buyback + 3-4% dividend yield; CET1 well above regulatory minimum
- Equities S&T franchise #1 globally - prime brokerage gains share post-CS
- Sweep-deposit yield arbitrage compressing as cash sorts into higher-yielding alts
- IB cycle deeply gated by rates + risk appetite; recovery is uneven
- Asset management fee compression (passive shift) pressures Eaton Vance margins
- Regulatory: Basel III endgame raises capital requirements on trading book
- Concentration risk in equities trading - one large prime brokerage event tail
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