Morgan Stanley’s stock (NYSE: MS) has gained 3% YTD, as compared to the 16% rise in the S&P500 over the same period. Further, the stock is currently trading at $88 per share, which is 12% below its fair value of $99 – Trefis’ estimate for Morgan Stanley’s valuation. The investment bank posted better-than-expected results in the second quarter of 2023, with net revenues increasing by 2% y-o-y to $13.5 billion. While the wealth management revenues grew by 16% y-o-y, it was partially offset by an 8% drop in the institutional securities and a 9% decrease in the investment management segment. Notably, the institutional securities unit contributes close to 50% of the total revenues. It was down due to lower investment banking and a decline in sales & trading income. On the cost front, total expenses as a % of revenues increased in the quarter due to a 13% rise in compensation & benefits costs. Overall, it resulted in an adjusted net income of $2.05 billion – down 14% y-o-y.
The company’s revenues for the first half of 2023 were $23.97 billion, which is at par with the year-ago figure. It was due to a 10% drop in the institutional securities and a 6% decrease in the investment management segment, offset by a 13% growth in the wealth management division. Further, the noninterest expenses increased 6% in the year. Altogether, the adjusted net income was reduced by 18% y-o-y to $4.9 billion.
Moving forward, we expect the same trend to continue in Q3 2023. All in all, Morgan Stanley’s revenues are forecast to remain around $54.8 billion in FY2023. Additionally, MS’s adjusted net income margin is likely to see a slight dip as compared to the previous year, leading to an adjusted net income of $10.14 billion and an annual GAAP EPS of $6.12. This coupled with a P/E multiple of just above 16x will lead to a valuation of $99.
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|S&P 500 Return||-3%||16%||100%|
|Trefis Multi-Strategy Portfolio||-5%||22%||293%|
 Month-to-date and year-to-date as of 8/10/2023
 Cumulative total returns since the end of 2016