Higher Regulatory Capital Requirements Could Reduce Capital Returns at Morgan Stanley

Morgan Stanley has built a resilient business model, and we forecast the company having nearly flat revenue and earnings over the next couple of years, despite a still precarious global economic outlook. Institutional securities segment revenue took a fall in 2022 from an abnormally high level in 2021 due to tightening monetary policy and fear of a recession, and falling asset prices put a dent in asset management revenue. These negatives were somewhat offset by growth in high profitability net interest income in the wealth management segment. With quite a bit of negativity already reflected in results, we don’t anticipate another significant decline in revenue. However, we also don’t anticipate a maintained recovery in capital markets activity and asset prices until the recession question is resolved.