Sharon Yeshaya
Chief Financial Officer at Morgan Stanley
Thank you, and good morning.
The firm produced revenues of $15.4 billion in the third quarter. Our EPS was $1.88, and our ROTCE was 17.5%. Results in the third quarter show the inherent strengths of our business model, and our ability to grow revenues while also driving profitability. The firm's year-to-date efficiency ratio was 72%. In addition to strong revenue growth, efficiency gains are the result of disciplined prioritization of our controllable spend. An ongoing review of our real estate footprint as well as lower litigation and consulting spend contributed to this year's operating leverage, while maintaining strong infrastructure to support ongoing growth.
Now to the businesses. Institutional Securities revenues were $6.8 billion. Notwithstanding advisory and equity underwriting markets remaining below historical averages, the segment's revenues represented a near-record third quarter. Performance accelerated towards the end of the quarter and was driven by the benefits of scale and the global reach of our integrated investment bank. Activity outside the U.S. drove the segment's outperformance relative to historical averages.
Our global footprint positioned us well to capture share. As risk events around the world drove activity, including the Bank of Japan's monetary policy changes, shifting expectations around the size and the timing of the Fed's first rate cut and China's announced stimulus, we supported our clients. Investment Banking revenues increased to $1.5 billion. The year-over-year improvement was driven by continued strength in underwriting, led by debt underwriting and further aided by a pickup in advisory revenues. Steady improvements in corporate and sponsor activity as well as our investments in talent and client relationships are yielding results.
Advisory revenues of $546 million increased year-over-year on modestly higher completed M&A transactions in the quarter, with particular strength in EMEA. Large fee events from closed deals in EMEA, including those involving financial sponsors, supported the strongest quarter in over a decade for the region. Equity underwriting revenues were $362 million. While global market volumes remain well below historical trend lines, revenues were higher year-over-year with a notable pickup of activity in Asia, driven by IPOs and follow-ons.
Fixed income underwriting revenues more than doubled versus the prior year to $555 million. Results were driven by strong non-investment grade issuance, supported by both refinancing and event-driven activity, as well as a record third quarter volumes in the investment-grade market. Pipelines are healthy and diverse. We continue to believe we are in the early stages of a multi-year capital markets recovery. Corporate activity is gaining momentum, and the desire among sponsors to transact is steadily materializing, not only domestically, but also abroad.
While we are cognizant of the broader macroeconomic risks at play, we are well positioned to deliver the integrated firm with a deliberate focus on comprehensive solutions for our global clients. Equity revenues were robust at $3 billion. The business navigated bouts of market volatility well and remained nimble as we supported clients. In particular, performance in the Americas and Asia was strong. Prime brokerage revenues were above historical averages as client balances once again reached a new peak, driven by higher equity markets.
Cash results improved versus the prior year, reflecting higher volumes across the regions. Derivative results were also up year-over-year, reflecting an increase in client activity, coupled with an improved trading environment in Asia associated with China's announced stimulus in the final weeks of September. Fixed income revenues were $2 billion, driven by strength in macro, particularly rates, largely offset by results in commodities that were stronger in the prior year. Results reflect solid performance in EMEA and Asia, as well as a coordinated global effort to support clients through periods of volatility.
Macro revenues increased versus the prior year, attributed to higher client engagement as our rates business navigated the markets well amid shifting expectations around the size and the timing of the Fed's first rate cut. Micro results were roughly flat year-over-year. Results in commodities declined compared to the strong prior year, which benefited from elevated volatility in energy markets.
Turning to ISG lending and provisions. In the quarter, ISG provisions were $68 million, driven by portfolio growth, partially offset by an improved outlook. Net charge-offs were $100 million in the commercial real estate and corporate loans.
Turning to Wealth Management. In the third quarter, the business produced a record revenue of $7.3 billion and record PBT, highlighting the model's strong operating leverage. Strength in wealth management reflects a combination of constructive markets and a disciplined execution of our strategy. Client assets and Wealth Management reached $6 trillion. Fee-based flows were strong, demonstrating the power of our scaled and differentiated client acquisition funnel and the value of advice. Our multichannel model is driving durable long-term growth and profitability, benefiting from continued investments in our expanded offering and technology.
Moving on to our business metrics. Pre-tax profits of $2.1 billion drove the margin to 28.3%. In the quarter, DCP negatively impacted the margin by approximately 90 basis points. Asset management revenues were $4.3 billion, up 18% year-over-year, driven by the cumulative impact of positive fee-based flows and higher markets. Fee-based flows in the quarter were robust at $36 billion and year-to-date flows are on pace to exceed last year, supported by an ongoing contribution of assets from advisor-led brokerage accounts to fee-based accounts. Clients are diversifying fee-based accounts to include fixed income and alternative products. Fee-based assets now stand at $2.3 trillion.
Net new assets were $64 billion, bringing year-to-date net new assets to $195 billion, which represents 5% annualized growth of beginning period assets. Net new assets in the quarter were supported by our advisor-led and workplace channels, with a notable contribution from new clients in the advisor-led channel. Transactional revenues were $1.1 billion and excluding the impact of DCP were up 10% year-over-year. Overall, higher levels of client activity supported results. Loan growth was $4 billion for the second consecutive quarter, driven by mortgages. Total deposits increased sequentially to $358 billion. While average sweeps were down slightly, the recent stabilization, particularly -- we've seen recent signs of stabilization, particularly as the Fed began cutting rates. This is encouraging.
Net interest income was $1.8 billion. Looking ahead to the fourth quarter, we would expect NII to be modestly down from the third quarter results, largely on the back of lower rate expectations, consistent with the forward curve. We are committed to continuing to execute as the opportunity in front of us remains significant. We currently touch 19 million relationships, 1.3 million more than last year. Our expanded offering includes unique market access for high-net-worth clients across a broad range of alternative products and more recently, robust private market services, which continues to attract demand. We are investing in our intellectual capital, unique products and an integrated infrastructure to help our advisors serve their clients.
Turning to Investment Management. Revenues of $1.5 billion increased 9% compared to the prior year. Results reflect higher asset management and related fees, which increased 5% year-over-year, driven by higher average AUM. Long-term net flows were approximately $7 billion. Inflows were primarily driven by continued demand in alternatives and solutions, and were further supported by our fixed income strategies.
Since the acquisition of Eaton Vance within alternatives and solutions, Parametric customized portfolios have been a consistent source of strength. Our multi-year investments into Investment Management's partnership with Wealth Management includes initiatives around advisor education on our tax-efficient product capabilities. This has helped drive steady demand from originating from our own Wealth Management clients as well as the broader retail base.
Liquidity and overlay services had inflows of $9.3 billion, led by our Parametric overlay strategies. Performance-based income and other revenues were $71 million. Results supported gains in infrastructure and real estate. And total AUM now stands at $1.6 trillion. Our investments in customization and alternatives are showing returns, demonstrated by positive long-term flows this quarter. We continue to invest in secular growth products in order to meet global client demand.
Turning to the balance sheet. Total spot assets grew to $1.3 trillion. Standardized RWAs increased sequentially to $490 billion as we actively supported clients. We accreted approximately $2 billion of common Tier 1 capital. Our standardized CET1 ratio stands at 15.1%. We continue to deliver on our commitment to the dividend, which we raised to $0.925 per quarter -- in this quarter, and we bought back $750 million of common stock during the quarter. Our year-to-date results serve as hard evidence that we are executing on the opportunity set, benefiting from being global and diversified with the resources to invest in growth. Across Wealth and Investment Management, we reached $7.6 trillion of total client assets. Expanding markets and increased client engagement should further support asset growth as we progress toward $10 trillion in client assets.
With that, we will now open the line up to questions.