Sharon Yeshaya
Chief Financial Officer at Morgan Stanley
Thank you and good morning. The firm produced revenues of $14.8 billion in the first quarter, representing the second highest quarter in our firm's history. Excluding integration-related expenses, our EPS was $2.06 and our ROTCE was 20.3%. The firm's first quarter efficiency ratio, excluding integration-related expenses, was 67.9% and reflects our expense discipline, while continuing to invest in the businesses.
Results of the first quarter illustrate resiliency and durability. Equity and fixed income supported our clients, while navigating volatile markets. Wealth Management proved resilient and Investment Management benefited from diversification.
Now to the businesses. Institutional Securities revenues of $7.7 billion represented the third highest quarter on record. Results declined 11% from the record set in the prior year. This quarter's performance again demonstrated the power of our global integrated investment bank, with balance across businesses and a strong presence across geographies. We remain a global diversified leader.
Europe delivered its best quarter in over a decade, while Asia saw its second highest result, with strength in both equities and fixed income. Investment Banking revenues grew $1.6 billion, led by strength in Advisory. Compared to the prior year, revenues declined by 37%. Advisory revenues were $944 million, almost double the prior year's first quarter, reflecting higher completed M&A volumes.
Equity underwriting revenues were $258 million, a meaningful decline from last year's elevated results, in line with market volumes. Heightened volatility led clients to delay issuance activity. Fixed income underwriting revenues were $432 million, down compared to the prior year as macroeconomic conditions contributed to lower bond issuances.
Investment banking pipelines remain healthy across sectors and regions. However, the conversion from pipeline to realize will be largely dependent on market conditions going forward. Equity revenues were $3.2 billion, reflecting broad-based strength in performance against the backdrop of volatile markets. We continue to be a global leader in this business.
Cash revenues were solid, with particular strength in Europe, consistent with market volumes by geography. Derivative revenues were robust and the business navigated the volatility well.
Prime brokerage revenues were strong, while intra-quarter balances were impacted by uncertainty, we saw balances rebound alongside markets. Fixed income revenues of $2.9 billion were in line with the very strong prior year.
In the quarter, commodities and macro, particularly foreign exchange led the strength. Macro revenues increased meaningfully from the prior quarter. Clients remained engaged and the trading environment proved constructive.
Micro results were strong, but reflected lower revenues compared to the prior year. Commodities delivered a more diversified results, with revenues notably higher than the previous first quarter, benefiting from the heightened levels of activity.
Turning to Wealth Management. Revenues were $5.9 billion. Declines in DCP negatively impacted the revenues by approximately $300 million. Excluding the impact related to DCP, revenues increased 6% versus the prior year's first quarter results. Results underscore the resilience of the franchise, the value offered to clients during uncertain times and the benefits of our scaled multi-channel model.
Retail clients remained invested, with allocations across asset classes consistent with last year. PBT was $1.6 billion and the margin was 26.5% or 27.8%, excluding integration-related expenses. These strong results should continue to be supported, as we realize the benefits of rising rates.
Asset management revenues were $3.6 billion, up 14% versus last year, benefiting from the growth in fee-based assets. This growth continues to reflect the investments we have made into the business over time and affirms our strategy is working.
Net new assets were $142 billion for the quarter. NNA was inclusive of an asset acquisition, which I will touch on shortly. Absent this asset acquisition, annualized growth was 5.4%, and despite the volatility, net new assets were generated from all channels.
The advisor-led channel benefited from an even split of existing and new clients, as well as positive net recruiting. Fee-based flows were also strong and inclusive of the asset acquisition were $97 billion.
Workplace continues to benefit from the establishment of companion accounts. Retention of assets also continued to rise as a result of incremental companion account adoption and the value of the platform.
In the quarter, we added $75 billion of retirement assets through an asset acquisition of our institutional retirement -- of an institutional retirement consultant. We remain a platform of choice and this is the second institutional retirement plan to join us in the last 9 months. We continue to view these asset acquisitions as incremental opportunities to reach the expanded audience through education and financial wellness. The acquired team's client base includes nearly one million of plan participants. Transactional revenues were $635 million. Excluding the impact of DCP, which is reflected in this line, revenues were strong.
Although activity moderated from the prior year, self-directed daily average trades remained above $1 million in the quarter, over 3 times E TRADE's pre-asset acquisition record. We have also seen meaningful interest in our alternatives offering, given our broad-based access to managers and their retail-oriented products.
Loan growth remained strong in the quarter, with bank lending balances growing $7 billion, driven by securities-based lending and mortgages. We expect loan growth over the remainder of the year to be consistent with our prior guidance of approximately $5 billion per quarter.
Deposits increased $6 billion in the quarter to $352 billion. The average rate on deposits declined to 9 basis points. We have completed the net runoff in wholesale deposits and do not anticipate further declines in deposit costs.
Net interest income was $1.5 billion. Excluding prepayment amortization, NII increased 15% from the prior year driven by loan growth. Back in January, we indicated that the fourth quarter NII was a reasonable base to inform 2022 and that we would expect $500 million of incremental NII on the back of rising rates. Due to the further moves in rate expectations since January, we should see this benefit at least double if the forward curve and our modeled assumptions are realized over the remaining 9 months of the year.
Moving to Investment Management. My remarks will refer to quarter-over-quarter changes as the timing of the Eaton Vance acquisition makes the prior quarter a more relevant benchmark. Revenues were $1.3 billion. The sequential decline reflects the seasonally lower performance fees, which are mostly recognized in the fourth quarter and a more challenging market environment. Despite headwinds, this business is benefiting from increased scale and a more diversified product offering. Total AUM of $1.4 trillion declined 8% quarter-over-quarter as a result of market declines and outflows.
Long-term net outflows reflected approximately $9 billion of institutional outflows in our Solutions business, including the expected redemption of a large asset manager who brought their equity trading implementation in-house.
Equity strategies saw a giveback of some of the prior year's asset appreciation, as the broader market experienced a rotation out of growth. This was partially offset by the continued strong flows into Parametric customized portfolios, as well as our inflation-related and interest rate-sensitive products.
Asset management and related fees decreased sequentially to $1.4 billion on the back of the aforementioned seasonality and market volatility.
Performance-based income and other revenues were a loss of $53 million in the quarter, driven by markdowns in one of the Asia private equity funds, declines in deferred compensation plan investments and negative marks associated with legacy international real estate investments. Away from these specific markdowns, we saw broad-based gains across our alternatives platform, reflecting the strength and diversity of the platform.
Turning to the balance sheet. Total spot assets increased to $1.2 trillion. Our standardized CET1 ratio sequentially declined and now stands at 14.5%. Multiple factors contributed to this change. Standardized RWAs increased as client activity returned after the more moderated levels at the end of 2021 and volatility increased.
OCI related to our available-for-sale securities portfolio reflected an increase of an unrealized loss of $2.4 billion as a result of higher interest rates. While this should earn back over time, it impacted our CET1 ratio by 50 basis points in the quarter.
We continue to return capital to our shareholders. We are executing on our $12 billion buyback authorization, as we repurchased $2.9 billion of stock in the quarter. We remain in a strong capital position.
Our tax rate was 19% for the quarter. The vast majority of share-based compensation and the share-based award conversions takes place in the first quarter creating a tax benefit. We continue to expect our full year tax rate will be in line with full year 2021.
The first quarter again tested the resiliency of our franchise. We are pleased with how our team navigated the volatile environment and stayed close to clients during times of uncertainty. While the outlook for the remainder of the year is difficult to predict, the second quarter has started constructively and clients remain engaged.
With that, we will now open up the line to questions.
