Yahoo Finance Higher-for-longer rates are 'good for business': Morgan Stanley CEO Ted Pick
Morgan Stanley (MS) CEO Ted Pick said Monday that higher-for-longer interest rates are "good for business."
"I do think it's really good for our business, because we have spent so much time refining the strategy," Pick said at a financial services conference hosted by Morgan Stanley Research.
Central bank policymakers have been cautioning investors to expect rates to remain elevated following a string of sticky inflation readings during the first quarter and surprisingly strong economic data.
The Federal Reserve is expected this Wednesday to keep rates at a 23-year high and dial back the number of cuts they expect for the remainder of 2024.
The current rate path presents a conundrum for many banks that rely heavily on the spread between what they pay for deposits and earn from their loans and banks that are heavily exposed to certain types of troubled borrowers.
But Pick said the strategy developed by his predecessor, James Gorman, protects Morgan Stanley from the risks of an elevated rate environment.
"We know we don't do unsecured credit in emerging markets, credit cards through a loan cycle," he said. "These are great businesses, but we know [what] we do and that's why it’s so important, the discipline that James crystalized."
Pick became CEO at the beginning of this year after Gorman announced his decision to retire, making it clear Gorman’s blueprint would remain in place.
"While there has been a change in leadership, there is no change in strategy," he wrote in his 2024 letter to shareholders.
Since that time, Morgan Stanley’s stock has risen just 3%, underperforming its big Wall Street rivals. Its stock was roughly flat Monday.
Profits last quarter rose more than analysts expected from the year-ago period thanks to pickups in fees for investment banking, trading, and asset management.
Fees from investment banking rose 19% from a year ago, driven in large part by more equity and fixed income underwriting transactions for work on IPOs and corporate bond issuance.
Pick on Monday pointed to better integration of Morgan Stanley’s investment banking, trading, wealth, and asset management as the key place for the firm’s future growth.
He highlighted Morgan Stanley’s business of stock plan administration for corporate clients as a way to engage with other divisions of the firm like investment banking.
Pick also discussed how artificial intelligence would boost Morgan Stanley’s investment bank revenues.
"There's an enormous flywheel of activity," he said, pointing to clients in the utilities, telecommunication, real estate, and technology sectors who will face more demand as the trend takes off.
Morgan Stanley has a set of artificial intelligence products it offers clients within its wealth and asset management division known as AI at Morgan Stanley (AIMS). Some of the firm’s products may already save its financial advisers 10 to 15 hours per week, according to Pick.
Morgan Stanley and other big banks are waiting this year for a final ruling on new capital requirements that were initially proposed nearly a year ago.
Executives now anticipate the final requirements to be less onerous than the initial proposal. That may mean banks will be freer to return to shareholders some of the excess capital they are currently holding.
Without saying what the firm plans to do, Pick admitted he loved dividends as a way of rewarding shareholders.
"I really care about the dividend as a stockholder … I think it is emblematic of our strength, of our stability … so that’s sacrosanct," he said, adding that investments to grow the firm along with stock buybacks were also possible uses of excess capital.
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