Chief Financial Officer at Morgan Stanley
Thank you, and good morning. The firm produced revenues of $13.1 billion in the second quarter. Our EPS was $1.39, and our ROTCE was 13.8%. Excluding integration-related expenses, our EPS was $1.44 and our ROTCE was 14.3%. Our results reaffirm the stability of the franchise against a challenging backdrop and the benefits of a balanced business model. The integrated investment bank continues to serve clients' evolving needs in a dynamic environment. Wealth Management benefited from its scale and rising rates. Despite the decline in global asset prices, our expanded product set in Investment Management proved supportive to that business.
The firm's year-to-date efficiency ratio, excluding integration-related expenses, was 70%. This includes the $200 million legal matter related to the firm's recordkeeping requirements that James discussed. Given the broader market uncertainty and inflationary environment, we are focused on discretionary spend while balancing continued investment initiatives and ensuring the right controls are in place to support future growth. As a management team, our priority is to diligently address what we can control given the market realities. We will continue to review incremental spend as we regard efficiency as a critical performance objective.
Now to the businesses. Institutional revenue of over $6 billion demonstrates the power of our balanced franchise against the difficult market backdrop. Revenues declined from the exceptionally strong prior year. While the backdrop was challenging for Investment Banking, particularly underwriting, fixed income and equities led the strength of the quarter as clients navigated volatile markets. Investment Banking revenues were $1.1 billion, down significantly from the prior year. Heightened volatility led clients to delay strategic actions and new issue activity. Advisory revenues were $598 million, reflecting lower completed M&A volumes. Equity underwriting revenues declined to $148 million. Results were in line with global equity volumes, which fell meaningfully versus the prior year.
Fixed income underwriting revenues were $326 million, also down compared to the prior year as bond issuance was muted across both investment-grade and non-investment-grade companies. The Investment Banking pipeline remains solid. Conversion to realize will largely be dependent on market conditions and corporate confidence. Equity revenues were $3 billion, reflecting the strength of our business against a volatile backdrop.
Prime brokerage revenue [Technical Issues].
Our revenues declined versus the prior year and reflected a loss of $413 million. Mark-to-market losses on corporate loans held for sale, including event loans, offset by gains on hedges, were $282 million. This reflected the widening of credit spreads. Notable declines in deferred-based -- in deferred cash-based compensation plans compared to gains in the prior year also contributed to the decline.
Turning to ISG lending. As a reminder, over 90% of our ISG loans and commitments are either investment-grade or secured. Our Institutional Securities Group credit portfolio continues to perform well. Our funded ratio on corporate loans stands at approximately 11%, in line with pre-pandemic levels and well below the first quarter 2020 peak of approximately 25%.
Turning to Wealth Management. By several measures, performance was strong despite the volatile backdrop. We reported revenues of $5.7 billion. Results were meaningfully impacted by movements in DCP, which reduced revenues by $515 million in the quarter. Excluding the impact of DCP, revenues increased 6% from the prior year to $6.3 billion, a new record. The decline in DCP was substantially offset by a reduction in compensation expense. Excluding integration-related expenses, PBT was robust at $1.6 billion, and the margin increased to 28.2%. The margin resilience in a turbulent market environment serves as evidence of the strength of the franchise and the benefits of our business mix, including the growth of our banking offerings.
Transactional revenues were $291 million. Excluding the impact of DCP, transactional revenues declined 17%. Lower revenues reflect a moderation of client activity from last year's elevated levels and limited new issuance. Self-directed daily average trades remained well above E TRADE's pre-acquisition highs. Asset management revenues of $3.5 billion were up modestly versus the prior year driven by strong fee-based flows realized over recent quarters. Fee-based flow assets were $29 billion in the quarter, and fee-based assets now represent 50% of our adviser-led assets.
Total net new assets were $53 billion in the quarter, bringing year-to-date NNA to $195 billion, representing a 6% annualized growth rate. Tax outflows were roughly double that of recent second quarter and yet asset generation remains strong and balanced. NNA was driven by existing and new clients in the adviser-led channel, stock plan vesting events, positive net recruiting and self-directed channel inflows.
Bank lending balances grew $7 billion in the quarter driven by securities-based lending and mortgages. We continue to expect full year loan growth of $22 billion. Deposits declined $12 billion in the quarter to $340 billion. The decline was associated with seasonal tax outflows and the deployment of rate-sensitive cash. The outflows were largely in line with our expectations. The average rate of deposits increased to 28 basis points. This was driven by an increase in savings account rates and deposit mix.
Net interest income was $1.7 billion, up notably from the prior year, driven by higher rates and continued strong bank lending growth. Looking ahead to the second quarter, NII is now a more reasonable exit rate going forward. While the magnitude of rate hikes is not certain, if the forward curve is realized and our model assumptions materialize, we estimate $500 million of incremental NII to be spread over the upcoming two quarters weighted towards the fourth quarter.
Turning to Investment Management, revenues were $1.4 billion. Against the challenging public market environment, our results demonstrate the benefits of our diversified product mix, particularly with strength in our portfolio solutions led by Parametric customization and private alternative funds as well as our liquidity offering. We have built a portfolio that provides balance across various market environments. The benefits of these efforts were apparent in the quarter. Total AUM was $1.4 trillion. Long-term net outflows of $3.5 billion primarily reflect recurring headwinds in equity strategies that were partially offset by strong demand in alternatives and solutions, particularly in Parametric customized portfolios. Collaboration with our Wealth Management business as well as other U.S. wealth management platforms is a driver of strength of our customized offerings.
Liquidity net inflows exceeded $30 billion. We have invested in our liquidity business in the past decade, which has positioned our franchise well to benefit from the current rising rate environment. Asset management and related fees were $1.3 billion. The impact of lower AUM was partially offset by higher liquidity fee revenue as rates came off of a zero-bound. Performance-based income and other revenues were $107 million in the quarter. We saw broad-based gains in our private alternative portfolio with particular strength in infrastructure and the energy sector investment. The decline versus the prior year was driven by movements in DCP and markdowns on public investments. Overall, our integration with Eaton Vance continues to progress well. We have seen early success in leveraging our global distribution across our combined businesses.
Turning to the balance sheet, total spot assets declined 4% from the prior quarter to $1.2 trillion. Our standardized CET1 ratio was 15.2%, up 70 basis points versus the prior quarter. Standardized RWAs notably decreased to $461 billion from the prior quarter as we manage our exposure efficiently across our businesses amid a market decline. The result was a reduction in RWAs of $40 billion. OCI related to our available-for-sale securities portfolio reflected an increase of unrealized losses of $1.1 billion. While this should be earned back over time, it reduced our CET1 ratio by approximately 20 basis points in the quarter. Our supplementary leverage ratio was 5.4%. During the second quarter, we completed our $12 billion buyback plan that we announced last year. The most recent stress test results further reaffirmed our durable business model and we announced a dividend increase of 11% and a $20 billion multiyear repurchase authorization.
Looking ahead, while the second half of the year remains difficult to predict, we are focused on our underlying business drivers. Lower asset values will impact revenue in both Wealth and Investment Management. However, in Wealth Management, rising rates are already driving NII higher, supporting performance and net new assets remain healthy in Investment Management. The diversification across fund strategies should continue to support results. What we do not know is how much volatility we will see in the coming months and how it will impact our Institutional Securities business. However, our competitive positions remains strong and we remain close to our clients while they assess current valuations and the overall environment.
With that, we will now open the line up for questions.