So – and then the deposit stuff will – it’s kind of going to be what it’s going to be depending on where rates go and what the Fed does.Glenn Schorr Appreciate that. And thank you for fixing my question. The follow-up I have a simpler on commercial real estate. Can you just help us just dimensionalize the portfolio? What exposure do you have? And how do we get comfortable that this is going to get that keeps on giving, like I’m sure there is details within the provision that you took that could help us? Thanks.Sharon Yeshaya Absolutely. I think what’s important about that portfolio is that it is diversified, in addition to that, we have been reducing the exposure in the ISG direct CRE portfolio over the course of the last year or so.
So obviously, we keep our eyes on it. As you know, CECL is a life-of-loan concept. And so as you see economic deterioration, you do need to account for that. And the same goes for what we’re seeing in the commercial real estate market. So I think that those are the two main points I would point you to is that it is diversified, and we have been continuing to reduce that direct exposure.Operator We will hear next from Ebrahim Poonawala from Bank of America.Ebrahim Poonawala Good morning. I guess just first question, I wanted to follow-up, James, a comment you made about being expecting 2023 to end on a constructive note. I was wondering if you can elaborate on that just in terms of a lot of this is tied to macro. How do you think the economy paying off in terms of the Fed’s fight against inflation damage it does to the economy in the markets?
And as you think about ending 2023, where do we think – where do you think we will be on all these fronts by the time the year ends?James Gorman Well, our house call out for the markets went about flat from where they started at the beginning of the year, and they certainly support that. I think the two wildcards out there are geopolitical risk, which we can’t really handicap my gut is that the U.S.-China relations while having the moments tension remain overall stable through this year and global trade remains stable. The second risk, of course, is that the Fed’s actions doesn’t bring down inflation. Well, the evidence so far is it is bringing down inflation, but they are probably not done. I think it’s likely we will see at least one more and possibly two more rate increases.
That gets you to sort of high 5%, 6% type interest rates, which is not shocking. And if we get through that, again, many people are calling for a modest recession, it might be, I don’t know, obviously, but got is, whether it’s a modest recession or we dodged that bullet. Sort of doesn’t matter that much. What really would matter is if inflation is not tamed, it has to go much higher than people are expecting. You go into a much deeper recession it’s certainly not a likely outcome at this point. So that’s why I said I think I used the words constructive.For Morgan Stanley, if the sort of green shoots we’re starting to see. Again, I don’t think they are a Q2-type event but back half of the year and next year in banking and underwriting, we just had a Global Risk Committee yesterday discussed some of the stuff and certainly the underwriting calendar, it looks like it’s picking up a little bit through the back half of the year.
I think the wealth management, what Sharon pointed to, the 23% in cash like security is moving into active investments, that will happen. I mean through the long history of this business people don’t hold a quarter of their money in cash. They just think it is not real. So – and I suspect once we pass this sort of inflation Fed action, there will be a long pause would be my gut followed by some rate cuts starting in 2024. I do not expect that this year. So when I put it all together, relative to sort of other periods that I’ve been through my career, I think it feels given the landlord, given the geopolitical stuff, given the inflation surge given COVID, it actually feels surprisingly benign from what it could have been.Now that’s not denying there are clear stresses, the commercial real estate that I think Glenn just asked about across the banking sector, what’s going on in some of those banks with very idiosyncratic portfolios that frankly didn’t match duration interest rate risk, well, is were issues.
There are parts of the world that are still having slow growth. So it’s not a perfect kind of remains the rolling on song, you can’t always get what you want but you get what you need. And I think about Morgan Stanley coming out of this, and we’re kind of getting what we need. We’re getting a 15% CET1. We’re getting a 17% ROTCE decent revenue, decent earnings, obviously, opportunity to take some costs out and I think very well positioned on a go-forward basis. So that’s where the word constructive came from. Sorry, it’s a long answer for one word.Ebrahim Poonawala No. I appreciate the color. And just as a follow-up, when we think about capital return in terms of one, the pace of buybacks, given the macro uncertainty, any perspective there?
And just opportunistically, do you see this as creating opportunities inorganically M&A-wise for Morgan Stanley as we look forward?James Gorman We’ve maintained – it’s a very good question. I’ll deal with sort of what the capital position is now and what the opportunities are for excess capital. On the capital position now, CET1 is running at 15.1%. We obviously have control over that dial to a large extent. So – and we have tilted conservative. I think it’s fair to say. I haven’t seen all the numbers, but I’m pretty sure we’re at the top or above all of our competitors set again, and we’ve been that way for quite a while. So on current capital requirements with the last stress test, we’re at 13.2%, I think or 33%, somewhere around there.
So 15% is a very healthy buffer. But we’ve got a new stress test coming out. So many people feel that’s going to be a little tougher than what it was last year. It might be, and we’ve obviously got plenty of capital for it. So I don’t expect any issues whatsoever. And then we have Basel III coming out in, I think, sort of late May, June time period where – and again, that will be implemented probably 2025 that looks like earliest. So again, there is time for the banks to adjust their capital position. So we will have much better visibility as to what we’re dealing with by, say, July 1. And I – again, I don’t – I suspect it might drive some changes in how we run our balance sheet, but I don’t think it’s going to involve anything particularly draconian.Now given that, we like to maintain a healthy buffer.
We have done, obviously, the deals we did in the last couple of years, E-Trade and Eaton Vance, which I just said I couldn’t be more happy with both the timing of those deals, the pricing of those deals and the performance of the businesses. And when we see a really robust market environment, you’ll see that even more so in spades. We’ve had a very healthy dividend yield. I think it’s over 3.5% churn, something like that now. We believe in the dividend. I’ve said for years, and I think of the wealth management business is a dividend stock, and we’re clearly making more money in that business than we’re paying out a dividend. And we’re buying back. I mean we dove the buyback down a little bit. I think to $1.5 billion, we’re probably running at $2.5 billion at our peak last year on a quarterly basis.
And we did that just – it was an interesting environment. I mean, let’s just say you had two of the biggest banks fail in the last 15 years. So being a little prudent a little conservative, watching that going on, you don’t want to be too grabby is my attitude. So I think we have lots of flexibility. There is no doubt we can and over the years, we will do more acquisitions in my mind. There is no doubt about that whatsoever. And it will be in the wealth and asset management space and we constantly keep a list of who’s attractive and who would be a good fit.But obviously, I couldn’t say if there was something imminent, but there is nothing imminent, but it’s something we focus on. So again, I’m sorry, I’m giving long answers this morning.
It must be this cold that I’ve got.Operator We will move next to Steven Chubak from Wolfe Research.Steven Chubak Hi, good morning. So I wanted to start off just unpacking the NNA lows that you saw in the quarter. I mean 10% is really an impressive result. The fee-based flows continue to lag brokerage. And just wanted to better understand what you see as a sustainable fee-based flow rate. And just as we try to evaluate the durability of 10%, how much of the quarterly inflows were from FRC where you’re clearly a destination of choice for some of those attriting advisers?Sharon Yeshaya I’m going to try and remember all of your questions, Steve, in order. So if I forget one, just remind me. The first point on FRC, I’ll take first. In terms of the regionals, more broadly, as I mentioned in the prepared remarks, I believe we had about $90 billion that came in without any relationship to those regionals.
