MS - Earnings call transcript Q1 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Sharon Yeshaya

Good morning. This is Sharon Yeshaya, Head of Investor Relations.

During today’s presentation, we will refer to our earnings release and financial supplement, copies of which are available at morganstanley.com. Today’s presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our notices regarding forward-looking statements and non-GAAP measures that appear in the earnings release. be reproduced not our may presentation duplicated without or consent. This over now and turn will to the Gorman. I James call Chairman Officer, Chief Executive

James Gorman

strong us. typically billion quarter, comfortable albeit firm Good you and of net quarter. very Sharon. XX.X% everyone. a revenues a billion footing. XXXX record, in respectively. were joining ROE $XX.X strong first you, targets, a $X.X began what exceeded the Thank In seasonally our income is on and morning, for Thank The

performance consistently quarter’s operating in the inherent Importantly, demonstrated across leverage an our Results environment. all attractive strong. market businesses were

changes Our rates sales activity. This backdrop Equity performed FX with clients and regions. strong and well client of fixed new Trading sized & elevated expectations against advantage themselves. all benefited management from markets catalyst rise being rates Wealth inflation when they portfolios. provided despite demonstrated and the their contributed in Investment appropriately periods trading by opportunity to businesses rebalance punctuated remain markets Sales in volatility. volumes remains We present activity an banking strong and and in heightened a with volatility sustained to to volatility active combined solid. across results. markets exceptionally Return strength interest U.S. issue of the of take income

to billion. offerings, to scale X broadly. the products building with and range we an of represents PBT strong actively again businesses investment across over produced alternatives of public to and net quarter, Investment achieve out operating long-term markets. quarter team the driven and we returns technology years. our by At increase same time, of This out more continues invest the in the the as the the the inflows produce witnessed both management continued capabilities business year-on-year combination banking and leverage $X.X the pretax digital continue secular margin For advisory growth set almost trends supported the in record XX% profit

our In We as from quarter, several platform. acquisition closed global we the management ahead made advantage investment returns West attractive in years the and particularly highs. key Mesa expect of we take the

often that up going have more is said this our wealth forward investment engine active make witnessed the other quarter. and exactly management give businesses drives markets. in We in us we that what the first and That balance

billion the unthinkable been put the on importance past appropriate. of XX.X% wealth just has the been This has been $X.X of has For of years firm. stability years, have a several ago. X to brought Margins focus would lot management our that focus of revenues on

being alone, the However, over income our and XXXX discussed dominance CCAR our revenue. $X industry, the in continued what In is the not the commitment investment we recently as the institutional businesses. securities plan. banking securities strength the of strengthen equities, with billion rest often Along of of of is generated fixed breadth institutional to submitted

is As year’s scenario more this years. previous is severe than being widely reported,

range we of transparency reasonable course into variability. Therefore Fed year. a prepared are degree don’t but years we of seen outcomes full have the over a Of we models, for have this the

More importantly, rulemakings. on recently Reserve the beyond comments has this Fed requested year several proposed

capitalized profiles expect over less our We and believe coming complex sensible regulation. financial the from benefit maintain sector have more we capital return we more attractive broadly that will and sufficiently We expect U.S. the and years. to

I discuss and makes Jon laid over will it the business the year. that goals model I detail. the turn remain very same deliver objectives the our out medium-term our of execute now our our forward in look strategy am given on and the are this beginning to to at strength we to of global competitive on confident we franchise quarter As well-positioned.

Jonathan Pruzan

good and morning. you Thank

DVA from a were solid billion, firm and wealth asset to increased markets businesses quarter’s classes, Revenues volatility record businesses delivered businesses benefited a investment asset and EPS weathering XX.X% respectively. and was higher prices. expenses of by billion, Total costs increase prior $X.X across associated return combination excluding non-interest revenues active, institutional while related strong of trading sequentially ROE first up execution periods. results after Global driven volumes year-over-year. on XX% higher $XX.X PBT XX.X%. XX% the results regions. return softer compensation management common were across was securities The in healthy with our many were and and expense was business up volumes and impact billion, $X.X was was equity a was tangible $X.XX, of The

same ratio fully Over gross-up was strong The described XX%. material was impact growth the firm are also the accounting new technology with XX% the in for that the The supplement. Continued details contributed the into was all quarter to operating leverage. recognition In revenue not more of revenue investment guidance segments to the level. at period efficiency increase. firm quarterly contributing

This transactions. engaged billion. have were and million, the healthy. the to up Compensation are higher increase Clients volumes will sequentially. all XX% both a quarter stability combination strong quarter, had were a start revenues investment XXXX. income banking, the billion, for pipelines segment to I sequential there $X.X net M&A a expenses for Non-compensation increase $XXX year. the X% revenue Institutional increase fixed Now, performance reflect over a were a for the The all expenses. results. expenses advisory generated $X.X execution Advisory compensation strong representing ratio revenues increased underwriting, fourth strength. best Notably have the Announced in contributed In and banking, billion demonstrated generated represents XX.X%. revenues as larger been whole of regions in results by securities since remained a revenues of quarter. to of has to driven we X% XX% $X.X turn and Investment of cross-border billion, the pickup and and a $X.X equities businesses.

underwriting The spreads, volatility, underwriting, rising interest to despite equity challenged rates during heightened conditions quarter, Equity periods we Asia the in up of issue credit sequentially. new impacted our Turning remained and and market were backlog, million more convert the solid. X% remain wider but revenues were in Americas. of ability doubts strength results our robust. activity IPO witnessed market follow-on some backdrop $XXX of to Regionally,

saw in diversified higher A issuance. income Overall, by convertible also through We in financing yield healthy with products, sequentially event large by our million. Fixed X% high decrease pipelines take volatility to part grade issuance. provided $XXX revenues remain underwriting increased This financing investment and partner activity was issuers advantage supported of sectors. investment together including one and increased driven regions MUFG. was increased we across banking offset

economic by factors. future market by and geopolitical as recent be However, demonstrated macro dynamics impacted activity may regulatory,

also businesses all of In and and of strong sequentially during retained billion, we across billion, Revenues on $X.X revenues more results. globally results. fourth quarter volumes $X.X strength regions. were the improvement XX% strong was were a as balances and from a particularly up billion up position of volatility activity offer first increased quarter higher and income first more than quarter the in brokerage half in Derivatives leadership Asia. and hedging market revenues. cash in revenues our sales episodes A expect engagement produced equities, of Revenues bid And increased quarter benefiting had trading for increase prime very activity, created the quarter-over-quarter XX% significant client drove solutions. the globally. all $X.X rise in saw strong. Europe particularly be sequential Fixed Our to generated favorable and demand strong and spreads one products quarter-over-quarter, also trading doubling number client engagement strong combination client

the in interest sharp patterns rise our were the quarter contributing in rise the aided of performance. part rates levels expectations factor, and a activity seasonal volatility inflation While early the in and heightened

business performance performed credit across performance sequential macro in was improved FX. by Our The well. solid driven businesses rates

clients from higher has product fourth and and by driven market best a increased lending of close by increase trading ability structured activity our benefited transactions, quarters flow its to were income in operational can institutional of in Deepening also XXXX. million securitized in The environments. Commodity market period be the group driven The results and strength business was up and $XX revenues years of increase one the a aided this in range backdrop. quarter stream. volatility more strong. from Average which more client had VAR episodic. revenue both the Fixed results in an Our Europe footprint active million, the facilitation segment’s to demonstrate activity. for the was service in $XX flex trading X

$X.X last quarter in business. flat client point Total both assets PBT asset in scale pre-tax the and resulting XX margin un-deferred billion domestic management $X.X at impact continue net strong. of Turning uplift first record Net organic in from down to was firm. year-over-year increase of expenses The X% source investments. flows billion non-compensation by the trillion segment be points to indices. to of conversions into by despite X% planned revenues long-term sequential were supported asset Despite of operating basis the XX.X%. a $XX a were growth demonstrates On compensation business this Fee-based equity growth brokerage and the leverage quarter-over-quarter wealth produced of margin of year’s in new revenues. basis, in profit and management, revenues, reflecting lower are for flows softness international billion an the essentially assets, growth basis XXX unchanged fee-based $X.X of compared a mark-to-market was continued as offset sequential asset

of high trillion assets. result, or a $X.X As new XX% a of client assets fee-based total reached

origination on was as This sequential deepening U.S. into volatility. around growth revenues income the clients in lending Asset lower deposit platform. were in our calendar $X.X interest of clients a an was and and in-house loans have an rates, offset allocations billion. the across billion remain retail driven and net accounts offset in wealth suite income effect modest up at balances level transitioned quarter, responded the historical $X.X was to lows management more portfolios has In by also by increase both billion. XX% mortgage. Retail balances levels and higher client were is quarter. continued of SBL and to growth as banks. were balances assets. strong rising the at investors repositioned of Loan deploy management primarily XX% X%. Cash basis, interest loan hovering historic quarter asset year-over-year pay-downs partially market. highs were engagement driven to yields by funding remains costs days to impacted primarily production by last with driven Higher actively been On $XX.X or space in The up flows the rates higher X% in our cash by of quarter’s average Lower in mortgage fewer equity Net billion. $X.X we as our market a grew Positive by NII the in deposits. increase

driven X% down by was million, the $XXX of of principally revenues transaction compensation deferred on impact plans. total However, mark-to-market

This highs. in the despite of stability and of investment, segment quarter’s underscore our reached results pre-tax the pace gyrations equity new profit markets

revenues our new service and their continue capabilities these provide AUM We down of are $XXX driven higher management, digital we in advancements relationships. million, the of better to to X% advisors that were applications long-term organization. the we and billion, $XXX and up continuously impairment our enhancements with advice believe introducing Over to XX% enable assets In sequentially billion time, to will management quarter-over-quarter. by was broaden client quarter-over-quarter pursue investment Total last $XXX quarter’s X% AUM asset of up fees charge.

flows. long-term outflows strategy business the adding for private our estate West balance cash the their needs the as acquisition, saw the our turn of saw also positive around we our in clients liquidity platform. quarter, real we capabilities continued credit closed Mesa year, manage In Although

the fees on quarter. sequentially million Asset up of of were the back average X% management for AUM higher $XXX

fee to revenues by related Total long-term expenses earned We impacted lower equity increased X% in performance by certain to driven largely this segment. revenue the in Invested recognition XX% related million, quarter, by rates $XX gross-up on quarter-over-quarter, continue were to stability relative see by assets. last market private down funds. our

was $XXX Turning to flat. the balance billion sheet, assets of spot basis, essentially on total a sequential

billion. Tier approximately $XX is higher in equity quarter, commitments X standardized lending to RWAs and relationship III $XXX grew ratio result a to common standardized Basel decrease billion of by our activity event expected supporting to As XX.X%. the

ratio expected leverage remain supplementary relatively Our to X.X%. unchanged is at

common we This per of with the our During MUFG. XX the million shares billion morning, plan $X.XX declared a and or fourth $X.XX dividend approximately quarter we repurchased share announced share. approximately repurchase Board stock

help part ensure we program, alliance. will from their their purchases passivity Federal make will will Reserve XX.X%. MUFG. our rata pro As by ownership our of with repurchase maintaining below of the not This regular directly impact compliance This strategic commitments

and XX.X% corporate associated was benefits tax the the quarter reflecting rate Our first tax reduced rate U.S. with in share-based payments.

tax at the placed for this to based the the conversions majority the expected full the award to of be share quarter, upper for Since of guidance XX% we year first the at in are Our end remains quarters XX%. vast remaining rate range.

demonstrates the franchise benefit global strength and This of quarter the our our business of model.

forward, look remain of we strategic execute out objectives confident – market to of aware sentiment. the that year. near-term the this medium-term earlier In we the the that we fragility As are are we well-positioned year we laid in

We importance emphasized the open our markets relates have as functioning of and to performance. it

This quarter beneficial open for levels demonstrate we that that will of to results engagement With now client the broadly our and increased business. questions. activity line are

Operator

of from of Steven [Operator Instructions] Nomura. line comes Our Chubak first the question

Your open. line is now

Steven Chubak

Thanks. Good morning all.

James Gorman

Good morning.

Steven Chubak

you are as that you we been SLR binding. some based about are just in some are there now read, And are focused your constrained, to more expectation your constraints and in James about more have based leverage not but comments what out I recent just historically thinking as hoping capacity, now strategy SEB you proposals that manage changes your bit that capital on regime, longer to to you longer once could the proposed looking the the balance we term? proposals how terms risk of enhanced surrounding just So initial again constraints new capital term, outlined on think sheet this more become ratios which payout bit future have a are also there informs to a of and was unpack

James Gorman

there well, that, in bunch – There obviously. a is is

approach think the unemployment currently acknowledgment scenarios your or are run point CCAR at when I least that year’s test the unemployment requirement the by which to just his Dodd-Frank reiterate this and is economic first driven XX% this under in generates are – hit achieve then sort very X.X% academic some will to it’s an if which it’s XX%, country, models an so you X%, you of severe very need severe. outcome shocks which to

how these – will out. well tests it are interesting of of kind believe see We year play to year So, kind all be will out. we we but this obviously how all plays capitalized, the anticipate this

are the on under our and first rather it remember what going XXXX maybe focused Historically, been one, is So, proposal, really constrained pretty are and we I SEB not – but are remain think constraint model. you the Under been am likelihood you will CETX right, buffer the CCAR into exactly, ratio play. leverage I traditional ongoing would can’t you SEB comes I is are the the I the back our right on And think sure. the right leverage are it’s ratio. tests constraint ratio the than constrained has that that the every be

would it but balance binding debt capital want the versus I a seen, where comment it I as that me one sheet comes have slightly may always period the have for its asked remains the illiquid these where thing forms surreal that other be For the but of has sheet, but against. to the don’t that of changes to constraint securities securities moment, to common treasuries highly multiple on the to to and out high-risk of comprised that unfriendly cash Jon Morgan we road way, a sheet. on kind asked something comes irrespective assets balance found comments would Stanley, balance Fed the of are by ratio Reserve of add content and or for out the Having or the news, think seems the at differentiate to a has Fed and that’s leverage government that be sponsors

ratio a in leverage – a should should always ratio. capital So, played been have the core secondary my have ratio I to have mind

been personal an is just here you your that’s very view, leverage to don’t in frankly, or regulators cause it assets, a because ratio, to risk-based as bizarre that very constraint, constrained it’s in your outcome, world anywhere but the leads not leverage ratio my So, to if want. order on they the aggressive clearly if might would because matter outcome be it

if So, don’t And to scenario model, that’s to don’t say, we going going Stanley, just prejudge me regulatory sensible I think the off, welcoming under we don’t translates let today. I than the I to but think we it perspective. think and are that Whether be that. a capital, constraint I all, being off be, shift are to I more worse think which think to are am Morgan kind better I poor it SEB much the of I from how want

Steven Chubak

Alright. Thanks, James.

factors, continued but how specifically had think see some improvement I profitability spoken area against coming in a inform was from bit growth the probably about for part of As will maybe trajectory of flows, fell loan for know one to in growth. fee-based does year a in management, mortgage to of short driven it how switch I that the the encouraging you wealth backdrop very of the rising slower by we migration and over the side NII including maybe expectation if NIM in-house, robust response, certainly outlook your it’s business the pre-tax cost, here? originations the comprehensive funding loan should the outlook our

Jonathan Pruzan

Sure.

results So, lending own in I line expectations. say were and with that NII actually our results would the

billion we will NII into We year of Last a we suggested or what $X year excuse and still about throughout growth we NII was going have be growth have this into do that couple this as $X coming year we – loans quarter the year, forward. the driver me. by talked that believe factors will or loan I this as would about grew billion. good obviously of what and we segment think in this saw last a coming growth well slowdown that that’s

billion. Our portfolio now is about $XX

transition opportunity client $XX reasons penetration you We the continue probably at to sort highlighted look pace. numbers at healthy pace for at within on of slower portfolio. rising still a the if and set is grow grow like still feel there that a we that we line, billion So, think that’s you rates, will but slower and a growth our whatnot but will

then you saw about have to seen we was were are deposit that obviously into it different we of excuse investments. that talked the on clients cash our more the sweep capture net and strategy you when we that last have The markets this play year, and we or our We still item. liability diversifying place into assets again quarter and also it but and replaced putting line brought out down has higher go that are had deposit going seeing the on and other quarter we those and planning deposits interest have advisory last told accounts, with we me our last which we deploying What transaction-related news year accounts types good this that into those structure, done. expense accounts is cost in and they deployment and we

point other of some that new briefly seen running. had products, very our just we is CDs around I if The savings receptive the or particularly will to been you we promotions that network would quickly have make and

been raise deposits to since albeit So, higher a price. last summer have billion able at we odd $XX

to growth, expected actually but and as is it this playing think I we slower. So, be is will be it out going

Operator

Thank you.

next UBS. comes question Brennan the of of Hawken Our from line

open. now Your is line

Brennan Hawken

would – of lent Is such, the We or the just here support saw ask on this you institutional strong balance pipeline does that quarters? the lending another here. some balances quarter. being for supported wanted what’s long this institutional big used this on stay fund the Jon, of lending CDs some certainly activity and trading to in plan some to for the sheet growth, results are question institutional in morning, that highlighted growth Good and the coming for funding how DCM that a here some to the here provide loan you doing

Jonathan Pruzan

all of kick-off. just lot them. a there quickly to I basically say would of But and in let’s questions So yes

pages look you of our the supplementary banks. if the on in So the U.S. I has think in one deck disclosures

Fed increased, warehousing lot businesses You the that has in secured institutional you very a will our good has is of active. velocity see that been business been or which that lending in as those There our mentioned facilities. have

finance banks our of as have strength good in really clients the portfolios that Europe We of been have help actually to these we some selling. buy some seen

good is and been that that a the actually for velocity, So bank. financed yield has business good in us, good

in that wealth that interest in see talked income in don’t net we management, shows up You lines. about ISG because the the it

growth So that it’s in in area. some and there is the good item, income items, sales just trading embedded that good asset and so sensitivity of in line growth fixed good line and

stable continue it’s to grow to ability or We source for us, been that the good invest and in area revenues of see have business that a and revenues.

Brennan Hawken

Terrific.

trading not the NII line this of So, not to is quarter, through sits born way, sheet the it the we used revenue certainly all to the that be to really are are supported volatility necessarily expect CD and that get in it’s want the are annuitized focus also upon, the issue, I the is so balance that some strength generating on strength is line? the and a but the of different on follow-up being touched was you or my going some benefit might economics in least deposit but – costs getting out the so I wealth this is wealth, then CD Thanks. some to this those here of which NII just being geography here and is you trading have would in there try so would not component at another and component NII, what fund pulling

Jonathan Pruzan

And the FPG our macro lending these in over area. item good being funding have as again external of mean that that’s activities. other a fixed corporate seen coming of to line as yes, they used growth there – part micro fund that that commodities Again, we some of sources the deposit bank lots So of of that the are and time we well will I trading primary the have savings suite the are percentage business, be the sources larger are within for institutional whether income businesses within time bank lending the and that program. from deposits the are

you give are the the and to that us stability growing it’s of and it characteristics business like that it relatively some we to the is overall credit yield of will again, It continue try characteristics forward. but pie. grow small So still part that right going a segment, and does we to

Operator

Thank you.

Our comes Schorr of Evercore. next question from Glenn line of

line Your is open. now

Glenn Schorr

Hi, very thanks much.

you structure about in products, that talked talked levels components the securitized know of about expecting quarter first historically question and Morgan seasonality commodities, we a is Stanley had specifically should active which big it’s and with you chunk industry, but given a be but quarter? impossible the thought in putting seasonality the physical Just I there, whole also a this of past commodities the but to the an that no first I transactions aside higher do question, quarter, activity general, had that some more was specific those longer business this

James Gorman

realized I impossible your second which by that will am am to back actually and back to question glad then an means to that’s it’s you, but… I get processed Glenn because go question, going and the Brennan’s part that that I saying I

Jonathan Pruzan

transfer obviously On we price the across NII segments. comment,

in if within being added many the to owners because you our generally business. terms of oil in of has ISG and of would are the but the period NII component ultimately sales of smaller businesses people we that a it year saw the a repositioning over whether real trading weather has first the though, and the that’s of years in sales seasonality, that in how usage to X, physical or the were we So, terms and back strong, some performance, Glenn, clearly I in you for segment generally quarter been function there say seasonality trading. look of falls exit generally of is seasonality money We It’s year. of seasonally commodities and invest banks XX start have deposits activity clearly quarter during the seasonality their is obviously in just the speaking level. new because particularly been in And to commodities to born measurement of of first benefit with of those or now they the the winter that now And components different it. did generally this in saw

early is it up, at data, the the wallet income actually quarter-over-quarter, wallets it up, equity suggests equity If based wallet on balanced. like the but is fixed look also wallet also would you income think year-over-year, least that quite and at look up fixed I of is looks you certainly some be if

James Gorman

has our what business an around first that that pre-tax got seasonally in make are yes, to just we revenues something a take in be order. in across planet the observation have or ago I years Obviously, and also here, was point X% at in different Street, the historically XX mix but started quarter I account XX you years been I the that wealth quarter stronger our Wall is. I into the was when now. running ago quarter-to-quarter think management wealth very management, or

$X you think billion, at say we add this, you And then $X about I plus So, wealth over together pre-tax quarter the had $X.X I billion wealth, think way equities the off and a billion that management and start if minus and every about or in quarter think asset billion, they time much have high had been been we had $X mean, I I historically, billion quarter banking we quarter have and XXXs. I since have investment long long some below banking since a a quite time below in a the $X.X think equities have and it’s an bank.

in those. bank $X.X the pretty So, from billion I think much at

gone in the reflecting kind is correctly quarter as which did. year obviously of it the how lot trades you of season, with is away. very the roughly of point strong out, for depending The multiple up flex time income. every commodities big begins in pumps has the what obviously So, tail the of wagged the calendar equity in billion. some in new then the large dog fixed activity, while are the A issue the that $X.X – And markets that a physical reflecting structured income we was and fixed banking

ups So, we gave we way, it won’t and got restructured huge kinds the to had we of the downs the rid fixed income by of in ‘XX XXXX have of the back had and business. but have that most we which physical that before stuff – have the it’s unlikely won’t

this not XX was That of billion So, kind around case case quarter. without the I the not was years think the completely range imploding case worst is years ago the ago. X $X.X of a scenario market it firm and a

we So, slightly every is quarter end slightly the quarter, the that which seasonally lower of have and market, highest good – in at that’s lower the first the sort obviously tax of speed an active you market, the are in higher for then strong had market, towards a the rate, playing of are or end other to balanced we be we going then your preferred what ranges.

Glenn Schorr

appreciate thought. Appreciate much that I more than I it.

Operator

Thank you.

Our Guy comes of the Autonomous. Moszkowski next line question from of

now open. line Your is

Guy Moszkowski

you hoping little that I Good for and you how got a were say at what being this mean bit elaborate trying the future what about by talked were of on range, you send a year’s you when and was gist but the to you some morning. view versus think messages you to just think that I could I James, prepared trying there I outset might CCAR CCARs?

James Gorman

have we years in X there. row years simply I simply, follow-up that very a buyback the put, increased Very appreciate increased and a the I dividend X think in Guy Well, go. and question

is $X.XX billion from and $X test We And have mean, this is, and this test. $X a I billion. $X.X to hard gone

some is to to generate the – people it’s is That’s currently actually Frank shocks was, have believe so profitable not it’s the firm more in pretty was a firm outcome doesn’t that that coming grown scenario more more what that’s materially XX earnings. obviously the financial I The XX% capital. hit more the us of year of a it The We points happened what’s to for the would going has which in stable. certainly is not that’s firm extraordinary suggest legislation you below it have management In to the be firm saying you creating am a we has to more out X.X%, happen. – unemployment rate has operating that wealth much what of and ‘XX, ago. the anyway earnings number The mathematical, need and of but tax crisis generated. nearly are us. just reality Dodd than than provide If unemployment

assessment, say serves we the payout would are you think that – I objective memory any we are in last high-XXs me. XXX% on there is year, if approaching So

case some and for against us the the be certainly that be test out backdrop paying splitting will that any I expect And we XXXX. accrete is I just objective would would You saying that. way models this am to would XXXX. this out don’t assessment for the particular be of say anything the think of

come our and business outlined. Reserve want throws off, are to really clear. what I numbers we I confident until $X.X ask I over am between saying pretty obviously think mean seen at for we a swing. and PPNR the billion, should us So I Federal it’s have that’s out years the are the will seen that’s have results $X.X less we getting I that separate those think billion be what But discussions. and we I

So can’t very exactly up, it’s and so the I the I out, and prepared play am you it I am prepared pretty result years unusual over some of seen I which for I have outcomes XXXX. range to picked how predict said deliberately just for going

Guy Moszkowski

you. clarity. Thank helpful Okay, that’s

would has concept pick just wide to products very offer that what to little in Jonathan bid across on strongly I a quarter, up a other guess was and up The I the and saw, think on that in color of was areas normalized we I early was already? more the in the the saw something and you mentioned question extent part bit and interested be probably you should in just what terms which of of remarks products range where it wanted this of his that

James Gorman

Just I does say, just he clear. to before be want

year, We we as that’s strong firm. are and this it’s in was stronger firm’s now where highly If capital confident last it stand position. a

So imply capital. don’t that our very to indicate would feel I there strongly is that trying or am about suggest that we nothing

shareholders definition last to you accrete We have would and either on from back every dollar to give by then good year sufficient capital you put use.

I So around Jonathan? I when out of [ph] enough these we been to anticipating that got scenario enough about it and track position. made enough variability am are have seen What up lead can this unintended it highly is sure long that and the consequences. up confident dial tests you the to level

Jonathan Pruzan

the heard, $X repurchased Guy billion quarter. you in we add that would I

have quarter in James authorization a This billion and quarter. that intent use it’s to authorization second the $X that our referenced we

you it just In and spread around really volatility. out the function widen offer terms of heightened volatility our making spread, of activities, in anytime equity you see really markets a would it’s of that generally some market the bid see

So volatility just offer that changes you see I as spread think simple that. will bid changes the it’s in as

Operator

next Securities. Mike comes of of Thank from you. Fargo our question line Mayo And Wells

is line open. Your now

Mike Mayo

away increased on just have your unpunished, your not exceeding equity might see question you or category of the it you could or return but after are are yet, of it’s got estimates and of you targeted because them no be targets them first tax seasonal target? you you targets do missed to raising that benefits margin, by years and wide because biggest of your don’t fact or you want some this James, you so I results a exceeding couple CEO, on now the the especially compete be something you but and return good super-safe are you started, couple between because or Hi, why so you and not extrapolate on equity, goes deed guess the gap

James Gorman

actually our we Well, serves which us targets we if on – calls. you performance generated Mike, you, to when not pretty the I return reminded between memory and a bigger glad these had target and frequently had XX% me you ROEs will was a asked correct that we but gap our and question, X%

we is gap well are all the the when Stanley’s might there the tough. is and other this markets there direction. well – So, would markets that’s it But to we we be defined bad we here others be are markets. function markets how operate markets is do simply, when fine. models markets business who would fine are our do What build and are Morgan tough will science, If do about it’s that in could when that strategy a do good. care I an seriously, are the better good are in There when happy these things the the called

we for target put I it one would change anticipate called think so a don’t we of it couple in range, those years. about a we quarter it, and you never it’s range, think we when a us after firstly expect So, wouldn’t do I so medium-term

silly quarter, few We expenses portfolio So, activity very environment but right not not is and under extremely light. to not we aside, where one is This calendar sit better. be the was it kind underwriting strongly, management The definitely as environment. that outset, represent very transaction outcomes bounce are gains the putting perfect, environment set market market managing had phenomenal. kind at philosophically, supposed can target good the of after we ruthlessly. investment do of but tough we would range a a market of a good to just was around normal in Wealth

clearly returns we in could So, revenue going we growth. do is a drive aside there things difficult to microenvironment. focused what are we how up But on is are higher do putting to

the this the of to rate just XX% about that up range rough extra math probably preferred return seasonally tax add to XX.X% in and dropped from XX%, XX%. quarter talked the agreement Jon sort So, about to

we of XX%, was is as and I XX%, this yes, were said, go a prepared above of I think environment. point. as back end to high If goals I So, consistently it then very to at starting that our come end am renegotiate the good but to the target XX%, of we will our basis year and

Mike Mayo

And terms up enough. you quality? $XX that that XX% follow-up loans, almost one will of of environment stay Fair reassure you have loans do these investors of good in year-over-year, now billion how

Jonathan Pruzan

form of majority think or Again, there good of house the way, components, where whether secured credit shape protections. one one it’s I a loans, or we are LTVs from is or that the good is our via couple quality, the mix, be the have all management security-based in wealth data obviously lending and of portfolios bigger that overall portion virtually vast around good a

has has know side, good lending the mortgages, secured. on protections the think structural of very very, and I institutional business our been again clean all you warehouse good haircuts. portfolio On then is that and The

pretty its some in performed of environment. good Our at nicely commercial suspect we real also point whatnot, estate I LTVs has but get we are and will again, a credit in terms portfolio yields that will a this very would a strong very credit portfolio. point, it’s more you clean. losses and good from at see credit with risk cycle and been return It’s been But profile characteristics. healthy into

Operator

Thank you.

Our of RBC. Gerard comes the Cassidy next question line of from

Your line is now open.

Gerard Cassidy

clients. state it to evidence that issue it’s and the and tend salt talked borrowing to you of any Thank early, the have you yet? but us I ye restriction you. local it higher impacting Good about some on net that mortgage people’s comes mortgages and when you production Jon, the to may growth, on moving share habits know can thoughts morning. Have type in-house slower seen your be taxes is worth contributed the but with of clients your obviously

Jonathan Pruzan

lot To ours. and about any haven’t be so is had based to provider we the York, seen did answer people discussion of we there obviously have And at I California, PHH, change honest, their places no. on New – know they that moving particularly a bring models, We was dynamic. activity changed like our business but really was

to and the down for that level clients. it sure still So, think of opportunity production there make in-house have and required grow. we have We we purposely client service we right our brought to infrastructure slowed that is

in runoff, the we are see again rates as growth quarter, of less where slower lending we about expected. we presumably but will terms also but good rise, As feel first

Gerard Cassidy

environment technology in just meaningful and you then traditional you touch Very are in trading, touch commitment really a high the high touch and are falling it’s to low made good area you more trading can the equities, share pivoting have touch low the trends course trading coming to with one the which us trading guys of moving, versus a obviously of of fast those how in? and trading leaders is

Jonathan Pruzan

Yes.

seen been going benefited dramatically quarter-over-quarter. has that more there there voice dynamics volumes transition. versus obviously We up is and trend versus trading. have electronic we have quarter around that the are different actually electronic. pricing versus voice The think multiyear this And a trading we I although of as seen price

but in volume, We trading pressure been have the voice part of business. it there lot up on is making of a the clearly

Gerard Cassidy

you. Thank

Operator

you. Thank

from question the next line of comes Bank Our of of Lynch. Michael Carrier America/Merrill

now open. is line Your

Michael Carrier

Jon, being is expected just non-comp side, activity, the you expecting should wealth the in driven maybe lower, investments some the with in the just guys just generated on comp versus guys. leverage somewhat management what but on what ratio by we good color on what’s more operating like ongoing? guys be Thanks quarter, activity you we mentioned

Jonathan Pruzan

items would were feel on Again, based sort of with other BC&E we line. some and the expense sort on our in up sort bank clearly budgets, shows in what expectations BC&E I other levy in in of of increase line non-revenue actually transaction things think up our in expectations show a which an related in right the then and in that we were UK of the the increase increases taxes, line,

as we So renegotiating occupancy knew in where leases. the we is bit a expected some we increase little increase we had of were

in the We related planning we of are some some Brexit. to expenses have got doing

So slight virtually and and increases to related that we would activities. in have, expected saw the revenue trading the related felt we was again sales and then we all all increase of real the expenses

Michael Carrier

navigate over the ratios more in it. variable if maybe volatile next and the forward, some And like capital capital expect it few to test do the going better stress you manage just given follow-up better will the or of but…? on the calculation more or early, of portfolio I give I you got just you kind wanted that then business a get and Okay, current to that that can it’s buffer, transparency in be years then know the in as the take

Jonathan Pruzan

has of testified would some I Vice or say a there made it’s Carla day couple say would have yesterday Chairman, Again, comments. been I announcements early, and very and before

an that transparency. is actual more bespoke firm better clearly I a transparency towards stability a XX trend risk profile. after is think your regulation trend is based towards us simplification. would more lead might scenarios. trend individual recalibration is of there There years there on to And element And the transparency own I There a for think be really fact. around the towards

upfront things world fair there have not are us XX% test how when harder We we James this as what couple year-after-year get is also get past, seen the market mentioned year but every and at see there scenarios of there and in happen rate, unemployment and shock necessarily the surprised that a scenario be to are like that. with in in would we a XXX% always consistent

of does business, we for about on. a our any and that helpful scenario we for some get has things would and at of to – plan Vice out around comment planning. something mentioned us Carla transparency, on because I for surprise mean comment. term strategy year-after-year look scenarios are that the scenarios to the the things to sort that’s of So longer going of Chairman, long-term obviously inhibit think based putting that I that around one And be the anything

Operator

you. Thank

Our next Buckingham question of Research. of comes line Jim the from Mitchell

open. is Your now line

Jim Mitchell

seem about going hit of look how terms the therefore going think that view you think you – think you hit you the it? in or to SEB this do rates starting in said you doesn’t have point firm, stress sort in had or help just get of higher plenty How you anything help do test, get we about a revenue stable hardest morning, offsets we stress or you follow-up loss reduce think hardest they at we capital. built you to attribute built you do your on losses there of forward yourself with the have how Fed even just forward have can Good the that though can of that, is you what about guys, it as business model that to kind and of producing more when James you you jive kind terms minimum seems, stable of

Jonathan Pruzan

to – the of and on take models a continuing of transparency in some their phase-in is try this This of sort their chance. are will Again, they one transition models. uncertainty this X-year I is PPNR year the

As James unpredictable that a created more been we wildly stress PPNR a prepared, base mentioned, stable and we revenue has think they much wildly the have in cases have yet low. our

your to business. revenues know from our impact be ever don’t and flows that is going down comes an markets are year obviously function recover, and our has as portion this that they of of are a fee-based of significant wealth if XX% Some on in you our

know is The not tests actions. do other management were make of to any thing you these all allowed should sort

on go no it. ability So, we react just have all to to this and watch of

So, a of doesn’t the reduction. less mentioned we think II some Also, tests, has just think Chairman, high it of GCIP one do seem our particularly that reasons Carla that we do be Vice RWA why and with also and – that is recalibration density the to is which methodology, the of would MiFID have I this we do helpful. think has I else’s lower a yesterday, everyone intuitively to than from benefit while means that have risk

are MiFID those have some on this process. of gap that in we MiFID going big things Our of and got like comment and higher types sense the forward and so between de-risking strategy buffer, which led intuitively to has we a a GCIP doesn’t make pretty to I II would the

James Gorman

And Fed the then just ratio. that’s And highly balance the as sheet, us models your – if constraint have grow we in was as done, on said, the specifically historically leverage punitive. you

I X.X%, a been think year. growing X.X% it’s

his privately, and support have has certainly fact illogical think have in to are have resonate. of to your period. I of of was that institutions, moving post-crisis. talked as unless speeches in of that you has – I don’t time requiring financial seen deflation the XX% And I think I they during sheet balance is stress think model. and empirical a growth But publicly just view considering anticipate and it grows I distress So, buffer evidence during one assets I memory, balance that scenario, I some the about sheet financial Vice time Chair, that our other where And our think can’t I of Carla said recently I experience started said strength are balance this no sheet to

that wildly ratio perspective. we be under would So, a leverage from overcapitalized

had that, and that are the had institution very the Now, obviously having stronger steps appropriate model we institution to and just we constraint balance we because is even suggesting return sheet be believe away because steps and discussion. regard, if it to a less it I that’s bottom might kept always growth a wouldn’t we am in took took not you to draconian leverage But stronger flat, the now. we draconian line ratio this we have take

Jim Mitchell

that of of And complexity that. kind is from them about feel for traders, some chatter revenue some Thanks rule? in rule greater maybe impact Just they simplicity absolutely. an a just would Right, more know of you expense the and the uncertainty there or kind trying when mean, don’t your is in is then talked to as the rule, on awful just material any hurt help of lot a follow-up anyway, through and Volcker if where the I little, a think issue? I Volcker like expense has simplicity to do it

James Gorman

of too it’s to going call. probably Volcker to rule apart long the all take this pull the for Yes, aspects

into in Paul to on putting many I or something, was what institutions far but trading activity. into of proprietary at go trading has from more it, focused given their deposit-taking do trying restrict the and which risk time, requires won’t on view So, of to clearly proprietary people’s complex Volcker was impinged capital principal lot is attestations just own from liquidity and and move walked it a lack activity investing

not I their industry sure I in on do not sure think risk this aware is expect response trading should I at at hard are where point obviously investment removed. am a this the proprietary parts very opportunity it capital or an of are not Volcker the proprietary large it. look the am regulators banks be position. they should be because to taking of I and removed, rule

it essence was the the way appropriate. So to which agree would what some trying personally would revision was of executed be in left do Volcker with, I

Operator

Thank you.

from line Our Bernstein. comes Christian next question of the of Bolu

now is open. line Your

Christian Bolu

morning Good James. squeezing here. in Good me morning Thanks for Jonathan.

I the number follow-up you On it to deposit just for forward, should questions, wealth be about just be to side, think we quarter growth for quarter on helpful also? how thinking should the also going that would the guess wrap the the QX have if deposit, sequential up, want management NII and base we about all progress brokering

Jonathan Pruzan

Sure the lot, way would of being like we heard going it James I think sort and have this describe quarter-over-quarter very it to you sequentially it it’s out. all balanced, a I again move that’s not talk grinds about why business so much, this lot a of first

year-over-year the in If call year. that tried loan growth. be have this I to loan I comparison, over NII you – a slower going very would And look is at driven say by X% to we growth nice rate have highlight up than last the forward,

have the bigger of start below of already XX% going are to think – We towards sort are betas the not we betas the XX%, predicted of of beta type that going of betas creep or a and up sort we of we the lower to level. also the and base also betas model are benefit seeing I get sort is up actual

will started new we lot just slower have So over of again, clearly a we in tripled be portfolio slower than last growth years. continue But can’t have our mean see continue We a of X X NII at the as we strategies. with clip that I we and years. will we to loan a with had do lot it products pace. growth, expect new

Christian Bolu

Okay.

Just year-over-year trying what growth guess I to…? or growth, sequential sorry the is I that’s am

James Gorman

NII historically growth, year-over-year, so average we been clearly NII pace. grow going have to we sorry, are you $XXX we to be in on it’s going we talk talking ‘XX I but at that slower you we growing look about am are when are telling million, NII at if a ‘XX, year-over-year versus

Operator

Thank you.

line of JPMorgan. Kian of next Our the from Abouhossein question comes

is line now Your open.

Kian Abouhossein

why have just you, for securitized market Europe that revenues, Abouhossein, issuance of Kian because industry like share, I one context best X performances what I if doing logic terms in products least that are mentioned at looking It’s over in wondering wondering but what data which small area? revenues, just as and I that and you the this years you look wouldn’t Yes. so that particularly in in historically very you is also are am seen you globally, of at data particular that the looks is I highlighted it expect want part you is in driving you it’s Europe was in to a at gaining last understand well

James Gorman

of say the type Again, income would small elephant number broadly across weren’t the just fixed sort in of lot quarter, one. globe, really transactions was I strong. out-performance in so of places There a it’s a lot

de-leverage and providing the on been obviously continue us. been us. but clients, business has very Europe active some that good financing some we in good as things syndicating highlighted, exposure, portfolios of business very of our – European clients that’s In again very for back of of is and they for warehouse larger real have one that out also we FPG been for We we estate getting to this have of terms securitization combination as both activity in out been the of a banks it been the supporting

lot products better areas again, was but it world it because outshine look the just geographies. bit called wasn’t and a did it – me, if both the FPG you little other with fixed different out across So percentages just that FX in a and commodities, all sort excuse of will overall places if – you I of at

Operator

question Brian you. of comes the KBW. from last Thank the Kleinhanzl line And of

line Your is now open.

Brian Kleinhanzl

Thanks. Yes.

had be some year-on-year, quick question is forward point there we advisors actually saw that wealth Just just I in going declining advisors? is X% business, a a your based mean or in can there be growth down see from on a the that space, were we about to the reps to way the will right management that going here think

Jonathan Pruzan

still who I and some X% mean the I with ages a think Generally, given attrition leaving. leaving been number in and generally quite the of the retirements significant is seen low. to-date the actually been this of the production low people left. the had What year people people pretty of relatively of has a franchise small size the have is the have size slowdown number have who has we been

recruiting. We have deemphasized

this people certainly in the recruited franchise, quarter, of of how in flattest over we our only handful current our speaking plus but see sort our invest of have continue I and a term FAs near sort or think I flattish infrastructure. and current minus generally we bucket first as current the into We the to X%, categories

James Gorman

per total but focus the advisers, would won’t number more assets than of I assets see radical in you and on numbers. Yes. shifts adviser

little at are that, went little they I question on questions because are know these I dense. some am about we were a the We longer people there other last on sorry more early, of the a line,

you cause do. need then your to own, please if So,

everybody’s answer Thank questions much. so you will We offline.

Operator

in participating concludes the for you program. thank gentlemen, and That conference. today’s Ladies

You may disconnect. day. a great have all Everyone

Morgan Stanley (MS) 18 Apr 182018 Q1 Earnings call transcript