MS - Earnings call transcript Q3 2019

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Sharon Yeshaya

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

During today’s presentation, we’ll 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

Firm’s to and billion lending and joining trillion continue assets despite In were to divisions, backdrop mixed quarter strong everyone, under attract management $X you to a wealth balances margin. strong. $X.X results produced management, Institutional in aggregate, an The revenues contributing were assets morning, performance third flows. XX% management, in with all across ROE of and positive surpassed client the for Good Fee-based and trading XX.X% solid build quarter. the as firm net a thank continues performance us. ROTCE investment long-term for and XX.X% the Securities

business in takes assets thoughts. we look historic management assets The several me growth. is results at your and Before biggest margins convinced I through A over wealth of away. The in annualizing held our $XX meaningful avenues of answers clearly $X.X share remain the is couple Jon highs, questions, you trillion to and a there powerful. business is am let firm. for revenues billion the stabilized aggregate

segment see client asset the growth over decade. core Our should significant next

also that Further grow end arriving individual us the exciting may every the provides with And spectrum at margin the expand. is wealth family not attractive the existing you opportunities, will our through are this our is any among business. expansion highest Asia Stanley of trillion will and the loan quarter, business. a particularly revenue growth expansion see at margin Work in of But the than this time, business opportunity, services remain most dollar of part over from the offices high while asset service the over margin incremental international across opportunities and the portfolios $X Morgan to continued employees potential

markets, the well. has $X trading in to Against segment some performed we proven a mix Securities Institutional volatile be revenues relatively resilient. difficult made of by income and This characterized for the lines investment our and environment it business fifth quarters, Our very the billion banking, seasonality three and client out the equities. of in business, franchise time all fixed underscores strength and last seven of

the been and evolve. to client dynamics continue this competitive of We’ve beneficiary share date consolidation as expect to

our business. in well-positioned are with refocus in business of the alternatives markets attractive growth testament profitability assets years Finally, last net in said the total The positive asset is trillion equity and segments and the active public and and the leading on growth most platforms. to in I a strategies earlier, significant private few management our passed with flows. assets this And we long-term as solutions $X.X

ROE of of the revenue benefit firm performance higher stable pursuit challenge we’re how to ongoing despite hold, of equity to been streams. from more continued amount the our required One has we’ve repositioned the

address capital current leverage ROE, course constraint the which ratio. our is To drives of

aggregate. will the the to us which CETX As benefit Reserve capital the framework, Federal adjusts should focus in expect the we transition

tremendous competitive gains reason of combination strength businesses. dynamics, there stability the we confidence institution, remains the to potential growth, the of here. brand, is and global upside our me The share Given gain of for stability of several there can that with share in believe, the leaves

be franchise look growing of talks focus to enhance on the expect trade and swirl debated, continue us beyond rate months remain stability we Overall, cautious to continuing the the and and next few but business. interest the to paths today as

Our job continue this is term. to the to for manage long institution

it I’ll discuss strength detail. the of in take to to quarter the said, that turn now greater results Jon? of away to All want over the and I Jon don’t from

Jonathan Pruzan

morning. and you, Thank good James,

with quarter revenues in billion over X% quarter revenues Firm revenue quarter, seven, out our third third the prior the XX.X% XX.X%. last of the The are is in PBT $X.X In XX.X% an over $XX Year-to-date, sequential ROTCE decade. ROE and quarter and and trends. the resulting seasonal $XX respectively. fifth a of and ROE from were decline of representing EPS was an reflective of was highest billion, billion $X.XX, ROTCE and XX.X%,

Total expenses ratio declined basis, a the were non-interest our non-interest billion in efficiency On $X.X third XX%. expenses and total was year-to-date quarter. X%

on we controlling marketing in business professional enhancements and services. expenses, of particularly remain we the technology, invest workplace to and more development As continue and integration Solium, discretionary focused

a increasing the in $X X% quarter businesses. XX client for to backdrop, highest volume-related of Non-compensation quarter, sequentially billion mixed driven were the the revenues for were Now Security revenues Institutional a higher expenses particularly increased on years. activity. by Despite billion costs market September. third DVA in strong, were $X.X excluding

to net XX%. compensation at remained ratio Our revenue

our In risk. central the and responses, on concerns context including and uncertainty, trade managing bank actively of serving while remain fluid political growth economic our clients, markets we focused

increase revenues increasing Americas. underwriting record $XXX driven M&A Completed industry by transactions. in quarter-over-quarter to sequentially. and supported accelerated. as the income X% underwriting in revenues banking activity was issuance larger revenues million. strategic income particularly Advisory billion, quarter-over-quarter were fixed X% advisory, $X.X The volumes Investment fixed produced increased by Notably, improvement increased

Underwriting robust. results were

strength to it declined in decline, business. Equity than XX% While million. gains more debt $XXX saw was offset markets share our the equity and underwriting a capital revenues underwriting sequential by

the issuance particularly advantage backlog a across $XXX Fixed of Activity strength loan and a and to grade second transactions summer on issuance. million sequentially decline rate leveraged offset issuances. partially convertible quarter, event-driven IPO strong increased in executed. environment Issuers investment strong both underwriting the witnessed was was particularly Following XX% the took notable income of by September.

remain underwriting healthy. is advisory activity businesses. both and CEOs engaged and strategic supporting pipelines our are and our confident Overall,

However, conversion from remains pipeline conditions. to market highly dependent on realized

retained leadership decline be In $X number The quarter equity billion. with expect strong sales was revenues was and to seasonal globally. X% trading, we position one our with The and of consistent sequential trends.

Cash by supported partially financing revenues prior quarter an a revenues the Higher client lower on saw increase versus sequentially. slight decline seasonality. rose in by revenues balances global volumes. were regional average brokerage Prime offset

performance. here conditions market weighed revenues share were on we market. have consolidating Volatile an a derivatives However, resilient as increased in

Fixed income to were strength of particularly levels results sequentially sales by year. in Activity high and last across billion, balance Micro business sheet focus $X.X trading securitized the revenues products. the and all driven remains lines, has area were increased robust credit major versus XX% improved complex. an velocity and

million particularly While American by Power quarter. activity, macro Commodities absolute environment, results the including revenues performance and by challenging of client increased $XXX transactions. Gas. Investments the half impacted first was from North quarter-over-quarter sequentially, benefited increased Sequential driven structured a improved revenues over sequentially. declined

associated gains on IPO and investment’s realized partially third mark-to-market holdings reversed which benefited the subsequent quarter from with prior gains quarter. an remaining The in

business margin and Wealth to Solium integration. On PBT a produced and PBT pretax the XX.X%, $X.X while billion, continuing respectively. a $X.X billion management expenses basis, revenues The margin and absorb year-to-date related to was of profit technology the were investments XX.X%.

XX%. up total $XX at revenues from at strong trillion, client from comprise the prior the line end. were assets, $X.X the quarter’s benefiting now quarter prior management were assets Fee-based Asset at X% Total levels ended $X.X we fee-based billion, of Net quarter-over-quarter, billion. saw client XX% up improved assets flows asset in quarter. with

the secular advisory expect to allocation assets continue. increase We of in towards the

deferred weaker remain $XXX the impacted XX% movements given Seasonally investors were equity around in quarter. and our plan uncertainty subdued. the million, results. activity compensation negative Transactional from activity, second calendar slower Retail continued the remains down investments revenues a outlook. cautious Transactional client

income On was billion, sequentially. net interest basis, $X X% income Net up interest year-to-date a was unchanged.

was Loan prepayment year-to-date and up growth mortgage strong as digits. mid single is of last impacts up year. X% sequentially versus NII expense, balances are Excluding X%

of receptivity to good loan annually. lending grow a see to balances our to expect and similar continue We products at pace continue

NII strong will Putting growth more current more loan BDP stable raising this together, stable be saw success levels at offset components and than We and by expected continued deposits path. quarter rate however and the deposits. these

to Non-compensation unchanged. compared The Total of plans. offset expenses compensation were the compensable the expenses effectively of to quarter, related despite integration impact our were Solium. the deferred largely second essentially revenues higher movements unchanged

margin Our is XX% target XX%. to

pierced end that we quarter, high This range. the of

range. be could solidly be within always, our As full-year but results movements quarter-over-quarter will there

Investment story as more The up this remains a running remains revenues investment is nearly net business intact. versus of and positive and assets XX% are investment surpassed $XXX revenues levels. XXXX under constructive Year-to-date $XXX strong management revenues business million. million. for $X billion management flows and the business $X.X growth were The environment produced revenues saw broad-based trillion. The

funds. be benefits As have see to private we previously performance said, line the lumpy, has potential to though continue our across of broad-based this we the

AUM $XXX to which increased Positive net AUM billion long-term AUM. drove the $XXX was higher flows of Total billion.

of quarter strategies platform inflows. our to net see Our investment have investments with And we the inflows. benefits the into of driving are to income performance, fixed we second continue the strong consecutive made equity beginning deliver net

realization Asset by of were management in the Performance quarter. million $XXX sequentially. non-recurring fees fees aided X% increased a

fees management average benefited rising Additionally, from AUM.

assets by $XXX to Turning to billion, which in activity Total the spot balance rose driven increased drove also RWAs. growth client sheet.

X to As common our a equity declined XX.X%. ratio result, Tier

million During dividend the average price common share. a approximately at declared $X.X per XX Board quarter, shares our third billion $XX.XX, or we stock an of of repurchased and $X.XX

items tax Our intermittent These tax tax to XX basis net added discrete excluding approximately to XX.X%, was of discrete $X.XX points rate in and benefits. ROEs. EPS $XX the million quarter

expect will with discrete tax tax rate, line to excluding rate continue the XXXX items. We be in our intermittent full-year

and quarter, activity but of we of levels good and are cognizant we’re patterns off ahead, engagement are look encouraged we As client fourth a to the start. by seasonal the

continue consolidation our are are We positions as pleased the executing see our and share growth to strategies. we with competitive on industries

will to we now that, open questions. line With the

Operator

Wells Instructions] [Operator Our Thank Fargo. you. question comes with Mike from Mayo first

open. Your now line is

Mike Mayo

Hi.

James Gorman

Mike. Hey,

Mike Mayo

if one certainly expenses that the with You look quarter and for just comp when progress faster quarter, the revenues. have for it’s up where than grew are know confidence a XX%, bit. thinking you at up but I X%, are just making you’re do about you little will relationship? non-comp but but of you And over sort time doing expenses, how next were than year that not ROTCE grow that expenses What was faster year-over-year revenues the

James Gorman

growing that’s do. revenues of we’re where not long we’re paid kind we are what term, to faster Mike, than good a If very business. business firstly, in we’re expenses

that So, way going relating high little and given bounces litigation active of activity, it. just some right, the this the slightly the so. stuff bit. in through [ph] particularly was XX pipes way had quarter And sort quarter we’re crisis, from maniacally focused its of different any in makes And We BC years September. a some you’re you’re see the back to at to moment, and given on obviously, ago quite bumps

we’ve Solium, spend concerned that. about the relating And I’m we’ve things, other been of of not platform. stuff developing I tech to I out doing, some wasn’t various But, integration our the frankly, Some tech -- that I’m to next year. and brought discipline certainly several would intend say, it going last not for maintain the for not to years, about that’s to concerned this place change. We the the

Mike Mayo

a you All right. some guess, then, didn’t I specify just And really one-timers, follow-up, the amount. as were there

technology just and two you efficiency over as it ratio efficiency, So, years? improving where relates see the generally, the to next or one going can

James Gorman

call not lay going get at ahead the expense to our we do what of targets. Well, where out January I’m we earnings in

think, $X.XX. but the the started Look $X.XX, last We we’ve it -- generating forget business. at $X.XX, target listen, in was on certainly economics. I been and scale taken $X.XX management originally the we’re this this, we -- I was year’s think we’ve year efficiency and ratio, where wealth $X than -- XXs was the

the that grow about the few we’re business. a lot million million non-comps why costs in There some made were is that numbers integration. think, no need non-comp last years. down I to to or $XX absorbing reason We’ve investments relating $XX those of including

the are to terribly to some what we’re out taking costs major efficient platform market, while from of the also technologies over the to a to system having hasn’t has We’re last are been reformation wanting spend has full that XX that those. Rooney of it for Rob technology the internally on -- realize new of legacy obviously organization. And years. been benefit a focus and our is the starting coming the and we leading

an you scale long-term obviously expense leverage we’re think, on I the number premature. now. I’m That’s this clearly focused not business. ratio going give So, in to But,

Operator

you. Thank Hawken from our UBS. Brennan And comes with next question

Your is now line open.

Brennan Hawken

Good morning. Thanks for questions. taking the

And, threat? that a But, that that are concerned to advice. could to still easiest that be pretty make do you a placed they investments tech the saw front? against So, are moving you or brokers that Do to could have well commoditize. that there is investors we your think you is chop consider recent on wood this zero. move Obviously, next revenue by discount move commissions transactional there the part significant some quarter,

James Gorman

have don’t Why a add may I something. at Jon want go to this and

that at was to Firstly, brokers timing, went I I surprised zero commissions. the frankly. wasn’t surprised the online

point wealth it timing, with I but rates buying Brennan, it selling half given Firm, and wealth whole obviously, a And business, in very -- the what of think,, is. bonds firm less commission management that XX% management. it was given business small it’s are, and backdrop our about is of and I activity stocks is for where of think, out you the as that curious the the percentage than of that it’s

for So whole discussion. a us, different it’s

the clients clients pricing rightly pressure value. charitable, It’s it’s trust the complicated getting And for mid giving people working a will implications with their planning, fees. Jon paying, will mean correct great this absolutely questioning, pricing financial accountants, execution, planning, tying I on on few are as together on mean, trade research, level, and long when on wrong up being You’re their at think as points advice a points, me with are it’s and in overwhelm dollars there being wrong the equation. stuff. value the the holds the long-term And be assets. you I of tax XX basis I are in the their advice. estate advice the the basis put

years strategy. quality a quality design. high is for my has basically for winning in question having level an households giving is seen the channel precipitously. online price our core segment channel in the We is And The That not you’ve business of by that zero and for advice That’s it view of So, assets XXX,XXX accident. into the out a XX relevant. high advisers between last real reason. is what dropped in

last I’ve $XX mind, and households Somebody two us, the than advice decade. and between and my where view with a But adviser. $X with have bear the won’t million. fee create we’re for reasonable million households many, more where our it. in many what like $XX attention relationships need that And the growth of to times get said over and $XX And than is. does spot dramatically is grown business tend three way financial fair as the $XX,XXX, not financial with have that is is very that those just more to sweet you the the for doing million and adviser given That’s the in million very

Brennan Hawken

that all and very here. color, Thanks follow-up That’s for extensive. helpful James. One

bought Solium. recently guys You

in process of You’re the integrating.

the in undertook part would potential eventually this little made there? bit pressure a competitive that that or where reference would at the are. Thank a when guys that you Morgan business? of on think impact this of that do your You scenario take direction the you. was and Do returns made with think impact a might to -- around that’s Is closer comments you platform Stanley be guys brokers discount that to Work. you investment might acquisition That you planning head this little the you that might commissions this

Jonathan Pruzan

So, Jon. Brennan, it’s

is acquisition. the but well. days, We’re It’s the early excited integration very going still about very Solium

investments stock The good. receptivity We’re investing of This education put Work and that going integration. well. plan has wins. won receptivity quite technology We’ve in new closing clients for pickup tools and money XXX financial in sort seen high. behind product, been -- and platform product of of a of is the quite is transaction, continuing state-of-the-art Morgan the Stanley to combination the since over with and for client actually the administration savings We’ve quite about clients corporate at

going our Additionally, that’s business their well. platform, we convert onto continue to and

is but and going the early signs So, days, well. integration early

it a of and base. to to was access And really economics think about client the different how channel. we this younger It’s get direct a in business, and terms

we be attractive channel business competitively. of is still a trillion is getting James companies one advisers And employees start billion about priced digital our As that virtual assets mentioned, with to there our -- And that’ll X.X clients. service $X $X.X using into or to million for And in the these away. we’re economics us. me, excuse for going tools, think those and provide very of that

well, still So, early days, about going really it. excited and we’re

Operator

question you. And our with from Cassidy Capital RBC Thank Gerard next comes Markets.

now is open. line Your

Gerard Cassidy

think take binding the you look adjusts leverage What’s as more XX%. place? the you at CETX highest good shift ratio. clearly, the your ratio? ratio shift James, And your you do When being at capital peers with number amongst when you will once your that ratio, all also move touched the we its over constraint. then, CETX CETX appropriate, it’s the is a that, think to that framework, it on Fed capital indicated And to you may

James Gorman

think into Gerard, looking and think, critical step the you at has stepping raise Listen, lion at back banking to reflective their discipline Fed our and are I the been to that. constructive that. liquidity around asking is last with banks, clearly peers U.S. recapitalize, framework. happened was you what’s the It the the the of of really have week, in build I results obviously pit And here. the system, me of if regulatory look and health

dramatically of all years shape they Morgan think, them including I better Stanley. in than were are ago, XX

our illiquid balance much treating of treasury. security versus constraint leverage doesn’t long on risk that I privately publicly business those the argued quality, the assets weighted make a for intrinsic think, sheet time the asset in does relevant to not where levering is and a looking what and of make equal, it’s sense, at more lie. liquidity a I’ve simple is sense when terms the ratio a not and It is

and It’s with Fed would to gives investors likely outcome to back and agencies I’m but change Federal risk the to going certainly be the own of the get and to been That within should none that. to us which said, transition of it, this likely, their presume seems agree me rating And as I sensible. of by times. ratio the as to Reserve it’s to leverage So, the a where XX this much think, not regulators XX up the were lies want advertised I say, better levered has sense most banks pre-crisis people where firms. the rule-making,

to I months want what the that. the I it’s know. to And guess. of years, in And for it’s So, sort my pre-guess to translates not don’t specific as period that is just timing, But don’t stay early or capital our I think, a again, up. probably that. to it’s into it’s scenario flat I see me hard us a where little it’s -- get go for think

So, one premise. only bunch there that I start would the what regime. off go SCB simple is that change depends Therefore delivers that other of How alternative. much and buffer new is into the on factors a

So, And a and then, institution. little bit as what see. with, dealing see wait act we an will we’re accordingly once we

Gerard Cassidy

Great. technology is boost Jon, on you prime then, insights. guys brokerage in cash when at then, that that’s on the that it about or you driving appreciate that equity the trading number? helped business the trading the consolidating just that you derivatives, more of way? the economies revenues. to relative the revenues your And your I talked have contributor the And cash driving look equities your to market desk Is scale? Is that? What’s largest cash equity it

Jonathan Pruzan

economies first yes. question technology. yes answer the and it’s It’s to of your scale is So, and really

seeing technology kit, business. we’re We’ve some people from a good step got Additionally, obviously. really away that

volume. said, business, see I percentage increase little in for that of been of in down the you’ll is volume us. an it’s think our opportunity as resilient. that The Here, And that’s to share pretty we continue bit. and But, an consolidation trading we’ve seen a

our center sort years. for brokerage In and five last the We’ve the number that there and really people business. entire if drives both obviously, It’s plan. one machine, capital as we’re globe technology nice said, different will. the of businesses, prime of in mix the got the of of intellectual a And terms I of is sort you about biggest the

that business powerful PB but around bounce quarter-to-quarter the biggest. a business. cash will clearly So, derivatives, it’s Between client the based and and on is strong very activities,

Operator

from with Thank Mitchell Buckingham next Research. our And you. question comes Jim

open. now is line Your

Jim Mitchell

just Maybe wealth little morning. management a talking bit about Good flows. Hey.

from of growth flows that your I think, the How what to versus just franchise? $XX saw fee-based is were I just pretty strong into through of relative solid by at we fee-based that organic focused shift one billion of guess, you’re brokerage being much competitors. more driving asset driven

Jonathan Pruzan

continue the services that Yes. new the and flows both to pleased on people that format secular and to into attracting to fee-based of We very-focused value were the because with we’re see the we’re proposition. think their convert we continuing assets, provided wanting trend and of accounts

flows mix expect the dynamics, as assets our well So, And continue brokerage. new we a from that. different to it good to was see of as

we That up has We’re now expect creeping been at number continue to to it creep time up; about here. XX%. over

Jim Mitchell

final do seem think now it’s thoughts Volcker maybe And question, just have it’s but about expenses, doesn’t Any Rule. guys, impact just regulatory we a big, revenues, we that on like you a how whether all? the at that

Jonathan Pruzan

really there adjustments Again, some perspective, material -- not be a rule us, impact. out, from a real incremental it a bit, but is is but a impact. little additional, things it’s clarified But still have Yes. that It’s few simplified maybe no for made. there final our will

Operator

you. Thank Christian next Bolu Autonomous Research. with our from comes question And

is Your open. line now

Christian Bolu

given XXXX and one at peers, If and team but of the on market look U.S. have an the done unfair to down. ask looks end drifted this it the peaked like share has Ted bit of morning. just at I’ll be a question, Maybe job basically relative Good that I equities, steadily business, good might it and anyway. in

and color what’s So, of constraints, issue, -- anything alluded leverage the an you’ve seen in on of else you competitive the what curious maybe front that sort on kind this, any business? to driving

Jonathan Pruzan

do that. or at share we last the When in stabilized numbers. the year years it’s XX% two sure the and we’ve last not market, of the to We what grown look grow I over opportunity referencing. of know couple sort share global type I’m you’re there think over is

in on, there’s but to We as into jump capital cash not continues Asia market. well consolidation see going in going to We’re historically, share market derivatives, more particularly James we’ve opportunities be mentioned, interesting that people think seen market. are as an lockstep as the divert there the that

results. very competitive It’s again, market. market. a with competitive the So, been always It’s we’re a pleased

think, seen two peers. a come has of providers, or the over real a consolidation three from probably or from you’ve into most European time I the that a shift period top long of

So, the we’re pleased with very with we’re position. performance, very pleased the

James Gorman

You from might can a be has the look banks what prime shift also into referring in there other obviously the to equities of returns -- European terms parts and brokerage we the kind been of balances of some always get. at U.S. business in of the business. And, we opportunity

So, drive we’re regional share. not to global drive we what at, Jon as we’re share, not trying to just numbers numbers, at look trying profitable said, frankly. And

Christian Bolu

Okay. discussion But, -- you here. the just exposure the about that helpful mean, ticket look commission I charges? it do wealth you sort XX% peers, get you on zero hear management, on appreciate of global and small. any make charges I how any when could you’re to XQ, to online to it’d much I pressure your point you in if relative trying on and if probably brokers, just of at the be to But, trade from I Europe. U.S. reduce field hear on XX%. it’s sort ticket detail the Maybe started I can switching versus

James Gorman

Christian, you large for position types a as have family don’t we million or very details I different a that of don’t know the because -- mean obviously, I it, ticket. it We really average make liquidating a whatever. $X on look whether concentrated investor per how $XXX stock much office, somebody way, million of within businesses of at or or $XXX,XXX selling stock it’s the

I’ve way have that’s anything focus don’t heard think really I not So, on. we Nothing, the you heard it’s not from Jon, field? just But the nothing. certainly, -- so.

Jonathan Pruzan

from looking No business clients that They’re noise more our that again, is really put different zero field. And the looking are here. field. for the anything heard from than model we we proposition And dollar haven’t And for value forth. the think the I trades.

James Gorman

that’s is hard paid management who rather An after adviser Yes. and than I not is paid. commission to the It’s by being working fee by an deal. mean, get profit. wants a

take exactly want So, fairly that they’re job and us. get away saying from to up calling doing. paid revenues they’re They not for our the

So, if any I’d feedback had that. be we on very surprised

Operator

you. Thank

with Our Glenn Evercore Group. next question from Schorr comes ISI

Your line is now open.

Glenn Schorr

one please. First on management, wealth

away if $X to the and the the more held curious the in of wealth you straightforward management things I trillion held accounts. away, So, specific could I’m talk motion some get piece in doing to of X.Xish you. mean, you’re consolidate big part seeing the tactics I’m with each you’re in drop buckets. incent it just clients really to of the of but doing? a on curious we’re what that’s quarter, I Solium

Jonathan Pruzan

have Sure. I proposition investments mean, costs commoditized. also and again, it’s really around, Clearly been the technology a of but construction lot execution made. portfolio the value we’ve that

provide so, service we’re And trying to the financial and planning to our clients.

around relationship management; service; four and We’re really places, acquisition. asset technology it with our advice; doing

would impactful is time. around I scenarios both to most testing best or technology real allows we It say side, and our aggregation risk have and asset us acquisition asset the really the the do stress On analytics.

with at assets. their an our to have we our So, of had concentrations. we’ve of asset a it’s not And paper-based on different scenarios assets ability more that look clients’ tools, much all found better aggregation picture once and attract we

all really try it’s we’re around that that experience, So, of that attract technology to think to we’re acquisition. ability enhanced a the digital to we and client we’ve leads those to enhancing our better our developing drive experience, And assets. asset then,

growing fast high as point well. the bucket is, net or The actually would quite make assets are wealth worth high those the other last in I

not firm, are wealth quite firm, only have and they incremental So, outside it’s growing quickly. their the but the of of the assets their inside assets

Glenn Schorr

to And reduce a doing you bring management cash more products room still assets bring on are have you low still deposits? will, some Do funding you wholesale rate and periodically in if environment? in specials, over to

Jonathan Pruzan

new your around really if a to developed do. -- sort seen attracts -- high-yield Fed that. We’ve specials, We of account, great savings I’m receptivity which more not we’re comment not we’ve funds, you will.

at $XX in And Morgan wholesale rate attractive come into two last about quarters. the CD of new in the money has that market. think, flowed the Stanley to or billion I relative does

So, good there’s there. spread a

really and continue we develop we’ve receptivity. the So, good seen to products,

Operator

Thank you.

Chubak question next with Steven from Our comes Research. Wolfe

Your now line open. is

Steven Chubak

have with with I the a drag which me. the at next into bit many So, James, is start you’ll implementation, step question on And XXX your big gap return. XXX basis-point to burden, to pit. capital of indulge your But, ask strategy. deeper to the wanted investors on a into sticking SCB translates a ahead bps the roughly higher That XX% point you above the I’m peer. is CETX to going

impact know, has a at prior those you’ve We the valuation. the spent publicly. back about So, XXXX going But think, looked many material really far as talking in transcripts, despite as I the progress. that an we efforts, on shortcomings models. occasion can haven’t certainly that’s the receptive the given to progress seen slow And you burden? can doesn’t Fed seem potentially I’m what alternative capital if as the if actions to some give you wondering changes, evident, reduce the take to us context I

James Gorman

has give a I Steve, actually want I think, progress. of bit mean, the there Fed been little credit here. you to

supervisory I SCB the letters, which counting test CCAR change consider, systemically we of against constraint banks the the ratio plays to buybacks I’m and as said change on and this basis, all transparency that how the of we that them, out, qualitative change around movement I -- hurdle of in but the of away on through capital the relying firm’s our Just better talking a out, And more on openness and and the feel asked designated we annual changes this as Gerard, is the potential will leverage the that specifically have I sort not place proposal, are. question, and around of Rule, qualitative important, sort dividends think not sense how of removal who capital last the capital structure. from it just came the Fed Volcker when are and taken the gating earlier, see in the the positions, rules playing was needs taking then the in in have we’ll towards -- rules the Morgan forget what Stanley

about. confident I’m going up. not they’re are And much think I said, I they staying don’t As That flat.

affected suggest the that And enables would first do PPNR idiosyncratically within having where of we’re which disconnect transparency time in also obviously source would where the what the quite us the Stanley, as on the year, last then, structure our doing the we discussion I systemic by time expense the for leverage to between stress. what And we’re you expenses models And Fed. that’s very openly call, it. and at in ratio; a have some said affected by and we’re the we’re look dig difference of models as a modeling we the find the to with on is, this Morgan

from is these of the overcapitalized properly the side There grow out for The years. individuals. is the to capitalized financial and XX provide supervisory not Having health on years and prudent to into of what’s sector and lending industry. balance critical the Federal businesses for think right the issues and leadership Reserve. for banks figure for openness this of sheets addressing them back some the there’s capability their a different I to essential XX economy. is the it’s Obviously, last different to And step

So, of see what wait I’m are I not going bait in know if that. and I’d and because next, to they to where we’re get going the be next don’t into months. try and take you rather couple

is a model within that of strategy I the time. business management franchise. our and the to fixed stabilizing adjust shown have of part and the from the build as away willingness of institutional the we’ve And revenues income gone parts was the over more We asset trading prop of -- volatile out out of the wealth business management build clearly think strategy, which

I’m rather not but with satisfy into get you, may deal what to not then going results and are I’d game. see a guessing see with what it. it we’re dealing So, the and

Steven Chubak

wondering enough. you Okay. and color, look for for appreciate for might me I’m on trajectory just can all give Based us James. forward follow-up XQ Fair like NII it’s just cuts NII. what the the if And two in XXXX. I roughly through that one curve, on XXXX. expectation some pricing

Jonathan Pruzan

terms the try higher given Why -- will excuse BDP two And, growth be the loan to the of in I stabilization are, we’ve that as me, or the quarter, for the level. benefits higher of already last I rate where of absolute cuts loan than rates that? by more don’t balances think had well take XQ, offset

so fourth In that’s terms of look. next, a quarter

of -- NII. NII. But, a the low negative now. negative get a fourth we around more is And clearly, towards rate bias next as into obviously, a get pressure declining into So some just right There you then, when it. we variables excuse puts environment, rate a me, and we’ll year, on lot give thoughts

Operator

you. Thank

Our next question Securities. from Ryan JMP Devin comes with

now open. Your line is

Devin Ryan

first should I the wealth one of that think management, Just question. Steven’s NII equal, dynamics how lower, up comp on moving given else If creates? all guess, ratio is the guess in just positive comp kind I following we about,

Jonathan Pruzan

Yes.

think, my percentage. script, little as compensable I a ticked a mentioned up we in has as revenues bit

sort comp the that in platform, you’ll mix comp. think, so very-disciplined, will but the But, ratio. across specifically is around And of management we’re impact wealth And see the obviously important. I some stabilization,

Devin Ryan

follow-up Jon. the And here just investment I then, Okay. within banking. guess, Thanks,

But, So, the you hearing healthy. closer And are does seems still constructive. has that that outlook corporate as forward. if getting but to been that anything mentioned I’m sentiment in we backlogs some underwriting it strong backlog seem M&A the then, around equity -- pushed U.S. move you’re keeps It curious of election, the script there.

and right the talk the businesses as move the can maybe outlook a add we within else now more you of investment around about So, banking can you and if intermediate-term just near-term various XXXX? bit into kind tone anything

James Gorman

about guardrails banker. of an was and concerned see CEOs of Why add of don’t I -- always I a mean, sort investor. as you’re within Right? investment former I he economic are And slowdown. start? So, that Nobody direction the talks trade indeed the this the to obviously discussion stays guess, global in wants Jon a can reasonableness.

On strong. was U.S. the And, has number are done. The is people advisory transactions backlog remain about getting confident the healthy. cheap, economy, I been think the hand, financing other and

of pointed some that. the little on deals you got last the put months out, of pulled. market As of the things that a ECM to numbers a dampener several that bit with That came of and has some

the push saw the you I results. and made with other major we a think business, DCM hand, On our

we’ve think, which share quarter, around -- I the our year was had for this this share best many XX% years. is

out still U.S. spend are think, shape solid the balance is a or and there the week the good the across all sense People in news good I and shape. sheets is consumer -- the where all earnings the pundits, is continuing So, last the economy performance naysaying to despite so very are and the reality of coming board. all the in demonstrated

think, it don’t on stable. know I disagree I remains So, Jon, that. if you

Jonathan Pruzan

growth M&A and for And would they to mentioned, wait think, settle M&A strategic every think year, is year. M&A I And constructive. are. that is search The market scale trillion and there continues markets you healthy activity, point, good ingredients that’s synergies, have pretty and And of the which still to and unknown can’t what CEOs type very LBO at feel all of I potential the another just doing CEOs next down James behind No, where $X.X intact. we’ve on. we’ll agree. as about around because execute sponsor market that, to be lot they some do again the active. a a to and and that probably seen have they’re We still imperatives want initiatives is are for Yes.

So, healthy environment. a

now, is break have pipelines in the can’t the dislocation Now, constructive. healthy are a healthy market a and But we or -- market. the right

Operator

Thank you.

from comes with Mike question next Bank America. Carrier of Our

line open. is now Your

Mike Carrier

upfront mentioned share you market that of you some opportunities the still James, see.

trillion just the place color or share, institutional in side? You you whether side But, guys some done are in initiatives now I increase on over securities, banking trading the on guess, it’s the have well the $X wealth on time. what provided management. to

Jonathan Pruzan

Yes.

in the you’ve execution. think our just clearly looking highlighted ISG. lot assets, both growth simplest, we’re of strategies. a and grow I grow management the in to Right? And the trying in management We’re I wealth investment sort to And think, it’s around business. share

mentioned, see a who to equities We continue as more opportunities offer top providers investment Asia, banking we continue see the see to share to opportunities we share, differentiated continue to go consolidate service. within in in I to and

or share good constructive, to the feel in about of build we years. the segments. X all in points we So, the all momentum. last stays three share like that business. market momentum in assuming in across believe several we We gained the probably We’ve And ISG combined business the X continue

Mike Carrier

on And just a quick follow-up the question. last

particularly levels, you the news activity, this follow-through side on issues? trade. on If trade the get that activity the here, weighed How Europe Just mentioned on Brexit on is versus we much some morning. confidence in in

Jonathan Pruzan

probably like the it’s be It We would get not there, specifically, in dramatic. softness doesn’t Obviously, something UK. uncertainty. to did resolved. Brexit the most impactful see some nice market

executed, hopefully will and So, will will this deal be off taken and get approved get the that table.

Brexit se. European results I think, impacted the just global countries about on growth probably going in the than what’s though were more per individual and dynamic

Operator

gentlemen, that for today. Thank conference your your participation. concludes Thank Ladies you for call you. and

Morgan Stanley (MS) 17 Oct 192019 Q3 Earnings call transcript