MS - Earnings call transcript Q3 2020

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Operator

Good morning. I will be reading a statement on behalf of Morgan Stanley. Today's presentation will refer to Morgan Stanley's 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

and joining everyone, you morning, Good thank us. for

from we've positioned firm withstand whatever now, a to way. to For our depths the crisis the rebuilding decade of Morgan comes been a Stanley

our of high balanced each that consistent of last have this second and in result we intent which highest been validated third We again E*TRADE. in acquire week, across business as Vance, continues strength, of strong announced revenues deliver year-to-date, our these approach, momentum returns. strong. The to Institutional businesses. 'XX Eaton mix to pivotal performance our in acquisitions And and ROTCE the from closed of Our We with to has were and transformation. an quarter performance results added quarterly extremely year-to-date step our and we acquisition a position the X, has Securities year we XX.X%. in of $XX.X our the reported history. serves latest billion, October 'XX, On strategic XX% ROTCE XXXX,

billion Strength This and and over and reported $X of performance. equities business pretax. overall revenues our quarter, Income billion sales in ISG $X underwriting equity trading Asia, of Fixed and powered our

continue inorganically. billion, balances that increased with our a over $X have has quarter excluding organically growth basis, in date as billion year year, to to third $XX was up lending grow, the see continue XX made years a Fixed billion, the the in we believe business we billion. have quarter nearly $XX continues been its the quarterly have last revenues and Management opportunities. $XX had DVA. balance decade in record Securities of investments Lending quarter growth XX% Versus to Wealth a organic in and Asia we nearly best prior flows fee-based Income year-to-date this are alone. both exceptional to revenues benefits ISG meaningful highest region. On XX%. Institutional of delivered

own and as With quarter, it how activity now is in E*TRADE, representing assets our from the client While is asset the we we client Smith they in we Xx. trillion. important have Barney billion are a note growth That delivering performed, oversaw total approximately an all strong up year. nearly $X.X quarter did not increase bought ago, to they third decade E*TRADE of $XXX before

leg own over the Our revenues $X Investment on produced of third of Management stool the and business billion as its serves this quarter.

management under to of two years record that that, reached we billion assets ago. Assets a management $XXX is had billion. less under Important compared to than $XXX note

the course, $XX in Assets under management been growth third long-term with fee powered net flows by growth. quarter, billion fueling, revenue of over has

While good opportunity one us and Investment transform was this to it Management our too organic at Frankly, business, scale time. engines our generating strong to it incremental growth of growth, recent several up. announcement pass an giving allowed

viewed as the we've perfect Vance years, For partner. Eaton

of a revenue recurring, upgrade of pandemic. now asset as bank, combined our to further to mix recognition and we integrated in billion shift from annual in trillion high-performing X to transformation. $X our receive most an Their the generate Moody's, consistent wealth management together the history, low-risk, only in momentum. AX profitable with partnership, during great firm's towards asset And investment our together our strategy bring clear and managers an to October will management, streams a the business upgrade GSIB is codification with business months of manage we and through We will this cement revenues. assets XXXX important the under And in $X.X one received

doing will we noting do we in will what of the Reserve. X to Three, of integration Vance, of So the CETX Vance. months Two, progress Eaton discuss growth plan over maintaining requirement worth expenses. meeting managing Federal XQ will ensure remains will reinstitute client-centric will thing. our One, questions. next regulatory driving profile And Four, results risk on XXX grounded ratio, capital resiliency, culture the our and XX I E*TRADE. distribution of the close be the XXXX, will you. above integration turn we Jon we assuming, commence SCB Thank of we make our hold? to the on we the all material and our includes quarter. XX.X%. Eaton that your This additions operational five, points course, from today. and while to E*TRADE we clarity and call of the have expectations focus following together, is is And It now we the enjoy organic in expected firmly will basis to right business the take

Jonathan Pruzan

quarter, applicable billion third income were net net of good We $XX.X Morgan firm billion. and $X.X an you, Stanley to Thank reported revenues with In the of ROTCE morning. XX%.

exceptional well. industry-leading Our having delivering elevated net Institutional Management flows. Securities is year Wealth year-to-date an post-crisis record. client is the And long-term growth. Investment Management stability delivering the us while growth activity future to reached indicators revenues and capturing continue for is underlying a through position managing risk

basis, spend more continuing from XX%, increased unfunded on decrease expenses by management revenues. our higher marketing a engaged. remains points Expense expenses. Our focused to financial a priority. remain and clients basis business efficiency our expenses on offset meaningful which initiatives, are approximately firm they the down bankers provisions, Compensation expenses sources Non-compensation year-to-date our partially higher prior year. as were On supporting XX communities. We in ratio remain higher volume-related development support of our on credit controllable while employees and intensely growth a advisers and and increased was

through and assets markets rally remained Clients third From August Securities to turning strongest underwriting, to the its had the perspective, engaged and strongest XX% strength Institutional Asia and quarter as each underpinned particular XXXX, in quarter in in a nearly Heightened results. all decade. than Investment equities, which the capital remained Equity and prior risk higher active. contributions revenues Now drove businesses. from corporate third IPOs of of interest activity revenues the China, through Asia billion, a $X.X businesses. regional the Banking with the in decreasing quarter had credit saw a Asia in XXXX. Year-to-date results. decade, from strength generated are of continue quarter.

versus results million. of underwriting Results advisory continues active extremely Equity with reflective to subsided remain underwriting of While underwriting Advisory and strength industry lower Fixed were particular muted, $XXX volumes. Income revenues M&A be equity IPOs. in completed buoyed of IPOs, revenues $XXX with doubled revenues offsetting declines equity million, by which in The were activity by the the quarter. Income prior remains Results lower nearly levels revenues Fixed million. quarter, and underwriting convertibles pipeline the in event-related impacted driven $XXX were blocks. were underwriting healthy.

pipeline to access sponsor evidenced in The remain pickup and and have in seen Equity recovering, and advisory is continue to $X.X the issuers market by were and trading recent corporate increase activity. both the opportunistic. sales the expect We as announced activity, we billion. revenues

and well in were in with and interest strong consistent We year-to-date. business Results particularly this are for higher-growth the the client momentum as Americas, regions as in both Asia quarter respectively. names, #X

Prime $X.X activity certain robust. as third prior the market quarter, balances summer second quarter. balances in in in perspective, was results spreads remained above elevated and historic Fixed Bid-ask Fixed lower closing Brokerage had cash spot third From by and billion a micro. the in throughout continued strength were quarter exchange Macro of rates declined. robust foreign DVA, rose revenues Income quarter, levels. were supported volatility were healthy corporates. were results. the products and second a XQ over elevated Micro strongest in continued sequential was with now aggregate, billion clients levels strong from and lower clients remained for of broad-based, of by and increased derivative Activity sales Income Average than geographical and Revenues spreads its engaged impact performance. has strength exceptionally though the revenues normalized volumes generated as trading Both securitized results Performance were products excluding period-end revenues. levels $X While months. impacted credit the declined remained as year-to-date, quarter. benefiting relevered, and levels strong. by from decade, most a declining with driven an the

but Foreign rate and exchange supported by diversification years. Commodities activity in results were continue strength of metals, markets highlighting the lower reflected to in be range-bound. recent business the

ISG loan continued Our portfolio well. to perform

prior sequential reflected due lower As a loans other compared to other to gains, of XX% held-for-sale or either trading in commitments our less on ISG The decline net secured. across results sales are the of and primarily over hedges, portfolio tightening revenues quarter. reminder, and investment-grade spread and our

by primarily declined prior Our $X.X by corporate paydowns our book. the loans driven loan billion quarter in from funded ISG

at XX% of in XX%, Our modestly now to XX%. and below stands loans XQ our at from the quarter reserves this prior corporate quarter. peak We over well added in funded ratio down the

provision second Our $XX charge-offs, pre of troubled from primarily one million, loan approximately down We that XX% losses real the COVID. loan commercial net quarter. from was was for $XX million had estate

by Our substantial are loans The now XX% $XXX allowance billion, on sectors COVID-related these our to sectors. investment-grade collateral. of the at just our lending of stands either on exposures, allowance loans which ISG increased and for increase exposures of total COVID-related secured or primarily million. credit was and losses lending continue commitments by driven $X.X represent to majority

corporate total remained loan Our our allowance and CRE Across to portfolio, loans rose increased the to stable allowance at for entire for X.X% held-for-investment X.X%. X.X%.

wealth. to Turning

DCP. was up $X.X revenues line approximately in and prior quarter were quarter billion. broadly $X.X with profit of the Third Pretax X% excluding billion, impact the

quarter, new at XX%. the Our was almost billion a assets, year-to-date robust, fee-based Including net exhibiting margin reported $XXX indicators loan basis client impact assets activity. originations net than higher strength and ended revenues of record charge The at of $XX flows the were quarter, prior sequentially, XXX the including in of third remain to continued capital engagement, XX% and recruiting. flows, Total by fee-based In business DCP, margin this quarter the strength trillion, the transactional year. points. underlying markets driven third by billion. were million. $XX strong exceptionally revenues the impacted Merger-related seasonal client flows Fee-based regulatory $X.X contributing in a increased expenses

sequentially levels and asset higher higher starting XX% fee-based to increased reflecting revenues billion, management $X.X on Asset flows. markets

portfolio. strong remained quarter. saw and growth the only over Lending had billion year-to-date, billion. of We in broad-based portfolio $X by balances record the strong growth strength third Importantly, asset this On from billion net year-to-date adding $XX management engagement driven with are continues exceeding across in charge-offs The quarterly by $XX to portfolio. exceptionally in fees a in billion, increase businesses. ultra-high by was have balances million our resources grown X% $X Growth a with XXXX. securities-based basis, $X well. X which We loan lending was worth perform lending, clients quarters to last in net the

than to continued forbearance XX-plus representing and portfolio, decline. our delinquencies to basis points. fell Mortgage more XX by half, X% Forbearance of day less declined than

Forbearance a accelerating prepayment as BDP latter decline payments. BDP third Higher lending performance Total amortization. Being spreads. to $XX a Prepay strategies. the $X $XXX supported our remains the continues September billion, commercial declined. rates quarter results which billion, XX% was to declined was net partially of flows Long-term Total estate of interest $XXX delayed $XXX by is million, the of in more representing over very attributed balances meaningful billion and deposit record-high billion billion, were XX% and income critical. prior with half revenue. declining equity expenses billion $XXX the despite represented translating on sequentially. to quarter, Total driven a helped of Long-term demonstrate flows higher were billion Net in in XX%. real bank growth prepayment tailored investment continued U.S. the growth, since strong quarterly and business has lending the AUM level over in fee quarter. in $X.X strong decade, performance tighter net impact strong global NII deposits quarter. second tax Nearly from in were up momentum. increasing highest robust year. book Management line Investment of AUM in the investment Revenues were loans part $X.X approximately offset prior global last by rose was were sequential into and balances to as amortization meaningful

quarter. the most newly Our equity rate in liquidity was growth and annualized quarter. quarter in assets in a from led XX inflows pivoted Japan money second Inflows in the Total all years fund billion investment ESG began for billion funds. as consecutive $X sub-advising It and end, management. the global long-term of fundraises under Asia net at had the flows last regions third team more one over $XX away than to investors established moderated notable across in XX% an were

increased higher see higher did a Investment quarter. quarter. the fourth gains $XXX Total by increase XX% third portfolio as on higher gains waivers an In TC&E expenses were driven The certain full were on as funds. this Asset on saw the average with revenues higher million million. in revenues with management equity AUM. the AUM. driven trend compensation driven higher million fee fees in funds in sequential consistent by the expenses $XXX the we broad-based primarily across Asia increase sequentially growth well of We private in by $XXX as money environment. of see management quarter, to strong increase the rate fees we effect expect of result in And market was

excited partnering with to business Vance. are the of We future be very and Eaton about this

We to We quarter with further Vance our the in partnership close enhancing platform. of forward to and Management Eaton look expect second the transaction our advancing Investment XXXX.

Turning the of highs to assets the to second billion Total declined balance $XXX spot declined as the levels funding from quarter. sheet.

to to declined ratio CETX And compared Our standardized $XXX our our $X rose XX to points standardized by RWAs XX.X%. basis SCB billion of billion. XX.X%

Our $X.XX declared a per share. Board dividend

was intermittent of tax XX.X%. tax our rate million $XXX net Excluding benefit, discrete

We continue X, to tax full core will to we XX%. On expect year of closed acquisition XXXX be the rate XX% E*TRADE. approximately our October

shares we of equity. issued As million and function common of a the billion $XX closing, XXX

$X was and points. book over XX billion. basis XX created $XX And We billion per RWAs which share our approximately declined value ratio will and value share of increased and billion our Our by by $XX $X, goodwill $X of book flat. approximately approximately billion per assets be intangibles, Tangible by by CETX increased essentially approximately approximately amortized years.

expect, start in the merger-related fourth see you we as to will begin we integration As E*TRADE. would the quarter, expenses of

disclosures to we in out charges these results. our report in start We break will year-end January when

cognizant of As for outlook, we few the high. across outcomes the fourth questions. we And now dispersion the patterns businesses are operating first remains by client seasonal weeks of the all line that, are quarter. encouraged will in engagement to we the X potential of macro of open the the quarter, while With

Operator

Instructions]. [Operator

comes Our Schorr from first question Glenn with Evercore.

Glenn Schorr

in Curious Wealth Management. talk if could flows we about

share. and year-to-date consolidation versus being could I'm you mentioned you would curious on a Management the couple And it, that of Management. Just that combination a within we're but curious while You talk things, about if what up Is attribute Wealth what's of recruiting to of driving SBLs? wallet Wealth mortgage loans almost XX%.

Jonathan Pruzan

Sure.

cash fee-based quite brought months. the In seen been significant them. sidelines to bigger deployed, a net several of seeing into a being we of of the secular the are our with financial of over But It's to are come deployed that's advisers. become of the cash although in And your more pay within market. of we've two, the for assets bringing still course One, account and want teams which network, for being Morgan last and that being assets, seen mentioned has is really a the strong, think of XX% nine seen network. you put the trend approach and accounts. long-term there's we've this they Recruiting this many destination choice combination we and accounts. listen, that in we We're the factors, about managed continue fee. about is one we cash their them, we a into last people into flows, more the fee-based see, years, comment multiple now have more that Number Stanley and the terms And and I amount recruiting. are come of in, for manage on

then So drop lastly, really, a significantly. seen combination of those And X things. attrition we've

So we're not losing assets. many

quarter. $X two continue continue, ultra-high billion to of the continued pickup, things. and that's of base. I really, So accounts. We've again, about growth that saw those then to from a client products. product, will think that came we'll significant XX%, net is secular the flows a this we X And we those lending mentioned, you about a combination in worth platform. Predominantly, into all our as our And good trend think see fee-based SBL The invest XX% long-term

better lastly, as up see gotten do to as and mortgage our using had Interestingly, which nice the we've added we was seen analytics. that that data to base. real think this at well. more quite We've quarter, I to receptivity support then and around has we've And with picked well. client XX% purchased some about continues field, product

-- strong footprint. both really quite been the products it's those So have within

James Gorman

I distance of business it, directly which extremely involved flows, flows, I've both out. observing historically of in it a because the said. like, sort lot seen very in during XX been healthy. and the tax in client have And this is I'm this movements absolute the here Glenn, little add, we were a I would fee-based now don't just years payments year from terms healthiest flows Jon the and break numbers, attrition with it's the as but of low, not There

you year. validating very a very flows exciting strong also penetration recruiting, model. better it. to which add client to And see it's very net of It's E*TRADE So this the for wealthy -- seen and clients franchise, has lot the me,

Glenn Schorr

the I appreciate one that. expense just Maybe side. follow-up on

you are dollar-wise. that start then Maybe for know about mentioned marketing we maybe the to E*TRADE levels and that our together can so I up expense, could has spend what think money just go-forward the But your have you you actually First, about but January on the if And T&E talk integration little expenses been of elevated, putting obviously, start down. models. you on, a to so with thoughts maybe expenses. we on to activity integration bit core on E*TRADE on are how until with could have thoughts wait for

Jonathan Pruzan

Sure.

we've seen and on what with elevated given clearing the the trading base, is the taxes. Just obviously volumes expense as broadly brokerage well transaction as expense that elevated volumes goes

a very the ebb job we've assuming of I towards elevated, generally do they will really of strong, remain remain the got volumes. so skew bit nice done As flow Asia with taxes. continue has ebb those expenses. and and mentioned, been those that professional little transaction elevated, or to And our flow managing also more We've a -- and volumes a

converted to the start and will while. marketing, we to down. been We continue business numbers to see has ultimately, just we things And remain to virtual, expenses that would of the a lack development to as by of those muted around the then But expect to drive conferences, being tick really the up expenses driven globe. those try lack for start movement travel,

In of would of transaction, February, you when E*TRADE, X-year we charges terms talked over million period. about integration-related as announced know, a we that $XXX the in we incur

extremely about In as confident there's that just both We're this opportunities here. As also significant in so that fourth closed to disclosures into think deal XX I mentioned, break you about we out. quarter, exactly the days integration start cost we we the those We can out we'll ago. are. the get they what will And laid funding and synergies current revenue start see the quarter.

around January. to it give we'll you'll out. this that thoughts So as said, more that We'll start some And see you in you quarter. break

Operator

from comes question next Chubak with Research. Steven Our Wolfe

Steven Chubak

capital. question with noted, pandemic off started, a James, significantly wanted you're since as and The overcapitalized. to accretion been I considerable, So has on clearly start the you

early XXX% and How XQ the payouts moratorium. approval excess, evolve to you of cadence your about buyback just we earnings? returning noted plan separately, subject buyback thinking does target as in dividend removal also be that of should year, regulatory the initiating excess And that? next of and pace comfort how alongside You the and of as possibly on the

James Gorman

making overcapitalized artful. CCAR lowered by we time, the A I line. for would were expense financial prevail. I felt look so overcapitalized. revenues come recognized. than at PPNR reflecting showing. went adviser actually the variable, Steve. it it's will maybe will the through before And $X.X in think think from dividend, appropriately, change higher. thought that currently even our and long argument fixed net. Eventually, healthier few as prevail. quarter where a questions something even a looking we you argue, actually the mean $X.X to last Very to be the be it out down, compensation I we total paying I we're they're that We models slightly SCB numbers without with the that, that tucked at think, in there, we time, bottom down billion, accretion I would hope And Listen, were It's Fed, we're is not if come the about -- we're a of and But entirely our E*TRADE Jon, business transaction, numbers continue billion model. starting PPNR that's

that. probably requirement. net accreting that doing CFO probably points he XXX. without our know oh, he's probably clearly on hand XXX little like minimum base at He's what points if billion we're excess don't I'm little with something a $X basis of a a see where little So above about be, -- me. shaking minus. the buffer. of the basis disagrees buffer lot capital, a on XXX like We'll we're always the I a plus should a to minus I'm sort he's on sideways, probably, here keep his looking buyback

all We're Okay. happy.

not significant stress those its we showing does capital. of I'm into have get will excess we have balance condition, we out On obviously, sheet, we'll come distributing capital no businesses, Fed highly of year, and going there our thing test, is it's Let's except reason, hopeful absolutely mix my why exercise before on buybacks, the pandemic to through as wouldn't within is liquidity Stanley's we that shape right now. our the next work right see. the Morgan this we pandemic the confident that's of purview. I'm broader current do for for community profile right which now, results and given the but the be that

first and positive the would us results quarter. the to bets buybacks I back Obviously, got are to But business that, doing to the then in expect or be completely economy tanks I now off. them Given all the than be, as then if between you've do? be, you definition, XXX and that's my it XXX% we likely you see eat points. Why you How we'll above to By payout. into we not do likely At do could have point, with capital. basis this scenario. something to do run -- expect are much never less the otherwise, some if

who to Our are their the own decent the return in shareholders rightfully company investment entitled capital generate on a company.

Buying something meantime. a basis was the XXX We use about to our hit accreted to I do going It's some tremendous have of with in Vance it. we've XX, basis points. think CETX, Eaton XXX opportunity XX to points But to that.

new sort to own we started thing. but of nice back company. That's we're a So where a we

tell So the you I'm can a little subject. on animated

any capital we unless think If that fair would why, the I reason And that, to you result once say stress the which get perpetuate will, the are in think global I through there's I don't most look COVID is which test, adverse, G-SIFIs you if get carrying the U.S., at any we it's expect. rational surplus. a don't of we

Steven Chubak

a for outlook. just the NII Jon question on maybe And

You item. every beat line on virtually

exception. NII was think I the lone

the to even end as You prepay were accelerate towards of not this quarter. quarter the started alone

should to the a whether stabilize trajectory as as given how here, we sense curious, that to thinking was to growth strength about XXXX. look be we want from just expect should things cited maybe the earlier in in NII out we question, grow and even get loan to to start So Glenn's I

Jonathan Pruzan

of Yes. I prepayments Well, with you're right. at We end quarter. get think the did the hit

and generally guided prepayment some probably deposit where saw in absent we I where came contraction as little you to, that spreads. had a light we we think we thought level, in

E*TRADE with the pretty we but I did as deposit we're offsetting a we point. investment as basis, just would think and generally in We that portfolio. have I E*TRADE. if this liquid, on we're a the close investment portfolio. portfolio a you very say obviously we're comes stable over, reinvestment with low-cost know, the at highly ourselves, growth turns large But were go-forward high-quality base seeing risk

dollars next perspective quantum NII this out that, highly wealth confident we're a the the what can probably funding the ticks of overall give in of about half their that better portfolio are about of synergies sense again, which but we we smaller in go from NII is at February. We'll get from around start a see And E*TRADE XX% the company. optimizing generated then So as of you'll of NII. quarter you but up we going sort sensitivities revenues quarter, as were or to laid sort only relative contribution is of the much we're to February. of, that part of the still others, to outlined be And going up, business, again a

James Gorman

assume right of we're now, I just excess still XX%. ROEs question. just to note know, carrying we're that's don't mathematically, capital mean XX%, points of then on basis let's XX.X% -- XXX-plus generating I to capital that case, If the important your back Steve, it's ROTCE requirement. XX%

generating So kinds with that excess of returns. these capital, we're

what returns we're the where than would using actually capital think through the project they're and run shareholders sensibly to be the on are business. So look obviously, that we I higher now. could And

Operator

Brennan with Our next question comes from Hawken UBS.

Brennan Hawken

wanted I one on to expenses. start with

So were what at I to legacy in before ratio so I'll they MS, margin to two on based not some they efficiency for clarity. the all pejoratively James, I But as and this the -- based you focused pretax deals, the targets, that refer wealth. targets, provided year, that think beginning recall was were of on on year seem but just

wanted understand able going progress we're got to in and now sort of that on transformation, trumping are to to here. like there those how try efficiency you've more and the to idea there integrations laid strategic efficiency nitpicky of the trying your that just many to Just integration these be business way that continuing towards is want focus not not the just understand. had I legacy track push? Or you that's so previously So to work be the targets? important to on about that. a that your Is that it's to your try therefore, think out and

James Gorman

Sure, Brennan.

elements One -- you in is there business looking think were to slightly three described, higher is think QX, this that as ratio. sort are I -- the And the over less button XX%. terms and in right right what now, efficiency at right are generate in of of I to on We're year, we think we're We this. are going the what QX. quarter. I this than legacy

that. Our two so year objective was to meeting XX%, XX%

we XX%, long-term are under and aspiration meeting very that. close was Our to

check So sort on new do what the box two efficiency the do legacy. Number ratio. of our to acquisitions is

you look percent to see in the with closer range, sort at Vance net of And business, income. XX%. on if what's the Eaton the at little pretax that a look on If you maybe interest with it's below XX-ish business, E*TRADE margin let's going the it's

personally a I actually Vance Well, So by last lower. on number if be little you QX X, already think three integration E*TRADE of bucket, next year. be start like X the should over said of simply until of added efficiency But definition, we costs will out bit, projection what I would We your in $XXX and that. to we Eaton that ratio that, had plus put the million build. years. are a And integration don't Jon course, close small in accelerate would is costs. third they the which of

below-the-line number. identify will as it a We probably

integration to to cleanliness We're with you'll to But an we're ratio show models, But hide they clearly, there's for right it. confident ball to why absent no without for here. that -- that. and way costs, your see our highly efficiency going efficiency and just talk able reason be stand. numbers, our don't So the report the accountants about we'll not we'll

Brennan Hawken

bank Jon, then know these Stanley the the E*TRADE subs? public that what's that to of bank the plan the And the Great. -- one your the sense. Are you a more sort is focus, makes a likely you this mentioned quarter the I on folded brings, around has assets with on really of stock the of the to your thinking back out how And fourth different one changes focus. early of read call, Okay. plan specifics planning that integration? about of that -- great you're happen which lot to business, Is integrate E*TRADE more think BDs? are will plan Morgan But of be I some that lay into plan of a sub some E*TRADE

And different, strengths which very private are the so offering. yin a offer strong the with kind Solium, and of yang a but nice has

approach to so in those So Or it to that separate order the how to various integration you to plan a fully do better realized together? strength, -- the the is going full capture those maybe be not strengths? broad platforms order is is keeping and them maintain bring in idea

Jonathan Pruzan

as the and we said, customer the that yes. XX%. the question broadly, to I the integrate and first, experience. But think get there and numbers now the XX%. to enhances want that channels And the We about running that business revenue the is disrupt when opportunities north out. I I to we believe -- way then customer got we we've doesn't did in plan trying all we're whether generate of it, were to capture systems. the synergies And We answer, up deal, growth it you our want three they running Sure. to are and that's E*TRADE cash capture think in mean laid cost numbers the growth. to a experience about across They're Brennan, way ultimately stock thinking the to significant do funding

lower that. Our numbers were dramatically than

bring can they the closer that of Clearly, and are combined level, generating that's get together lots theirs, a significant synergy. new clients. we if a to to So business higher

of those going are to advice. want clients Some ultimately

and opportunities to start are channels, integrated. we as there three systems all those get these so lots we'll of see across And

to mentioned we just these companies was. for take we'll companies It not that together. brand a time, deal deal business As before, together line. the opportunities the keep This our slowly. E*TRADE the was And them about and and integrate But about ultimately, was revenue cultures costs. Vance bring we're going like well Eaton bring to we're going self-directed the

James Gorman

retain changed with has in our committee, nothing clear, joined banks, for cetera. X has view stage E*TRADE. because CEO detail. We'll months et the anything, separate great workplace, marketplace. highlighted, a business the will identity brand operating got been integration very be plans, E*TRADE, actual better. of of And Mike it businesses, working to If we've as very various who's Pizzi, a the plans in the you then powerful trading And well-thought-through on our the The it's E*TRADE

deal. So February, we fair it we when it's did with you probably think we $XXX are tend highly be conservative would the And confident we're going numbers -- that. that I that to say number million to guess, to we or be I January get the like And gave cost in not synergies.

we're I And doubt just integration the going spending run So will of with the plan. that. pace than more be spend to the be

a going go, exactly we little would frankly. as it's better, even it but So hoped

Operator

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

Michael Carrier

institutional good few you upfront just organic you very see opportunities. strong had James, a years And and year growth a that First, matter. still some for mentioned

a given where you of some can moderation in can and leading provide the see color the share in the business growth in some little maybe you organic that if business? some expected the offset attractive Just just your of of maybe that areas, on

James Gorman

Yes. Well, fraught. little firstly, space the deals institutional is a doing in

haven't really up to world would small to sheet businesses be that I excites balloons but deals. unlikely You're you yet. you want acquire, anybody around us advisory think obviously do that if type the anything like, there And did don't could sending that. we found if boutiques, are we ones, balance

phenomenal. the look from what So by still they've come where business. last if organic just phenomenal, and between which the for Sam gap our But that at truly have is is growth, we Fixed in capacity I doing, Fixed the institutional And Income in Pick grow way, business the turnaround years, Income. credit couple mean, Kellie-Smith at And to business of Ted overseeing they to it's that just phenomenal. from, clearly our look

that. we growth should mantle consolidate. There's continue #X quarter. We business, didn't We Brokerage Prime across it a Brokerage. lost Prime equities for got the to back. Clearly, like Our

in business Asia, markets capital Our particularly China-bound Asia, enormous.

We have an incredible franchise there.

parts banking of are there think be stronger we could in. I

then very where dominant, some segments industry other some have tech We even get could we groups care, we're health stronger. and

in think progress. DCM, made I So we've

X DCM well me. Jon, in he's X pointing four underwriting, I to think actually or we're

some the a be no there's competitors, our rational particularly of there gap with reason should there think why gap I there.

it's what could -- from nowhere -- of the expect near returns can potential. I the we we be and question think near as there's we is, we're a The just want kinds business. nowhere get with there

We're trading we're the So Look at just quite balance at bar. throwing sheet it. judicious. not

that this day, than major was million lower I $XX was quarter materially competitors. think bar a our our and trading

I point So quite small it. judicious in the and about again a delivered. delivering. way in saying big swings had they rather the 'XX, of series I describe we're than and record, But business, 'XX, of they've a made a would steps is 'XX, institutional they're

I think European also upside. And of the or to landscape there's obviously, you competitive doing, Jon, know a and So what don't cetera. I by it's add et lot not banks are to if framed the want that. doing

Jonathan Pruzan

think well. I bright really summed spot a And is Asia No, you've Yes. us. think that I up for

than generation a ISG make business revenue in real year-to-date, is continue now bigger that Europe. we'll to I engine, see that As there. as the investments from and said, growth We

Michael Carrier

or recent in Eaton the make just whether Investment I both Vance E*TRADE All M&A, given it's wallet sense. think Management, in And then right.

Is obviously, seeing businesses you the from good both more you timing. And are something curious are putting growth. like up it, industry importantly, on then have capital? dynamic? Just an excess those Or of

obviously that years? So X to business over X, what the months, XX just not does next think but X you these do maybe with transactions,

James Gorman

Yes.

garbled little was the the but timing line, a think the there with around I of You're question those phone transactions.

are matter. the think you strategy, like Here's is will, is culture, I is is at Strategy high things if holy and two grail. about that the acquisitions. three price, is There least One four timing. how four table,

to of would combined shareholders the leadership income much funds distributor and has absolute had internal It's been that to It's logical And in including, about talked already the that and run our extremely funds. on a equity swing bad structure, It's we're of get have the fixed cultural a confidence fits, product. You've strategic Parametric their I out and of what by voting a all a ground. way, Eaton We fences. space, There's in which years. We high to that, perfect an we of deals they've at. voted you be not industry, core Culture so been Eaton voting their is you E*TRADE strategic shareholder finance home done fit. building fairly got something point when it important, sustainability not management good all in income in. comes like from there's and something It's around about that know Vance. well, an and a of got team. particularly large got with biggest It's asset to then gone the Vance where skepticism the in lot. we the And you our XX for fixed with new business, management got the internal unanimous. of be intent. in XX through about deals. their deal, the has well. probably Calvert We're their system, have them know space. very have asset the because with bad opportunity they And lot favor

the Board, just it wasn't the it was management. So

about. really good Price price. feel I culture, So is

do the buy do we Vance, your And We the else want You cheaply. least before is might assets Timing it Eaton don't transaction thing sure to quality I'm E*TRADE with somebody thing if control. done. didn't this completely didn't had in we have.

them. hand, the as interested in the to Stanley. very other On on sit wanted shelf interested in are Morgan moving quality we They for We're don't get assets long.

not acquisition certainly ultimate be didn't We're the week. timing. thing the to So It all got of do tail we're timing We a convenience. most you've control on We to a on. the communicate, the to an of E*TRADE. may came want didn't is trying hot give It sudden, not.

if growth. thing, what's timing got does it three They've is So on important. least growing. your right, is Listen, the we with the What the first broader I issue their we in COVID think, -- business economy. going with the is timing had then great

growth our great They're business. product seeing it a has across whole few incredibly ago. is created years asset the platform I As Parametric was as management well the done since said,

not So in we really investment is growing to X the away election, happens together think politically. we're happens businesses. whatever the And going whatever strong, putting go market

years. about worried couple not the I'm next So that of over

Operator

comes with from Mike Fargo Wells Securities. question Mayo next Our

Michael Mayo

with Well, to is risk. In on your coincide credit your my rating, question the... upgrade of congratulations,

James Gorman

to you were you us, Mike, upgrade. upgrade thought about when I said

have man. me, You disappointed

Michael Mayo

growth Well, is well quarter-over-quarter loan first, X% the above industry.

just about the you're risk So are that to how and getting others wondered not. related what

the E*TRADE spread lower. seem quite revenues acquisition, for the be like Second, bit on a E*TRADE they'd

acquisition. firm with that's And $X thoughts So $XXX third, billion Vance, that then million. about a updates revenue on earning for with Eaton

get ROE. to have You'd XX% over a the just to earnings double

with loan money's risk, and terms spread Vance worth. risk getting full of E*TRADE the risk, risk revenues with your just in really Eaton So

James Gorman

been credit credit have Well, I I'll business very but We have visibility at what let risk, this loyal businesses really in us, scale want we of tend total great we unsecured to collateral Jon lending do talk and more any we observe really on loan world. we're we've so to we during We're side, a that institutional all. We the against are about not in. overexposed troubled the on been the do have good clients sectors not support to period. small And some not that side. portfolios, lot And people's about consumer would owned on of sectors. the the to we careful who've have

irrelevant. some the on it is other entirely and depends conditions. on lending from institutions is who fact performing what differently you're I and that our credit to So mean completely terms

with on obviously, yes, by business So is that. the NII, the E*TRADE that affected business,

are year of On platform said, opportunity for like on the the the there XX-plus Jon million to opportunity kinds system, not lending the clients, that asset even conversion the their the platform, so other us we're rate, mortgage digital a own business, to hand, put spending provide as the percent. where and flows, those products to alts is us account positives their positive get something openings, out building to fact you many workplace $XXX before the our their for

about Ours been has X%.

permanent benefit going wide So expect acquisition. this The -- state, we I in be a interest attractiveness are don't in that shy but that the rates this what's certainly that on something me open think not it's of I eyes to makes we about the world. just on phenomenal. the certainly is business of the underlying changing And what's shopping, one increased obviously on going cetera. years the even people's in et health digitalization, been more thing use than whether financial flows behavior services, the that five is actually their services, have it's last and in

more been I'm have the we So listen, E*TRADE Eaton at I got that not couldn't blessed than smart. Mike, got think we to have Vance, it. On time

I'm that it's position. said even call the to ashamed priced, is if rate quality at on $XX it, colleagues as static a your paid And at growth the like, in billion not company, of for this say I yes, the One a fully we look but asset. billion don't a $X asset. excess it's I look

expenses of get out the this. will We

this. consolidate will We

little We with with Parametric, got businesses Calvert distribution. the fund. with have They've equities fixed from will many couldn't I real internationally. work platform we have in our it. a endurance, We income that the management that growth otherwise, revenues way It for and us business so some us. core them out international Atlanta said, it very asset as their done can take fills They provides generate funds,

trouble a our have as have do. don't we world-class We wholesaling They do. others one. domestically strong distributed getting They force because have product a sales

-- hundred of of positive going people by I'm deliver? by deal that deal couple that hundred million Solium we million if will So couple dollars. And we overpaid overpaid said a is to a deliver. dollars

by couple we of said Barney a overpaid Smith dollars. billion people Some

I So long-term on very a take view acquisitions.

Michael Mayo

follow-up. more one Just

the As you back now of you're years, mean, more, XX lens the that over actions right some XX to took. last reversing I the pull we even

off go you sold asset Kampen, manager. and ahead Van get now You and an

on out market your big-picture E*TRADE. Can you're management, of long-term here? got the us now mass thoughts kind the kind of give wealth why You of back reversal and you with strategic the

James Gorman

friend weeks that, wish of had if of wish said said did listening, reversal. a disagree a a God hadn't I ago, we I couple years done which what He's totally we mine, I a on a later you him. of as well. I regret couple mistake. and it. I but not call I We Van him but was sold bless regard And Kampen, Marty long-term We've Flanagan a just it, I with said.

the We active combination haven't And got and of a mass a market. workplace business an direct business. options, E*TRADE business, way, a derivative out by the of trader, is

We since we of of have of have dollars wealthy to with Dean tens have people very invest, the of always to not to but happen Witter addition, dollars XXXX investors in thousands services millions of provided of invest. in we merged a hundreds financial millions We lot with very, investor. to average

other look change did want be one a I've at did. So have out because servicing, repeatedly, Kampen. about oil got of the getting of was Muller's storage we of -- all. got got We in. the this out We some differently, and businesses of I storage Saxon. you But We This it which is and said The in done Heidmar. mortgage in Van would business. we thing strategy prop a is business, shipping, and the shipping, scale to is stuff Transmontaigne Peter at business, PDT out not differently, we start-up

credit hedge fund. mass was our Discover, FrontPoint, market, down to which the shut business unsecured we card out a credit. of We So got

that. for this fundamentally managing individuals, squarely fundamentally with institutions. That's and Eaton the -- that we to changed what happened this but company do, of profile entirely obviously, in governments that originating, sits consistent have before tenure on capital We And my and Vance focus and over is square. and distributing

Operator

Jim Our Seaport Mitchell next question Global. comes with from

James Mitchell

we E*TRADE. their out, X in XX%. James, is half, accounts, I retail on strong, on you very first, up rates. to XX%. XXX,XXX lower at are have flip Maybe I side, the first the adding guess up pointed question. just a as balance results the you If look follow-up Cash parts guess

of that mean, the what's So accretion but going volatile, since a surprise you growth growth secondly, announced given the seen interest the deal? markets I obviously, -- driving do are do that the seen And we've targets, kind mean, account is how -- And I do the can you rate think big continue? forward? think we've declines you you how about versus then

James Gorman

has sure I'm something then Well, I know models, wants will out to growth. and had sympathetic able do today. They already told here. so have XX your everybody to fill Listen, or that on not to we're to And everybody unbelievable for. me we're that love add. day I'd Jon Sharon I'm for that's that. do what be to start, looking you, but is let going And me

record XXX,XXX I account the hundred; they're quarter, incredible before over think this it. in first year was quarter, into this XX,XXX. the second quarter; new They've their over And of well a business. couple flows number had asset

There It So certainly opened that will because of but that lot will brought some will that these close were large at continue? I attrition think they stay of this smaller will also be won't it accounts a in elevated. net were accounts, level. continue accounts.

once other able of stuff and that. on benefits, baseline P&L the where the they've product out sitting is, plays a some So on and answer of Jim, were put actual full that based and address we Morgan new the of do to reached we I slow. their some update we'll inside Jon? it of mortgage and How system think will out engagement in above year-end because that that and we're the based at all believe can a take them their funding quarter the alts certainly the an they expenses have Stanley. Jon But I previously then around markets.

Jonathan Pruzan

Yes.

we information we cost still that and just million the high that broad But I for the in more confidence year started tuned three. we dilutive X, two and breakeven-ish January. We outline synergies, give think you we February. in funding that's the it year still this in when told think have deal year of January. path. you be this announced accretive in general $XXX would And in stay We we'll outlined in February, framework, savings in and on the

Operator

Our with Devin next question Ryan comes Securities. from JMP

Devin Ryan

retail customers through acquisitions. And or time, over we at guys the step around Stanley's least is your sounds full of Solium, the you've nothing appreciate and like. that just millions many or I if big to new that But a Eaton whether have Morgan coming of it hands E*TRADE be you is message Vance. one take period short soon ecosystem back, a added First

Stanley? at And cross-selling Or products, consumer so you're retail not sense if there yet services now really we that are or plug products really could this it into the think firm make about existing just base? touching level more to any is about that Morgan big broader

James Gorman

banking at I through right think putting E*TRADE with the mortgage high opportunity got very to the with good clients the Stanley to our we've two banks the I score a biggest already the -- FICO is and Morgan assets think plate banking we that full digital now. product go putting probably have. system, And product

I think right open they not competitors, including are We'd seeing that's Devin, two the if I'm we have but that's ones, specific always, obvious for the all because And product, architecture. to take total gap. do. then thing a product right from best as anybody's the what's client, our

I'm seeing So a product not gap.

Devin Ryan

the just follow-up. the quick just And head then on Okay. count. on a to make wealth want happening what's Terrific. adviser I'm I following sure side,

just looks and is kind of It's on and best head the as in destination the what attrition. the that net again shift five growth the to on backlog the the side. kind backlog we start also up? think quarter year. this is quarter a heard over Or something a focus of is recruiting back that So I of could benefiting from a first in And financial occurring Morgan maybe maybe one-off that addition this additions if But maybe about a Stanley curious quarter comment we lower -- evolution? So count like should and adviser in as should this years. that

James Gorman

be I trend comment. friend. We're great several definitely have gap is momentum. think by in have but But I net you... may the numbers part It's Then, all hand, Jon a Devin, them the hard recruiting our That's is seen. mean aren't leaving. an It's don't of attrition, to has closing. project, on quarters, at you going been turned that if definition, with business. inflection I've And to We've point the that got I interesting last look it, now but you're do positive. for the growing. The people Jon,

Jonathan Pruzan

Yes.

business. that's right. good recruiting, for business the the is think teams attracting term, of And books I in attractive with strong. certainly We're near -- pipeline

new JV them revenues future seeing on is the a As quite attrition higher. back, advisers, to said, James basis, go are assets advisers growing low. The slightly net if years. and with number that rates importantly, are more in the numbers. of you be bringing of But And additive going was the flat the the to dramatically we're sort in

really a position be to it's So right nice in now.

Operator

Our next with from Cassidy Markets. Capital RBC comes question Gerard

Gerard Cassidy

particularly you you Jon, with were clients strong us other in on the what's share as results Can with outside geographies balances, the Average became on improved more that these quarter. you Brokerage said, Prime you think -- or also increased winning touched Is North the engaged going of I markets and more. driving America? up new relevered in clients, numbers?

Jonathan Pruzan

a So nice a have did quarter in couple of things. We PB.

the are levels. still where were. from they peak They're balances right, below You're up

volatility as funds Quants much still reasonably still the seen short as have in remains relever. the equity haven't market We relevered hedge long, high. the

a growth see new add excuse adds the to and to broad-based. it's continue me, dynamic of been dynamic, We pipeline that the to launches -- nice pretty growth

if remain balances, constructive, So the believe future. comes revenue markets continue see we which volatility growth the continue the in if in to to we'll will PB growth down, drive

Gerard Cassidy

Very year-to-date. good. with in 'XX pleased XXXX, We've numbers business. think, James, the as strength institutional talked very in then been And about the a you I follow-up, the and

still their some do as Or we aren't kind Is you are cited look competitive think yet evidence forward? a as and up of getting they on feet so the competitors any overseas more struggling? environment that have they're back of we strong. You there

James Gorman

the for traditional on said last strategies competitors' be It's opportunity I wane balance depending little two bit. think might that, be to do. banking a sheets businesses go of years, And chosen, these there over Well, international the back shrink core said me them and I hard their just their of Gerard, clearly, to fair. wax to predict. some and things I what mean don't to more. some have I

comment their except strategy want clearly to U.S. some observe what's the provided on And that the that I change. don't happened. banks, opportunity So could to for of but

Operator

next with Soc Lim Our question comes Gen. from Andrew

Andrew Lim

please. James, question strategy, a M&A on you, So for

with XXx. disappointment CIB? But that to wealth asset a that. discuss a with to ratio and try like of to weeks few perception from me buying better can a MS asset about talked I your you ago that And So a sort -- wealth strategy has different Why I'd like not bank how like see to divest obvious been trading and has synergies businesses to management it and it management. X P/E isn't management change investors' CIB management of angle. from It's

with X management you'd excess the of wealth without have at top and and from at and You the the wealth XXx. of that then could have to trading the management, be could restriction shareholders capital asset to that, CIB trading Fed. XXx On asset returned bulk freely and

So I was just wondering maximize strategy as a to what value. your thoughts shareholder are that on

James Gorman

thought happen. that. to That's about That's not my going

We have integrated reason. for a model an

asset the and wealth have from ballots management. We

engine even -- across There think enormous in Andrew, our for helps the so that this close other product of where about remotely We house. to clients we not are have side that's provide room. institutional originate generate business. opportunities the our business the synergies, many We

Operator

you concludes And you. call. conference participating. Thank gentlemen, this for today's and Thank ladies

now disconnect. may You

Morgan Stanley (MS) 15 Oct 202020 Q3 Earnings call transcript