MS - Earnings call transcript Q4 2021

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Operator

Good morning. On behalf of Morgan Stanley, I will begin the call with the following disclaimer.

During today's presentation, we will refer to our earnings release and financial supplements, 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 and strategic update.

certain has update, noted. adjusted strategic the reported been information as Within adjustments a performance our objectives. provide made against and strategic These to of transparent were comparative view our operating included adjusted the of release. performance non-GAAP the earnings these of notes to reconciliations metrics The are in the presentation operating Firm annual and March closed Stanley the closed comparisons of Vance on impacting its XXXX, of the impacting Firm for October X, E*TRADE acquisition Investment Morgan for on and X, period-over-period acquisition XXXX, its Management. comparisons and Wealth Management Eaton presentation may duplicated be not consent. or our This reproduced without now I and James the will Executive turn Chairman call over Gorman. Chief to Officer,

James Gorman

in you. profits vision business. we the Securities, manager, trillion. asset through strength acquisition Sharon the updates. But our year Morgan the premier We a and under drove net our of Thank $X.X and full as over In Stanley and of XXXX, created showed assets will And bringing in of shortly. nearly and billion gained in details in forward Investment Eaton I trillion discuss Vance added record of quarter walk management. new successfully itself the full has strong $X generating client our we which a year assets, XX%. year will everyone. Wealth total each closing morning, Management, results to $XXX of Management, first, of strategic always, year strategic Institutional annual delivered Good ROTCE share. another was assets Performance

the XXXX be as through Firm's turn At the Clearly, objectives Slide our year, performance year set into year. X. the that we we to beginning for start would with last you integrations. that the had we XXXX on transition expectations work the If heading of X-year exceeded a and document expectation

XXXX of the Vance of momentum, Firm's the overall successes acquisitions we early Eaton and and ahead E*TRADE entered plan. the With

Slide X. to Turning

record. History and our offers First, the today. is transformation Firm track perspective I'll focus on on where our XX-year

Morgan Next, our together, maintain highlight competitive Total and continued highlights profitability. begin around than Institutional growing revenues today. we I'll expansion. taken to shareholders. a how, where should each of double their I grow I'll competitive transformation this Each advantages leading capital to with the commitment level XXXX and defensible will further higher our businesses Slide Firm our Start unique to of have Firm's our the protect of Stanley Then returning to with on our are how advantages on and to touch to businesses finally, positions. and Securities enhanced X. And sustainable now when balanced, evolution, more of lead and positions. into we've multiple return business the drive built each more significantly with Slide expect contributing longer-term address To our leading X

hold. we XXXX, leaders, across our industry aggregate and to from we've trend recovered some of individually financial lines. restructured to before and expect had increased back to crisis, strategy this to business, we both Looking overall the but share continues and the when we Share business reset this

years, and to the last not gain, if confident strong, very hold, on to as is demonstrated position across the markets for opportunities the competitive capitalize we Our X in division. share active ability our in are

Slide Moving to X.

highlighted delivered continues bank leverage, $XX Our expanding operating integrated our demonstrate revenues by investment billion and XXXX of to in margins.

of around a scale. with leading world, tier banks the us balanced investment Our putting global footprint is in

X. Management on the added propelled last $XXX in and net XX leading This in is low we organic a never Shifting possible. focused us With consistent has growth, to we Slide to recently year. in advantages seen to net of journey integration new and has asset growth, respect still been digits in single year. added position. The this to results initiatives nearly our business franchise predominantly the the unprecedented have X% last gone tangible months. single in Our has the our on new this execution expansion stronger, unprecedented. growth seen from between puts $X in trillion We we has Wealth the in and growth of decade have XXXX our client billion and place. collaboration over are Obviously, The the assets very the from but been Scale of to assets result segments. years more last it's days the early demonstrated and growth X% a verticals out few

net of these for feel you guidance more in are we I potential. understand points specific But can what need time we to proof is to great commit the better we and that we channels. today where new asset about are growth, business power the Before strong, the tell

Turning to Slide X.

serve and the workplace leading this business X. is remains With already advisor-led engine the franchise on top offerings, Firm. complemented segment economic nearly we've revenue and assets, of trillion points. the in as XX category $X an self-directed by client We underlining built overall -- high segment assets basis over wealth this as a industry, Underlining the for

XX, those workplace, growth As about clean at are assets excited across more relationships the incredibly most further excited I'm we platform. the have the which about we ahead, look the and closely potential channels million relationships we future. On the we to for under and think nearly Slide about XX deepen consolidate

vest. this XX% retention of the as That As have sustain asset as compares year. forward. we channel to we've a now increasing and going a for In expect We and assets acquisition previous XX% in billion retain said XXXX, with rate. before, $XXX growth we this client to over unvested proportion had funnel channel they see an

new business goal new metric our to reach XX% Management. strength the long-term illustrates net This Wealth focused retention. our is to Given assets augment effort, workplace the of to

Investment Slide to Management Moving on XX.

transformed into asset and Our manager. has growing platform premier

fees AUM to what triple $XXX trillion, in they is distinctive Total more management flows us value year. and are Our net $X.X XXXX. by nearly differentiated now the were deliver capabilities enable our of endorsed client as asset durable billion in

If of matters premier direct it most. and you our management we're position Slide Parametric with through specifically business meaningful the can sustainability look on a brand, across our see growing alternatives XX, Customization, Investment robust our where are Management we've seen closely growth you leader with under investment asset each areas as these categories demand. increasing client and We've and capabilities, indexing strengthened the in and areas growth these we greater of a with result. in income early our the platform, encouraged reach. value-added network, nature networks will future. along fixed distribution Eaton client success signs powerful with equity strength expect and to drive by Moreover, leveraging our MSIM's into retail distribution the and We're distribution complementary capabilities combined franchise enhances of world-class U.S. international Vance's continue

Slide expect ahead, Finally, we XX, as we to rise. on look rates

in this Wealth curve. year We $XXX based year-end forward approximately incremental the million on expect NII Management of

sensitivity, we further another Management rate Additionally, measure the Investment in deliver our basis our what line. there business. parallel year would look curve. $XXX the to which XXX happens million bottom goes from expect That billion, another point reversal this To incremental beyond is if rates in at waivers the fee we shift largely of an $X.X

strategy XX. don't several capital Slide to substantially as the the additional certainly benefit will years. expect rise next shift year, return we rates over on happen clearly this to While this Pivoting Firm our

our Our make at executing share last to the the the year to revenues to have sources, annualized excess capital our business, meaningful an position. power, $X.XX making dividend returns continue supported repurchases. on while, by we investments earnings from durable same time, more we're shareholders has increased we just double and Notwithstanding enabled to us in

SA-CCR. reduce paying count. after year-end at XX% on provided dividend, to the accounting was as us growing And and income share Slide plan repurchase ratio a impact CETX of on the XX, flexibility our net Our illustrated our our further executing has for

share our under future have Eaton million count from billion billion Vance, in Slide from the While of we continue place shares expansion. X XXX XXXX. XX together, program we drive all execute and back buyback acquisitions on back brought to just fundamentals Taking $X this we and highlights multiple our to have large $X.X in added to meaningful E*TRADE our

value footprint. for institutional been company. tremendous enough Of see coupled elements acquire reflect brands note, are we of wealth our supports strong in and return. Morgan few combined We've multiple with to significant XX a we the has sum fortunate investment leading expanding in stronger. capital scale, have in to years have the to growth expansion these The The We additional brand increasing performance goal Stanley model. a our last opportunities goals. that ROTCE the never in our our management, been business, and Slide power business earnings commitment shows

to and our We clients, an and excess of laser employees, our on in focused we delivering our are believe XX% is achievable. value ROTCE shareholders

and a goal, of support behind in the across $XX a client term, Management. record to new achieve long-term adding longer the look us, we Investment goal As assets Wealth our trillion we're track to with

in targets and As course, changes always, are of the our or subject, economic, moves major political regulatory to environment. market

outlook with call you. have annual and questions. However, goals. And to who we turn fully to the now, will take expect the achieve fourth over quarter we now discuss our your will results. I'll our we Sharon, together, Thank

Sharon Yeshaya

engagement market. footing the good morning. strong on you, strong of businesses levels year to All billion. with revenues extremely a full $XX.X fourth and revenues billion Thank reflecting XXXX and in results, X client quarter and $XX.X Firm of contributed high year ended of The active produced the record

fourth the XX.X% and full leverage we year was was to quarter, The $X.XX, Excluding Even operating demonstrate $X.XX integration-related for by XX.X%. was expenses, ratio continue respectively. EPS in ROTCE year Institutional Securities. while full XX.X% for efficiency our and and our business, investing the led

from in ratio of Eaton prior the the costs expenses higher Excluding reflects was compensation and expenses [$XX.X efficiency year on and XX.X%, revenues. the versus year higher our were XX.X% year Total increase The down billion]. integration-related and expenses, E*TRADE Vance in full addition XXXX. integration-related total the in

revenues businesses. Securities were year revenues fourth In the billion. of to quarter, full excellent with $X.X $XX.X billion. record Now Institutional performance the delivered

for Underscoring across and footprint operating pretax revenues the the full distinguish a margin prior continues from year, increasing model. in global XX.X% approach, full in year. billion integrated $XX.X the business, XX.X% business to the year. for leverage record our was lines balance were Banking the Investment Our

business each in clients robust capital. record were the Advisory excuse the third the EMEA. issuances and year delivered year-over-year exceptionally in results results, year. revenues Fourth led as billion improvement. strategic sectors. a quarter in strength from Advisory. Corporate prior led from broadening underwriting Trends sustained While from geographical with IPO by a pursued persisted, were And and Americas, driven across by results -- of opportunities Equity of perspective, sponsor-deployed strength quarter benefited $XX.X transactions from me, along particularly of the actively the

and overall, event-driven supported activity issuance revenues underwriting income. levels elevated of strong, Although moderated was equity fixed

business. in Banking invest Investment our to continue We

and open is entering CEO remain products. continue and our constructive. XXXX confidence across pipelines Our remains healthy outlook strong, and high, be to markets

brokerage market strength record Additionally, capital transactions year cash by declines was the and, $XX.X quarter. revenues increase increasing the XX% brokerage versus geographical Asia. from client as prior were were billion, remained The should on prior from Advisory a in were year support versus balances driven higher offset lower derivatives Revenues $X.X revenues client year client strong prime quarter. in by a billion activity Equity issuance. the perspective, high. in engagement prior prime Increased in full on the fourth and

included quarter Quarterly This was and year's a year, by of billion spreads full results. driven challenging the year client income credit trading full from on patterns and strategic mark-to-market corporates reflecting seasonal Fixed macro tighter offer rates results. were $XXX reflecting also $X.X bid investment. by Further, in $X.X revenues last engagement certain and gain declining lower securitized December, and in lower offer decline for revenues impacting products. XX% XX% volumes The and exceptional a spreads credit. the prior were of million bid partially environment a year, tempered the offset than tighter billion

Turning to Wealth Management.

billion year, Management of and revenues full record Wealth margin PBT the XX.X%. produced $XX.X of For a

Excluding $XXX quarter margin from margin prior the was year, expenses, integration-related was XX% XX.X%. billion, PBT revenues of and Fourth XX.X%. the $X.X up PBT were million the

benefits and further was PBT margin XX.X%. million, quarter expenses was made certain support negatively seasonal $XXX the Quarterly impacted of expenses for margin the decisions integration-related and by our employees. to compensation Excluding

of in Given quarter, taken these in was impact was annual decisions this fourth quarter's impact the amplified the full margin. the

forward, will Going rata. this spread year be throughout pro the

were growth new $XXX first through existing margin, benefit integration-related to represent full the the In Net we to assets saw from assets period Client which net year We a ahead this XX% continues growth management PBT million net the of clients $X.X saw year business workplace. to billion. year or incredible across momentum with in fourth This continue the look in Net we be of client the Fee-based generation new trillion and asset positive grew demand $X.X our more strong carried annual beginning the of newer trillion. year. quarter, strong assets. clients We $XXX the nearly were growth asset $X is channel. was line XXXX, expect quarter, of Momentum margin in billion. in stands of further higher platform. year, advisor-led choice retain teams to productive add at destination assets new strong channels, an and excluding driven of new the from assets XXXX billion remain and for XX% in $XXX fee-based last by now recording advisors. namely quarter $X.X revenues flows advisors expenses. than and As assets by buoyed both trillion the

year, $X platform. XX% prior to $XXX the prior flat. workplace impact year, declined revenues billion, were were our revenues of capability of the generation quarter DCP, by asset approximately tremendous the versus traction. demonstrate million continues fourth gain the Transactional declining in excluding from results which The Our

number read stands assets than we participants last total now unvested higher Our at exceed of $XXX million, and billion. now X.X year, XX%

As to XXXX, the measure of a metric plan show asset XX% to of on definition allow going E*TRADE grow new are which to saw new vested a XX-month Morgan Stanley reporting Wealth us retention in and assets of remain the on retention We the potential within will measure service compares to Management. to value the forward period. strength stock vest a of disclosed in The that XXXX. James XX- metric mentioned, stocks previously will XX% funnel our metrics. workplace similar the to we percentage rolling base. This

over for we administration business. mentioned, plan reach James number stock our retention time, As believe that can

lending driven This at plan year, the an NII fully Going this mortgages quarter magnitude of curve. lending growth. increase. the $XXX hikes year, will the fourth grew million quarter On demand and rates, rates This base would should rate $X.X in annually. we stand on we strong year. year, the synergies. while some, largely by metric the Strong weighted is to from phased-in the impacted timing to continue client year. loan the billion And and for $XXX curve likely lending income growth On reasonable benefit the is lending to of the and the and XXXX. by growth billion forward back by forward to drove now billion a half rising The of is $XX of in demand. funding lending, while and inform benefit of uncertain, imply billion. growth we NII NII forward, estimated disclose we of strong realization the additional Bank to see in Net be the this interest moderate securities-based lending expect was approximately the balances $XX

to Finally, go the the integration of continues E*TRADE well.

our platform. rate We clients Morgan are sign-on. are Building on via seeing able E*TRADE engagement introduced on the clients are continued self-directed accounts now encouraged and to single take their being client digital capabilities link Stanley of by client advantage experience,

E*TRADE's Throughout entities while We focus key successfully bank Stanley. the legal clients Completing efforts, we investment choice. merged client on to have a remains priority. continue integration Morgan providing this with experience integration a unified successfully

to to The prior makes Moving of periods Investment comparisons Eaton difficult. Management. Vance the timing acquisition

and on reported quarterly $X.X will Management an billion So revenues $X.X annual make billion. of comments I absolute basis. primarily Investment my of revenues

AUM $XX trillion. this and from were which Our more management slightly billion results Long-term business net flows to driven of high flows the record revenue. diversification Total AUM $X.X contribution trillion, overlay liquidity negative. a and demonstrate quarter at fee durable of Total were net the record in continue a of was to services. by a also $X.X rose long-term greater

net For the year, billion. were full $XXX flows

fees. fees management The in increase were Asset and X% related was $X.X sequential performance driven billion the quarter. higher by

As a alternative our recognized in platform. reflecting other income the fourth revenues $XXX Performance-based diversified reminder, performance were are in fees million, quarter. and gains broad-based mostly

Eaton the distribution with integration on of first Vance of Finally, year, we and track. funds bring a Calvert international the Eaton onto number will this platform. Vance half our In remains

E*TRADE model portfolios are also the We offering on and MSIM platform, traction. seeing we positive are now

Risk-weighted We at Turning to $XXX in the billion a sheet. market a to the the were trillion. X, the assets essentially were adopted resulting towards of end offset billion. $X.X assets quarter in Total by SA-CCR increase. RWA on decline $XX spot flat This balance December prior activity lower and was levels quarter.

produce adoption and an efforts prior impact lower We a to the remain Our ratio were common SA-CCR SA-CCR, mitigation in quarter. initial our billion of outcome. during resulted repurchased to the CETX capitalized at XX%, better anticipated We our quarter. flat now stands approximately guidance we of stock than post $X.X well and the than standardized better

Our full absent rate our with tax which exhibit year. the tax some We expect any rate XXXX. to was changes volatility. XX.X% tax we And law, XXXX in be line for to will quarter-to-quarter

outlook rate integrations results. of our businesses XXXX, set support these the terms Management the up of In acquisitions and of and to Wealth our base calendar Investment asset our for exit year further

relates As that, line the now depend lot a open and we up it and has With monetary to this securities, remains sentiment. well. difficult its impact and for pipeline will business, while looks to on the on healthy fiscal it said, forecast policy banking the questions. will started institutional That off year

Operator

[Operator Instructions].

Bolu with The Autonomous. first question Christian is from

Christian Bolu

share -- So recruiting, here. slowing James, on On bit you calling on the keep around strong pipeline. slowdown quite Can organic is I a that. you have anything, recruiting much would sort what's How questions not gaining more has any flavor retention of of a And then -- of growth? who it I on we're us a are driving a visibility into the but recruiting? growth, bit from? any growth accelerating you’re of been for organic organic imagine evidence you couple remarkably give you guess and seeing versus of

strength think So of like do the of you continue? any sense sort can how long

James Gorman

Christian. morning, Good

talking money, think net new right? about you're I I assume,

Christian Bolu

Correct. Correct.

James Gorman

financial not I buy by gain business. was in run for Yes. sorry simple settles sort P&L It It joy of years obviously, to a it's that Yes. leaving basically answer simple. money term. of money X you a bit a to function lost recruiting days, a because financial was near the advisors. that's mean old by and the way a the little you next it in of your advisors And

I the have the really now We It's financial we brought last are in that. has across get went Number one, are comes all across new but -- that the it in we've than lower our never heard I put you wealthier the the source to we've drivers And team people before. banking who to in the was running network, place lot year, places. we house. wealthy that pre-E*TRADE, Banking as get money our top family from retention -- less space with think people advisors, our in we two, of didn't E*TRADE. invest Investment from the Fortunately, structure workplace the The much linkages house, wealthy. whereas pre-Solium. office than is of relationships much pre several much, the sophistication we what we net reality assets did -- Number outgrown are from I mean, the across of wealthy have XX% of it Firm. the growth in of introduced in sort mean one got truly XX% better new like the just our and them. a quicker past, is

recruiting that's previous a people. we're losing And significant where doing relative many losing not to not that's reality mean I lot the because just we're deals. That's people. being not we're of because stupid years, gainers. net Thirdly,

where to in don't deals. oneX that Wealth has the doing are are put country, the all the bank we things would and sort provide from well. whole been people add coming best you that market. the we in you then deposits technology another have doing in Then And product of online the you growth. finally, platform you in focus what to focus old doing done place talent Management, There And is They're been on get. the built of advisor We that in Firm being we the in now or throw across E*TRADE go like bring the firms, team particular and Now talented with the type we've where banking. of we that's and Firm recruiting have not individuals, on that top you virtual the had leverage out, and technology on the has what another. to

Christian, confident we're story. many many, parts, going. which going so And It's is it's interesting an to it's keep why

Just recruiting, that's different.

just or You off, not on turn spigot recruiting. but that it's

growth. it's industry, of overwhelmingly, So than, never I unprecedented so-called frankly, never for history. the -- be to That's we year-over-year. companies. I we've It numbers, in organic better organic going strong to think and XX%, many these got had there's seen XX% the the be our the traditional faster-growing, it's mean best reason. growth said And in faster-growing -- best

I it. really going anywhere we're we're hold. XX% where certainly, in think excited days. But XX% is near realistic to or old the were to we about not So back don't

Sharon Yeshaya

of can only relatively, of balanced around these as to channel, would many also lot said, I we've, the say assets different at across speaking think, time you you to data, away. if actually But advisor you're just I the as think is held not a sectors. seeing just Christian, I spent James If -- the community look it, add of

assets existing assets bringing seeing as are well clients clients bringing advisor-led new the We as channel. to

a are seeing you So balance both. of

Christian Bolu

Okay.

long growth. Can question, about thinking while of longer you're second term, how all just good to are about balancing that control my we talent continuing on really nice expense peers elevated control quarter, for expense the you for sort your about like speaking forward to just growth going talk and in to expenses, invest the retain that invest For term? but

Sharon Yeshaya

Yes.

I think we have managed well. expenses

and side. of cognizant expenses, on the on the the pressures we think wage always I side are around that non-comp both

we feel technology, for the side, We're constantly I of And have. that's non-comps, our you model we've been place in investing also putting in that resiliency, of we're cyber. the you paid we But and comp processes and investing Morgan about think to to something the sort people about as demonstrate, in performance, or the been do margin think think Stanley right and that we the think well think inherent that for leverage course sure the investments types the place I we're that. as also the different there up as have that positioning in growth of in -- about you If integration. quarter and been is able we've as But me, also in excuse operating model, that's making operating I year. think, this over

James Gorman

obviously, it's topic say, to talk hot this you've at not going talk model. a I'm I is for I'd Yes. anybody XXXX. wants expense is about got be business mean, to management models. of to a going sudden about all all competitors, different we're a but Christian, because look to business

based in Management on and billion go what are upon If paid There advisors is did that bank and to Wealth based they on that's they bonus which Most inflation our revenue. of which $XX-plus is grid. they do our Those on performance this take a based produce. investment business, that. they paid we It's what no Just it. up, similarly goes our were thrilled on produce, is. up, is year what

invested but technology, So in lot we've bought a companies. we've also

and of ourselves, business would basically platform and Parametric the programming basically been Solium banking very -- platform, which are Solium would E*TRADE all expensive. have is bought we developing Vance, workplace have As them, software the been business, which these if Vance, online we just E*TRADE, with technology I Eaton it's buy the we built within said things within businesses which Eaton before, didn't we

we build, versus made buy trade-off. that So

it's guess, with a a situation -- those. right So I business We're model. of just now. We're don't different very it's know. comfortable of combination I And all our expense

Operator

with The question from is next Brennan UBS. Hawken

Brennan Hawken

liquidity and to a of in question wanted as as the revenue on you've deck realization ask well forward whatnot. curve on just slide the the the got that I Sharon,

$XXX At So number little is I'm the liquidity the in a $XXX what waivers. that's Wasn't that waiver recovery guessing was revenue Q. the the million? waivers million the in that in quarter, and But of seems third low. least

And $XXX where so that waivers can you running you're million? maybe on versus help currently reconcile

Sharon Yeshaya

Absolutely.

we're this good reflecting a So question, it's million, is Brennan, $XXX what forward here, the curve.

forward has in the rate looked from the curve XX. we first so at And December that hike effect

quarter. the So that's in second

Q, the amount this you that forward the should slide the That's though, realize to to was in year, play that way this on right to it's the illustrated. thinking low market distinction, what different money about curve therefore, see would expect the It's just you're out. So full context. between say But waivers. this And Q drive has you types relative a not of if just waivers. you're that number all would a basis be considered year

Brennan Hawken

Got it.

Okay.

calibrate and could we So both the NII number the liquidity it. for

when I'd just that Sharon, it. think think the thinking is we Management to of -- impact year the reading to want and way that of with right just assume that, sort point? Because off mean Did much year. whatnot, full continued the I point that? But than of off clarify thinking rate we about of But I about think, was, understand. the said lot were that total? a clearly like benefit. about low, margins, it like in and about that's talking it am you'd was a made Excellent. too benefit that I to fourth Or leverage in you then think way But talking you you about when comment, full into operating when XXXX impact jumping what sounded quarter about full entering were jumping be the And the the Okay. Wealth -- right, year XXXX that's you about more the coming,

Sharon Yeshaya

a No, as to That's and What accurate. obviously of XXX% is were launching up. not. that. number setting using full quarter is sort Thank for this clarifying year the you're That's first good you point of XXXX quarter. you off we for referring first ex-integration the

the yes, the course the forward it as throughout margin year. should that as So increase rises, of the rate goes

Brennan Hawken

Okay.

can because I one clarification Hopefully, in question. it Okay. sneak a was

Sharon Yeshaya

Brennan. worry, Don't Sure.

Brennan Hawken

was I a you rate But fact really you like -- improvement? we're Could of improvement. just fee there? thought that little fees but Vance some like an there whatnot. Management that I waiving Investment still there was about early still talked quarter in would despite one-time and -- progressing surprisingly Eaton lumpiness is about. still settled drove we there's the The and have Is talk improved that sustainable? talk what is Or kind that fully pleasantly fee that the Can third was about rate know

Sharon Yeshaya

fourth But see Brennan. you It's some obviously the -- think broadly, forward you fees base. look quarter. asset larger fourth overall, in a Those the I up and think quarter, of more we the you as have rates about moving

I ends -- revenue idea which really are fee of as about think we build, that's to time. really streams leaning thinks And thinking James' and slide back really well, growth what to into ties trying it all growth. creating over think, to this about I durable

Brennan Hawken

say performance line, when that guys So also management there out. asset the fee you have too, are because fees in break mean, performance that fourth the excluding I I Are embedded the was the quarter, you that seasonality?

Sharon Yeshaya

No.

Brennan Hawken

No.

Okay.

rate forward? going fee a rate fee the So good is core about to think

Sharon Yeshaya

the disclosed the K. also Yes. And them in and we Q in

Operator

with question ISI next is Evercore The Glenn from Group. Schorr

Glenn Schorr

all pre would like need the hand? we be meaning I range sure at additions tiny make to old quarter, right think likely looking qualifier, and above? it the be just more still still X% be you to don't Last said should the have old that Today, when the X%. won't like the days, little, getting like in down. that James, made if like of, X a shouldn't the I pin growth you comment well, opportunities Is Are could. organic want you days. it context. I and you're below I you I'm in

James Gorman

you're actually and correctly years talking sustainable, I'm think negative said Yes. it's I what think back X%, compound -- this don't We I'm with somewhere last lost I for going of you more growth Then out companies we And if here, why, X, heard trillion bad big than of of the that I I going we're sure days, back brought now healthy asset said right? a about not what say But Listen, historically, not -- lot of at what growth, but $XXX in a because X, management, be through know of aren't But don't quarter. the -- before are path I in. quarter. but combined get to I kind we and don't to me God years sort freakish, you what together I'd management see that's about that that's put its is size. you say couple money about we This to that X, really I a had is There rate. think you they're for sustainable. currently, over mean, happen. is early Glenn? running very them money. bunch which acquisition it, of what going stride, frankly, billion long-term we year, going -- at the $XX past We probably we This $X.X asset X% running we that can right, a X%, to X%, reasonable of X% and really to don't E*TRADE 'XX, to and X%, before, it's know $X.X wealth to we call were $XXX grew through numbers, 'XX want to X%. was X%. X%, hit is believe it's trillion, around I sort it's over we trillion. the love new guided we in XX%, about we I mean, The business predictions. let billion zone. were and in which

that in we're know, too script that the target early We where put it to new needed out I It's -- really in X, of, that's X. -- I see there. money deliberately X, a that's why net sort was X, and said don't settled. this So to

Glenn Schorr

Perfect. Exactly what needed. I Thanks.

people the would at it. great other get The love James, if think And sustainably, would look those goals, you expansion, that last I you long-term long-term your slide, goals. if the think do are multiple could one, you is I

James Gorman

$XXX friend. stock, my be Would

Glenn Schorr

the year, you what part think The every towards I so some this and of or through, up more, game problem means do what just high-class don't how last go you're just did you again, building year if just -- that about maybe of so could have long-term sustainability and if is then some have kind we them to you down quarter.

your "Oh, this like, wait, you quarter…? hit ROTC target So didn't

James Gorman

with putting is the problem this there. goals out Listen, Yes.

"Great, permanent was higher You unbelievably with goals year. to year, an -- it was hear last XX%. were goals what's good much a we now. percent take X-year And Our them if ROTCE, really operating the be XX and this XX% everybody XX-plus to says, one?" the new XX% would than our is stock of It to ROTCE We year. hit happen

higher is In it that's different it should fact, be I a than but issue. now, think

think new term, sort just have XX obviously, be appreciation, about it, we another net $X were of you're total zone So you out saying out XX the mathematically, we a ROTCE a over I in to full that, to X.X. cute not company put we're world market the our don't longer XX%-plus. too get putting to to mathematically, you trillion. trillion. forever, long term now way, client at separated X% XX%-plus trillion bank goal. to that's X-year not if assets just think talking as money at why we do that's going growth, you're in about a the We're XXXX, And but assets X% By time year as to X% find

was I the ratio, So ratio started it's not like On our in an XXs. efficiency impossible in job, when lift. I think efficiency low this

growth the years. XXXX, of to the over we XX the long-term XX%. we've we I'm business, blowout of think efficiency to We a And as notwithstanding phenomenal year, the the But down range under XX the XX, stay expense, was from couple Management, -- XX% the rate get pressure, was managing to talk that, the plus. expenses. investing kick We for will that's I We our there in outcome. 'XX When integration said to up long-term And versus beat had I year. have now XX. every in growth our that. -- -- We said, expense XX last forward including curve, single That a sorry, grounded this you all consistently finished XX obviously of Wealth we the we're next and got management and year. increase goals view ratio about some get had our balance

see number to No that going go question You're that. about up.

the context. can that's just planning a XX, clean on. like frankly, Everybody And what felt nice XX, follow And So I it. like the XX, round we're that's sheet. XX,

Operator

with question Chubak Research. Steven Wolfe is The next from

Steven Chubak

margin unpack the Wealth target assumptions the So the of some for I to underpinning was segment. XX% hoping

the from the see the In or and Wealth and And growth, the to I this target should a at contemplating past XX% bottom trade the feel the E*TRADE XX% when you benefits synergies? wanted the can like synergies when world where higher in layering you margin what largely new improvement following lot the from goal as to the fall higher of realization expect Management cited to if of bit just this windfall Looking significant the rate to adjusted of margin rating you've does upside achievable acquisition, is the is of order rates we simply believe And tailwinds over an line? year the organic NII decade-plus. full speak realization from you run curve. past run forward as a certainly it been conservative well a

James Gorman

you. Steve, I I have to say love

the first person mean I Management conservative. we're history we XX%-plus started X%. as call in Wealth You're a to pretax like margin

has there's in generated percent nobody XX-plus ever listen, number. So I history, think,

it think back believe, a then. if it was the Internet-based buy XX% XXXX, selling, generated I clients back, in Shearson the margin. doing, a they fourth of And and lot go of were quarter that was say, was -- because you just let's back I

XX plus don't is it. before We've we we the to XX%, which are is run will it even let's way story. But If So XX. an of the to sprint XX% to We XX period. margins with here. there XX% growth, that Listen, the we a think XX%, do ceiling. from artificial XX do gets that's was going, rates phenomenal the to better. like X reason can on gone because we put

I how of next couple great magic XX%-plus, what X.X years. It's might the the the So it be business X. be might it. to we no the of know out going or plays just It plus don't there's be. to is think math

Steven Chubak

enough, Fair James.

year, I the and raised. you had and last think pressed Although a it I was response, on ROTCE target similar you

see similar this a outcome So hopefully, time we'll around.

James Gorman

Maybe you're clairvoyant, I don't know.

Steven Chubak

significant a the hoping to coming I capital inflationary the learnings we could might yet some minimum And regime. Firm. ability the know follow-up, ask IV. down Basel my this the potentially gun. on I SA-CCR some you changes I as changes from part any requirements for have the just jumping of wanted those upcoming about share just preliminary to But thoughts to mitigate of pike some impacting Well, see was the Fed. certainly don't your just We be capital RWA experience in at you proposal pressures? the from terms There's of how

Sharon Yeshaya

don't Sure. theme think I take which around adaptation. the one the last really Why I first, is overarching

think move focus think I of able And I specifically there and was relates we're to SA-CCR, it were to forward. data proud As mitigation achieve. to that able we being

surprise the As that asked it no you question, relates to Steve. Basel,

hear But there to from one. is rule no yet. final you nice obviously, it's So that on

and difficulty rules. often in -- there's saying between I the that is think something these offset be there's can

we that's adopted something well. James capital CETX point I in would But think, we And through through XXX think metric. we showed, that also as basis the bear mind that I so really it have points, think it. think all is as excess the you And what have and of I on really is as

and our we're they position, comfortable to better we're way. I think comfortable as capital come our understand the with so And rules really

Operator

Fargo. is Mayo from question The next with Wells Mike

Michael Mayo

James, some are extra encouraging do looking for a to plan much how high target, by ROTCE Since, permanently, you stay the you're CEO? longer as XX% you setting risk-taking? such And

James Gorman

the not durable taking embedded This have are of the the -- these and it's completed involve balance integration of and Eaton scaling those business, we're come the business think the and revenues the know part extra every growing with year we it's the We, single certainly without is in No. don't reason. this risk-taking fact, assets. if taking The year, achieve I'll around of question for costs. Vance don't take -- and question growth -- risk rates, sources, a we managing a expenses. at in I to fee assets, first. I new did XX% ROTCE growing about the second the growing second goal, but in net removal and a movement to our it moats risk-weighted E*TRADE This all. durable and sheet certainly is going about the go

I know, fundamentally, asset risk. we I a lot different, no, it billion don't management risk. business Mike, wealth involve taking it's extra that our from generate up and $XX of and involves going you taking don't is mean, So as think model

of Investment traditional -- bank risk. taking lot a Banking investment involve doesn't Our

the of underwriting, Some obviously, does.

a business Some of the of the buying look at of equities clients. trading on of does. is the lot a But lot selling behalf and -- equities,

I I'm times, -- is be dial going the repeat after So not years to up I've to to the leaving not plan years, here many in not I'm Board. now, to that's us on want going to not X these to I'm and no, and up all I risk. said not decade. it's what And want the the few to years. these see who firmly want take path. And to And here over be to somebody see it this I us I'll integrations hand developing can else We're a done. next successors.

Michael Mayo

Great. And follow-up. then one

business some that that, perhaps market back the as are offsetting you're But to XX% sector. speak that's of share. the share. your And the after tech then Banking far other I coming to recently, Investment hand, providers tech XX% the the ins helpful online I industry. market themselves, and some on Investment And wonder And with the pain pandemic. what share, there one industries are Banking tech the to one for think having numbers Equity give percent is of outs, biggest As the

Sharon Yeshaya

a I It's X we're that in that is quarters, highly that's healthy one Investment pinned across to you diversified the Sure. to all in then sector. to business. model think I would look what's the in out contributed that I think, said, last really the And trading, really specific a sector. I point down of broadening it's sales one actually activity. not what Banking. seeing any been as advisor And fact to the not and any the pipelines has specific and

Operator

O'Connor is next Deutsche question from Bank. The with Matt

Matthew O'Connor

to wallet and there's and sheet? you talk And more on of as you a trying trading my we and think to pre-COVID, your the we're couple picture figure out wallet. anchor couple benefits back if do Fed industry positioning all been Obviously, about both banking rise years, just will recent as go the Can unwinds balance to years, the for rates bit last the the be of some the specifically. follow-up big last on

Sharon Yeshaya

Sure.

the different think mention. would think activity. of industry -- wallet, Investment you've couple about that you -- types There been obviously, specifically I One if Banking, I look of you if the I at a have things is, seen as said,

contributors a the and different one movement see corporates You been of about & also of there, has changed. the Trading wallet. which the But and franchise activity the has greater Sales then sponsors, think of you if types

period. of early could Obviously, there crystal bigger XXXX you one you of should rate. inject none and obviously a rates that 'XX, looking do types That -- or all I -- products, and very expect think as diversification said, us you obviously, different a saw were different activity ball. approach one you have similar the rising, being different mean, contribute if back a a expect to volatility you which with in amongst having think I wallet pre-XXXX, that of type you to banks less was 'XX, central back would to or

now, activity high. is know is we that do I think what right

of of point is of any client have that is there and that watch. trying don't we'll to that think sentiment. it is to see in a I I how I And the think broadly. out conclusion the it in we factor I make we my know there's wallet how have will to type a big was that's But really think goes. a differentiation robustness lot more And impact piece

Matthew O'Connor

deck positioning, very the in last enough. years. shows terms Fair And gains X your in few of Slide your of share obviously, then strong market

in have income about this an segments hold think on equities, being or year of pressures last back future and of into talked area example, the is As in the already in you industry in of peers the to either flowing, of plan bit your and about where for a between share you How about ties do somewhere strong to we kind expense the share, such and where fixed years? ebbing this think is but the. you've goal market the quite the kind some the invested some are

of do forward? businesses about how those think from a you view going point competitive So

Sharon Yeshaya

when in think -- put is what point I lot a I place. to We've you So scale-driven we really think of would a -- this it's that moats is a model.

to actually Securities having think Investment gain different division -- hold the Institutional I across and a to pieces or reach the franchise share excuse or global across ability more broadly. the Banking me, contributes

about very continue income, franchise you fixed then needs. I think feel and to If you And think a to very as feel share about continue over have business. that good before, the at of and to about for and we equities, invest years, client good we gained clients there. our as that those strong strong the positioning, relates if last said being we rightsized there we've Investment it couple business, banking, we our look in I've

Operator

from America. Poonawala of with The next Ebrahim Bank question is

Ebrahim Poonawala

in terms fully talked the behind about where I a E*TRADE scaling James, do if, an that, get you've just us. all the up one, mark-to-market guess, was looking just could of globally. past that we in wondering tied I expect on we get to and to Sharon, that integration, I think, at And are when update you

Just optionality E*TRADE there there And give in happen on term. near the us can that what's a something it taking sense of global? is and the

Sharon Yeshaya

So integration. on the start why don't I

we was a period. I integration we had looked we where X-year said -- for approximately what think

years. not have and vast the integration-related have portion some is of think that in later on would what course XXXX. spend XXXX X seen happening the but pulled will that XXXX a into of in -- E*TRADE, of last not we the be end forward client-facing. space see We expenses integration-related over this XXXX the -- majority in We seen obviously expect client back to of and I specific a the be with the the you'll more And slight really most to a really residual

in good place. seen, synergies cost we've it relates that actual to a the very As we're

think I that come those transaction. in synergy a basis, exceeded But stick gave line terms time of the the when terms that that gave in seeing we holistic guidance guidance we we and announced on a it's expectations of through. cost first our to we the

James Gorman

the I outside platform On already immediate have the to of the strategy. international, long-term We mean, E*TRADE it's the plans certainly some but internationally. don't part manages plans U.S., take

say the integration So let's right now, get done. I'd

Let's about prove get close synergies then further books cost on of the expansion. for the talked looking we're out we case sort the here, and that,

Ebrahim Poonawala

business you concerned the there's just some that terms of in has risk around markets of terms capital within Got or than the if of faster policy, separate a the behind concern an -- Fed one it. hike of sooner accident QT around Fed expected? the And happening curve your get the to with that? question is monetary how thoughts clients are in Any to

James Gorman

of a lot got clients. We've

rate sure hike. I'm are of So positioned some well for them

It's kind their their have change would point near to project going And normalization normal, are to be predict are -- here, point back gets this of Normal not it, That aren't very people Some then rates next of -- problem. right. get a a about manage to outcomes, That of year. to about particularly X.X%. and positioned to If rate to back of increases try people with hikes set the kind fairly it's X suggests going that, don't which about to from XX of us gets to positioning we're some in -- of is of couple at to us honest. getting it's I'm X is we feels normal. how X I predictable be sort interest that years. mean, will hard we and what year sort next to it's worried X not

Operator

from Sigee BNP is Paribas. next The question with Jeremy

Jeremy Sigee

ask strong in wealth The X couple of questions related that's the theme really to about what because, such obviously, I just wanted questions. you're just follow-up a management growth doing. a

too of an in in The is you're invested retention you about going first That's us, get one. you're terms I a think giving new synergy how those useful Advisory, putting interesting approaching the metric between Could that? workplace, second or are that assets. early what and cross-sell and to how any Wealth terms Or higher you're related, you're it seeing of drive that them higher? you to one self-directed? your you're talk clients the product Management the that in still how revenue metric of driving channels, for X And is front question,

Sharon Yeshaya

Sure.

at investments -- vest to right like And in of LeadIQ question on So assets to to the on from So And you still the and a first to on track. second U.S., the those as into self-directed going agility type of together, us right least to that it [Project to this a companion about and you new a will everybody first I Stanley fact lead what plans clients will give and XX% end workplace for think them lot is the offer the at you and of provide is account talked advisors we've technology technology that year, the of be tying by the or that's and products that the like stock way. advisors companion allow give on that then we asked the Morgan -- Genome] our account, better the metric, participants. to or retain this you're use companion accounts, right? that a driver expect would the understand sort see

doing already have individual where are We are workplace pilots giving place we We that. already different in advisors.

companion And to the clients account offer offer. we're to that's still the and them choice, better part client full Morgan that And everybody really this the such Stanley match say advice would integration is using so is -- while then network get first that has that, of part they getting to technology second able the process. a I step

Jeremy Sigee

above unrelated an the you ask ROTCE just I support Could to down Do ratio great. follow-up? your CETX XX%? get That's staying need target to

Sharon Yeshaya

a target. longer-term Does it -- this is no,

saw this even I it year. think you

do would at at say just with the time, we and where in look market capital. particular and, that our were to able So it we retort CETX this obviously, circumstance. terms say to continue I however, of look I'd given we were over year

as and other of we of course have last and we capital best think uses how about we As the at shareholders decade. returning then buybacks do dividends, that looking use to with for ways capital the over investment, it

Operator

The Dan next question is Jefferies. from Fannon with

Daniel Fannon

market hoping you I there's And quarters was wasn't several that the know cost wondering the deal had of discuss profitability management Eaton I of Vance. you've now driven, could asset if but business that as of the any And synergies? margin you additional coming as overall that you through, that context profitability money the in of waivers think incremental mentioned on fee the earlier, about business?

Sharon Yeshaya

Sure.

sort waiver gives fee I speak of and you themselves, the that think number. think a for I So so direct that

cost Management and the transaction. about Eaton marry it I think savings On idea it to always ever way Eaton and Investment think the that. The E*TRADE already see wasn't integration, to the the and that Vance a integration excuse -- to Vance begun is or the platforms, you've me, was

you're So business one in if down, product the you if in see itself, where suite go the diversification you've seen go a businesses. position think in you of about flows flows other up

thing But at distribution this highlighted the we lot different Vance you a had this second specifically. that that's was to so Eaton remarks, you my in And ballast I in addition in purchased and given business prepared networks. almost if look that when that, mentioned we the

capability Eaton Stanley an distribution have So or an international -- we that have. had Vance didn't international Morgan

interested -- to be using half people beginning have tailwind tailwind of distribution sustainability of in of in international secular terms sold product channels cyclical our in Calvert, that being terms a the year. going such first and that space, you as is a where a in So

I companies think that marrying together one. of sort that and momentum as you're they're different shows as the progress and have those we in X place coming

Daniel Fannon

of early of your one in to of other of strategies you've Wealth I is guess, is they clients? within the some And it offer the terms too talk advantage the that, Wealth. uptake highlighted attributes about opportunity Parametric tax

Sharon Yeshaya

the already was offered and very platform. Management received within Wealth Parametric well Well,

I to think of more Wealth channel. within we're for offer looking to -- should say, Management sell product, ways parts that the I different

Operator

concludes time. conference this today's and gentlemen, Ladies questions for are There at participating. no everyone, this call. Thank you,

disconnect. now may You

Morgan Stanley (MS) 19 Jan 222021 Q4 Earnings call transcript