MS - Earnings call 3 2023 | Morgan Stanley

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Operator

Good morning. Welcome to Morgan Stanley's Third Quarter 2023 Earnings Call. On behalf of Morgan Stanley, I will begin the call with the following information and disclaimers.

This call is being recorded.

During today's presentation, we will refer to our earnings release and financial supplement, copies of which are available at morganstanley.com. forward-looking may are differ cause include and to materially. may that uncertainties actual presentation statements subject that risks Today's results to in Morgan the undertake not this statements Stanley discussion. to does forward-looking update notices regarding the in Please refer release. to forward-looking and that earnings non-GAAP statements appear measures our may presentation duplicated without our or This reproduced be consent. not

Gorman. turn the now Chairman will over to and Chief I call Executive Officer, James

James Gorman

Thanks Thank for joining morning, everyone. all Good you. us.

aggregate, quarters. As over remain the market anticipated, in mixed, seen Morgan several XX.X%. environment, pattern a little for generated the a result in over past we $XX net in ROTCE $XX Notwithstanding income billion -- continuing net of we've was billion the Stanley $X.X and revenues, billion

seasonal pressures in impact year, challenges of of continue underwriting Our provide fourth quarter additional calendars quarter. momentum that the in materialize expect that M&A some to policy we we XXXX. concerns seeing the prices, are may and employment and around the Fed increasing given activity later tight while we to market, considerations, But expect are high this evidence inflationary building, commodity has the most

Meanwhile, it's control. can what our control to we job

the team. across accounts the quarter. have to for building Firstly, allows clients honestly, went the completed strategy, channels advice a conversion it performance E*TRADE incredibly undertaking, integration This onto of years. And to been couple best-in-class a offering. attracting platform. by to really migrating relating our was we and million a just our synergies on further well, us massive this revenue and our our execute seamless XX bleeding through successfully P&L expenses that That the involved It

delivered nearly a over back requirement. capital averaged a We have front, basis CETX in significant XX.X%, dividend clearly is buffer. our of time, at XXX we recent points the yield Secondly, X% billion which most the We $X.X capital same over regulatory and, on ratio the bought stock. quarter a

Also, proposal. saw Basel the III Endgame you the of initial full details

going industry being As that. amount had proposal, a know, conversations There a proposal. we've Sharon many I'm repeat the to this regulation. enormous members, final you this welcomes It's told all Board comments been an times being along And Federal Yeshaya. is agency across groups proposal. deeply and of energy spent, with been Reserve not the myself that involved and strongly I've is on

Given have this crystal me a agencies I as let written, will considering proposal open if the changes But final of adequate the anticipate that implemented built, be clear, even to today requirement. have were be ultimate thoughtful it's before to rule. we buffers as because this, the meet adopted capital we

year-to-date. consistent Management there It's many will below and That's in $XX recent we've to we're some and then. quarterly year, net around, new This quarters. are billion I've new for aggregate of assets always on long quarters quarter, These been saying of there the period, surprise are what generated Needless for things. a the between And In any the obviously say, net we had had in now years totaling billion. Wealth bounce upside. X $XXX time. assets where with idiosyncratic numbers year,

consistent. high Our range looking the rate X% that of at annualized we've and to end is X% at, growth been it's the

fact, money. In it's with net trillion spot of new on for X-year target our $X

strategy our the this outstanding issues of of culture. and and to its find is market deal My clean ourselves I'm is turmoil excited hope a and in with next a slate firm very months. expectation firm, hand that with shape, in. couple of and its about the possible we notwithstanding in as over as Stanley Morgan few future this Overall, leadership, excellent geopolitical the its

always, as in quarter to now And then it questions. we'll you. take Thank Sharon, greater your who can the turn discuss detail. over together, I'll And

Sharon Yeshaya

Thank third the quarter. you, The and revenues morning. in produced billion firm $XX.X of good

EPS $X.XX, Together, solid was severance against XXX ratio impacted quarter the nearly XX.X%. and ROTCE DCP The a the XX%. were Results mixed efficiency third year-to-date in and firm's our year-to-date efficiency was was basis ratio by Our market points. backdrop.

for invest third Integration-related we and in quarter previously growth, integration efforts a As anticipate a we our million $XX remained the in fourth have as were expenses amount the priority. quarter, communicated. similar

businesses. line prior Securities versus Fixed year. X% volumes. Now $X.X were to lower Institutional in historical the Income Investment depressed results on Banking averages. Equity revenues with billion, declining and the long-term revenues remain were

announced quarter However, Stanley's notable increase across progressed a a third volumes leading basis. indicators advisory and the year-over-year positively, on evidenced of by in Morgan underwriting

due transactions the our $XXX diversification sector of decreased previous volumes debt to lower similar announced The Despite a periods. and prior to $XXX and we lower quarterly in backlog the results, to of a reflects in broad see completed results pattern. to weaker continue underwriting. revenues Advisory in deals, was completed Investment Banking by advisory reflected change year the revenues million million. driven decline

underwriting million. Equity Overall, averages. muted to remained were relative historical activity $XXX revenues

increased a While moves market and a that tone in confidence reminder resulting Federal from Reserve the this interest window-driven. remains issuances, early supported rates hawkish the September serve as

revenues Fixed year, noninvestment grade $XXX the down events. income reflecting underwriting were prior million, primarily versus lower

and trends our to dialogue encouraged the the third end in the at the of observed continues the last are The M&A we've We activity by in evolve. geographies. announced growing to the quarter, landscape across bake-off pickup and volumes but speak quarter client sectors

look determined confidence by consumer will the input largely As of the be the stability health overall and corporate of costs. we ahead,

and desire objectives. strategic there risks including long-term to clients underlying threats, trends their pursue While remain, a is the geopolitical among activity suggest is building,

solid. in geographic averages, on year. and to increased strength Europe. balances Asia. versus relative $X.X particular of The historical declined volumes. overall year client Brokerage Client Prime revenues in modestly those prior line business performed mix higher activity, reflect strength with Equity narrower year-over-year, and global Cash Derivative balances. higher were with spreads in with the the The lower revenues results revenues reflecting compared were billion. Europe results were last

rates $X.X trading. versus decreased the were strength results agency last securitized increased results, versus year's supported by elevated revenues revenues exchange. in conviction, revenues Income revenues and environment, billion. products, of Commodity the Macro foreign year-over-year year, Micro with trading for policy. in particularly of lower the around a client increased Bank both constructive prior oil. Central and particularly back Results lower on Fixed nonagency reflect in future

Other revenues hedges and improved year, last by income mark-to-market driven loan net of interest of on corporate $XXX fees. higher million loans, net versus losses and lower

increase lending losses for ISG commercial $XX and negative sector. were estate ISG outlook to to estate driven for the primarily quarter, allowance real sector. one and commitments related the $X.X were In The real and $XX billion. Net in charge-offs provisions continued lending The was and Turning to loans the loan by increased ISG slightly provision. credit million. office million, a commercial

revenues the durability. Turning increase growth net management to Wealth Management. year. of strong, were of asset from prior than the Revenues The underscoring in cyclical an $X.X declines offset more billion their income, interest

drives our flows designed, we management asset asset in asset-led As support channel. this our mind, revenues. fee-based that remain strategy adviser-led With steady on migration into focused

client forward seamlessly ability continue them transition strategy milestone successfully we nearly the critical billion integration, Morgan introduce AUM our relationships. will This of into onto our to last advice-based This advisers of step a completed platform. took converting the Stanley E*TRADE enhance quarter, to and major $XXX our clients long-term as and

the which positive $XXX represents to were Pretax was was new Net to billion, bringing assets. were period billion, quarter as of PBT the adviser-led third beginning and the XX.X%. over business as the on impacted assets metrics well DCP Integration year-to-date Moving recruiting profit channel. $X.X XXX $XX assets and negatively quarter. in NNA new by new points. margin net billion, by annualized in approximately expenses margin the growth into basis clients the supported X% Net

the The assets provide third buildup of evidenced multiyear $XX.X fee-based pipeline adviser-led billion a foundational quarter into alone. by flows of our channel, in

$X.X into Results credit. into management up Transactional year-over-year. million, reflect flat the the Higher average X% excluding the private X% Bank were deployment of cumulative retail clients prior roughly DCP, revenues, balances private increase. and lending by equity billion revenues assets versus of the capital year-over-year. impact new quarter. were alternatives, flows over positive of and year particularly drove opportunistic Asset fee-based $XXX past increased

and paydowns billion offset Still, as platform, securities-based remained cash continue to clients and compared rate-sensitive quarter. including Total higher-yielding lending. alternatives the has of the Growth $XXX to deposits in allocate lending savings to our offering. prior stable tailored cash the shifted mortgages deposit on expanded available mix

balances, improvement sweep the equity monthly from of retail the client of consistent inflows ongoing sentiment. markets quarter In evidence addition, saw positive into the

sequential shift a income reflects deposit interest the decline $X was mix. billion. in Net The continued

deposit trend will mix we lower. on Looking this based be we function towards the of a our rest NII where of of expect trajectory the magnitude The to rates. exited the and quarter, year

aggregation, focused margin expanding advice clients, delivering business strong solutions asset and through cycle. Management on fees Wealth the is model growing and to durable steady while

are invest We industry-leading position in of and our growth. continuing long-term sustainability to the our

advisers As the supported backdrop model capture asset greater relationships. our was built to new to positioned attract well that by remain opportunity multichannel recovers, client

net Revenues Turning driven at redemptions with our billion trillion. strategies, which predominantly increased industry. consistent billion XX% to AUM by asset growth approximately outflows active of to year, prior to ended the to continue Total Long-term supported higher $X.X Investment Management. $X.X revenues. MSIM were management equity compared by of headwinds $X see the

and alternatives flows we long-term offset fixed across the to strategies, solutions, the for the customized partial a see franchise Excluding the were income Parametric continue both year-to-date headwinds of portfolios quarter. positive. Within segment's demand slightly equity and across outflows, to

Parametric were overlay and and billion, solutions entire this net flows franchise, quarter for business. liquidity Liquidity the services net almost in flows long-term $X.X to by and had Specific portfolio billion, overlay and institutional $X across strong the underscoring in demand driven overlay our of trends Parametric strategies.

were platform. supported and the real equity our higher of management private X% related were by weakness driven were million, private year-over-year gains fees by offset Performance-based U.S. diversification up on billion, revenues Results in and estate. balance other sheet-light average $XX income in equity, Asia $X.X Asset and AUM. by

place. focus the our franchise clients. our in in serve remains market-leading businesses, of areas innovation Parametric markets secular growth position our on including and investments continued Our to in well best global growth expansion as as footprint strategic our in well us our Ongoing private

balance sheet. the to Turning

resource management at stands $XXX quarter. flat our ratio Standardized and at market of RWAs ongoing the reflecting versus prudent CETX Our quarter. sequentially the declined to movements roughly end billion, last XX.X%,

shareholders, deliver billion of to quarter. the return capital $X.X our continue on back during stock to to commitment We our common buying

the the and context pleased Taken mixed in environment, positioning. with of our we competitive the are firm's resiliency

our in Investment Management. gain we support Investment to business Banking. clients more asset also conviction, increased Wealth will expect client This capture and institutional further more conviction opportunities, in As particularly growth

press to prudently while on advantages and continue managing all execute will our strategies We our profile. capital growth our

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

Operator

to [Operator Instructions] first Research. with We'll go Autonomous Christian Bolu

Chinedu Bolu

just question wanted Management, on bit I Wealth a a of to touch longer-term here.

As doesn't significant you growth years, Management growth. strong of revenue few the years it it really grown revenues, translating the be segment mentioned, gathering in really to despite appear X you've that to organic Wealth NII, hasn't I enjoyed If at excluding look over in assets. last but amount

you're unit gathering economics of flow-through or more growth how revenues AUM maybe curious from thinking broadly, the how your then asset asset thinking the So and strategy. you're about to about

Sharon Yeshaya

explanation Sure. we've seen enough, pretty funnel in literally Christian, that the the This we've about. Actually, talked the that of think I business. resiliency with interestingly impressed I'm is that the

the we've year, over captured. you see $XXX fee-based of course growth $XXX back or forward. exclude flows, the the of fee-based Then billion last some the you as billion, acquisitions that continue at -- last the If we of year had alone, we of rather, of that basically move over right? We look to are if asset increased This look seeing assets fee-based historical years, the flows. highs we at past couple

solutions and revenues where to times offer continue high offset trying move decline obviously we able offset a over our in management grow with forward. right place to our have asset It's that that, asset-based -- fees management engagement, make to asset grow. sure those You're looking We're very even as and at we you to had time growth since in been to NII, are retail COVID, to you've trying that we clients. the

let's forward. take Now that

We have this environment. mixed

That their investors see cash. X seen into on You right, months have that in the from begun put consecutively, the last averages. X% We've market. XX% XX% of sitting to higher, movement our retail client markets. cash into retail assets The we've historical is

growth alternative transactional This growth quarter products, alone, new revenues. we see to the began in the in

this We haven't cycle. you the that of first XXXX seen since quarter before rate started hike

migrate how them well, So in and markets the in aggregate grow these think all my invest to our these working them at clients, if these able as transactional products see is new assets, see dry about growth to you mind, and powder and have pretty deliver fee-based while that into actually, we've to look strategy darn clients been especially flows, turn.

Chinedu Bolu

is follow-up I is small just that over that, XX%. it but know your fine. XX%. it's ROTCE my nothing some is Maybe time XX% should bridge about targets is like you've of Banking, about How The but Okay. here? business. we sniff your think a off Investment from fairly ways thinking to of mentioned the part quarter

what's much And macro? you operating so the of is bridge sort looking of what it for? XX%? So What much How of is it self-help? How backdrop is of macro? are

James Gorman

what way, the to to return by only they're that be you have of X% just So not said a maybe give of people when little I'd given I take thing a doing Christian, choice break I to going nothing, and add Sharon you, making in By want bit a trading the is Sharon the here. market. X%, pummeled

the revenues are lowest in secondary in the of lines So actual the I've for the years. last couple seen years

As but they'll down year, do come don't that. eventually will think down, come come they down. next rates I after

more activity regard. more And see actually, sweep. the money that go up in you'll see You'll in

the an money optimal high are So kind kept high out so they attractive them interestingly, investors of market on not that for where of there's isn't point so there keep not sweep. and rates but

very different from the checking the commercial of said you account phenomena banks. So some

were I'd we mean, you the we at -- know, actually XX%. to back as But say, I XX%, just

been Morgan are -- this already not to a be margins. is in there those when achievement. it's first people -- generate, would came Management if could days, X the people It's I not it. business a this said, not like XX% and remarkable I So doing Stanley well, And asking Wealth

be can it obvious pretty it's So done.

stronger. firm's we've has got the nothing changed. it, done structurally and So If anything,

], lot We've integration over this The across lot. integrated done of deal Dan investment the never the a decided of dividends. because we a to XX across get were and wealth all -- Eaton great investing are been as keep Parametric years, mean going monster Calvert, think a platforms, one the integration investing to funnel the I was all really now platform they Vance Langberg pay job that's on that -- has next We through E*TRADE to doing. Eaton of sorting different through cycle it was done. [ which Vance and the that,

M&A, frankly, a we $X then mean was been really banking And strong. calendar has I quarter weak. very saw weak very under billion the pipeline is weak of this and and really evidence

don't will QX, won't QX, translate next revenues year. into but in I the in think announcements QX they So

million think the billion, quarter. on $X.X to about we'd have net a I So about just math, we're if another $XXX generate running

hundred of done, Fed we talked about move side, we management, expenses the million stuff of get transaction the will on annuitized into expense do think than and more and of the point. these from on revenue from then And a just as couple on then Just product. could Sharon moving this And things we've some easily I recovers assets that. banking up pointed you out

to You pretty easily the XX%. get

So question, long-term I'm I concerned about not -- I'm and outlook. appreciate that the

I be -- it that as will happened long. and think again it's has won't frankly happen and

Operator

Glenn Evercore We'll ISI. to go Schorr next with

Glenn Schorr

range are versus trying historical what happening But coming Wealth of is break client surprising. the could I'm on if of one to first of moving. sweep so curious trends, across not industry, overly type Management much down what's that how is the Morgan E*TRADE? the I mean even think, NII. just Stanley you in I movement in see qualitatively, So been I'm

the interest, made James, just next in not go and back, stable you comment that. maybe think you to then NII but year, about Wealth do you piqued grow? Management for conditions see after What we to my to And need

Sharon Yeshaya

So question, let's the of first deposit the which different types take X mix. is

I we've advisory-based Wealth of on -- we base had From the say traditional versus be side. would side you has I had. stickier client if to deposit an somewhat Wealth than historical Management Management think that that proven franchise, a is had right. the what you think see historically You're And a about client would the self-directed on that Management one in the Wealth the --

a on that which what's with of does that. terms you is client provide going sense of So seeing in base

potential of of On the that's growth forward, NII part strategy. gathering going asset again, the same

transactional proportion will be into Some come in assets of the of advice-based or some self-directed these sort they as that relationship, over, be the cash. held

be with of and us that will over deposit that So supportive capabilities NII a degree But provides opportunities. some lending time to also perspective. from

would seen client growth call, environment new products homes. But to product. we've penetration new what Glenn, to mortgages of this see and being SBL and in tremendous, in lending know, the sort bases, able rate various we even purchases with offer you mortgages our we to As household continue obviously, for and

our all able that the support the the is understand better also should used future. franchise able we as the perspective same to a we what this those to on that from same to As we and everything foundational of more. bringing a bank call actually, bank portfolio putting wealth base, together E*TRADE, And NII that look client being E*TRADE broader do rails we're into had in technology help offering and relationships integrate for

James Gorman

a telling treasuries cash since second them had client rate I mean personally X, but something. and rates we by hope bit. to going that, I sitting it is think put I point. I an if increase. the in or you're the went mean, with a early remarkable 'XXs, But would don't got What's and I Fastest -- think I earning way, effectively optimal don't X% of in know period haven't we're there's X just a lot to. recession from an to -- you've 'XXs. the on the adviser think I fastest we you're

happened. So that's exactly what's

At around of to X%, X% kind a different it becomes discussion.

trigger accounts. seeing in And people behavior you industry, for and it across, you're as there's set think I that's checking a a So the different whole point. why you're said, seeing

money in something. So they the know, sitting points is they're If not haven't The getting, XX they're don't still got buy. to attention, or basis I account. paying checking

are down, just cash be XX%, it's because right the have we an come in now. rates which to rates as related will So is the coming anyway where down abnormality that's book, -- total

over come going the As generating just down it what a less cash you're investments rates account couple much and sensitive on using on they're price and see to actually people going years, to next liquidity of as return out. manage in and a the

think in some business we I particular to mix. our ways, overachieved relative So

So sitting was that hearing said encouraged out language where think but CEOs I the of other you're it enormous that. of the future sitting same. because the I'm in wanted they making are some in overachieved, overachieved so effectively -- said, cash dormant. about high, what to on And accounts, banks money earning, unsustainable. and the We've everybody cash amount They've that, in rates that the some they're forget be quite of of not fact, in coming of that's word it's and checking but

did green if [ Glenn. makes shoots, to forgot know comment about you By them. that I water about to say, I the that way, you, love don't I have talked give one. I'd ], fraud somebody to your sense

Glenn Schorr

announcement the the world on CEO transition is the it one. distraction quick starts the but it's this more day? there in place, any know become as the I'll Board the it a takes frame longer put on is One on or strain pummel get I pummel. a reporter every every than organization better That's time one. Maybe to where writing decision,

James Gorman

said annual CEO wait be for going years listen, was CEO. I've X not Board said come don't. to do said Glenn, simple a it. possible to the And reason a that that be that comfortable No, feels going say believe I made wouldn't to about on. year. to will We meeting, within said Yes, would. leave at I the didn't And at I when decision, very I and people apparently from I I definitely I I'm going moment bank that that that making very the leave clear them. I because I do CEOs I'm something, would And earliest now.

a I terrific done think job. they've

Director opened broadly. Committee; Dennis Now the Glocer, up on a answer you've Board. that job, it Nally the Comp They've done I'll and terrific and more Succession the question, Tom Lead

that -- process. an want I apparently it. the don't time. forward. moving are We're we're But you well Logan sort I businesses team point not about do into exact once. time a because there in doing say, some believe we're of really thorough And to returns at of And engaged, diminishing I there. spoiler. shall All The directors is are that's great. The did we're -- Roy talking give already I

an MUFG we've get the And out so-called I of different advantage and the of look it. But lot that choices. things The Japanese a yes, it that up business a them That's things. do of do just has company, Hiro, else think taking with we've Japan, been see one driving them done can in in planks with think abundance of CEO with I of lot of want set growth this economy. with I to what they X.X have chance completely there's are turnaround seat with to you just give of with to And the Japanese that our And there's can in what example. level. strategically somebody the solid, we a now at so a many taking Japan Ted MUFG, the opportunities

help in getting as and go Chairman bit, know for a not with and close. this place I'm a get the if barrier is don't word to I'll thrive. the will I'm certainly it. I'd it, Executive enabler, but transition on I like So and -- to forth we're yes,

Operator

Bank Ebrahim to with Poonawala of The America. next

Ebrahim Poonawala

few business given to an to rates will structurally is cut, levels just assets in But or lower-spread level if other that the argument if stay Fed at that wanted is to these you be James, we the longer, around the products? to talk on a of times the for just you something to made challenged follow up optimal rate get to be rates, there hike Just talked about the to and I the other about guess were side? more client just NII. said, if a rates until of cycle, think in remain the terms side business get until get don't of how probably us headwind you we

James Gorman

issue. I definitely business with there's margins them. there. my structural No, wealth, is talking don't mean, the I'm about Sharon, think I generating, And without I think XX% goodness, the XX%, various costs in it's

me we'd I you to told If nobody few I in but did. XX%, years world a mean, ago, thought much get the else pretty

and XXXX, no the to by going expect end some will the in expect but I So saying there. not guess, Fed November, there's Fed one it, rate I'm the making a at risk but I I of just do year, that's do rates -- issue -- forward suspect or the structural cut of do no, I more as prediction, that be think increase after I likely do the to that. and here

moved months. given moved. has The we're talking the margin. about largely So that, cash That's XX on

You're months, real the forward game. but going real over that's NII go to little XX next game a of really after the not impact The is that. have bit

pull are rates, difficult it these indicate there sitting calendar is very understand stopped there activity. the transactions. see -- cost the until and they've raising M&A of to because is will of the we But trigger So saying, minute explode underwriting you Directors financing, enormous capital the Boards on of some and Fed the pent-up

to X going X focused months don't this heading out, coming will kicker. or think really heading around and good less So then I -- going when X or out thing the you're enjoy and unfortunately, going focused it's double I'm And people into to know a kick months rates turning, patch be I And but here. start down. be the cash to not out you're I when starts you're on they said, opportunities. into more accounts if months it it, to will investment That's as start on and is see and be but

Ebrahim Poonawala

guess it. good you I off. to Got time for a hand

will for be you that. thanking Your successor

James Gorman

so. hope I

Ebrahim Poonawala

growth, on question, international I'm anytime now. done But about not you M&A you're big focus mentioned I think, assuming I doing secular any think expansion. soon. Sharon, E*TRADE's

about some are, Wealth investing. color talk international Management, expansion, lot around that. disruption where love us are a banking what opportunities private globally, Just to of we Would on the

Sharon Yeshaya

Investing deals what more we've mentioned side, on, or look Sales we internationally, opportunities. X.X say, also been should between & MUFG continue research the working I to and Trading James broadly our for

been We have Arun who's on our India Kohli, franchise. working

that there. a think of also opportunities there are see We've discussed Asia. lot Europe. Within across I India, we opportunities clearly in opportunities throughout franchise different international all the

talked one seen you Vance investment -- look at points We've key distribution about was think potential that. Investment when So had Management, the we Europe. that that about of over of management, Eaton products all

that all AUM there. with and we're across raising again, products see to with Calvert, ETFs Europe active seeing we've various continue been new We

ways with move secular take Japan. different as in in that of more distribute growth There So across are places growth places there geographies. way India. and organically have product to forward such to like our strategic work are trends partners to a There's ways advantage

for about source the a as those through of to look organization. to are relationship that client internationally and we we there and I work talent ways partnerships opportunities also see securities can we tremendous being So where said, has work in take, raising talked and work across product, to across Dan together like that able Investment Simkowitz various funds Management. institutional lot also places

James Gorman

a was office I the ago. add, in an We're opening East months mean, I'd in Middle just And I few Abu Dhabi.

firm very Japan, asset what's going years in the of be on If I would in kind Middle surprised East, you and offsetting transactions of then both think of wealth over management China, some the do strategically, X next combination doesn't India, the U.S. if and outside this

careful works plan are of for a the Strategically, we that. about all on sure -- around lot of want fully opportunities obviously, and ready we of has a diligence game the do and I it. it, think have clearly issues these understand we the make And ideas. I think there. some we team relationships But we're to when

Operator

to Fannon We'll Dan Jefferies. go with next

Daniel Fannon

Obviously, follow a I the channels flows. you mention was in workplace. environment maybe flow up where pullback the about was seen wanted the is the third number total softer fee-based talk understanding to strong but in. flow And came but bit on You the quarter, the didn't could most? in the quarter, here

there I'm sure. not I would color some So well. love as

Sharon Yeshaya

Yes. We've Dan, -- question. for talked the thanks,

the -- been in We and some cash. about fact are I've first within I using of people asked think workplace the in have channel, quarter, talked that it about second is And the both that it.

seeing might aren't potentially and than directly taking rather economic environment, with stock movement inflation, given actually what's the seeing get that it selling We actual on cetera. -- it, et people's in accounts, necessarily and into they that investing going the they're

So my that's dependent did But more see the theme What exciting on recruiting. that's which new obviously, in clients out we is mind in actually NNA, the on market. and a increase there. potentially is was where

institution. Wealth able new how the ask, recruits. made that you for years and So those before were weren't we I've been were beginning we new technology the before at X ability been the across clients when the me modern on clients, well we've calls, will said many into you The people X if asked the we has strongest seeing bought investments ago, components. looking it of these ever platform, because the E*TRADE grow attract attract wealth And what's to Management new to coming just

products to talk the Stanley, can It's you to about It's have. that recruits Morgan technology they to they work offer. if we ability why the it's come clients. the with the So

acquisition continue. you're you're client funnel. And then seeing also seeing through So that new the

well. And metrics. you the plan positive rising all are again, as those participants see in stock that So

Daniel Fannon

follow-up a about And you just isn't that and on Investment the environment Great. talk increasing understanding ideal, did announcements. Banking but then

could hoping those maybe you how was I context the of community overall levels versus So sponsor kind last provide just and some quarter. backlog and are on maybe happening conversations

Sharon Yeshaya

at over be rise all, the of backlog course underwriting about of levels The lot we've that year, and the some to talked on sort itself, or Yes. we've continued build. being a to it across the advisory seen the side. highest we've Overall, of

one continue we emerging deployment. powder think And sector the when be have we sponsors, the transactions to And backlog are around optimistic. a that Obviously, easier pipeline that will see we the happening, more have that. at in the see is and discussions rates, we the that themes of we key some the that James look dry That's is all said, witnessed boardroom. about there of our then about theme consolidation. our that's So financial was Financial or around valuation some as talked the stabilization clarity that gaps. within

that is -- either we transitions important some through. that and we've again, that transactions The second energy we worked -- are that the to of the have on is talked

we as where you part addition and are landscape they're a can to are themes we in forward. how technology, when around about execute that franchise. that, themes And and -- the thinking we strategic see made navigate to these places see of in use that seeing more to AI, hires this all focus help the complex it's We've emerging backlog. key to some and investing there's companies through want parcel diversified opportunities to objectives. us around around move we're And And fact

Operator

to Chubak next Wolfe with go Research. We'll Steven

Steven Chubak

quarter. within growth So margin been trading. for just question I and the expense to banking your feels your in hoping confidence I just the talent in wanted It like Expenses case to the better firm-wide managed of with investment in your a in outlook. was of outlook talk Wealth the intensifying XX%. of well ability speak part target and that's of number you for Management. on of the a could the competition your and years peers achieve to of terms about did terms were actually margin But start one expense war

Sharon Yeshaya

we as -- think expenses, those year. and about through expenses the you the year, have in the at are last looking We've discussed one actions. of We unfortunately we We've actions the cycle. well. the took we end costs both then when at the So taken of throughout course severance took spring

better to the to think about And understand of of what we've base seeing. so sort our managing we and it backdrop against environment are been expense

at talent. for that see competitively And war for to the We we in a also always pay we talent, growth that's you processes in, have context we're we making. take in technology investments as -- leverage we we the forward. opportunities. into of you for look that But should operating there's around technology. and investing And account that the we're efficiencies to potential think where about the is investing while see and that So when do and And it have pay talent. go

of So that's plant. the modernization

that to you're to ourselves and right have to the on control opportunity work an going making you framework to grow. risk have going things give You're And also sure optimization. like

-- that to down that So a right right have rather, and gains investing it's is also you -- forward we move you the balance, the but sure making base, you about operating it forward invest future move it advantage just right, of boil see the for through take the what efficiency and as James as those expense means talking leverage is the really can cycle. and

James Gorman

one very issue. on And are bring the mean, that growing across we took some -- the new and about. did for the had stability demand But keep guess the firm. also war initiatives got We've talented performers I is obviously, because reflection place. in the initiative Sharon the we and It's of why flattered. talent. culture we've you've generations talked feel that's attrition, Yes. say actually in thing I a people to we of low of the just really to opposite I but should had this why expense which the high is street,

across the got that's broader here there, been and the is can you through. just we've the has onesies we've hired and said, bunch got yes, that Sharon and senior broader or So -- something lose banking, message remarkably a XX,XXX people we've somebody, twosies, low, attrition a to but is work person as in

Steven Chubak

follow-up, addressed James, contemplates informs And Endgame, you curious current how with, III on also a capital. that, of But your base. XX% great. ROTCE cushion That's plan your target, how target Basel capital III. running question And my it approximate on pro capital the much question do you you for just requirements your buyback? on higher capital capital noted Basel that under forma

So know cushion, there, there's ROTCE capital buyback XX% a I in lot target. level,

James Gorman

There's down. capital. This ROTCE. It's Going not be this lot to to not an to affect We're is to going guy. increasing remember. old going a write have to

time cushion, one rules a proposal I clear it's that So out. do very of mean been as where come can believe be regulatory what about over. the is spent a the the I've for I've you insight which bed. see function this put special will lot have years. obviously, done community, I The to comment that. day X. with not I when we period I no except the believe not I do that of XX is

been take sort I RWAs and have think in that. not everybody -- going based of is it [indiscernible] fees ago, and what they on calculated up suddenly, to that not that around use it, didn't and they we're ended and years -- want don't out rule even understands, operating a blunt do for example, We're to wasn't way they complying with Europe. don't just getting instrument risk, in the something

said just to God judgment That So is does The it's investors and is, it becomes happen That's not we're happen proposal tomorrow. is, [indiscernible]. -- rule fine. as is. that's call. that's the frame going rule Then to my we it want being what with -- forbid, exactly way just not

be be to through we're not with going -- We're period. continue this to So going buyback our raising we're not capital. certainly going to

this that's I not with advance and this time between a the then. happen of saying now you've listen, Board members come in rule The and of the they're the to going Fed final FDIC, to comfortable implementation be being is out think, XXXX. thing that is promulgated, going of lot word, if the had that's it. There's first a But

think debate the the capital, should be be, place them, cards is into, it the what That's why attached well, does, to regulatory which not punishing more within it regulatory past and institutions, fees clearly that only we clearly there's businesses it's shouldn't if or industry need management. the get intent. So you whether the credit I have don't wealth

told change. believe me and that they've that, I will therefore, And

And it's carry appropriate rule more No, So buybacks? thirdly, play put to we the side buyback create work. where Yes. from frankly can of capital? think the on to cushion, ends that will on unless And we we prudent continue we and can cushion need we what the whatever matter. Do it to give for dividends carry that, the grow more a up. business on. about that sure I'm function not reflect Sharon We'll we

Sharon Yeshaya

Yes.

-- about the of about said clear always really been the as years had reflective when we've growth in -- think the we've has think return of ago, September to buyback, dividend when dividend continually about doubled to capital we've On at increase going strategy. right? are increased to committed return expect the but you an That to usage, stable a We to that We our the all alternatives conference, Basel. the few we've Dan strategy, capital we shareholders. course, and capital of that what first that institution. opportunistic been dividend. continue our for revenues is Then, talked size more broadly a a the buyback of buyback you be foremost, and even

we'll the buyback right increased right capital, the the the and that shareholders for uses for So our and of we the think for the what make we the we is decision going decision forward, opportunities are see what quarter. around but this company

we compare of $X.X course about So from last billion that being feel capital quarter, our you billion. the shows quarter return this to to you over of shareholders to $X able sort how when moving

Operator

JMP to Devin go Securities. next We'll Ryan with

Devin Ryan

I the the side more and flow good on the think, I'm the benefits, guess get side. sure I just on E*TRADE revenue of of to first question that, and to other spoke you conversion. on side some

there's that probably opportunities, material expense any other that Just kind curious if any assuming saving just might can then some more exist. there and there's be removed redundancies of efficiencies

Sharon Yeshaya

to be been point savings of relates migrate Look, clients What the really things is the potential trying perspective. we of from about fundamentally clear really interesting deal channels than is that transaction. the margin? a I very from cost synergies. haven't synergy around It's It's E*TRADE really a clients a smoothly when the not and really think -- that's you we're that more foundation never when possible, there the went fact couple this move to contemplated themselves, them. on integration, creates it other was Will as think but it revenue the it

introduction from and an potential and migration. to channel channel self-directed begin FA somebody let's an or make give So an a E*TRADE that say,

If transition. seamless you're much on the it's a easier same more and platform, much

should That's use helpful. a The being that's helpful as positive workplace, we the the that. of Again, same move how platform right? forward. be flows same is an goes that for on into example Everything places. So of same

It's very a helpful perspective. bank rails also from

you as a to all use, the lot Again, or bank products, consolidated things banking about can potentially lending rails on E*TRADE now the a that Those of used or can grow are remember, be we that grow deposits. basis. are on looking of as are think grow we portions as platform. together now So had platforms put bank their that

So I a than would at perspective. it perspective necessarily synergy a look cost revenue from more synergy

Devin Ryan

be trajectory asset of about takes the thinking Okay. quick some deposits. can of the thinking here follow-up on I make income assumptions guess net Terrific. that curve? here puts and just to But we should in A there? what be around the the from are yield we forward trajectory so if about interest trajectory GWM some use we how

Sharon Yeshaya

the for Yes. I Again, would X draw the that movement quarters, asset yields. if are so are. supported a to sweeps at you're -- NII the look asset be to trying by sweeps between the we was I over when last yields function and of really example, look relationship -- I -- NII quarter, what market yields had going Last a higher mentioned the

that we a were where quarter, the in there remember of still when we You'll banking walked first was a position regional out crisis.

yields in yields the funding the what as about were environment. you think because going of on higher Some was of simply

reaction asset at a bigger change that we yield. -- normalized, that what sequential yields the deposits look some began kind a prominent a when different lost came see down, you in to -- those had And you of or As more themselves NII. you

course, both NII. would And by between determined I example, sweeps is what for be and factors the consideration you more asset So should yields take thinking and try of relationship when will market broadly. you're do quarters, about into

Operator

We'll with UBS. go Hawken Brennan next to

Brennan Hawken

that start to to like I would last similar question.

So clear that longer there's no wealth. clearly tailwind a is NII uncertainty, but also, equally seems it for

back least business, target your XX% provided given or you've the margin the are on think And for and So you the headwind pretax balance any when a turning that at how tailwind may -- out that that moderating? be growth into planned of with how that? plans are you what you're potential investment do about thinking calibrating that for

Sharon Yeshaya

Thanks question, Brennan. for the

about expect, assets important we time offer We've More our our so top advisers the want -- of you investment business bring the investing thing more funnel. most is to to both growth of over the opportunities advisers prospect it's time. As by expense would the that technology that solutions, platform the for But and being the able cetera, to course a base the able this they're long-term to advisers that new where create balance, have make the right? year. new changes made have, more to to we're sure et

how the to to in get as leverage order turn. operating investments So prioritizing begins the that's the market we're

Brennan Hawken

Okay.

investments enough? order you lever -- XX% -- without towards is margin do support back or have be Are to that large in -- pretax you or you do dial willing to So moving able to to tailwinds? that going enough even NII

Sharon Yeshaya

that to asset in terms timing put and ourselves those there not see a clock targets, would we to we're The model of Brennan. and grow the that course this of is is that We is a business -- And in out on a way create have what goal management streams. have -- that's those from the transactional alone. more has streams -- we the a not targets, to revenue strategy the that you're opportunity do shot sustained it's of quarter the to asset-led an that is basis. one the seeing over do And

able to You're grow assets.

eventually, it You're able different has into products, deploy products, transactional which helps moves a stream into advice-based well. And relationship the higher annuity which transaction those also to as assets align.

out we the forward. strategy, it that's as seeing move play you're And so and

James Gorman

deficit mean the about point $XXX of $XXX against Yes. $X.X out, is the on currently million, I'd revenue, Brennan. I target billion million. just XX% long-term

than We're hit X% take of this X%. the talking So not less could cost ex business They tomorrow the XX% -- that at integration number. and of costs. out is that we're already

a not want whole is happen next What different can go were X%, the people we this and we the can sure -- in were happen. XX% years. were XX%. that over about in to margin skeptical we about make the was We to now. league at make that XX% growth So certain make we is several We're back when day when that. talking

I'm not about at this So all. that a heavy worried is lift. not

Brennan Hawken

Great.

the just be market what's that maybe you wealth Because trying not disclosure asset Could as the If the And -- is calibrate? about if for looking side one about the talk duration could robust. to at the we're side? we more asset clarification. on yields, Sharon, you thinking should

kind to of metrics have couple a of creative We within the use filings.

Sharon Yeshaya

deposits also under it, AFS rise, In When at rates right we're shortens. is slightly about if with -- still just what you're duration the portfolio talking going course, on about portfolio asset-sensitive. general, when look of X. the themselves the think duration deposit the now. you and AFS But But is have what's we -- those to the of

think cycle. about the think you're consideration just you -- have I move given all you forward taking things So to as into

James Gorman

minutes to over. run going in and X We're the try last might questions here, X quickly get so we

Operator

with Global. to Seaport We'll go next Jim Mitchell

James Mitchell

slow a sequentially, quarter. trading third just trading, seasonally up the to unusual pivoting business. bit Maybe Fixed in a

term about maybe year. thoughts the they maybe how on into So next least and just you wallet a at in overall the sustainable little bit drivers talk industry think near are,

Sharon Yeshaya

talked above terms great about in going you Obviously, lot wallet industry Yes. question. the wallet, at XXXX XXXX on and this of what's out more are And levels. XXXX pre-COVID a a you think because more look When action. playing do bookends. Central It's we the you things more have vol you And fixed you you when Bank broadly have see associated about income, broadly. like do being

fundamentally positive. is that all So

move of to tremendously more be business sheet. X, said, That greater serve we're around of able specifically X degree and over but efficiently. ability oil. you there to and there terms it's in the it's movements And effectively the our trading commodities, more having that vol, some really businesses, our had we this to being the restructured as years, that to In able for we like the I clients do our forward, velocity last and to of clients capture course using being resources

Operator

with We'll go next Wells to Mike Fargo. Mayo

Michael Mayo

-- question, higher One and for levels kind above to X James. over Investment the wallet drifting of is was drifting years, be you how When the of global it -- do out question, prepandemic, that. and permanent positive the XXXX negative share both think think XXXX although back XXXX U.S. the big maybe, Or above should staying from banks you global we're are X Banking as toward improvement share that? back one normal? trading? should Because wallet much you Like be look

is inflects? is of X% when just And are quarter-over-quarter And negative NII [ you ] that then think to that And what question down? be guiding wealth. the down kind in you for do

James Gorman

Sure.

'XX. than higher trend would wallet global -- wallet the think I

now, right at extreme And side. the -- sort an we're global you're the the a near I U.S. at or equities obviously levels. run, of Fixed competitors mean low trading sequential at see -- top we nowhere banking a X of are yes, think muted. I top of the is kind firms. These Income, any of top I had on challenging X X X.X%. the the don't nice

what's growth Japan, over non-U.S. see think parts years. East to on, earlier, I with you're I next said the and Middle the of -- as Am, going and So going several India, Lat

the feel really I about yes, actually So pretty outlook. good

NII let of I'll lot obviously, you the think stuff. we've -- I this and model Sharon, And touched a stuff, on can't

are they behave know people other But where exactly in don't time. about it's Sharon? feel how rates You a point how opportunities at any function because of and

Sharon Yeshaya

next we at right giving behavior rates say But What is is then And mathematically the we September line we in encouraging ended as with exit that client not that's modeled we looked where that our is is a deposits into expectations. ended what we'll guidance and of lower. here. the October, quarter. be we Yes. did XXXX quarter, We're have said function, the

Operator

Cassidy with go next RBC. Gerard We'll to

Gerard Cassidy

give But successful and your in as I'll the have a of the it if appetite? just some but up what Can won't something the acquisitions, products acquisitions. economies have over us to scale a X out look it of guys Is lined opportunistic view seems single by appetite? of comes be your you your years, for time. I view next X outlook Obviously, of a up, guys your by you channels? know, the something mergers competitors you like buying channel, here. you what's get done -- question different ask in you tenure, James, number over still you And James, can all

James Gorman

Definitely, We just the a just about, plan. Ted, you It's in ago the we all with whole Dan, leaders an operating not completed opportunistic. latter. committee. strategic that a have about were And business that of It's side. and engaged the in from that each Andy game offsite month know heavily the

a of out a think of led Smith I'll there are people are on a properties the Hundreds got -- call Hennessy, all the Barney. I work way a led that. of integration integration He things machine. lot him. that interesting to we've And there give this of back E*TRADE. going lot world. to He the actually in Jim

But So The would will and when safely the So opportunistic hit -- that growth of bid? issue is, rate? have about which, available, a you you can of weighted the it. acquisitions. then we've them become And you got start available vision with like? think look securely? is an if company what like the team set integrate bid. hit do integration current the do having the finally, options, they Then in machine. how above [indiscernible] the run done drive that's have you behind And then real very a that, you we is I mean strategic you should

done I and there's don't there'll this West, want be not Mesa opportunity out sensible them, sensible, many that. know, life-changing Gerard. not as firm you a if but -- reckless, of of will anything Sharon, But add there, do deals Solium, to to yes, lot we've

a that's wrap. I think

Operator

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

You may disconnect. now

Morgan Stanley (MS) 18 Oct 232023 Q3 Earnings call transcript