Q1 2022 Morgan Stanley Earnings Call
Good morning.
On behalf of Morgan Stanley I will begin the call with you following disclaimer.
During today's presentation, we will refer to our earnings release and financial supplement copies of which are available at Morgan Stanley Dotcom.
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.
This presentation may not be duplicated reproduced without our consent.
I will now turn the call over to Chairman and Chief Executive Officer, James Gorman.
Thank you good morning, everyone. Thanks for joining us I know you have a very very busy morning. So we did our best to keep these earnings uncomplicated for Ya.
Heading into 2022, we anticipate as everybody did a bolt more volatile market and obviously, we saw that in the first quarter.
The year started with rising inflationary pressures accelerated the expectations fed tightening of monetary policy, and most notably and sadly the invasion of the Ukraine.
Back drop injected significant uncertainty into the markets and further test the resiliency of our franchise.
Against this quickly evolving market environment, our diversified business model again generated high returns.
<unk> produced revenues of $14 8 billion and in our OTC up 20%.
I'm pleased to report that our first quarter results continued to exemplify Morgan Stanley strength and affirm our long term strategy.
First institutional securities delivered another very strong quarter with revenues of $7 7 billion, making it one of its highest performances ever compared to last year's record first quarter, we saw a different mix of business that's driving the strength of this segment.
Underwriting was muted advisory was a highlight equity and fixed income again delivered exceptional results, particularly in Europe as we supported our global clients amid turbulent backdrop.
Global balance institutional businesses are complex they require many years to build an enormous amount of invested in human capital.
And depth of our franchise today is a competitive differentiator.
Wealth management showcased its resiliency in the quarter, notwithstanding fluctuating market levels the business generated a margin of approximately 28% excluding integration related expenses.
E trade integration continues to go very well and given the current path for on a significant portion of the integration will be done by the end of this year by the end of 2022, we expect to no longer separate our integration expenses.
Net new assets for the quarter were 142 billion that included an asset acquisition Nonetheless organic growth in our existing business remained very strong.
In a volatile market. This is very firming of the model.
Further we saw it first rate hike of the year in the first quarter and with a strong and growing deposit base. This will have a near immediate economic impact to our business and it supports our path to delivering the margins that we predicted in excess of 30%.
In investment management, the increased diversification of the business supported results in a very choppy market.
Fee based asset management revenues, which were one 4 billion in the quarter have grown with the addition of parametric Calvert and the broadening of our alts and fixed income platforms.
We performed better with these franchises than we would have without it and it has brought much more balance to our asset management business.
And with respect to the Eaton Vance integration it progresses very smoothly as well.
The teams remained stable and culturally it's a terrific fit.
Our markets continue to evolve we remain confident about our position and the many opportunities ahead.
Finally, a brief word on the Russian invasion of the Ukraine.
In managing a global business, particularly a market space global business, we must always remain vigilant about the potential for shocks or unexpected events.
Obviously, the invasion of the Ukraine is one such a bit.
First of all and most importantly, our hearts go out to the cranium and all of those who've been impacted.
As it relates to the business apart from the volatility. It has created has been very limited financial impact of Morgan Stanley .
A few years ago, we decided to give up a banking license and we significantly scaled back operations in Russia.
Further as a result of these actions in the current war, we're not entering into any new business in the country and our activities are limited to helping global clients address and closeout preexisting obligations.
I'm very proud of how our team has managed through a difficult market backdrop and going forward, we continue to navigate the turbulent markets and broader geopolitical environment with confidence I'll now turn the call over to Sharon to discuss the quota in greater detail and together, we'll take your questions. Thank you and good morning.
The firm produced revenues of $14 $8 billion in the first quarter, representing the second highest quarter in our firm's history, excluding integration related expenses, our EPS was $2.06.
Aro TCE was 23%.
The firm's first quarter efficiency ratio, excluding integration related expenses was 67, 9% and reflects our expense discipline, while continuing to invest in the businesses.
Results of the first quarter illustrate resiliency and durability.
Equity and fixed income supported our clients, while navigating volatile markets.
Wealth management proved resilient and investment management benefited from diversification now to the businesses.
Institutional securities revenues of $7 $7 billion represented the third highest quarter on record.
<unk> declined 11% from the record set in the prior year. This quarter's performance again demonstrated the power of our global integrated investment bank with balance across businesses and a strong presence across geographies, we remain a global diversified leader.
Europe delivered its best quarter in over a decade, while Asia side second highest results with strength in both equities and fixed income.
Investment banking revenues were $1 6 billion led by strength in advisory compared to the prior year revenues declined by 37%.
Advisory revenues were $944 million almost double the prior year's first quarter, reflecting higher completed M&A volumes.
Equity underwriting revenues were $258 million a meter.
Thankful decline from last year's elevated results in line with market volume.
Eitan volatility led to lead clients to delay issuance activity.
Fixed income underwriting revenues were $432 million down compared to the prior year as macroeconomic conditions contributed to lower bond issuances.
Investment banking pipelines remain healthy across sectors and regions. However, the conversion from pipeline to realized will be largely dependent on market conditions going forward.
Equity revenues were $3 $2 billion, reflecting broad based strength.
In performance against the backdrop of volatile markets.
We continue to be a global leader in this business.
Cash revenues were solid with particular strength in Europe , consistent with market volumes by geography.
Derivative revenues were robust and then business navigated the volatility well.
Prime brokerage revenues were strong while intra quarter balances were impacted by uncertainty we saw balances rebound alongside markets.
Fixed income revenues of $2 9 billion.
We're in line with the very strong prior year in the quarter commodities and macro, particularly foreign exchange led the strength.
Macro revenues increased meaningfully from the prior quarter.
Clients remained engaged and the trading environment proved constructive.
<unk> results were strong, but reflected lower revenues compared to the prior year.
Commodities delivered a more diversified result, with revenues, notably higher than the previous first quarter benefiting from the heightened levels of activity.
Turning to wealth management.
Revenues were $5 $9 billion declines in D. C P negatively impacted revenues by approximately $300 million.
Excluding the impact related to DCP revenues increased 6% versus the prior year's first quarter results.
Results underscore the resilience of the franchise value offered to clients during uncertain times and the benefits of our scale multichannel model.
Retail clients remained invested with allocations across asset classes consistent with last year.
PBT was $1 $6 billion and the margin was 26, 5% or 27, 8% excluding integration related expenses.
This strong results should continue to be supported as we realize the benefits of rising rates.
Asset management revenues were $3 $6 billion up 14% versus last year benefiting from the growth in fee based assets.
This growth continues to reflect the investments we have made into the business over time and affirms our strategy is working.
Net new assets were $142 billion for the quarter M&A was inclusive of an asset acquisition, which I will touch on shortly absent. This asset acquisition annualized growth was five 4% and despite the volatility net new assets were generated from all channels.
<unk> channel benefited from an even split of existing and new clients as well as positive net recruiting.
C. Based flows were also strong and inclusive of the asset acquisition.
Were $97 billion.
Workplace continues to benefit from the establishment of companion accounts.
Tension of asset also continue to rise as a result of incremental companion account adoption and the value of the platform.
In the quarter, we added 75 billion of retirement assets through an asset acquisition of our institutional retirement of an institutional retirement consultant.
We remain a platform of choice and this is the second institutional retirement plan to join US in the last nine months, we continue to view these asset acquisitions as incremental opportunities to reach the expanded audience through education and financial wellness.
The acquired teams client base includes nearly $1 million of plan participants.
<unk> revenues were $635 million, excluding the impact of DCP, which is reflected in this line revenues were strong.
Although activity moderated from the prior year self directed daily average trades remained above $1 million in the quarter over three time E trade pre asset acquisition record.
We have also seen meaningful interest in our alternatives offering given our broad based access to managers and their retail oriented products.
Loan growth remained strong in the quarter with bank lending balances growing $7 million driven by securities based lending and mortgages.
We expect loan growth over the remainder of the year to be consistent with our prior guidance of approximately $5 billion per quarter.
Deposits increased $6 billion in the quarter to $352 billion.
The average rate on deposits declined to nine basis points. We have completed the net run off in wholesale deposits and do not anticipate further declines in deposit costs.
Net interest income was $1 $5 billion, excluding prepayment amortization NII increased 15% from the prior year driven by loan growth.
Back in January we indicated that the fourth quarter NII was a reasonable base to inform 2022.
And then we would expect $500 million of incremental NII on the back of rising rates.
Due to the further moved and rate expectations. Since January we should see this benefit at least double if the forward curve and our modeled assumptions are realized over the remaining nine months of the year.
Moving to investment management, my remarks will refer to quarter over quarter changes as the timing of the Eaton Vance acquisition makes the prior quarter a more relevant benchmark.
Revenues were $1 $3 billion.
The sequential decline reflects the seasonally lower performance fees, which are mostly recognized in the fourth quarter and a more challenging market environment.
Slight headwinds this business is benefiting from increased scale and a more diversified product offering.
It'll a U N of one four trillion dollars declined 8% quarter over quarter as a result of market declines and outflows.
Long term net outflows reflected approximately $9 billion of institutional outflows and our solutions business, including the expected redemption of a large asset manager who brought their equity trading implementation in house.
Equity strategies, a give back of some of the prior year's asset appreciation.
The broader market experienced a rotation out of growth.
This was partially offset by the continued strong flows into parametric customized portfolios as well as our inflation related and interest rate sensitive products.
Asset management and related fees decreased sequentially to $1 $4 billion on the back of the aforementioned seasonality and market volatility.
Performance based income and other revenues were a loss of $53 million in the quarter driven by markdowns and wanted the Asia private equity funds declines in deferred compensation plan investments and negative marks associated with legacy International real estate investments.
Way from these specific markdowns, we saw broad based gains across our alternatives platform, reflecting the strength and diversity of the platform.
Turning to the balance sheet.
Total spot assets increased to $1 two trillion dollars.
Our standardized CET, one ratio sequentially declines and now declined and now stands at 14, 5%.
Multiple factors contributed to this change.
Standardize our double UAS increased as client activity returned after the more moderated levels at the end of 2021 and volatility increased.
OCI related to our available for sale securities portfolio reflected an increase of an unrealized loss of $2 $4 billion as a result.
As a result of higher interest rates.
All this should earn back overtime it impacted our CET one ratio by 50 basis points in the quarter.
We continue to return capital to our shareholders. We are executing on our $12 billion buyback authorization as we repurchased $2 $9 billion of stock in the quarter we.
We remain in a strong capital position.
Our tax rate was 19% for the quarter the vast majority of share based compensation.
Sydney share based award conversions takes place in the first quarter, creating a tax benefit.
We continue to expect our full year tax rate will be in line with full year 2021.
The first quarter again tested the resiliency of our franchise. We are pleased with how our team navigated the volatile environment and stayed close to clients during times of uncertainty while the outlook for the remainder of the year is difficult to predict the second quarter has started constructively and clients remain engaged with that we will.
Now open up the line to questions.
So we are now ready to take questions to get into queue. You May Press Star and then the number one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key you're allowed to ask one question and one follow up then we will move to the next person in the queue.
Please standby, while we compile the Q&A roster.
The first question is from Glenn Schorr with Evercore.
Hi, Thank you.
Just start off Big picture.
So putting up a 20% ROTC in this case I'm sure is.
It is good performance and it is affirmation of the strategy and what you built. So my question is you have enough capital you have a lot of earnings power rates are going up.
Curious, how you think about it.
Is there a what's next I mean, what do you do with the higher earnings production with all the capital that's being produced so you continue to chip away and find bolt on acquisitions.
Are you thinking about the next act inorganic growth alone can power this but I'm just curious.
Couple of years, how you're thinking about that James.
Glen.
High class problem and you know it's it's.
Great position to be and we've been very protective of keeping a buffer on our buffer.
Because you never know in this world and I think what we've experienced with the markets in the last quarter.
Extremely volatile and you just have to you have to anticipate the worst in and make sure you're prepared for that we clearly have done that.
We've been chipping away at the excess capital.
In fact, the OCI were running about 15% CET. One we were you know well above 16%. So clearly we will see where our CCAR results here I think last year, they're around 30 to 33.
I'd be surprised if there's material changes, but let's see so we're still sitting on a significant buffer.
We're clearly going to keep pushing capital distribution through buyback and dividend to shareholders.
You know clearly the case, we've just done two major acquisitions with about 21 billion. We would do more deals if you know as they are.
If they fit with our strategy, we won't do things that take us offline off piste.
We want to stay.
True to our strategy and our strengths in our three core businesses.
So yes continued buyback, but also a lot of investment in the business I mean, we're doing a lot on the tech side.
Obviously, you want to stay completely compliant with our regulatory responsibilities and we will continue to invest to make sure. We're best in class there, but a lot of a lot of investment technology and a lot of investment around the retirement workplace platform, which I think is sort of the next frontier and we adjust in baby steps, we're very early days of that but.
That's a huge opportunity and finally.
I do think that there are opportunities outside of the U S. Even though we are along the U S and that served us incredibly well and I think will serve us very well for the next decade.
But I think in the wealth and asset management spaces internationally.
Punch below our weight.
In institutional Securities, we don't we and we had a very strong quarter in Europe , and Asia, and institutional securities, but I think theres clearly more we can do internationally. So it's sort of watch that space.
Okay I appreciate all of that thank you maybe just one follow up.
Ron you mentioned alternatives on the.
Wealth management platform.
I think you are the largest in the world, but yet it's still in terms of distributor of alternative products.
It's still at a low level.
Percentage wise of client assets. So I'm curious you James mentioned building technologies building people.
How much do you have to prepare.
The.
Platform or is it theyre waiting for this day lose of products, that's coming I'm trying to get a window into.
What's coming in terms of alternative distribution on your platform.
I think it's a great question and we as you said, we continue to invest in it we've obviously seen the alternative.
The alternative players, creating more product and you'll see that from peers, but you also you can see that from our own from anthem as a secular growth trend in a place that we're investing they've obviously created products now that are more appropriate are more suitable for retail and our platform is there we're working very closely together.
Other there's clearly more that we can do as James said, we're continuing to invest but I agree with you that this is a place where we've seen an uptick are we noted it over the course of this quarter. It was interesting to US is I know we've discussed it individually as well Glenn and I think it's a place where you'll just continue to see that kind of growth investment from both us and also on the product side.
Thank you. Our next question is from Brennan Hawken with UBS.
Okay.
Okay.
Okay. Good morning, Thanks for taking my question sorry to ask.
So coupled with paper coating the deployment handset.
So I had a question first on the <unk>.
Wealth management deposits and thanks, Sharon for that.
Indication of.
Updating the NII outlook, but when we think about that.
Posits and the potential beta.
What's your expectation for beta this time around and what percentage of your deposits are actually on the self directed platform, we get the asset percentages, but it's my sense that self directed runs with a higher percentage of cash so I'm guessing be the percentage of deposits would be would skew.
Higher than the assets do on that platform and could that impact your beta this time around.
Sure I think it's a great question I think I think about it as two parts, probably actually a bit separately, one with beta beta for US is informed by the last rate hike cycle. So we've given you historically and we standby as sort of a 50 beta as at end state, but obviously beta also moves through time as you see different rate cycles, and so that's stage sort of.
A if you think about just where the beta is your point on deposits is also interesting I think that we think about deposit as we look at the composition of the deposits and obviously what E trade it and the self directed channel did is it offered us more deposits from smaller accounts with smaller levels and that might to your.
That might have a different beta so theres a beta obviously holistically, but then theres a beta as you've mentioned it might depend on where you are within the size of the accounts.
And the stickiness that you might see associated with those deposits. So we're looking at it from two ways overall beta the same but the deposits themselves and the way that we think about the run off of the deposits might be different this time around just given our own composition of the deposits as they've been acquired by a trade.
Great that makes that makes a lot of sense and then.
For the follow up sticking with the rate sensitivity.
S PLO growth has been quite remarkable.
This is for the past many years when we think about what happened last rate hiking cycle. You know I went back and I worked through and and the interesting thing as you know the SPL is often thought of as rate sensitive, but they continued to grow through the rest of the last rate hiking cycle. So how do you think about.
At this time around it.
Because obviously mature, but more mature and so maybe it could be more subject to some rate sensitivity, but also like advisors and customers probably understand the value of the product better too and so.
There's a couple of cross currents and I can't quite get my head around exactly how to think about it what are your thoughts on that.
Thanks for the question I think when you your points are.
Appropriate you're looking at obviously, yes. It was nascent what I'd say about our profile is we didn't have the same size of household penetration across lending products, then and even today. There are still I'd say room to run in better understanding educating product and educating our.
Clients about the different products that are available to them now.
Now of course, the pace may change and that's not impossible given what we're seeing or what you might think could happen that's not really the prediction, but the idea is there still more education that can be done and that's why I think we feel comfortable that even though we might see rates rise.
The actual the actual amount that we gave you a guidance from a lending perspective should continue part of that obviously being SPL part of that being mortgages, but when you look at the household penetration even five six years ago, you were in very low double digits for us and you've only reached that mid teen number so still.
A lot more to go as I said around the education of that product for clients, where that's suitable.
Thank you. Our next question is from Dan Fannon with Jefferies.
Thanks, Good morning.
The $75 billion acquisition.
AUM that you've got within wealth management. This is the second transaction I think over the last 12 months can you talk about the capabilities that you're getting with this and how this is being integrated more broadly into the wealth platform and also just thinking about the backdrop in strategy should we see more of these type of.
Transactions going forward.
So why don't I start with just saying, we'll see more when it's appropriate for you know, we're obviously continuing to look at this space. What these are and as James said when we're looking at retirement, we're looking at to find benefit we're looking at understanding how workplace coincides with the.
The FAA the FAA advisor led space together and the way that I would think of this is just an extension of our strategy. So the best kind of concept that you can say is yes, we had it a proof point in the third quarter of last year. We're obviously in a situation where we've acquired a similar plan.
Group of advisers is the group of advisors coverage.
Defined benefit contribution plan those defined benefit contribution plans have corporations associated with them that may also have participants in this case, we have 8 million participants that were added that those participants. If you go back to our strategy of the funnel there are top portion of that funnel that.
We begin to advise or educate or learn or teach people about financial wellness, we give them access to our services particular that we've already developed in the workplace channel and so that educational content has a crossover and as they now understand better what financial wellness is.
They can say I'm interested in speaking to our financial adviser, so that's where the channels begin to convergent merch and where you're beginning to really think about the top of the funnel into potentially providing access and advice to clients over time.
Got it that makes sense and you did talk about within the workplace higher retention rates.
And more companion accounts I don't know if you can give us some stats around that but maybe.
You also I think highlighted that the integration cost will be done with the trade by the end of the year. So maybe what's left in terms of milestones with that and then within the kind of work place some of the momentum and progress any numbers would be helpful. Thank you sure. So.
The companion accounts, what we said is that by the end of this year approximately 90% of U S stock participants will be in a position to access a companion account should they want to or should they have the stock to vest into the account. So that's the point there on the question around the retention of assets, we had given that metric.
At the beginning of January deck, and we talked about aiming towards 30% and we have made improvements from the 24% that we gave you at the end of the quarter. So all of those are milestones as you think about integration and integration related expenses and also the points that James had made around the investment in our business and technology.
And in this and in the integration more broadly.
Thank you. Our next question is from Steven <unk> with Wolfe Research.
Hi, good morning.
So wanted to start off with a question on M&A outlook on organic growth is moderated granted versus what maybe was a neck breaking pace that we had seen last year and to what extent to the market volatility disrupt advisor movement across the wealth space and have you seen any improvement in breakaway broker trends or just a recruit.
<unk> backlog more broadly as volatility has started to moderate versus the levels seen in Jan and fab.
Thanks for the question, Steve So as it relates to net recruiting still seeing inflows on the back of that recruiting in fact, all three channels. As you think about M&A were contributors to the net debt and in a number excluding.
The asset retention. So if you just take that other piece or the asset acquisition.
And if you look just at the advisor channel.
A couple of factors. So one net recruiting positive too on the actual advisor side evenly split between existing accounts, our existing clients and new clients. So continuing to see consolidation of assets held away as well as new client relationships going forward and then we had a contribute.
Shin from workplace, which is obviously impacted by both the companion accounts and also retention of assets and self directed so really broad based contribution from the different channels and net recruiting as I said remains a very in a good and a solid place.
Understood and just for a follow up just trying to clarify some of the NII guidance I was hoping you could provide sharon and update on the loan growth outlook, whether you're still comfortable with the mid teens loan growth you had guided to previously and there's the more than $1 billion of NII benefit that you alluded to.
In your prepared remarks contemplate some continued loan growth or is that on a static balance sheet.
No. It's the same loan it's the same loan growth a number that I gave you. So the percentage that you gave if you take that and do you think it was basically about $5 billion a quarter that we just gave you in dollars. This time around so it's the same that I gave in January and then that is what the point around the.
I don't know if it was illusion I actually gave you that it was double so I said at least double in terms of the NII guidance increase that really has to do with the realization of the forward curve and the change in the forward curve.
Thank you. Our next question is from Ebrahim <unk> with Bank of America.
Hey, good morning, just a quick couple of follow ups one.
Sharon if you could remind us in terms of NII.
NII guide how big is the money market Veeva is kind of coming back now that you've had.
Fed hike.
And is there any additional improvement if we should expect if the fed hikes, maybe 50 bps and me.
So our money market guidance. We gave you was about plus 200, and we standby plus 200, but I'd say, it's for the full year. It's really based on two factors that are contributing to that one is the balances as well as the industry and the waivers how quickly those waivers roll off so were.
$200 million for the remainder of the year for the increase for our investment management.
Understood and just as a follow up when you think about it is a tougher question on on the macro outlook. When you think about M&A ipos coming back any sense in terms of when you look at the world feels like volatility is gonna be high which bodes well for trading, but how do you handicap just talking to sort of your corporate.
Clients had an appetite for dealmaking and given just the current geopolitical backdrop any color would be helpful.
So a couple of things first on the advisory pipeline in particular pipeline remains healthy and diversified so taking a look at the underlying pipeline still diversified across sectors, which I think is another healthy sign in terms of the marketplace as it relates to the underwriting calendar that obviously you do have deals that didn't necessarily come to <unk>.
And the first murder, they that pipeline to realize that was associated really with the volatility and the uncertainty in the first quarter as that receipts if to the extent that it does that would move things from the pipeline state to the realized state.
Thank you.
Question is from Mike Mayo Bassett with Wells Fargo.
Oh hi.
I have a question then a follow up I guess no. Good deed goes unpunished going back to you said core net new asset growth for the quarter was five 4% if I got that right. Excluding the deal and so that that is down from where you were before but it's certainly up from where you guys had been a few years ago.
So where do you expect that to settle out and what's the relative contribution say E trade versus the other legacy businesses.
We've given what I think we were we started Mike as we said and James said it in January 11%, which we saw last year. It was exceptional and we didn't expect that to be repeated them in the near term or we weren't sure. We wanted to see how the pipeline moved out and how these different channels work together, but what we.
Did say is 3% to 4% is where we used to be and we werent expecting to see that obviously, we're also at a higher base now and so that's also something to bear in mind. So I think we feel very good about where we are and this is well within that range that we had basically giving you. When we said we would spend time better understanding the channels to provide guidance over time.
That's another.
The contribution from each of the channels as I said three different.
Channels, all contributed a very very nicely, we don't break it out into different pieces, but I would say that the integration is going well and the E trade client and client usage is also doing well.
Okay and my follow up question is on the block trading investigation, which you guys highlighted.
And your your filings and I I know you're limited about what you want to say I know you can't and shouldn't you know give any expectations, but there might be some things that you could disclose around this just might wind up being a non event I mean theres investigations all the time, we get it but every now and then one of these investigations leaves just something I'm not saying that this.
It is the case, but I just want to when investors ask me what do you think the impact of the block trading investigational Morgan Stanley could be it would be nice for me and investors to have that answer so with that big windup.
How much do you make from block trading per year.
And where are these issues self disclosed by Morgan Stanley to regulators or did it come from an outside party. Thank you.
Hey, Mike.
Preferred your first question about the net new money growth some high class problems of not achieving 11% organic.
Five 4% as you know generating something like a 200 to 250 billion net of years. So it's actually a great problem and I think just.
To assure and said you know the various channels there are going to continue to contribute.
My telling you all of this is to say I can't talk about ongoing investigations of block trades, obviously in and we're not going to do that on an earnings call, but you can look at our equities business and how it performs generally and how that's done over many many years.
In its current performance and draw whatever conclusions might be appropriate, but right now we can't talk about ongoing investigations and doesn't matter, whether it's this one or any other one.
From any authority, it's always the same room.
Thank you. Our next question is from Gerard Cassidy with RBC capital markets.
Thank you Hi, Sharon.
Shimon can you share with us when you take a look at the equities business as well as the FIC business and all the disruption we saw in the quarter.
Has there been any opportunity for you guys to grab market share from maybe some of the competitors that you know.
Our weaker are unable to handle the volatility that the way you guys did.
Thanks, George for the question I actually I know a lot of the peers have released this morning. So I haven't looked specifically at this quarters number in terms of this are the public market share, but what I can tell you is that we have seen increase share over time.
I think we're really proud of the positions that we've made in both of the sales and trading franchise is a lot of that has to do with what James discuss more directly in his script, which is building. These investing our people and talent both geographically and also making sure that we have it across different functions.
So all of these things are important I think it is decades in the making rather than just one quarter and we're really proud of the way that we've thought about the continue the continuous velocity.
All of our resources to make sure that we can better and more efficiently support client flows.
And then second following up on your commentary about your pipeline and we all understand the volatility what's going on out there if the markets settle down but still down at lower valuations in the underwriting area do you still think that could come back or do we need higher valuations. So.
Theres not basically down almost like a down round were private.
To go public is that's their intention at a lower price than what they've raised money on the private side.
I think that will be very I think individual companies will make their own decisions in terms of where where they have that from an advice driven perspective I. Just you know if you look at pipeline and you look at investment banking revenue.
Through cycles.
Remarkably stable on an annual basis.
On a quarterly basis as extremely volatile I mean look at the change between fourth quarter ECM in first quarter ease him but.
Then look about M&A did the advisory business I think over 800 million, but if you go through the end of the year I'm sure you'll find it's much more stable and.
Reflective of what we've done in 2020 'twenty one period. So I don't think that it's a very interesting question you raised but I don't think.
That individual companies they don't make.
The decisions, obviously based on averages of what the market say most them based on what their own equity capital need Cyrus capital needs or M&A needs and listen we've got we have one of the best franchises in the world.
It is global so any cross border deals any global companies we were in us.
That won't change. It's just a question as of Q1 O Q3 saw them I'm really unfazed by the volatility in banking on a quarterly basis.
Thank you. Our next question is from Jeremy Siggi with BNP Paribas.
Hi, there thank you.
I wanted to talk about the lower transaction revenues in wealth management.
Not so much about what happened in the quarter, but just looking at March and April what's the state of mind in your wealth management clients is this an environment, where they're going to stay active.
Become more active again or is this a sort of wait and see kind of mood among your clients.
So I I actually that's a really interesting question two things that struck me as we sort of went through and thought about the quarter.
Is the fact that when you look at allocation of investors in the retail space in terms of where their positions were in equities fixed income cash cash equivalents et cetera on a proportional basis over the last year or two actually they that those percentages.
Actually also remained relatively stable so the retail investors investment is something that hasn't necessarily fluctuated based on the data that we have that we've seen those positions have remained there. Despite the fact that there's been volatility. The second point is specifically on self directed is.
E trade. The fact that this is what I tried to mention in his script was where we are from the daily average trades levels still very very high three times the high from when E. Trade was a standalone company and so I think it highlights the change that we've seen in the retail sentiment.
Over the course of the last two or three years I'd just add two points of that number one the transaction revenue line in wealth management has the D. C P impact in them, which was actually very big this quarter.
That bounces around and secondly, if you look at the P&L of wealth management actually the transaction revenues as a driver of the overall health of the business is relatively small.
The much more important are the fee based revenues net interest income what we're doing in the banking side. So and then some of the new issue stuff. So just I just put that out there. It's again, it's one of these things that honestly I'm not very phased by much more interested in asset growth net new asset growth and what we're doing in the bank and the deposit transactions.
We'll bounce around given market volatility.
That's very helpful. Thank you could I just ask a follow up I'm sitting in Europe , you mentioned Europe with strong could you talk about which bit whats driving that what was so great in Europe this quarter.
I think that this is really based on the advice driven model right do you have uncertainty in Europe , there's a lot going on obviously there are pieces of commodities. For example, it's very specific but then you also just see client engagement as it relates to various parts of Europe and being able to service that advice is all.
Part of this diversified model.
Thank you. Our next question is from Devin Ryan with JMP Securities.
Yeah.
Great Good morning, everyone.
A question on the family Office strategy. There is interesting article recently and I figured to dig in here a little bit more I know, it's always been a focus for Morgan Stanley and really firm is uniquely positioned in my opinion to really take advantage of that but I'm curious kind of what is new in the strategy and how you guys would maybe frame.
The evolution and kind of where the opportunity is accelerating.
Absolutely I'm actually glad you asked the question I think it's a really interesting space and I think it's a example of connecting the dots. So over the course of the last couple of years, what we've realized is theres a need.
For family offices to have access to services that we already offer institutional securities clients through our fund services platform and so bringing together those conversations between what's happening in the institutional Securities group and what strategy. We're driving in wealth management is just an example of how the business is working.
More closely together to find those opportunities to service clients.
You know at family offices begin to feel more like institutional accounts and that back and forth and dialogue is really amongst the team the leadership and then throughout the organization.
Okay, great. Thanks, Ron a quick follow up just on the digital asset strategy and maybe how you would frame where you are today both in gws.
Institutional and what we could expect over the next year.
As you know, we're obviously offering something we have some offerings for a different qualified investors that we have but in this space. We're obviously, taking the lead from regulators as it relates to what we can and can't offer at various clients.
Thank you.
There are no further questions at this time, thank you for your centers Lady.
Ladies and gentlemen. This concludes today's conference call. Thank you again for participating and have a wonderful day you may all disconnect.
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