Q1 2024 Morgan Stanley Earnings Call

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Unknown Executive: Good morning. Welcome to Morgan Stanley's first quarter 2024 earnings call. On behalf of Morgan Stanley, I will begin the call with the following information and disclaimers. This call is being recorded.

Speaker Change: Good morning, welcome to Morgan Stanley's first quarter 'twenty 'twenty four earnings call on behalf of Morgan Stanley I will begin the call with the following information and disclaimers.

Speaker Change: 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 Morgan Stanley Dotcom.

Unknown Executive: During today's presentation, we will refer to our earnings release and financial supplement, copies of which are available at MorganStanley.com. This presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Morgan Stanley does not undertake to update the forward-looking statements in this discussion. 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 or reproduced without our consent. I will now turn the call over to Chief Executive Officer Ted Pick.

Speaker Change: Today's presentation May include forward looking statements that are subject to risks and uncertainties that may cause actual results to differ materially.

Speaker Change: Morgan Stanley does not undertake to update the forward looking statements in this discussion.

Speaker Change: Please refer to our notices regarding forward looking statements and non-GAAP measures that appear in the earnings release.

Speaker Change: This presentation may not be duplicated or reproduced without our consent.

Speaker Change: I will now turn the call over to Chief Executive Officer, Ted pick.

Ted Pick: Good morning, and happy spring in New York. Thank you for joining us. We enter 2024 with optimism, encouraged by improving boardroom confidence and an increasingly positive tone from our Institutional and Wealth Management clients. The quarter was strong. We generated $15 billion of revenue, a 71% efficiency ratio, $2.02 in earnings per share, and a 20% return on tangible equity. In a relatively constructive environment, these results highlight the power of our clear and consistent strategy, serving as a trusted advisor to our clients.

Ted Pick: Good morning, and happy Spring in New York. Thank.

Ted Pick: Thank you for joining us.

Ted Pick: We entered 2024 with optimism.

Ted Pick: Encouraged by improving boardroom confidence and then increasingly positive tone from our institutional and wealth management clients.

Ted Pick: Quarter was strong we generated $15 billion of revenue, a 71% efficiency ratio $2.02 in earnings per share and a 20% return on tangible equity.

Ted Pick: In a relatively constructive environment. These results highlight the power of our clear and consistent strategy, serving as trusted advisor to our clients.

Ted Pick: Helping them raise, allocate, and manage capital. During the quarter, higher asset prices and an improved economic backdrop supported confidence among our wealth management client base. We saw greater activity, both in the advisor-based and self-directed channels, resulting in higher adjusted margins of 27%.

Ted Pick: Seeing them raise allocate and manage capital.

Ted Pick: During the quarter higher asset prices, and then improved economic backdrop supported confidence with our wealth management client base, we saw greater activity both in the advisor based and self directed channels, resulting in higher adjusted margins of 27 <unk>.

Ted Pick: <unk>.

Ted Pick: Group I: $95 billion. Investment management also generated positive long-term flows in the quarter. Across both wealth and investment management, total client assets grew to $7 trillion, advancing toward our $10 trillion goal. As the new issue calendar returned for the first time in a number of quarters, it was great to see us regain our leadership position in equity capital markets. More broadly, we saw building momentum in investment banking, both in our M&A and underwriting pipelines across our corporate and financial sponsor clients.

Ted Pick: Net new assets grew by 95 billion.

Ted Pick: Investment management also generated positive long term flows in the quarter.

Ted Pick: Across both wealth and investment management total client assets grew two seven trillion advancing toward our 10 trillion dollar goal.

Ted Pick: As the new issue calendar return for the first time in a number of quarters. It was great to see us regain our leadership position in equity capital markets more broadly we saw building momentum in investment banking, both in our M&A and underwriting pipelines across corporate and financial spot.

Ted Pick: For clients instead.

Ted Pick: Institutional equities and fixed income both generated very solid results to round out a strong quarter in institutional security. As ever, we remain focused on managing our resources, squeezing the income statement and being judicious with our capital. Our CT1 ratio was 15.1%.

Ted Pick: Institutional equities and fixed income both generated very solid results to round out a strong quarter in institutional securities.

Ted Pick: As ever we remain focused on managing our resources sweating, the income statement and being judicious with our capital.

Ted Pick: She one ratio was 15, 1% our excess capital position allows us to support our clients invest in our businesses and return capital to our shareholders, particularly as regulators continue to evaluate Basel III.

Ted Pick: Our excess capital position allows us to support our clients, invest in our businesses, and return capital to our shareholders, particularly as regulators continue to evaluate the Basel III endgame. Additional regulatory clarity and a sustained capital markets recovery should have a multiplier effect across our global franchise, further unlocking the unique power of our integrated firm. I wanted to touch on the topic of client onboarding and monitoring in the wealth business with three short observations.

Ted Pick: Additional regulatory clarity and a sustained capital market's recovery should have a multiplier effect across our global franchise further unlocking the unique power of our integrated firm.

Ted Pick: I wanted to touch on the topic of client Onboarding and monitoring in the wealth business with three short observations.

Ted Pick: First, this quarter's wealth management results speak for themselves, with record revenues and strong metrics across the board, including strong margins and very strong net new assets. We are really pleased with this terrific performance, and we are going to keep going. Second, this is not a new thing.

Ted Pick: First this quarter as wealth management results speak for themselves with record revenues and strong metrics across the board, including strong margins and very strong net new assets we.

Ted Pick: We're really pleased with this terrific performance and we are going to keep ongoing.

Ted Pick: Second this is not a new matter, we've been focused on our client onboarding and monitoring processes for a good while we have ongoing communications with our regulators as all of the large banks do as James said in January we want to ensure we continue to be world class in every aspect.

Ted Pick: We've been focused on our client onboarding and monitoring processes for a good while. We have ongoing communications with our regulators, as all the large banks do. As James said in January, we want to ensure we continue to be world-class in every aspect of this growing business. Third, to be clear, this is about process. We have been spending time, effort, and money for multiple years, and it is ongoing. We've been working on it.

Ted Pick: Of this growing business and third to be clear. This is about processes. We have been spending time effort and money for multiple years and it is ongoing we've been on it and the cost associated with this are largely in the expense run rate.

Ted Pick: And the costs associated with this are largely in the expense run rate. To conclude, the first quarter of 2024 aligns with the goals outlined in the January strategy deck. $15 billion of revenue, a 71% efficiency ratio, $2 of earnings, 7 Trillion of client assets, and a 20% Return on Tangent. We have strong backlogs and momentum in every part of the firm. However, while the pipelines are healthy, there remains a backdrop of economic and geopolitical uncertainty.

Ted Pick: To conclude.

Ted Pick: The first quarter of 2024 aligns with the goals outlined in the January strategy deck.

Ted Pick: $15 billion of revenue, a 71% efficiency ratio $2 of earnings.

Ted Pick: Seven trillion of client assets and a 20% return on tangible we have strong backlogs and momentum in every part of the firm.

Ted Pick: While the pipelines are healthy there remains a backdrop of economic and geopolitical uncertainty.

Ted Pick: Our job is to generate these kinds of durable results on a consistent basis. I'm very optimistic about what lies ahead for Morgan Stanley. And on behalf of our 2,300 managing directors and 80,000 employees, I say to those listening to the call, we will deliver an integrated firm to clients and shareholders that is unmatched in both its integrity and in its intensity. Now I'll turn it over to our excellent CFO, Sharon Yeshaya, to discuss the quarter in more detail.

Ted Pick: Our job is to generate these kinds of durable results on a consistent basis.

I'm very optimistic what lies ahead for Morgan Stanley.

Speaker Change: And on behalf of our 'twenty 300, managing directors and 80000 employees say to those listening to the call. We will deliver an integrator firm to clients and shareholders that is unmatched in both its integrity and then its intensity.

Sharon Yeshai: Now I'll turn it over to our excellent CFO, Sharon you shai to discuss the quarter in more detail.

Sharon Yeshaya: Thank you and good morning. In the first quarter, the firm produced revenues of $15.1 billion. Our EPS was $2.02, and our ROTCE was 19.7%. Our model is working as intended.

Sharon Yeshai: Thank you and good morning in the first quarter. The firm produced revenues of $15.1 billion. Our EPS was $2.02 an hour our TCE was 19, 7%.

Sharon Yeshai: Our model is working as intended.

Sharon Yeshaya: The first quarter results demonstrate the strength of our scaled business and an improving backdrop. Benefits of durable revenues, particularly asset management fees, in the wealth management business, Stronger Capital Markets, and a continued focus on managing the full-income all contributed to results. The FIRB's first quarter efficiency ratio was 71%, illustrating the inherent operating leverage in the model and our ongoing efforts to consolidate our expenses, following multiple years of integration. These efforts are evidenced by the year-over-year reduction in professional services and marketing and business development spend. Lower legal expenses further supported the improvement in efficiency ratios. Now to the business.

Sharon Yeshai: First quarter results demonstrate the strength of our scaled business and an improving backdrop.

Sharon Yeshai: Benefits are durable revenues, particularly asset management fees in the wealth management business stronger capital markets and a continued focus on managing the full income statement all contributed to results.

Sharon Yeshai: The first first quarter efficiency ratio was 71% illustrating the inherent operating leverage in the model and our ongoing efforts to consolidate our expense space following multiple years of integration.

Sharon Yeshai: Efforts are evidenced by the year over year reduction in professional services and marketing and business development spend lower legal expenses further supported the improvement in efficiency ratio.

Sharon Yeshai: Now to the businesses in.

Unknown Executive: Institutional securities revenues of $7 billion were up 3% versus the prior year, reflecting strong performance across businesses. First Quarter Results underscore the power of the integrated firm as our cross-divisional collaboration positioned us to capitalize on market opportunities. The geographical breadth continues to distinguish our franchise and puts us at the center of Kleineck's history, as the backdrop improves across regions. Investment banking revenues were $1.4 billion for the first quarter, up 16% from the prior year. A pickup in both equity and fixed income underwriting supported results, offsetting the year-over-year decline in advisers. Leading indicators continue to progress. Including the preliminary re-emergence of sponsor activity.

Sharon Yeshai: Institutional securities revenues of $7 billion were up 3% versus the prior year, reflecting strong performance across businesses.

Sharon Yeshai: First quarter revenues underscoring the power of the integrated firm as our cross divisional collaboration positioned us to capitalize on market opportunities.

Sharon Yeshai: The geographical breadth continues to distinguish our franchise and puts us at the center of client activity as the backdrop improves across regions.

Sharon Yeshai: Investment banking revenues were $1 $4 billion for the first quarter up 16% from the prior year a pick up in both equity and fixed income underwriting supported results.

Sharon Yeshai: Offsetting the year over year decline in advisory.

Sharon Yeshai: Leading indicators continue to progress positively, including the preliminary reemergence of sponsor activity.

Sharon Yeshaya: This has been a presentation by the U.S. Department of State.

Sharon Yeshaya: Advisory revenues of $461 million reflected a decline in completed M&A transactions. However, equity underwriting revenues of $430 million more than doubled versus the prior year as IPO markets reopened for most of the quarter, alongside conducive markets for follow-on. Our global reach supported our ability to lead cross-border transactions, and we regained our premier leadership position in the Equity Underwriting League as global market volumes ticked up. Fixed Income Underwriting increased year-over-year to $556 million.

Sharon Yeshai: Advisory revenues of $461 million reflected a decline in completed M&A transactions.

Sharon Yeshai: Equity underwriting revenues of $430 million more than doubled versus the prior year.

Sharon Yeshai: IPO markets reopened for most of the quarter alongside conducive markets for follow ons, our global reach supported our ability to lead cross border transactions and we regained our premier leadership position in equity underwriting league tables as global market volumes.

Sharon Yeshai: Picked up.

Sharon Yeshai: Fixed income underwriting increase year over year to $556 million results were driven by strength in investment grade and non investment grade bond issuance as clients took advantage of tighter credit spreads.

Sharon Yeshaya: Results were driven by strength in investment-grade and non-investment-grade bond issues, as clients took advantage of tighter credit. Looking ahead, we expect the steady build of this business to continue. We are encouraged by the health of the advisory and underwriting pipeline. While the uncertainty of the rate path and geopolitical developments may impact the near-term conversion of pipelines to realized, conditions should improve over time, and the underlying trends suggest that confidence is increasing.

Sharon Yeshai: Looking ahead, we expect the steady build of this business to continue we are encouraged by the health of the advisory and underwriting pipelines.

Sharon Yeshai: While the uncertainty of the right path and geopolitical developments may impact the near term conversion of pipeline to realized conditions should improve over time and the underlying trends suggest that confidence is increasing.

Sharon Yeshaya: We remain focused on expanding our reach through opportunistic hires, particularly as we continue to see diverse pipeline and increased sponsor activity. TURNING TO EQUITY, we continue to be a global leader in this. Revenues were strong, increasing 4% from the prior year to $2.8 billion. Results were supported by performance in derivatives and cash, and the franchise benefited from the scale of our prime brokerage. Cash revenues increased year over year, reflecting broad-based strength in equity markets across the region. Performance in Japan was particularly strong, supported by higher volume. Our increased coverage, augmented by our longstanding and unique partnership with MUFG, should be supportive over time.

Sharon Yeshai: We remain focused on expanding our reach through opportunistic hires, particularly as we continue to see diverse pipeline and increased sponsor activity.

Sharon Yeshai: Turning to equity we continue to be a global leader in this business revenues were strong increasing 4% from the prior year to $2 $8 billion.

<unk> were supported by performance in derivatives and cash and the franchise benefited from the scale of our prime brokerage business.

Sharon Yeshai: Cash revenues increased year over year, reflecting broad based strength in equity markets across the region performance in Japan was particularly strong supported by higher volumes.

Sharon Yeshai: Our increased coverage augmented by our long standing and unique partnership with M. USG should be supportive overtime.

Sharon Yeshaya: Prime brokerage revenues were solid as client balances increased back towards all-time highs on higher market levels. Results reflect the mix of client balances and narrower spreads. Fixed Income revenues were $2.5 billion.

Sharon Yeshai: Derivative revenues were robust as the business navigated the market environment, well and client activity was strong.

Sharon Yeshai: Prime brokerage revenues were solid as client balances increased talk back towards all time highs on higher market levels.

Sharon Yeshai: Results reflect the mix of client balances and narrower spreads.

Sharon Yeshai: Fixed income revenues were $2 5 billion results declined slightly compared to the strong result last year.

Sharon Yeshaya: I recall last year's results benefited from increased client engagement on the back of idiosyncratic events, including those related to the U.S. Regional Bank. However, client demand for corporate solutions acted as a partial offset, reflecting the strength of our integrated franchise. Macro and micro revenues declined modestly year over year on lower volatility and client activity, which resulted in less transactional flow.

Sharon Yeshai: Call last year's results benefited from increased client engagement on the back of idiosyncratic events, including those related to the U S regional banks.

Demand for corporate solutions acted as a partial offset reflecting the strength of our integrated franchise.

Sharon Yeshai: Macro and micro revenues declined modestly year over year on lower volatility and client activity, which resulted in less transactional flowers.

Sharon Yeshaya: Resulting commodities increased year over year supported by higher revenues in North America power and gas. Turning to Wealth Management, the business delivered strong results across all key metrics, demonstrating the continued power and differentiation of the engine we have built.

Sharon Yeshai: Results in commodities increased year over year supported by higher revenues in the North America power and gas business.

Sharon Yeshai: Turning to wealth management.

Sharon Yeshai: The business delivered strong results across all key metrics, demonstrating the continued power and differentiation of the engine we have built.

Sharon Yeshaya: Record revenues increased from the prior year to $6.9 billion, driven by record asset management fees, driven by both a rising market and ongoing success in migrating clients to advisory relationships to better serve their needs. Transactional revenues, excluding DCP, were also strong, as retail sentiment improved alongside institutional investment. Importantly, net interest income remained in line sequentially. Pre-tax profit was $1.8 billion, and the PBT margin was 26.3%. Together, DCP and the FDIC Special Assessment impacted the margin by approximately 115 basis points. The results highlight the inherent operating leverage embedded in the business, particularly as revenues rise on the back of cumulative strong fee-based flows, as clients invest more in higher beta assets, and transactional activity rebounds. Yet, new after

Sharon Yeshai: Record revenues increased from the prior year to $6 $9 billion, driven by record asset management fees from both a rising market and ongoing success in migrating clients to advisory relationships to better serve their needs transactional revenues excluding <unk>.

Sharon Yeshai: C. P were also strong as retail sentiment improved alongside institutional investors importantly, net interest income remained in line sequentially.

Sharon Yeshai: Pretax profit was $1 8 billion.

Sharon Yeshai: And the PBT margin was 26, 3% together D C P and the FDIC special assessment impacted the margin by approximately 115 basis points there.

Sharon Yeshai: The results highlight the inherent operating leverage embedded in the business, particularly as revenues rise on the back of cumulative strong fee based flows as clients invest more in higher beta assets and transactional activity rebounds.

Sharon Yeshai: Net new assets for the quarter were strong at $95 billion with contributions from multiple channels, including our family office offering.

Sharon Yeshaya: We're strong at $95 billion with contributions from multiple channels, including our family office. Over time, our ability to deliver unique solutions to clients should continue to attract assets and lead to share capture.

Sharon Yeshai: Over time, our ability to deliver unique solutions to clients should continue to attract assets and lead to share capture.

Sharon Yeshaya: Fee-based flows of $26 billion were strong. Within fee-based flows this quarter, we saw particular strength in the migration of assets from advisor-led brokerage accounts to fee-based accounts. This demonstrates that over time, assets migrate through the funnel into recurring revenue-generating assets. Fee-based assets now stand at over $2 trillion. Asset management revenues were $3.8 billion, up 13% year-over-year, primarily reflecting higher market levels and the cumulative impact of strong fee-based flows. Transactional revenues were $1 billion, and excluding the impact of DCP, they were up 9% versus the prior year.

Sharon Yeshai: Fee based flows of $26 billion were strong within fee based flows. This quarter. We saw particular strength from the migration of assets from the advisor led brokerage accounts to fee based accounts. This demonstrates that overtime assets migrate through the funnel.

Sharon Yeshai: <unk> into recurring revenue generating accounts fee based assets now stand at over two trillion dollars.

Sharon Yeshai: Asset management revenues were $3 8 billion up 13% year over year, primarily reflecting higher market levels and the cumulative impact of strong fee based flows.

Sharon Yeshai: Transactional revenues were $1 billion and excluding the impact of DCP were up 9% versus the prior year. The first quarter's results were driven by client engagement across products, including record activity in structured product investments in our platform allow us to support.

Sharon Yeshaya: My first quarter's results were driven by client engagement across products, including record activity in structured products. Investments in our platform allow us to support increased client demand. Bank lending balances were $147 billion, up slightly quarter over quarter, reflecting modest growth in mortgages. Total deposits of $347 billion were roughly flat quarter over quarter as the decline in suite balances was offset by continued demand for our savings offerings. While sweet balances were down on a spot-to-spot basis,

Increased client demand.

Sharon Yeshai: Bank lending balances were $147 billion up slightly quarter over quarter, reflecting modest growth in mortgages.

Sharon Yeshai: Total deposits of $347 billion were roughly flat quarter over quarter as the decline in sweep balances was offset by continued demand for our savings offering while sweep balances were down on a spot to spot basis.

Sharon Yeshaya: Average sweeps were roughly in line with last quarter, broadly consistent with our modelled expectations. Net interest income was $1.9 billion, flat with the fourth quarter's results, consistent with our guidance. The moderate increase in average deposit costs was offset by several factors.

Sharon Yeshai: Average sweeps were roughly in line with last last quarter broadly consistent with our modeled expectations.

Sharon Yeshai: Net interest income was $1 9 billion flat to the fourth quarter's results consistent with our guidance.

Sharon Yeshai: The moderate increase in average deposit costs was offset by several factors, including the reinvestments of assets at higher market rates.

Sharon Yeshaya: Including the reinvestments of assets at higher market rates. Looking ahead to the second quarter, the deposit mix will continue to be the primary driver of NII. Assuming the current forward curve and that our assumptions around client behavior materialize, we would expect NII in the second quarter to again be roughly in line with the first quarter. Our strategy is working.

Sharon Yeshai: Looking ahead to the second quarter the deposit mix will continue to be the primary driver of NII.

Sharon Yeshai: Assuming the current forward curve and that our assumptions around client behavior materialize, we would expect NII in the second quarter to again be roughly in line with the first quarter.

Speaker Change: Our strategy is working.

Sharon Yeshaya: We have a clear path to $10 trillion in client assets across wealth management and investment management. We remain focused on supporting clients on their path to advice, deepening existing client relationships, and using our scaled platform to achieve sustainable 30% pre-tax profits over time. Investment management reported revenues of $1.4 billion, increasing 7% versus the prior year. Results reflect higher asset management revenues, which increased 8% year-over-year, driven by growth in average AUM on higher market levels.

Speaker Change: We have a clear path to 10 trillion dollars in client assets across wealth management and investment management, we remain focused on supporting clients on their path to advice deepening existing client relationships and using our scale platform to achieve sustainable 30% pretax.

Speaker Change: Overtime.

Speaker Change: Investment management reported revenues of $1 $4 billion, increasing 7% versus the prior year.

Speaker Change: <unk> reflect higher asset management revenues, which increased 8% year over year driven by growth in average AUM on higher market levels.

Sharon Yeshaya: Total AUM increased to $1.5 trillion. Long-term net flows were strong at $7.6 billion, inflows were driven by strengths in alternatives and solutions and reflect the benefits of our diversified product offering. Within Alternatives and Solutions, demand for Parametric Customized Portfolios was robust as retail clients, including our own wealth management clients, allocated investments to Parametric's equity-based products, underscoring the value of the integrated model.

Speaker Change: Total AUM increased to one five trillion dollars.

Long term net flows were strong at seven $6 billion inflows were driven by strength in alternatives and solutions and reflect the benefits of our diversified product offering.

Speaker Change: Within alternatives and solutions demand for parametric customized portfolios was robust as retail clients, including our own wealth management clients allocated investments to parametric equity based products underscoring the value of the integrated model.

Unknown Executive: Those who are further supported by global

Speaker Change: Those were further supported by global interest in our active fixed income strategies.

Sharon Yeshaya: by Global Interest in our Active Fixed Income Strategy. Liquidity and Overlay Services had outflows of $12.9 billion, while performance-based income and other revenues were $31 million.

Speaker Change: Liquidity and overlay services had outflows of $12 $9 billion.

Speaker Change: Performance based income and other revenues were $31 million gains in the U S private equity and private credit offset lowered accrued carried interest in Asia private equity and real estate demonstrating the benefits of our global diversified platform.

Sharon Yeshaya: Gains in U.S. private equity and private credit offset lowered accrued carried interest in Asia private equity and real estate, demonstrating the benefits of a global diversified platform. We are seeing the benefits of ongoing investments in this business. We remain focused on customization, private credit, and our global distribution.

Speaker Change: We are seeing the benefits of ongoing investments in this business, we remain focused on customization private credit and our global distribution parametric in particular has allowed us to deliver the integrated firm evidenced by the ongoing demand from our wealth management client base.

Sharon Yeshaya: Parametric, in particular, has allowed us to deliver the integrated firm, evidenced by the ongoing demand from our wealth management clients. Turning to the balance sheet, total spot assets were $1.2 trillion. Our standardized CET1 ratio was 15.1%, down 14 basis points from the prior quarter.

Speaker Change: Turning to the balance sheet total spot assets were 1.2 trillion dollars our standardized CET one ratio was 15, 1% down 14 basis points from the prior quarter.

Sharon Yeshaya: Standardized RWAs increased quarter over quarter as we actively supported our clients in more constructive markets. We continue to deliver on our commitment to return capital to our shareholders, buying back $1 billion of common stock during the quarter. Our tax rate was 21%. The vast majority of share-based award conversion takes place in the first quarter, resulting in a lower tax rate.

Speaker Change: Standardized <unk> increased quarter over quarter, as we actively supported our clients and more constructive markets.

Speaker Change: We continue to deliver our commitment to return capital to our shareholders buying back $1 billion of common stock during the quarter.

Speaker Change: Our tax rate was 21% for the quarter. The vast majority of share based award conversion takes place in the first quarter, resulting in a lower tax rate.

Sharon Yeshaya: We continue to expect our 2024 tax rate to be approximately 23%, which, similar to prior years, will exhibit some quarter-to-quarter volatility. The first quarter is clear evidence that as the backdrop improves, our franchise is strategically positioned to capture upside, as it was designed to do. With client assets at a record of $7 trillion across wealth and investment management, we are on strong footing. Our Wealth Management business continues to focus on growth as well as supporting our clients with advice and delivering our differentiated offerings.

Speaker Change: We continue to expect our 2024 tax rate to be approximately 23%, which similar to prior years, we will exhibit some quarter to quarter volatility.

Speaker Change: The first quarter is clear evidence that as a backdrop improves our franchise is strategically positioned to capture upside as it was designed to do.

Speaker Change: With client assets at a record of seven trillion dollars across wealth and investment management, we are on strong footing.

Speaker Change: Our wealth management business continues to focus on growth as well as supporting our clients with advice and delivering our differentiated offering and.

Sharon Yeshaya: And our institutional franchise is supported by our scale and our global footprint. This, combined with the build of the investment banking pipelines and market confidence, provides us with momentum to deliver on our objectives over time. With that, we will now open the line to questions.

Speaker Change: In our institutional franchise supported by our scale and our global footprint.

Speaker Change: This combined with the build of the investment banking pipelines and market confidence provides us with momentum to deliver on our objective overtime.

Speaker Change: With that we will now open the lineup for questions.

Unknown Executive: We are now ready to take questions. To get in the queue, you may press star and the number one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press star and the number two on your touchtone telephone. You are allowed to ask one question and one follow-up, and then we'll move on to the next person in the queue. Please stand by while we compile the Q&A roster. Then we'll move to our first question from Glenn Schorr with Evercore. Your line is now open. Please go ahead. Hi, thank you.

Speaker Change: We are now ready to take any questions to get in the queue. You May press star and the number one on your Touchtone telephone.

Speaker Change: If your question has been answered or you wish to remove yourself from the queue. Please press star and the number two on your Touchtone telephone.

Speaker Change: We're allowed to ask one question and one follow up and then we'll move on to the next person in the queue. Please.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Well move to our first question from Glenn Schorr with Evercore.

Glenn Paul Schorr: Your line is now open. Please go ahead.

Hi, Thank you and I appreciate youre not running away from a sensitive subject I'm going to push the envelope and just ask one follow up if possible.

Glenn Paul Schorr: And I appreciate you not running away from a sensitive subject. I'm going to push the envelope and just ask one follow-up question, if possible, on the wealth matter. I wonder if you could size the non-U.S. wealth piece, whether it be in client assets or revenue, for us. And correct me if I'm wrong if that's the focus. And then, more importantly, do you think – obviously, we had a pretty darn good quarter. So do you think this impacts any day-to-day operations or your ability to grow and onboard clients in the future? That's my real main question. Thank you.

Glenn Paul Schorr: On the wealth matter.

Glenn Paul Schorr: Or if you could size the non U S wealth piece, whether it be in client assets or revenue for us.

Glenn Paul Schorr: Correct me if I'm wrong, that's the focus and then more importantly, do you think obviously you had a pretty darn good quarter. So do you think that impacts every day to day or your ability to grow and onboard clients in the future.

Speaker Change: My main question. Thank you.

Unknown Executive: I think it's a great question, Glenn. I'm happy to take that and just follow up on exactly what Ted said, which is, as you said, the results really speak for themselves.

Speaker Change: I think it's a great question Glen I'm happy to take that and just follow up on exactly what Ted said, which is as you said the results really speak for themselves is is a phenomenal business. We had record revenues and we're in a great position with strong margins strong net new assets and no there aren't.

Unknown Executive: This is a phenomenal business. We had record revenues, and we're in a great position. We have strong margins, strong net new assets, and no, there are no strategic changes to our business. There are no changes in our ability to do business, and we're extremely confident in our ability to grow and to deepen the relationship with the breadth of firm offerings that we have to serve our clients.

Speaker Change: No strategic changes to our business there is no changes and our ability to do business and we're extremely confident in our ability to grow and to deepen our relationship with the breadth of firm offerings that we have to serve our clients specific to your question on the international business. It is small.

Ebrahim Huseini Poonawala: We'll move to our next question from Ebrahim Poonawala with Bank of America. Your line is now open. Please go ahead.

Speaker Change: Alright, well move to our next question from Ebrahim <unk> with Bank of America. Your line is now open. Please go ahead.

Ted Pick: Thank you. Good morning. Maybe Ted, for you, as we think about the strong quarter for investment banking underwriting, there seems to be a fragility to the macro outlook based on how rates have behaved on the back of inflation and geopolitics. Just give us a sentiment check on when you're talking to your corporate clients, like how resilient do you see the investment banking sort of trends and the sort of desire and appetite for corporates to engage in either DCM, ECM, or Thank you.

Ebrahim: Hey, Thank you good morning, everyone.

Ebrahim: Good morning, Oh, maybe it did for you.

Ebrahim: As we think about it so it was a strong quarter explained with some banking underwriting.

Ebrahim: This seems to be a fragility to the macro outlook based on what how rates have behaved on tobacco for inflation geopolitics, just give us a sentiment check off when you're talking to your corporate clients.

Ebrahim: Like how resilient do you see the investment banking sort of trends and be sort of desire and appetite for corporate corporates to engage in either the DCM ECM or M&A large M&A activity as we look into sort of later in the year and Pizza U S elections. Thank you.

Ted Pick: Thanks for your question. The pipeline is clearly growing. It's growing across sectors, it's growing on a cross-border basis, there are some who will be willing to take the regulatory risk at this point in the cycle, and there is activity that we will see both from the financial sponsor community and the corporate community, which will effectively be bidding with and against each other for assets. This is a moment when most companies want to purify their business model or grow. And that scaling needs to take place now that the effects of COVID and the supply chain are in front of us, and geopolitics continues to be on our minds.

Speaker Change: Alright. Thanks for your question the pipeline is clearly growing it's growing across sectors is.

Speaker Change: Growing on a cross border basis, there are some who will be.

Speaker Change: Are you willing to take the regulatory risk at this point in the cycle.

Speaker Change: And there is activity that we will see both from the financial sponsor community and the corporate community will effectively be bidding with and against each other for assets. This is a moment when most want to purify their business model or grow and that scaling needs to take place now that.

Speaker Change: The effects of Covid in supply chain.

Speaker Change: Are in front of us and geopolitics continue to be on our mind. It is not surprising that the C suite wants to add so I think we are in the early innings of a multi year M&A cycle on the back of that we should continue to see all kinds of underwriting what was interesting about this ECM quarter, where we had real success.

Ted Pick: It is not surprising that the C-suite wants to act. So I think we are in the early innings of a multi-year M&A cycle. On the back of that, we should continue to see all kinds of underwriting. What was interesting about this ECM quarter, where we had real success, was that it was a combination of IPOs from the Valley, capital raises from industrial companies, regional trades, cross-border unlocks; it was the whole potpourri of offerings.

Speaker Change: Was that it was a combination of ipos from the valley.

Speaker Change: Capital raises from industrial companies regional trades Cross border unlocks it was the whole potpourri of offerings and we also began to see the beginning of event financings in the high yield and leveraged loan markets. So I'm feeling good about this big.

Edward N. Pick: And we have also begun to see the beginning of event financing in the high-yield and leveraged loan markets. I'm feeling good about this being the early to mid-cycle for the classic investment banking capital markets business around the world. And as you know, we are very active in Japan, where we think activity will be heightened for years to come.

Speaker Change: Early to mid cycle for the classic investment banking and capital markets business around the world and as you know we are very active in Japan, where we think activity will be heightened for years to come.

Sharon Yeshaya: That's good, Kala. And just one quick follow-up, Sharon. On the wealth management NII and sweep deposits, I think the sense is that we're getting to a bit of a bottom on NII. Is that an accurate characterization? And should we stop worrying about a big cliff event where NII declines meaningfully from where we planned it?

Speaker Change: That's good color and just one quick follow ups here one on the wealth management NII in sweep deposits I think the sense is that we're getting to a bit of a bottom on NII is that an accurate characterization and should we start worrying about a big cliff event with declines meaningfully from where we planned it.

Speaker Change: Hi, I welcome the day, where I stopped getting questions on the NII.

Sharon Yeshaya: I would welcome the day when I stop getting questions on NII.

Speaker Change: Yeah.

Speaker Change: [laughter] I would I would characterize it as it's now the third quarter in a row.

Sharon Yeshaya: I would characterize it as it's now the third quarter in a row.

Speaker Change: Said that our sweep models and the client behavior is as following client expectations. It does feel as though we are reaching that frictional level of cash of course.

Unknown Executive: ...

Sharon Yeshaya: It does feel as though we are reaching that frictional level of cash. Of course, you know, we'll have to wait and see how things play out.

Speaker Change: We'll have to wait and see how things play out but broadly speaking it feels as though like I said, we're at a place where you have what we would say is intra quarter volatility associated with things that might be T bells maturing people, putting things in markets, but that again is frictional levels of cash rather than large.

Sharon Yeshaya: But broadly speaking, as I said, we are at a place where you have what we would say is inter-quarter volatility associated with things that might be, you know, T-bills maturing, people putting things in markets. But that, again, is frictional levels of cash rather than large changes or movements in real client behavior. This is what you saw two years ago in the summer when we saw the large move in rates, which was a, you know, one-off event.

Speaker Change: <unk> our movements in real client behavior, which is what you saw two years ago in the summer when we saw the large move in rates, which was a one off event and then you had again a very large event with the regional bank movements in the first quarter of last year. So those are very specific events that we can look at <unk>.

Sharon Yeshaya: And then you had, again, a very large event with the regional bank movements in the first quarter of last year. So those are very specific events that we can look at. And since then, like I said, we have been working with our modeled expectations.

Speaker Change: Since then like I said, we have been working with our modeled expectations.

Steven Joseph Chubak: We'll move to our next question from Steven Chubak with Wolf Research.

Speaker Change: Well move to our next question from Stephen Ju with Wolfe Research. Your line is now good morning.

Unknown Executive: Good morning Steve, good morning Steve.

Stephen Ju: Good morning, Steve Good morning, Steve Good morning, Todd Good morning, Sharon So maybe just starting off on the expense outlook. You know we saw some good progress on the expense front.

Sharon Yeshaya: Good morning, Ted. Good morning, Sharon. So, maybe just starting off on the expense outlook, you know, we saw some good progress on the expense front, and the KPIs are encouraging, headcount was down year-on-year, comp and non-comp surprised positively in ISG and wealth, and I was hoping you could just speak to your efforts to rationalize or optimize the expense base. And with IB and wealth fees expected to ramp, consistent with the M&A commentary Ted that you cited, how should we be thinking about incremental margins as these businesses and, particularly, fees start to grow?

Stephen Ju: And the Kpis are encouraging head count was down year on year comp and non comp surprised positively in ISG and wealth and I was hoping you could just speak to your efforts to rationalize or optimize the expense base.

Stephen Ju: And with I B in wealth fees expected to ramp I'm consistent with your M&A commentary tether you sided yeah, how should we be thinking about incremental margins as these businesses and particularly fees start to grow.

Sharon Yeshaya: Certainly. Let's take just the big picture of expenses, and we obviously disclosed the SEC drivers of expenses. I called them out.

Speaker Change: Certainly, let's take just the expense Big picture and we obviously disclose the SEC drivers of expenses I called them out we've had multiple years now where we've been looking to integrate multiple acquisitions and as we've come out of that we've been able to re evaluate our expense base and I've talked about it.

Sharon Yeshaya: We've had multiple years now where we've been looking to integrate, you know, multiple acquisitions. And as we've come out of that, we've been able to re-evaluate our expense base. And I've talked about it in different parts of our earnings call. Many times, I mentioned space. You can see even in the lines around occupancy in the actual disclosures. You can see bump-ups in space, where you're taking right off down in space, and then it begins to trend down again.

Speaker Change: Different pieces of our earnings call. Many times I've mentioned space you can see even in the in the lines around occupancy in the actual disclosures you can see bumps bump ups in spaces, where you're taking write off down in space and then it begins to trend down again, so we're making big picture decisions around what do we actually.

Sharon Yeshaya: So we're making big picture decisions around what we actually need and where we want to invest those growth drivers as we move forward. So consolidating marketing dollars and figuring out what is the best use of those marketing dollars, consolidating professional services, and how do we actually want to deploy full-time hires to support those growth objectives? So in my prepared remarks, we talked about two things. We talked about taking expenses down on certain line items, but we also discussed investments, right?

Speaker Change: Need and where do we want to invest those growth drivers as we move forward. So consolidating the the marketing dollars and figuring out what is the best use of those marketing dollars Mark consolidating professional services, how do we actually wanted to deploy full time hires in those growth objectives. So in my <unk>.

Speaker Change: Prepared remarks, we talked about two things, we talked about taking expenses down in certain line items, but we also discussed investments right I talked about the fact that we're looking at opportunistic hires in M&A. We've discussed a lot about investing in parametric in technology, we've been giving technological tools to our advisers and.

Sharon Yeshaya: I talked about the fact that we're looking at opportunistic hires in M&A. We've discussed a lot about investing in parametrics and technology. We've been giving technological tools to our advisors and investing in the business. So it's a push-pull, and it's making sure, as Ted said, that we're sweating the income statement, and we're thinking about our resources efficiently and durably as we move forward through the cycle.

Speaker Change: Being in the business. So it's a push pull and it's making sure as Ted says that we're sweating. The income statement and we're thinking about our resources efficiently and Durably as we move forward through the cycle, what I would add to that is.

Edward N. Pick: What I would add to that is if you just sort of had an intangible sense of what we talk about at our leadership meetings, our operating committee of a dozen people, and the next group, the management committee of about three dozen, and then their leadership teams. I think it's fair to say, Steve, over the last five years, a large chunk of time has been dedicated to how we can optimize those toggles, and, of course, with Basel III's endgame pending and the annual CCAR process ongoing, we of course continue to dedicate time to that.

Speaker Change: If you just sort of had a.

Speaker Change: In a tangible sense of what we talked about at our leadership meetings, our operating committee of <unk>.

Speaker Change: Some people in the next group the management Committee of about three dozen and then their leadership teams I think it's fair to say Steve over the last five years.

Speaker Change: A large chunk of time was spent talking about capital efficiency, how we can optimize those toggles and of course with.

Speaker Change: Basel III end game pending.

Speaker Change: And the annual CCAR process ongoing we of course continue dedicate time to that but the.

Edward N. Pick: But the sea change over the last number of quarters, and it has accelerated now into 2024, is that we're actively talking about the income statement, about delivering earnings growth, earnings momentum, that obviously then ties into the returns on capital that we were able to generate this quarter. But we're looking to make investments, strategic investments, in top human capital now and then when it comes around, but we're being pretty judicious about that. This is a great platform, and we have a great team, but we need to be running this thing super efficiently, and that is why reiterating the efficiency ratio of 70% in January was so important and that we put up 71% this quarter, where it was a generally constructive environment.

Speaker Change: The sea change over the last number of quarters and it has accelerated now into 'twenty. Four is we're actively talking about the income statement about delivering earnings growth earnings momentum that obviously that ties into.

Speaker Change: Returns on capital that we were able to generate this quarter, but we're looking to make investments strategic investments.

Speaker Change: In.

Top human capital now and then when it comes about but we're being pretty judicious about that this is a great platform and.

And we have a great team.

Speaker Change: But we need to be running this thing super efficiently and that is why.

Speaker Change: Reiterating the efficiency ratio of 70% in January was so important and then we put up 71% this quarter where.

Speaker Change: It was a it was a generally constructive environment I think I called it a relatively constructive environment, but there's clearly more operating leverage to be had when you get to the higher brackets of ISG and then as you move through the funnel as well so the focus on generating that operating leverage and keeping them.

Edward N. Pick: I think I called it a relatively constructive environment, but there's clearly more operating leverage to be had when you get to the higher brackets of ISG and then as you move through the funnel of wealth. So the focus on generating that operating leverage and keeping the income statement really tight is very much on the minds of the leadership team.

Speaker Change: Income statement really tight is very much on the minds of the leadership team.

Unknown Executive: That's great color and just for my follow-up relating to the wealth management margins, you know, unpacking some of the different component pieces given continued strong fee momentum; nice to see the inflection in NNA too. It sounds like NII is, you know, close to stabilizing just given some of the key drivers and inputs and the focus on efficiency. Just throwing all that into the blender does suggest that this 26% is probably a reasonable jumping-off point, and you can build off that base, but I was hoping you could maybe provide some context around that.

Speaker Change: That's great color and just for my follow up relating to the wealth management margins now unpacking some of the different component pieces, given continued strong fee momentum nice to see the inflection in there too.

Speaker Change: It sounds like NII as you know close to stabilizing just given some of the key drivers and inputs.

Speaker Change: And the focus on efficiency, just throwing all of that in the blender. It does suggest that this 26% is probably a reasonable jumping off point and you can build off that base, but was hoping you could maybe provide some context around that.

Sharon Yeshaya: Well, what I would say is that we put out our goals in the last strategy deck, and we're obviously making progress towards those goals. And when you think about what gets you to 30%, the framework that we've offered the investment community is that there are sort of three parts to it. The first is migration to advice. The second, and really the monetization of the funnel, will go through this. The second, when you think about it, is the solutions and products that we're offering.

Speaker Change: Oh well.

Speaker Change: What I would say is that we put out our goals at the in the last strategy deck, and we're obviously, making progress towards those goals and when you think about what gets you to 30% the framework that we are offering advice.

The investment community is that there is sort of three parts to it. The first is migration to advice the second and really the the monetization of the funnel will go through this the second when you think about it as solutions and products that we're offering and then the third is the benefits of scale and what was encouraging about this.

Sharon Yeshaya: And then there are the benefits of scale. And what is encouraging about this quarter is that all three of those things happened. The first being the fee-based flows that we saw at $26 billion came from brokerage accounts. They came from people taking money that was already in the channel that we've said will eventually be deployed, and it is being deployed, and that's what you're seeing here. If you look back, that particular transition, that conversion, is at a two-year peak. Again, encouraging color.

Speaker Change: This quarter is that all three of those things happened the first being the fee based flows that we saw at $26 billion came from brokerage accounts. They came from people taking money that was already in the channel that we said will eventually the deep.

Speaker Change: Be deployed and it is being deployed and that's what you're seeing here. If you look back. It's a those that particular transition that conversion is at a two year peak again encouraging color, Steve the second piece solutions products differentiated offering I called out structured products people have interest in <unk>.

Sharon Yeshaya: The second piece, solutions, products, differentiated offering. I called out structured products. People have an interest in products, as Ted said, as markets begin to improve. Those could be new issuance, that can be derivatives, that can be solutions through structured notes.

Speaker Change: As Ted said as markets begin to improve those could be new issuance that can be derivatives that can be a solutions through structured notes. That's what we're seeing beginning to happen here. So yes, again, an encouraging sign and the third is that we continue to gain the benefits of scale and operating leverage so all.

Sharon Yeshaya: That's what we're seeing beginning to happen here. So yes, again, an encouraging sign. And the third thing is that we continue to gain the benefits of scale and operating leverage. So all three things are working. Of course, there's room to run, but what we're trying to do is make sure that we also have the right tradeoffs between investing in the business, giving ourselves room for technology, and being able to build a 30% margin for a sustainable business and durable revenues over time.

Speaker Change: All three things are working of course, theres room to run, but what we're trying to do is make sure that we also have the right trade offs between investing in the business, giving ourselves room for technology and being able to build a 30% margin for a sustainable business and durable revenues overtime.

Brennan Hawken: We'll move to our next question from Brennan Hawken with UBS. Please go ahead. Good morning, Brennan. Hey, how are you, Ted? Good. Excellent.

Speaker Change: We'll move to our next question from Brennan Hawken with UBS. Please go ahead.

Brennan Hawken: Hi, Good morning, good morning, Brian and my questions.

Brennan Hawken: How are you Ted.

Brennan Hawken: So.

Brennan Hawken: Excellent.

Unknown Executive: I'd love to start with a question on NII. I know I've asked this in the past, but we saw stability in the wealth management NII, which Sharon, you've spoken at length about, both on this call and in the back. But we did see the firm-wide NII dip again, and it was the fourth quarter where the firm-wide NII declined. So could you explain how those diverged and maybe what caused some of that divergence?

I'd love to start with a question on NII and I know I've asked this in the past, but we saw stability in the wealth management, NII, which Sharon you've spoken.

Brennan Hawken: <unk> spoken at length about both on this call into the back.

But we did see the firm wide NII dip again, and it was the fourth quarter, where the firm wide NII decline so could you.

Brennan Hawken: Explain how those diverge than maybe what caused some of that divergence.

Sharon Yeshaya: Sure, I think we've talked about it before, Brennan, but I'm happy to talk about it again and highlight the reason that we point you to the Wealth Management NII is that it's a business-driven NII. When we look at the Trading NII, and we look at Firm NII, it really depends on the products that you have, where you're booking them, and what you're using as your funding sources that fall into the various pieces of the trading revenue. So we call it, we focus you on from our disclosures really on the Wealth Management NII when that NII is being driven by a business concept rather than just where you might be booking certain trading trades.

Sharon Yeshai: Sure I think we've talked about it before Brennan, but I'm happy to talk about it again and highlight that the reason that we point you to the wealth management NII. So its a business driven NII when we look at the trading NII and we look at firm NII. It really depends on the products that you have where you're booking them.

Sharon Yeshai: What you're using as your funding sources that falls into the various pieces of the trading revenue. So we call it.

Sharon Yeshai: We focus you in from our disclosure is really on the wealth management NII when that NII is being driven by a business concept rather than just where you might be booking certain trading trades.

Unknown Executive: Okay, got it. Is there something going on in the institutional NII that would cause sort of steady declines? And with those specific products, that maybe might be a trend that we could explore a little bit?

Speaker Change: Okay got it.

Speaker Change: Is there something going on in the institutional NII that would cause sort of steady declines.

Speaker Change: And with those specific products.

Speaker Change: That maybe might be a trend that we could explore a little bit.

Sharon Yeshaya: Now, I would really step you back and tell you that that's not how we manage the business, and the trading revenue is going to fall where the trading revenue falls based on the products that we transact in in that quarter. And the wealth management revenue, I've given you the drivers with the deposits, with interest rates, with spreads, and with reinvestment. And they're really two separate things that you should be looking at.

Speaker Change: No I would really step you back and tell you that that's not how we manage the business and the trading revenue is going to fall, where the trading revenue falls based on the products that we transact in in that quarter.

Speaker Change: The wealth management revenue I've, given you the drivers with the deposits with interest rates with spreads and with reinvestment and they're really two separate things that you should be looking at.

Michael Lawrence Mayo: We'll move to our next question from Mike Mayo with Wells Fargo Securities. Please go ahead.

Speaker Change: Well move to our next question from Mike Mayo with Wells Fargo Securities. Please go ahead.

Unknown Executive: Good morning, Mike.

Michael Lawrence Mayo: Good morning, Mike Hi.

Michael Lawrence Mayo:

Sharon Yeshaya: You had big year-over-year growth in wealth management client assets, up by about 20%, but the wealth management revenues increased by 5%. You know, still decent growth, but it seems like a little disconnect there. So I'm wondering what kind of wealth management client assets you're growing.

Michael Lawrence Mayo: You had a big year over year growth in wealth management client assets.

Michael Lawrence Mayo: About 20%, but the wealth management revenues increased by 5%.

Michael Lawrence Mayo: Still decent growth, but it seems like a little disconnect. There. So I'm wondering what kind of wealth management client assets Youre growing.

Sharon Yeshaya: Certainly. So when you're growing the wealth management client assets, it's going to be in all sorts of places. Like I said, we are beginning to see assets that can come in, actually, on the brokerage side. And over time, they will migrate or can migrate based on client preferences into the advice side. Those different assets are going to have different fees associated with them. For us, it's about growing the funnel, Mike, and then beginning to see this movement toward advice. Now, I'd also point out that once you're in the advice-led channel, even if you're in the fee-based channel, you might not directly be in the S&P. There's a composite.

Speaker Change: Certainly so you're when you're growing the wealth management client assets is going to be all sorts of places.

Speaker Change: Like I said, we begin to see assets. They can come in actually in the brokerage side and over time, they will migrate or can migrate based on the client preferences into the advice side those different assets are going to have different fees associated with them for us it's about growing the funnel, Mike and then bill.

Speaker Change: Getting to see this movement towards advice now I'd also point out that once youre in the advice led channel even if you're in the fee based channel you might not directly be in the S&P theres a composite there might be preferences to be in fixed income products, there might be preferences to be an equity products, but for us it's about building a sustainable durable <unk>.

Sharon Yeshaya: There might be preferences to be in fixed income products, or there might be preferences to be in equity products. But for us, it's about building sustainable, durable revenue over time. First, you bring in the clients and the participants. We've seen the number of participants grow. Then you bring in the assets. We've seen the assets grow. That then goes into the brokerage accounts, which eventually moves into the advice-based accounts. And we continue to see great trends in the advice-driven model, in fee-based assets, and in asset management revenues. The asset management revenues, Mike, are at a record high. So I would just highlight that as well as provide proof points that this model is working.

Revenue overtime first you bring in the clients and the participants we've seen a participants grow then you bring in the assets. We've seen the assets grow that then comes into the brokerage accounts, which eventually moves into the advice based accounts and we continue to see great trends in the advice driven model and fee based assets and the advice.

Speaker Change: Asset management revenues the asset management revenues, Mike are at in at a record high So I would just highlight that as well as proof point that this model is working.

Edward N. Pick: And then just one follow-up for Ted. Ted, I think your outlook for the industry capital markets was about as bullish as we've heard. Yet, I think you use the word potpourri, you know, IPOs in the valley, cross-border by sector, financial sponsor, Japan, highest in years, event financing, specifically, you know, what are your backlogs? How do they compare with last quarter? And just one more time, the level of your conviction that this time is surreal because there's been a lot of false starts in the last two years. Thanks.

And then just one follow up for Ted Ted I think your outlook for the industry capital markets was about as bullish as we've heard yeah. I think you used the word potpourri.

Speaker Change: Ipos in the Valley cross border by sector financial sponsor, Japan highest in years event financing.

Speaker Change: Specifically what are your backlogs, how do they compare with last quarter.

Speaker Change: And just one more time the level of your conviction that this time it's for real.

Speaker Change: There's been a lot of false starts for the last two years.

Edward N. Pick: Yeah, I think it's a reasonable question. The backlogs are all over. I think it will be a slow march back.

Speaker Change: Yes, I think it's a reasonable question.

Speaker Change: The backlogs are all up.

Speaker Change: I think it will be a slow March back.

Edward N. Pick: People are not going to jump into some of the speculative paper that we saw during the SPAC period, clearly. But the receptivity to recent IPOs that were high quality was quite impressive, and there was quite a broad interest among investors. The need to execute on cross-border M&A is here. It's, for many companies, an existential reality. Their supply chains have been disrupted by two major global conflicts, and they need to nearshore and make the tradeoff, which means they need to potentially bolt on a piece of the supply chain that's in front of them.

Speaker Change: People are not going to jump into some of the speculative paper that we saw during the <unk> period, clearly, but the receptivity to recent ipos that were high quality was quite impressive quite broad interest among investors, but the need to execute on cross border.

Speaker Change: Order M&A is.

Speaker Change: Is here.

Speaker Change: For many companies and extra central reality their supply chains have been disrupted by two major global conflicts and they need to.

Speaker Change: Near shore and make the trade off which means they need to potentially bolt on piece of supply chain. That's in front of them. They may need to take regulatory risks there may need to be structuring and financing advice around that so called solutions, where we think were strong the other motivating piece, Mike is and I do think there.

Edward N. Pick: They may need to take regulatory risk. There may need to be structuring and financing advice around that, so-called solutions where we think we're strong. The other motivating piece, Mike, and I do think there's going to be growing consensus on this, the financial sponsor community is sitting on a product that has a three-, four-, five-year life as a private company ready to come out one way or the other, either through a public offering or to be sold in the private markets.

Speaker Change: Is going to be growing consensus on this the financial sponsor community is sitting on.

That has a 345 year life as a private company ready to come out one way or the other either through a public offering or to be sold in the private markets that is the best way for the financial sponsor community to return capital to their Lps.

Edward N. Pick: That is the best way for the financial sponsor community to return capital to their LPs and keep the thing going with raising ever-bigger funds. So there will be a competitive dynamic, I believe, between the financial sponsor and corporate community with respect to assets that are available, whether they are public or private, in order to continue to create value for their LPs or shareholders. The fact that the U.S. economy continues to grow, that China's weaker, and that parts of Europe are weaker highlights the fact that people indeed want to get even more exposure to the U.S. With respect to Japan, what's interesting there is that most of our client base are both buyers and sellers of assets, which is to say they're sitting on enormous yen-denominated deposits, but they wish to grow the economy.

Speaker Change: And keep the thing going with raising ever big funds. So there will be a competitive dynamic I believe between the financial sponsor and corporate community with respect to assets that are available whether they are public or private in order to.

Speaker Change: Continue to create value for their Lps are shareholders. The fact that the U S. Economy continues to grow that China is weaker that parts of Europe were weaker highlights. The fact that people indeed wanna get even more exposure to the U S.

Speaker Change: With respect to Japan, what's interesting there is most of our client base are both buyers and sellers of assets, which is to say they are sitting on enormous yen denominated deposits, but they wish to grow the economy. So that is a market, obviously where were active on the financial sponsor and corporate communities both in.

Edward N. Pick: So that is a market obviously where we're active, and the financial sponsor and corporate communities both in and out will continue to be. So I am quite bullish about the full investment bank capability for those that have a global reach. It could take several years and have some lumpiness along the way, but I think the next three, four, five years will be quite active.

Speaker Change: In and out we will continue to be so.

Speaker Change: I am quite bullish.

Speaker Change: About the full investment bank capability for those that have a global reach it could take several years and have some lumpiness along the way.

Speaker Change: I think the next 345 years will be quite active.

Daniel Thomas Fannon: We'll move to our next question from Dan Fannon with Jeffreys. Please go ahead.

Speaker Change: Well move to our next question from Dan Fannon with Jefferies. Please go ahead.

Unknown Executive: Good morning, Dan.

Daniel Thomas Fannon: Morning, Dan.

Daniel Thomas Fannon: Good morning.

Sharon Yeshaya: I'm hoping you could provide an update on overall client cash levels within Wealth and how you think about the revenue opportunity as that cash is eventually redeployed.

Daniel Thomas Fannon: Hoping you could provide an update on overall client cash levels within wealth and how you think about the revenue opportunity as that catches eventually redeployed.

Sharon Yeshaya: Sure. So we did see the percentage of client cash. So we've given you, I think, 22% in the advisory channel is now down to, say, 21%, 20% levels, depending on what channels you're looking at. But that, I would say, is not a function of the actual cash levels coming down, but rather that the equity markets have risen. So just to be clear in terms of the actual mix. The reason I bring up those percentages is that they're still high relative to the pre-COVID historical levels of, say, 17%, 18% that we've given on previous calls. So there is still room to see the deployment of cash over time into the markets.

Daniel Thomas Fannon: Sure. So we did see the percentage of client cash. So we've given you I think 22% in the advisory channel is now down to 21%, 20% levels, depending on what channels that you're looking at.

Daniel Thomas Fannon: But that I would say is not a function of the actual cash levels coming down, but rather than the equity markets have risen so just to be clear in terms of the actual mix. The reason I bring up those percentages is theyre still high relative to the pre COVID-19 historical levels of say 17, 18% that we've given on previous.

Daniel Thomas Fannon: Calls so there is still room to see the deployment of cash over time into the markets.

Sharon Yeshaya: And as a follow-up, in the release, you mentioned about half of the flows came from your family office offering. Not sure we've heard that stat before, or I was hoping you could provide some context in terms of the size of that business for you. And then also just the mix of flows more broadly in terms of the channels. If you could provide, you know, a few more specifics in terms of the percentage breakdown.

Speaker Change: Understood and as a follow up.

Speaker Change: In the release you mentioned about half the flows came from your family office offering I'm not sure we've heard that stat before or so was hoping you could bring some provide some context in terms of the size of that business for you and then also just the mix of flows more broadly in terms of the channels. If you could provide.

Speaker Change: A few more specifics in terms of the percentage breakdown.

Sharon Yeshaya: Absolutely. I'm so glad you asked as it relates to the family office offering because we have been talking about it for some time. We launched and really formally enhanced our family office offering in 2021. We discussed it on some of our earnings calls as a place where you could begin to see the integrated firm. And by that, I mean a way to offer our wealth management clients different solutions from institutional securities.

Speaker Change: Absolutely I'm. So I'm. So glad you asked him in as it relates to the family office offering because we have been talking about it for some time, we launched and we really formally enhanced our family office offering in 2021, we discussed it on some of our earnings calls as a place where you could begin to see the <unk>.

Speaker Change: Integrated firm and by that I mean, a way to offer our wealth management clients different solutions from institutional Securities. So our fund management products, where you're actually able to look at your portfolio from a more integrated basis. The way that you would as an institutional client.

Sharon Yeshaya: So our fund management products, where you're actually able to look at your portfolio from a more integrated basis the way that you would as an institutional client. As we begin to offer new solutions to our clients, these are more ways to get touch points and deepen different client relationships and bring them on board. So this is an example of that.

Speaker Change: As we begin to offer new solutions to our clients is there more ways to get touch points with different and deepen different client relationships and bring them on board.

Speaker Change: This is an example of that the reason we pointed out is also to highlight too that there are lumpy flows that come through these channels and so when we say these flows can be lumpy there are different sales channels across the offering and those different channels have different sales cycles, and so therefore, you will see ins and outs.

Sharon Yeshaya: The reason we pointed out is also to highlight, too, that there are lumpy flows that come through these channels. And so when we say these flows can be lumpy, there are different sales channels across the offering. And those different channels have different sales cycles. And so, therefore, you will see the ins and outs of various pieces of NNA over time. But in this particular quarter and over the long-term history, we have seen a very diversified set of channels. We have the workplace. We obviously have the advice-based relationship, different pieces of stock plan, et cetera, that come in through the channel. And there is diversification there.

Speaker Change: Various pieces of M&A over time, but in this particular quarter and over the long term history, we have seen a very diversified.

Set of channels, we have the workplace, we obviously have the advice space relationship different pieces of stock plan et cetera that come in through the channel and there is diversification there yeah, what I'd add to that is.

Edward N. Pick: Yeah, what I'd add to that is, to Sharon's point on integrated firm, we have this, Sharon made reference to this gem of a business that we have in the institutional equities division called fund services, which caters to alternative asset managers and effectively does their documentation work, and effectively all of the release to their LPs. The question that has been asked over the last number of years is, when some of these folks go on to open their family office and manage their own wealth, what about having a product that has the feel of an institutional product from when they were running their asset manager for their So the folks in fund services got together with the folks in wealth management who run our outsourced CIO product and they effectively came up with a mousetrap that gives the look of an institutional product for folks who are very much in the ultra high net worth category.

Speaker Change: To Sharon's point on.

Speaker Change: Integrated firm we have this.

Sharon made a reference to this gem of a business that we have in the institutional equities division called <unk> Fund services, which caters to alternative asset managers and effectively does there.

Speaker Change: Their documentation work.

Speaker Change: Effectively all of the release to the to their Lps.

Speaker Change: The question that has been asked over the last number of years is when some of these folks go onto open their family office and manage their own well.

What about having a product that has the feel of an institutional product from when they were running their other asset manager for their family office or for related business. So the folks in our fund services got together with the folks in wealth management, who run our outsourced CIO.

Speaker Change: And they effectively came up with a mousetrap that gives the look of an institutional product for folks who are.

Speaker Change: Very very much in the ultra high net worth category and this helps work towards a piece of the wealth bracket that we've all been focused on over the last several years, which is the very high net worth space, which is very competitive but in bringing together some of the capability.

Edward N. Pick: And this helps work towards a piece of the wealth bracket that we've all been focused on over the last number of years, which is the very high net worth space, which is very competitive, but in bringing some of the capability and kit from the equities business over to the wealth business and having them work together with the founder in her next life managing a family office, it's actually a nice, seamless way to keep the funds in house and to deliver So this is something we are putting our foot on the accelerator on and is a great example of our equities division and the wealth management folks working hand in glove to deliver something for clients.

Speaker Change: And.

Speaker Change: Kit from the equities business over to the wealth business and have them work together with the founder and her next life managing our family office, it's actually a nice seamless way to keep the funds in house and to deliver institutional style capability to <unk>.

Speaker Change: So this is something we are putting our foot on the accelerator on and is a great.

Speaker Change: A great example of our equities division and the wealth management folks are working hand in glove to deliver some of these clients.

Devin Patrick Ryan: We'll move to our next question from Devin Ryan with Citizens JMP. Please go ahead.

Speaker Change: We will move to our next question from Devin Ryan with citizens JMP. Please go ahead.

Unknown Executive: Good morning, Devin.

Devin Patrick Ryan: Good morning, Devin great good morning.

Unknown Executive: Great. Good morning, Ted. Good morning, Sharon.

Unknown Executive: A question just on trading. Obviously, results have just been incredibly resilient at a high level, and I know you all have spoken about both market share opportunities for Morgan Stanley, but then there's still this kind of expansion of the overall industry wallet. So I'd love to maybe just hit on that second point. And when you think about that wallet opportunity, the expansion of the wallet, what are some of the biggest opportunities in kind of the growth algorithm? Because I think a lot of us are sitting here saying that the results have been phenomenal. How can they continue to improve from here? Thanks.

Devin Patrick Ryan: A question just on trading obviously results have just been incredibly resilient at a high level and I know you all have spoken about the market share opportunities for Morgan Stanley. But then there is still this kind of expansion of the overall industry wallet. So loved it maybe just hit on that second point and when you think about that wallet.

Devin Patrick Ryan: Opportunity with the expansion of the wallet what are some of the biggest opportunities and kind of the growth algorithm. So I think a lot of us are sitting here, saying results have been phenomenal how can they continue to improve from here. Thanks.

Sharon Yeshaya: Sure, I'll take that. When you think about the expansion of the wallet and consider where we came from and where we are now, as more and more of the corporations and their coverage of the corporations is becoming more integrated, there are many solutions that a bank such as ourselves can offer. From a global perspective, if you think about where rates are as just a tangible example, interest rate hedging, that you can offer corporations as they think about transactions.

Speaker Change: Sure I'll take that one.

Speaker Change: When you think about the the expansion of the wallet and consider where we came from and where we are now as more and more of the corporations and coverage of the corporations is becoming more integrated there are many solutions that are banks such as ourselves can offer be that from a global perspective.

Speaker Change: If you think about where rates are is just a tangible example interest rate hedging that you can offer corporations as they think about transactions. There are different types of foreign exchange transactions that you could think about when you're looking at M&A or you are looking at other corporate deals that you have to do in house for a global franchise. So.

Sharon Yeshaya: There are different types of foreign exchange transactions that you could think about when you're looking at M&A or you're looking at other corporate deals that you have to do in-house for a global franchise. So there are corporate solutions that we expect to see growth in from a wallet perspective, and there's also financing where you have different types of markets and channels that are growing, private credit being an example. We're financing different assets by different types of sponsors, and these are places where we could see opportunities for wallet share growth more broadly.

Speaker Change: There are corporate solutions that you see we expect to see growth in from a wallet perspective, and there is also financing where you have different types of markets and channels that are growing private credit being an example, where financing different assets by different types of sponsors are places, where we could see.

Speaker Change: The opportunities for a wallet share growth more broadly.

Edward N. Pick: I think we're in the middle of the P ecosystem. With respect to M&A financing risk, if you ask a number of asset managers, both real money and alternative asset managers, they would say we are a partner of choice. So opportunity exists within credit, where there's a big focus on the financing side. It's obviously a stable revenue. And we're getting after some of the opportunities that lie across fixed income and inside of our new issue business to originate structure, finance credit, of course, a focus on private credit, and then in equities to continue to expand our prime brokerage capability and to build out derivatives. So this ecosystem around the financial sponsors who know our firm very well with all of the integrated firm capability is a space and a client base that we are focused on along with

Speaker Change: I'd add to that is.

Speaker Change: We're in the middle of the Pea ecosystem.

Speaker Change: With respect M&A financing risk.

Speaker Change: If you ask a number of the asset managers, both real money and alternative asset managers. They would say we are a partner of choice so opportunity exists within credit whether it's a big focus on the financing side. It's obviously stable revenue and we're getting after some of the opportunities lie across fixed income.

Speaker Change: And inside of our new issue business to originate structure finance credit.

Speaker Change: Of course, a focus on private credit and then in equities to continue to expand our prime brokerage capability to build out derivatives. So this ecosystem around the financial sponsors who know our firm very well.

Speaker Change: With all of our all of the integrated firm capability. This is a space and a client base that we're focused on along with of course.

Unknown Executive: Okay, terrific color. Thanks.

Speaker Change: Our leading strategic clients on the corporate side.

Speaker Change: Okay terrific color. Thanks.

Unknown Executive: And then a follow-up just on the debt capital markets outlook, obviously, a very strong quarter. We have heard a little bit about maybe some pull forward, just on the year, in terms of people front loading. And so just want to get a sense of whether you feel like that may play out as well for Morgan Stanley. And then, when you think about the pipeline for debt underwriting, I appreciate that deals come together quickly.

Speaker Change: And then a follow up just on the debt capital markets outlook, obviously very strong quarter, we have heard a little bit about maybe some pull forward just on the year in terms of People's front loading.

Speaker Change: Just want to get a sense, whether you feel like that played out as well for Morgan Stanley and then when you think about the pipeline for new debt underwriting I appreciate that deals come together quickly. So there is maybe not as much of a formal pipeline, but is the tone. There. Similarly strong as what youre seeing for M&A and equity underwriting and also appreciate there's probably some interconnected.

Unknown Executive: So there's maybe not as much of a formal pipeline, but the tone there is similarly strong as what you're seeing for M&A and equity underwriting. And I also appreciate there's probably some interconnectivity there as well. Thank you.

Speaker Change: <unk> there as well thank you.

Sharon Yeshaya: Yeah, I would I would put you on the same as you said there is interconnectivity. Remember that I think many of the peers have also mentioned there could have been some pull forward that you saw. It's also been a market that's been open over the course of the last two years. So I wouldn't I wouldn't draw the same parallel that you might have seen in M&A or in equity, where you had a real dearth of activity the last two years, but rather that market, especially in IG, has been relatively open. When you think about high yield and other non-IG kinds of concepts. And, of course, there are event-related transactions, but from an IG market, that market's been pretty open over the last two years.

Speaker Change: Yeah, I would I would point you to as you said there is interconnectivity remember that I think.

Speaker Change: Any of the peers have also mentioned there could have been some pull forward that you saw.

It's also been a market that's been open over the course of the last two years. So I wouldn't I don't I wouldn't draw. The same parallel that you might have seen an M&A or an equity where you had a real dearth of activity in the last two years, but rather that market, especially in AG has been relatively open when you think about high yield and.

Speaker Change: Other non <unk> kinds of concepts and of course, there is the event related transactions, but from an <unk> market that market has been well open over the last two years.

Sharon Yeshaya: We'll move to our next question from Gerard Cassidy with RBC. Your line is now open. Good morning.

Speaker Change: Well move to our next question from Gerard Cassidy with RBC. Your line is now good morning.

Gerard Sean Cassidy: Morning Gerard.

Gerard Sean Cassidy: Good morning, Gerard.

Gerard Sean Cassidy: Good morning, Thank you for taking the call.

Unknown Executive: Good morning, Ted. Thank you for taking the call.

Gerard Sean Cassidy: You had some very encouraging comments on the outlook for the capital markets, which is great.

Edward N. Pick: Ted, you had some very encouraging comments on the outlook for the capital markets, which is great. A question for you, you mentioned the high yield and leveraged loan market. You're starting to see event financing, which is good. But how is the competition from the private credit side? Because they have made inroads obviously in the last couple of years. Are you guys seeing that the traditional investment banks are getting some of that market share back?

Gerard Sean Cassidy: For you you mentioned about the high yield and leveraged loan market youre starting to see event financing.

Gerard Sean Cassidy: Good.

Gerard Sean Cassidy: How is the competition from the private credit side, because they have made inroads obviously in the last couple of years are you guys seeing that the traditional investment banks are.

Gerard Sean Cassidy: Again, some of that market share back.

Edward N. Pick: The competition is real, and uh... We all need to adapt to stay relevant in the ecosystem. I think there's going to be room for folks in the private space to participate in deals, but I certainly do not believe, as some seem to suggest, that the global investment banks will not have a large role to play as underwriters of securities and all the benefits that that brings to the issuer versus someone issuing private credit and potentially being the owner over time if things don't go well.

Speaker Change: The competition is real.

And.

Speaker Change: We we all need to adapt.

Speaker Change: Two to.

Speaker Change: To stay relevant in the ecosystem.

Speaker Change: I think theres going to be room for folks in the private space to participate in deals, but I certainly do not believe as some seem to suggest that.

Speaker Change: <unk>.

Speaker Change: Global investment banks will not have a large role to play as underwriters of securities.

Speaker Change: All of the benefits that that brings to the issuer versus somewhat issuing private.

Speaker Change: Credit and potentially being the owner over time, if things don't go well. So I think we're in a world where the.

Edward N. Pick: So I think we're in a world where the ecosystem will at times have many of the players acting as partners, sometimes will act as counterparties, and at times even competitors. But I think the ecosystem has more than enough room on a global basis for both the emerging private credit space and also the incumbents to continue to be able to do their thing.

Speaker Change: System will at times have.

Speaker Change: Many of the players acting as partners sometime.

Speaker Change: Sometimes we will act as Counterparties and at times, even competitors, but I think the ecosystem has more than enough room on a global basis for both the emerging private credit space, but also the incumbents to to continue to be able to do their thing.

Gerard Sean Cassidy: Very good. And as a quick follow-up to that, once again, your outlook is very encouraging. Ten years up again today, there's talk of it moving even higher. You know, the front end of the curve; there's talk about higher for longer. If we get into a really higher-for-longer rate environment, does that kind of weigh on some of the optimism of the outlook that you presented today, or no, does it really have a material impact on it?

Speaker Change: Very good and just as a quick follow up to that.

Speaker Change: Once again your outlook is very encouraging.

Speaker Change: 10 years up again today Theres talk of it moving even higher.

Speaker Change: End of the curve is talking about are higher for longer.

Speaker Change: If we get into a really higher for longer rate environment does that kind of weigh on some of the.

Speaker Change: Optimism of the outlook that you presented today or no. It doesn't really have a material impact on it. Thank you.

Edward N. Pick: Well, it's a great question. It depends on whether rates are higher because they are sustaining continued growth in the US or if they are higher for a period of time and are followed by a tough landing, in which case we are in recession, and clearly then things will slow down. I think our view is that the US economy continues to progress quite nicely, and that balance sheets amongst our client base are quite strong.

Speaker Change: <unk>.

Speaker Change: Well, it's a great question it depends on whether rates are higher because they are sustaining continued growth in the U S or if they are higher for a period of time and are followed by a tough landing in which case. We're in recession, clearly then things will slow.

Speaker Change: Down I think our view is that the U S economy continues to progress quite nicely.

Speaker Change: That balance sheets amongst our client base are quite strong.

Unknown Executive: Oluwadamilola

Unknown Executive: on the institutional side and on the wealth side and that there is plenty to do and that the higher rates that we see are in part, if not more than in part, dictated by a view that we continue to have some inflation and that the economy is in healthy shape and maybe asynchronously relative to other places in the world, but that again speaks to U.S. strength. As you know, first and foremost, we have our activity based in the U. So my bullishness is not a mark to market on any given week or month; it's a view that corporate boardrooms have been quiet for three, four years, and that is not sustainable.

Speaker Change: On the institutional side and on the wealth side and that there is plenty to do and that the higher rates that we see are in part if not more than in part dictated by a view that we continue to have some inflation and that the economy is in healthy shape and maybe.

Synchronously relative to other places in the world, but that again speaks to U S strength that as you know.

First and foremost we have are activity based in the U S. But over time, there will be strength in places again, like Japan, and Europe and then eventually in the China complex, where we will be busy too. So my bullishness is not a mark to market on any given week or month, it's a view that corporate board.

Speaker Change: Rooms have been quiet for three or four years and that is not sustainable they need to move they are ready to move for the pandemic and the pandemic came and then there were higher rates was higher rates seem to be well absorbed yes, now we need to have models that factor in appropriate cost of capital as we saw in prior regimes where cost of capital matter.

Edward N. Pick: They need to move. They were ready to move before the pandemic, then the pandemic came, and then there were higher rates. Those higher rates seem to be well absorbed.

Edward N. Pick: Yes, now we need to have models that factor in appropriate costs of capital, as we saw in prior regimes where costs of capital mattered, and now we're in a period that comes after financial repression where we'll have some inflation and some real rates, and companies and financial sponsors will adapt, and the strong companies will prosper. So we are setting up for that, which we believe will be a multi-year cycle. And I would say finally that what we're most excited about, of course, is the model that we are working with both the institutional community and our wealth management clients to adapt and optimize as we move into the next cycle.

Speaker Change: And now we're in a period that comes after financial repression, where we will have some inflation and some real rates and companies and financial sponsors will adapt and the strong companies will prosper. So we are setting up for that and we believe will be a.

Speaker Change: A multiyear cycle and I would say finally that what we're most excited about of course is the model that we are working with both the institutional community, but also our wealth management clients.

Speaker Change: Clients to adapt and to optimize as we move into the next cycle.

Unknown Executive: There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you, everyone, for participating. You may now disconnect.

Speaker Change: There are no further questions at this time.

Speaker Change: Ladies and gentlemen. This concludes today's conference call. Thank you everyone for participating you may now disconnect and have a great day.

Speaker Change: [music].