Q3 2024 Morgan Stanley Earnings Call

Unknown Executive: Thank you for joining the Morgan Stanley Ernie's conference. Please continue to stand by as we will be going live shortly.

Thank you for joining the Morgan Stanley Earnings Conference. Please continue to standby as we will be going live shortly.

[music].

Speaker Change: Good morning, welcome to Morgan Stanley's third quarter 2024 earnings call on behalf of Morgan Stanley I will begin the call with the following information and disclaimers.

Unknown Executive: Welcome to Morgan Stanley's third 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. During today's presentation, we will refer to our earnings release and financial supplement, copies of which are available at MorganStanley.com. Today's presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. 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.

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.

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.

Unknown Executive: This presentation may not be duplicated or reproduced without our consent.

Speaker Change: This presentation may not be duplicated or reproduced without our consent I will now turn the call over to Chief Executive Officer Ted pick.

Ted Pick: I will now turn the call over to Chief Executive Officer Ted Pick. Good morning, and thank you for joining us. In the third quarter, Morgan Stanley delivered strong revenues of 15.4 billion. Three billion of net income and a 17.5% return on tangible. The results reflect top line growth across our businesses and demonstrate operating leverage. Year-to-date results reflect the firm's ability to generate consistent quarterly performance. 15 billion of revenues, sequential EPS of 202, 182, and 188. And year-to-date returns on tangible of 18%. Across the firm, we advanced toward our strategic goals while continuing to invest in growth.

Ted Pick: Good morning, and thank you for joining us.

Ted Pick: In the third quarter Morgan Stanley delivered strong revenues of $15 4 billion three.

Ted Pick: <unk> 3 billion of net income and a 17, 5% return on tangible.

Ted Pick: The results reflect top line growth across our businesses and demonstrate operating leverage year to date results reflect the firm's ability to generate consistent quarterly performance 15 billion of revenues sequential EPS of two O to 182, and 188 and year to date returns.

Ted Pick: On tangible of 18%.

Ted Pick: Across the firm, we advanced toward our strategic goals, while continuing to invest in growth.

Ted Pick: We are delivering on asset aggregation by leveraging our unique platform and scale in wealth and investment management. To the first nine months, we achieved 200 billion of organic growth. It's worth noting that over the last year, total client assets are up almost 1.4 trillion. Total client assets across wealth and investment management have now reached 7.6 trillion on the road to 10 trillion. Our strategic investments across the Integrated Investment Bank are reflected to share gains in our institutional franchise. The breadth and depth of our global team working seamlessly across all three regions was evident through the summer and post-Labor Day.

Ted Pick: We're delivering on asset aggregation by leveraging our unique platform and scale in wealth and investment management.

Ted Pick: For the first nine months, we achieved 200 billion of organic growth.

Ted Pick: It's worth noting that over the last year total client assets are up almost one four trillion.

Ted Pick: Total client assets across wealth and investment management have now reached seven six trillion on the road to 10 trillion.

Ted Pick: Our strategic investments across the integrated investment bank are reflected through share gains in our institutional franchise, the breadth and depth of our global team working seamlessly across all three regions three regions was evident through the summer and post labor day, as we help clients navigate volatility against economic and policy uncertainty.

Ted Pick: As we help clients navigate volatility against economic and policy uncertainty. As a whole, the integrative firm is achieving operating leverage with their year-to-date efficiency ratio improving by approximately 300 basis points to 72%. We have achieved this while continuing to thoughtfully invest across business and infrastructure priorities. The strong performance and institutional securities speak to clients seeking Morgan Stanley's advice. Improved underwriting markets combined with increasing participation among financial sponsors and corporates across investment banking support a constructive outlook. A broadening equity market and evolving interest rate policy are favorable backdrops for our market businesses. Continued individual client focus on tax customization strategies are tailwind for our parametric business inside investment management.

As a whole the integrator firm is achieving operating leverage with our year to date efficiency ratio improving by approximately 300 basis points to 72%. We've achieved this while continuing to thoughtfully invest across business and infrastructure priorities.

Ted Pick: Institutional and individual clients are engaged and we are well positioned to capture opportunities against different market condition backdrops strong fee based flows in wealth and the strong performance in institutional securities speak to clients seeking Morgan Stanley's advice.

Ted Pick: The improved underwriting markets combined with increasing participation among financial sponsors and corporates across investment banking support a constructive outlook a bit.

Ted Pick: <unk> equity market and evolving interest rate policy are favorable backdrops for our markets businesses.

Continued individual client focus on tax customization strategies are a tailwind for our parametric business inside investment management.

Ted Pick: Now, with three quarters of 2024 on the board, we are striking a cadence that we will execute against. Our team is unified across the four pillars of strategy, culture, financial strength, and growth. Morgan Stanley's strategy is to raise, manage, and allocate capital for institutions and individuals. We will continue to execute on this strategy with a culture of rigor, humility, and partnership. And with high levels of capital and liquidity, Morgan Stanley will continue to execute on a plan of durable growth across our integrative firm.

Now with three quarters of 2024 on the board we are striking a cadence that we will execute against our team is unified across the four pillars of strategy.

Ted Pick: Culture financial strength and growth.

Morgan Stanley strategy is to raise manage and allocate capital for institutions and individuals.

We will continue to execute on this strategy with a culture of rigor humility and partnership and with high levels of capital and liquidity Morgan Stanley will continue to execute on our plan of durable growth across our integrated firm.

Unknown Executive: Jerome will now take us through the quarter. Nice job. That's why.

Speaker Change: Sharon, we'll now take us through the quarter nice job is y.

Jerome: Thank you and good morning. The firm produced revenues of 15.4 billion dollars in the third quarter. Our EPS was a dollar and 88 cents, and our ROTCE was 17.5%.

Sharon: Thank you and good morning.

Sharon: Foreign produced revenues of $15 $4 billion in the third quarter, our EPS was $1 88, and our Aro TCE was 17, 5%.

Jerome: Results in the third quarter show the inherent strengths of our business model and our ability to grow revenues while also driving profitability. The firm's year-to-date efficiency ratio was 72%. In addition to strong revenue growth, efficiency gains are the result of discipline, prioritization of our controllable spend. An ongoing review of our real estate footprint, as well as lower litigation and consulting spend, contributed to this year's operating leverage while maintaining strong infrastructure to support ongoing growth.

Sharon: Results in the third quarter show the inherent strengths of our business model.

Sharon: Our ability to grow revenues, while also driving profitability.

Sharon: The first of the year to date efficiency ratio was 72%. In addition to strong revenue growth efficiency gains are the result of disciplined prioritization of our controllable spend.

Sharon: Ongoing review of our real estate footprint as well as lower litigation and consulting spend contributed to this year's operating leverage while maintaining strong infrastructure to support ongoing growth.

Jerome: Now to the businesses. Institutional securities revenues were $6.8 billion. Now, with standing advisory and equity underwriting markets remaining below historical averages, the segments' revenues represented a near record third quarter. Performance accelerated towards the end of the quarter and was driven by the benefits of scale and the global reach of our integrated investment banks. Inc. Activity outside the U.S. drove the segments' out performance relative to historical averages. Our global footprint positioned us well to capture share. As risk events around the world drove activity, including the Bank of Japan's monetary policy changes, shifting expectations around the size and the timing of the Fed's first rate cut, and China's announced stimulus, we supported our clients.

Sharon: Now to the businesses.

Sharon: Institutional Securities revenues were $6 8 billion.

Sharon: Notwithstanding advisory and equity underwriting markets remaining below historical averages. This segment's revenues represented a near record third quarter.

Sharon: Performance accelerated towards the end of the quarter and was driven by the benefits of scale and the global reach of our integrated investment Bank.

Sharon: Activity outside the U S drove the segment's outperformance relative to historical averages our global footprint positions us well to capture share.

Sharon: As the risk events around the world drove activity, including the bank of Japan's monetary policy changes shifting expectations around the size and the timing of the fed's first rate cut and China's announced stimulus we supported our clients.

Jerome: Investment banking revenues increased to $1.5 billion. The year-over-year improvement was driven by continued strength and underwriting, led by debt underwriting, and further aided by a pickup in advisory revenues. Steady improvements incorporate and sponsor activity as well as our investments in talent and client relationships are yielding results. Advisory revenues of $546 million increased year-over-year on modestly higher completed M&A transactions in the quarter, with particular strength in AMIA. Large fee events from closed deals in AMIA, including those involving financial sponsors, supported the strongest quarter in over a decade for the region. Equity underwriting revenues were $362 million.

Sharon: Investment banking revenues increased to $1 5 billion.

Sharon: The year over year improvement was driven by continued strength in underwriting led by debt underwriting.

Sharon: And further aided by a pickup in advisory revenues.

Sharon: Improvements in corporate and sponsor activity as well as our investments in talent and client relationships are yielding results.

Sharon: Advisory revenues of $546 million increased year over year on modestly higher completed M&A transactions in the quarter with particular strength in EMEA.

Sharon: Large fee events from closed deals in EMEA, including those involving financial sponsors supported the strongest quarter in over a decade for the region.

Sharon: Equity underwriting revenues were $362 million, while global market volumes remain well below historical trend lines revenues were higher year over year with a notable pickup of activity in Asia, driven by Ipos and follow ons.

Jerome: While global market volumes remained well below historical trend lines, revenues were higher year-over-year, with a notable pickup of activity in Asia, driven by IPOs and follow-on. Fixed income underwriting revenues more than doubled versus the prior year to $555 million. Results were driven by strong non-investment grade issuance, supported by both refinancing and event-driven activity, as well as a record third quarter volumes in the investment grade market. Pipelines are healthy and diverse. We continue to believe we are in the early stages of a multi-year capital market's recovery. Corporate activity is gaining momentum, and the desire among sponsors to transact is steadily materializing, not only domestically, but also abroad.

Sharon: Fixed income underwriting revenues more than doubled versus the prior year to $555 million.

Results were driven by strong non investment grade issuance supported by both refinancing and event driven activity as well as a record third quarter volumes in the investment grade market.

Sharon: Pipelines are healthy and diverse we continue to believe we are in the early stages of a multiyear capital market's recovery corporate activity is gaining momentum and the desire amongst sponsors to transact is steadily materializing not only domestically, but also abroad.

Jerome: While we are cognizant of the broader macro-economic risks at play, we are well positioned to deliver the integrated firm with the deliberate focus on comprehensive solutions for our global clients. Equity revenues were robust at $3 billion. The business navigated bouts of market volatility well and remained nimble as we supported clients; in particular, performance in the Americas and Asia was strong. Prime brokerage revenues were above historical averages, as client balances once again reached a new peak, driven by higher equity markets. Cash results improved versus the prior year, reflecting higher volumes across the region. Derivative results were also up year over year, reflecting an increase in client activity, coupled with an improved trading environment in Asia, associated with China's announced stimulus in the final weeks of September.

Sharon: While we are cognizant of the broader macroeconomic risks at play we are well positioned to deliver the integrated firm with a deliberate focus on comprehensive solutions for our global clients.

Sharon: Equity revenues were robust at $3 billion, the business navigated bouts of market volatility well.

Sharon: And remain nimble as we supported clients in particular performance in the Americas and Asia was strong.

Sharon: Prime brokerage revenues were above historical averages as client balances once again reached a new peak driven by higher equity markets.

Sharon: Cash results improved versus the prior year, reflecting higher volumes across the region.

Sharon: Derivative results were also up year over year, reflecting an increase in client activity, coupled with an improved trading environment in Asia associated with China's announced stimulus in the final weeks of September.

Jerome: Fixed income revenues were $2 billion driven by strength and macro, particularly rates, largely offset by results in commodities that were stronger in the prior year. Results reflect solid performance in AMIA and Asia, as well as a coordinated global effort to support clients through periods of volatility. Macro revenues increased versus the prior year, attributed to higher client engagement as our rates business navigated the markets well amid shifting expectations around the size and the timing of the Fed's first rate cut. Macro results were roughly flat year over year. Results in commodities declined compared to the strong prior year, which benefited from elevated volatility in energy markets.

Sharon: Fixed income revenues were $2 billion driven by strength in macro, particularly rates largely offset by results in commodities that were stronger than the prior year.

Sharon: Results reflect solid performance in EMEA and Asia as well as a coordinated global effort to support clients through periods of volatility.

Sharon: Macro revenues increase versus the prior year attributed to higher client engagement as our rates business navigated the markets well amid shifting expectations around the size and the timing of the fed's first rate cut.

Sharon: Micro results were roughly flat year over year.

Sharon: Results in commodities declined compared to the strong prior year, which benefited from elevated volatility in energy markets.

Jerome: Turning to ISG lending and provisions, in the quarter ISG provisions were $68 million, driven by portfolio growth, partially offset by an improved outlook. Net charge-offs were $100 million in the commercial real estate and corporate loans.

Sharon: Turning to ISG lending in provision in the quarter ISG provisions were $68 million driven by portfolio growth, partially offset by an improved outlook net charge offs were $100 million in the commercial real estate and corporate loans.

Jerome: Turning to wealth management, in the third quarter the business produced a record revenue of $7.3 billion and record PBT, highlighting the model's strong operating leverage. Strength in wealth management reflects the combination of constructive markets and discipline, a disciplined execution of our strategy. Client assets in wealth management reached $6 trillion. Feed-based flows were strong, demonstrating the power of our scaled and differentiated client acquisition funnel and the value of advice. Our multi-channel model is driving durable long-term growth and profitability, benefiting from continued investments in our expanded offering and technology.

Sharon: Turning to wealth management.

Sharon: In the third quarter the business produced a record revenue of $7 3 billion and record PBT highlighting the models strong operating leverage strength in wealth management reflects a combination of constructive markets and disciplined a disciplined execution of our strategy.

Sharon: <unk> <unk>.

Sharon: Client assets in wealth management reached six trillion dollars.

Sharon: Fee based flows were strong demonstrating the power of our scale and differentiated client acquisition funnel.

Sharon: And the value of advice.

Sharon: Our multichannel model is driving durable long term growth and profitability benefiting from continued investments in our expanded offering and technology.

Jerome: Moving on to our business metrics. Pre-tax profits of $2.1 billion drove the margin to 28.3% in the quarter. DCP negatively impacted the margin by approximately 90 basis points. Asset management revenues were $4.3 billion, up 18% year over year driven by the cumulative impact of positive fee-based flows and higher markets. Feed-based flows in the quarter were robust at $36 billion, and year-to-date flows are on pace to exceed last year, supported by an ongoing contribution of assets from advisor-led brokerage accounts to fee-based accounts. Clients are diversifying fee-based accounts to include fixed income and alternative products. Feed-based assets now stand at $2.3 trillion.

Sharon: Moving onto our business metrics.

Sharon: Pre tax profit of $2 $1 billion drove the margin to 28, 3%.

In the quarter DCP negatively impacted the margin by approximately 90 basis points.

Sharon: Asset management revenues were $4 3 billion.

Sharon: Up 18% year over year, driven by the cumulative impact of positive fee based flows and higher markets.

Fee based flows in the quarter were robust.

Sharon: <unk> $36 billion.

Sharon: And year to date flows are on pace to exceed last year supported by an ongoing contribution of assets from advisor led brokerage accounts to fee based accounts clients are diversifying fee based accounts to include fixed income and alternative products.

Sharon: Fee based assets now stand at two three trillion.

Jerome: Net new assets were $64 billion, bringing year-to-date net new assets to $195 billion, which represents 5% annualized growth of beginning-period assets. Net new assets in the quarter were supported by our advisor-led and workplace channels, with a notable contribution from new clients in the advisor-led channel. Transactional revenues were $1.1 billion, and excluding the impact of DCP, were up 10% year over year. Overall, higher levels of client activities supported results.

Sharon: Net new assets were <unk> $64 billion, bringing year to date net new assets to 195 billion.

Sharon: Which represents 5% annualized growth of beginning period assets.

Sharon: Net new assets in the quarter were supported by our advisor led and workplace channels with a notable contribution from new clients in the advisor led channel.

Sharon: Transactional revenues were $1 $1 billion and excluding the impact of DCP were up 10% year over year.

Sharon: Overall higher levels of client activity supported results.

Jerome: Lone Growth was $4 billion for the second consecutive quarter, driven by mortgages. Total deposits increased sequentially to $358 billion. While average sweeps were down slightly, the recent stabilization, particularly, we've seen recent signs of stabilization, particularly as the Fed began cutting rates. This is encouraging. Net interest income was $1.8 billion.

Sharon: Loan growth was $4 billion for the second consecutive quarter driven by mortgages total deposits increased sequentially to $358 billion, while average sweeps were down slightly.

Recent stabilization, particularly we've seen recent signs of stabilization, particularly as the fed began cutting rates. This is encouraging.

Sharon: Net interest income was $1 8 billion looking ahead to the fourth quarter, we would expect NII to be modestly down from the third quarter results largely on the back of lower rate expectations consistent with the forward curve.

Jerome: Looking ahead to the fourth quarter, we would expect NII to be modestly down from the third quarter results, largely on the back of lower rate expectations, consistent with the forward curve. We are committed to continuing to execute as the opportunity in front of us remains significant. We currently touch 19 million relationships, 1.3 million more than last year. Our expanded offering includes unique market access for high net worth clients across a broad range of alternative products, and more recently robust private market services, which continues to attract demand. We are investing in our intellectual capital, unique products, and an integrated infrastructure to help our advisors serve their clients.

Sharon: We are committed to continuing to execute as the opportunity in front of us remains significant.

Sharon: We currently touch 19 million relationships, one 3 million more than last year.

Sharon: Our expanded offering includes unique market access for high net worth clients across a broad range of alternative products and more recently robust private market services.

Sharon: Which continues to attract demand.

Sharon: We are investing in our intellectual capital unique products and an integrated infrastructure to help our advisors serve their clients.

Jerome: Turning to investment management, revenues of $1.5 billion increased 9% compared to the prior year. Results reflect higher asset management and related fees, which increased 5% year-over-year, driven by higher average AUM. Long-term net flows were approximately $7 billion. Inflows were primarily driven by continued demand in alternatives and solutions, and were further supported by our fixed income strategies. Since the acquisition of Eat and Vance within alternatives and solutions, parametric customized portfolios have been a consistent source of strength. Our multi-year investments into investment management's partnership with Wealth Management includes initiatives around advisor education on our tax-efficient product capabilities.

Sharon: Turning to investment management revenues of $1 5 billion increased 9% compared to the prior year.

Sharon: <unk> reflect higher asset management and related fees, which increased 5% year over year, driven by higher average AUM.

Sharon: Long term net flows were approximately $7 billion.

Sharon: Inflows were primarily driven by continued demand in alternatives and solutions and were further supported by our fixed income strategies.

Sharon: Since the acquisition of Eaton Vance within alternatives and solutions parametric customized portfolios has been a consistent source of strength.

Sharon: Our multiyear investments into investment management partnership with wealth management includes initiatives around advisor education on our tax efficient product capabilities.

Jerome: This has helped drive steady demand from originating from our own Wealth Management clients as well as the broader retail base. Liquidity and overlay services had inflows of $9.3 billion, led by our parametric overlay strategies. Performance-based income and other revenues were $71 million. Results supported gains in infrastructure and real estate. And some total AUM now stands at $1.6 trillion. Our investments in customization and alternatives are showing returns demonstrated by positive long-term. We continue to invest in secular growth products in order to meet global client demand.

Sharon: This has helped drive steady demand from originating from our own wealth management clients as well as the broader retail base.

Sharon: Liquidity and overlay services had inflows of $9 3 billion led by our parametric overlay strategies.

Sharon: Performance based income and other revenues were $71 million results supported gains in infrastructure and real estate.

Sharon: <unk> total AUM now stands at one six trillion.

Sharon: Our investments in customization and alternatives are showing returns demonstrated by positive long term flows this quarter.

Sharon: We continue to invest in secular growth products in order to meet global client demand.

Jerome: Turning to the balance sheet, total spot assets grew to $1.3 trillion. Standardized RWA is increased sequentially to $490 billion as we actively supported clients. We have created approximately $2 billion of common Tier 1 capital. Our standardized CET-1 ratio stands at 15.1%.

Sharon: Turning to the balance sheet total spot assets grew to one three trillion.

Sharon: Standardized <unk> increased sequentially to $490 billion as we actively supported clients we.

We accreted approximately $2 billion of common tier one capital our standardized CET one ratio stands at 15, 1%.

Jerome: We continue to deliver on our commitment to the dividend, which we raised to $92.5 per quarter in this quarter, and we bought back $750 million of common stock during the quarter. Our year-to-date results serve as hard evidence that we are executing on the opportunity set, benefiting from being global and diversified with the resources to invest in growth. Across wealth and investment management, we reach $7.6 trillion of total client assets. Expanding markets and increased client engagement should further support asset growth as we progress toward $10 trillion in client assets.

Sharon: We continue to deliver on our commitment to the dividend, which we raised to $92.05 per quarter in this quarter and we bought back $750 million of common stock during the quarter.

Sharon: Our year to date results serve as hard evidence that we are executing on the opportunity side benefiting from being global and diversified with the resources to invest in growth.

Sharon: Across wealth and investment management, we reached seven six trillion of total client assets.

Sharon: Expanding markets and increased client engagement should further support asset growth as we progress towards 10 trillion and client assets with that we will now open the line up to questions.

Unknown Executive: With that, we will now open the line up to questions. We are now ready to take in questions. To get in the queue, you may press star and the number one on your touch-tone 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 touch-tone telephone. You are allowed to ask one question and one follow-up; then we'll move to the next person in the queue. Please stand by while we compile the Q&A roster.

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: You're allowed to ask one question and one follow up and then we'll move to the next person in the queue.

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

Stephen Chubach: We'll take our first question from Stephen Chubach with Wolf Research. Hi, good morning. Hey, good morning.

Speaker Change: We will take our first question from Steven <unk> with Wolfe Research.

Speaker Change: Hi, good morning.

Speaker Change: Hey, good morning, Joe Good morning, Steve.

Stephen Chubach: So, good morning, Steve. Ted, hey, Sharon, how are you both doing?

Speaker Change: Okay sure on how or how are you doing so wanted to start off with just a quick question on.

Stephen Chubach: So, one of the start-off with just a question on up leverage. You noted that the management team has been very focused on driving more efficiency. We're definitely seeing now on the ISG side, 75% incremental margins; even in wealth, you're delivering 35% incremental margins.

Speaker Change: Op leverage.

Speaker Change: You noted that.

Speaker Change: The management team has been very focused on.

Speaker Change: Driving more efficiency and we're definitely seeing now on the ISG side, 75% incremental margins, even in well if youre delivering 35% incremental margins just wanted to gauge the sustainability.

Sharon Yeshaya: Just wanted to gauge the sustainability of some of those higher marginal margins, just given some of the efforts you cited on the efficiency side while continuing to invest for growth.

Speaker Change: Some of those higher marginal margin just given some of the efforts you cited on the efficiency side, while continuing to invest for growth.

Sharon Yeshaya: Certainly. Thank you for the question, and thank you for noting the progress. We have been really focused on this over the course of the year, and I'd say that it's not; the intention has not been to be short-sighted, but rather to take a very long-term lens as we think about efficiency.

Speaker Change: Certainly thank you for the question and thank you for noting the progress.

Speaker Change: We have been really focused on this over the course of the year and I would say that it's not the intention has not been to be shortsighted, but rather to take a very long term lens as we think about efficiency over the course of this spring we began to look not only at one year budgets, but really.

Sharon Yeshaya: Over the course of this spring, we began to look not only at one-year budgets, but really two to three-year outlooks, not just about revenues, but also understanding where are the efficiencies that we have to gain, and where can we consolidate certain investments in order to make room for what would be investments in growth. I highlighted occupancy because that's one that's very notable in the SEC disclosures. You'll see that over the course of a year-to-date, a year-to-date basis. That line item has really only increased about $11 million. We've made a lot of room to invest in optimization of the space, but also investments of space.

Speaker Change: Two to three year outlooks, not just about revenues, but also understanding where are the efficiencies that we have to gain and where can we consolidate certain investments in order to make room for what would be investments in growth I highlighted occupancy because thats one thats very notable in the SEC disclosures you'll see.

Speaker Change: Over the course of the year to date to year to date basis. So that line item has really only increased about $11 million and we've made a lot of room to invest in optimization of the space, but also investments of space do you think about data centers do you think about new buildings, you think about new technology and new places that you think need to be.

Sharon Yeshaya: You think about data centers, you think about new buildings, you think about new technology, and new places that you think need to be used for occupancy.

Speaker Change: He used for occupancy. So there is a way that we're thinking about self funding same goes for a decline in professional services. Some of that was related to remember we were going through many years of integration and while we stopped disclosing on an integration basis. There were still places that we thought that we could augment what we were looking at from a P.

Sharon Yeshaya: There is a way that we're thinking about self-funding. Same goes for decline in professional services. Some of that was related to, remember, we were going through many years of integration, and while we stopped disclosing on an integration basis, there were still places that we thought that we could augment what we were looking at from a professional service basis, and where we were thinking about long-term gains. On the other side of that, you've seen increases in places like BCNE because we have been in a position where we've been supporting our clients. We're also making space investing in the infrastructure as we think about the growth that we have going forward.

Speaker Change: Professional service basis, and where we were thinking about long term gains on the other side of that you've seen increases in places like <unk>, because we have been in a position where we've been supporting our clients. We're also making space investing in the infrastructure as we think about the growth that we have going forward some of that.

Sharon Yeshaya: Some of that just has to do with cyber, resilience, thing that you would expect us to do as we grow the business going forward. We're also looking at places where we're investing for our phase, new products, new technology that can give them space to go and prosecute new clients, which you see in our net new assets, of course, the course of the quarter. Broadly, as you think about risk and controls, you need to make sure that you have all of the right, like I said, infrastructure, really the foundation and the building blocks so that when you have growth, you're able to support it on a go-forward basis.

Speaker Change: It just has to do with cyber resilience thing that you would expect us to do as we grow the business going forward, but we're also looking at places where we're investing for a phase new products, new technology that can give them space to go and prosecute new clients, which you see in our net new asked.

Speaker Change: <unk> of course.

Speaker Change: The course of the quarter and broadly as you think about risk and controls you need to make sure that you have all of the right like I said infrastructure really the foundation and the building blocks. So that when you have growth youre able to support it on a go forward basis. So we've been looking at it from both sides Steve.

Sharon Yeshaya: We've been looking at it from both sides, Steve, and it is a multi-year process, and we would continue to do that not just in this business cycle and this budget cycle, but as we go forward over multiple years.

Speaker Change: And it is a multiyear process and we would continue to do that not just in this business cycle in this budget cycle, but as we go forward over multiple years.

Stephen Chubach: No, thanks for all that perspective, Sharon. And maybe just for a quick follow-up on the wealth business, the KPIs were quite strong across the board; this clearly reflects very strong momentum in the third quarter, especially in September.

Steve: No. Thanks for all that perspective, Sharon and maybe just for a quick follow up.

Speaker Change: On the wealth business.

Speaker Change: The Kpis were quite strong across the board clearly reflects a very strong momentum in the third quarter, especially in September.

Sharon Yeshaya: Just wanted to better understand what, if there were any idiosyncratic factors that maybe drove some of that strength. Inevitably, when you see that type of momentum, it begs the question as to how durable or sustainable some of those KPIs might be, and especially focused on just the growth in sweet deposits, which was certainly an eye-surprise. Yeah, you know, specifically, I say actually all the KPIs and all the underlying is strong. Sweeps being one that I called out as the deposit trends are certainly encouraging, especially since the Fed began to cut rates. We've seen that over the back end of September and even as we look into the beginning of the fourth quarter, on a relative basis in terms of expectations.

Speaker Change: Just wanted to better understand what if there were any idiosyncratic factors that maybe drove some of that strength.

Speaker Change: When you see that type of momentum back.

Speaker Change: Thanks for the question as to how durable are sustainable some of those kpis might be especially focused on just the growth in sweep deposits, which was certainly a nice surprise.

Yeah.

Speaker Change: Specifically I would say actually all the kpis and all the underlying is strong.

Speaker Change: Sweeps being one that I called out.

Speaker Change: The deposit trends are certainly encouraging, especially since the fed began to cut rates, we've seen that over the back end of September and even as we look into the beginning of the fourth quarter on a relative basis in terms of expectations. So that has been positive the underlying for me on all of the asset growth.

Sharon Yeshaya: So that has been positive. The underlying for me on all of the asset growth, both on NNA, as well as fee-based assets, there's not one particular driver, but rather you've seen the advice base side really picking up. You've seen clients and FAs engage. There continues to be investments into markets on a monthly level from brokerage, from brokerage sweeps, which you didn't see last year. So needless to say, the markets are improving. You're seeing momentum in the economy.

Speaker Change: Those on M&A as well as fee based assets Theres not one one particular driver, but rather you have seen the advice space side really picking up you're seeing clients and Fas engage there continues to be investments into markets on a monthly level from brokerage from brokerage suites.

Speaker Change: Which you didn't see last year, so needless to say the markets are improving youre seeing momentum in the economy uncertainties are lifting and retail clients are engaged both from seeking advice, but also coming to the platform as new clients, which I think is particularly good trend to watch.

Sharon Yeshaya: Uncertainties are lifting, and retail clients are engaged both from seeking advice, but also coming to the platform as new clients, which I think is a particularly good trend to watch.

Ibrahim Poonawala: Our next question comes from the line of Ibrahim Punowala with Bank of America.

Speaker Change: Our next question comes from the line of Ebrahim, Pune Waller with Bank of America.

Ibrahim Poonawala: Ibrahim. A good morning.

Speaker Change: Abraham.

Ebrahim: Hey, good morning.

Ibrahim Poonawala: I guess maybe just a first question on capital priorities. Just talk to us in terms of how you're thinking about the capital ratio today. In context of we are still waiting for the Basel reproposal.

Ebrahim: I guess, maybe just.

First question on <unk>.

Speaker Change: Capital priorities, just talk to us in terms of how you're thinking about the capital ratio today.

Speaker Change: In context of we are still waiting for the Basel III proposal, but more importantly, I think the history of the last 10 years has been.

Sharon Yeshaya: But more importantly, I think the history of the last 10 years has been excellent capital allocation, organic or inorganic. As you're looking at the world-predated, where are you deploying capital, and where are the best investment opportunities? If it's in market, it's in international. We'd love to get your perspective.

Speaker Change: Excellent capital allocation organic or inorganic as youre looking at the world created whether you're deploying capital where are the best investment opportunities, we've had in market and relative to the international would love to get your perspective.

Sharon Yeshaya: Thanks for the question. As you know, we're at 151 CT1. The new number is 135. So our buffer is 160 basis points. We like that buffer. It gives us room to operate. You saw that we had some risk-weighted asset increase, but we still managed to keep the ratios at 15 percent plus.

Speaker Change: Thanks for the question as you know we're at 15, one CET one.

Speaker Change: The new number is 13 five so our buffer is 160 basis points. We liked that buffer gives us room to operate you saw that we had some our risk weighted asset increase but we still managed to keep the ratio is at 15% plus so there is a.

Sharon Yeshaya: So there's a story here which is to continue to prize best-in-class financial strength along the lines of capital liquidity, but also to lean into the businesses as the market opportunity of Ford. We did that clearly in both businesses. You saw it in the investment bank where we gain share across the primary and both markets businesses, but you also saw it in wealth management, some of the technology spend that Jerome describes.

Speaker Change: Story here, which is too.

Speaker Change: <unk> continued to.

Speaker Change: <unk>.

Speaker Change: And class financial strength, along the lines of capital liquidity, but also to lean into the businesses.

Speaker Change: As the market opportunity affords we did that clearly in both businesses you saw it in the investment bank, where we gained share across the primary and both markets businesses, but you also saw in wealth management and some of the technology spend that Sharon described in the.

Sharon Yeshaya: In the sort of forced hierarchy of what we would wish to do at any given moment around capital allocation, as we said before, it's the dividend first. That is Sacre-Santhan. We continue to grow it. Second here, because of the secular growth and where we are in the cycle, as Jerome just described, there is a good cause to be investing in all three segments: wealth management, investment management, and the investment bank. And to do so across the world, we're clearly seeing rates of equitization increasing in places like Japan and India and on the continent. So having a global franchise and investing that we think is existentially important.

Speaker Change: Forrest hierarchy.

Speaker Change: What we would wish to do at any given moment around capital allocation.

As we've said before is the dividend first that is sacrosanct and we continue to grow it.

Speaker Change: And here because of the secular growth and where we are in the cycle as Sharon just described there is good cause to be investing in all three segments.

Wealth management investment management, and the investment bank and to do so.

Speaker Change: That's the world, we're clearly seeing a rates of equitation, increasing in places like Japan, and India and on the continent, So having a global franchise and investing that we think is X essentially important and then the buyback is is opportunistic we'll be buying back.

Sharon Yeshaya: And then the buyback is opportunistic. We'll have an ongoing lever that we're going to pull. Of course, the Basel uncertainty likely lasts through the election. And we have our points of advocacy that are aligned with the industry, but also those things that matter very much to Morgan Stanley specifically. And we're going to continue to make our case concertedly, respectfully. And we'll see how it plays out to have the election. But as it stands now, 160 basis points of buffer on CT1, 5.5% SLR. We are investing in the business; we're achieving operating leverage. So these things are always a movable feast, but we are keeping a very close eye on it, and we're happy with how we're optimizing the allocate.

Speaker Change: $3 billion plus this year, so it's an ongoing.

Speaker Change: And ongoing lever that we're going to poll of course, Boswell uncertainty likely last through the election, and we have our points of advocacy that are.

Speaker Change: Aligned with the industry, but also those are those things that matter very much to Morgan Stanley specifically and we're going to continue to make our case concertedly respectfully and we'll see how it plays out after the election, but as it stands now.

Speaker Change: 160 basis points of buffer on CET, 155% SLR.

We are investing in the business, we're achieving operating leverage.

Speaker Change: So these things are always a movable feast, but we are keeping a very close eye on it and we're happy with how.

Speaker Change: How we're optimizing the allocation.

Sharon Yeshaya: Gordon, and one quick follow-up for you, Sharon, on sweep deposit, NII, all that good stuff. Just as we think about rate cuts, clients kind of maybe serving a figure event for clients to reallocate how they invest, is the NII give or take close to a bottom because of a certain level of sort of, I think you've talked in the past about cash balances that clients have maintained, are we close to that? And if we get QT maybe before the end of the year, could those deported balances potentially have one less headwind and as a result, we're looking into next year despite rate cuts.

Speaker Change: Got it and one quick follow up for you Sharon on.

Speaker Change: <unk> deposits and I all the good stuff just as we think about red cards clients kind of maybe building a good event for clients to reallocate how they invest.

Speaker Change: Yes.

Speaker Change: Is the NII give or take close to a bottom because of a certain level of sort of how you think you've talked in the past about cash.

Speaker Change: Cash balances declined to maintain close to that and if we get <unk>, maybe before the end of the year could those deposit balances potentially have one less headwind and as a result.

Speaker Change: Looking into next year despite Jacobs.

Sharon Yeshaya: Sure, so let me take the last part of your question first. Just to be clear, QT hasn't really been a driver for us; I'd say that's more for a commercial bank. So in neither direction was, I don't think it has to do with the decline or an increase. So I'd put that aside because our deposit base is just slightly different. When we look at where we've been and the types of language that we've used historically, I'd say that, just to put it in context, the rate environment has changed since the second quarter, and I'd say it's changed pretty materially.

Speaker Change: Sure. So let me take the last part of your question first just to be clear Qt Hasnt really been a driver for us I'd say, that's more for a commercial bank so in either direction.

Speaker Change: I don't think it has to do with the decline or an increase so I put that aside because our deposit base is just slightly different.

Speaker Change: When we look at where we've been in the types of language that we've used historically I would say that just to put it in context.

Speaker Change: The rate environment has changed has changed since the second quarter and I would say it's changed pretty materially. So we don't have control as we all know in terms of where interest rates are going what I can speak to is where we are from a deposit level and as I said the trends that we've seen are extremely encouraging if you think about where we've come from.

Sharon Yeshaya: So we don't have control, as we all know, in terms of where interest rates are going. What I can speak to is where we are from a deposit level, and as I said, the trends that we've seen are extremely encouraging if you think about where we've come from and where we are over the course of the last couple of weeks, especially whenever since the Fed has cut interest rates. The near term guidance that I gave is that we will likely be modestly down over the course on a quarter or quarter basis and where we will be as we look into 2025, I think we will reevaluate based on where sweeps are, but more importantly, on the four word is likely where interest rates are, which will be a function of what does the Fed do in November, what does it do in December, and what is the path for 25 when we sit at the beginning of January.

Speaker Change: And where we are over the course of the last couple of weeks, especially where when the fed ever since the fed has cut interest rates.

Speaker Change: Near term guidance I gave is that we will likely be modestly down over the course on a quarter over quarter basis, and where we will be as we look into 2025, I think we will reevaluate based on where sweeps are one but more importantly on the forward is likely where interest rates are which will be a function of what does.

Speaker Change: The fed due in November what does it do in December and what is the path for 25, when we set at the beginning of January but I, just want to put a little bit of perspective around the conversations that we've had about suites in NII over the course of the last couple of years I understand that it's been a very important topic for investors.

Sharon Yeshaya: But I just want to put a little bit of perspective around the conversations that we've had about sweeps and NII over the course of the last couple of years. I understand that it's been a very important topic for investors, especially when you think about sweeps in particular, but sweeps, as I said, have been, to some degree, stabilizing. And when you look at NII for Morgan Stanley on a relative basis, think about where we were last year in the third quarter. The delta between NII this quarter and last quarter is $175 million. We make $100 million a day in this business every single day.

Speaker Change: <unk>, especially when you think about sweeps in particular, but sweeps as I said have been to some degree stabilizing and when you look at NII for Morgan Stanley on a relative basis think about where we were last year in the third quarter. The delta between NII this quarter and last quarter.

Speaker Change: Is $175 million, we make $100 million a day in this business every single day, and so I think that we really need to begin to think about what is the model. What are we thinking about and how are we executing in the model asset management fee based revenue.

Sharon Yeshaya: And so I think that we really need to begin to think about what is the model, what are we thinking about, and how are we executing in the model. Ascent management, fee-based revenues, that increase this year is double the decline of NII. So we just need to gain a bit of perspective now that we see where sweeps are, that the markets are coming back, and that we continue to see asset management fees rise.

Speaker Change: Is that increase this year is double the decline of NII. So we just need to gain a bit of perspective, now that we see where sweeps or that the markets are coming back and that we continue to see asset management fees rise and that is the durable revenue and what we expect to see from this business model as we move forward.

Sharon Yeshaya: And that is the durable revenue, and what we expect to see from this business model as we move forward.

Glenn Schorr: Our next question. Christian comes from Glenn Schorr with Evercore. Hey Glenn.

Speaker Change: Our next question comes from Glenn Schorr with Evercore.

Speaker Change: Hey, Glenn.

Glenn Schorr: Hello there. Okay, so with RWA up 10%, I had assumed that it was trading and client led with PV balances at record highs, and it comes with a bar that's actually down a little bit. So I'm curious, do you think that capital plan continues to feed this great client franchise across markets? And I'll just ask the follow up with it because I think it goes together better. With all of that, wealth and wealth hasn't, now that you've made a lot of investments, wealth doesn't need a lot more capital infusion, if you will.

Glenn Schorr: Hello there.

Glenn Schorr: Okay, so with our Wi up 10% I would assume that it was trading in client led with PV balances at record highs.

Glenn Schorr: And it comes with a bar, that's actually down a little bit so.

Glenn Schorr: I'm curious do you think that ebbs and flows with just the environment.

Glenn Schorr: Or is there some of the your capital plan continues.

Glenn Schorr: To see this great client franchise across markets.

Speaker Change: And I'll just ask a follow up with it because I think it goes together better.

Speaker Change: With all of that wealth and well.

Speaker Change: Now that you've made a lot of investments wealth doesn't need a lot more capital infusion if you will.

Sharon Yeshaya: Based on how you're going about your capital plan, do you envision any material shifts in literally business mix? You know, we've gotten all very custom and used to a big percentage of this company being asset wealth management. Thanks for both of those.

Speaker Change: Based on how you're going about your capital plan do you envision any material shifts in it.

Speaker Change: In literally business mix.

Got an all very custom and used to have a big percentage of this company being asset and wealth management.

Speaker Change: For sure let me take let me take them backwards, Glenn just so I'll talk to well well see the steady.

Sharon Yeshaya: Sure. Let me take, let me take them backwards, Glenn, just so I'll talk to wealth. Well sees a steady, you know, a very small but steady increase when you look back in history, associated with RWA's, and a lot of that is just has to do with the lending growth. And as we think about greater household penetration, greater usage of those products by FAs and offering that to our client base, that's kind of where you'll see that capital allocation as we move forward. When you think about ISG though, and the RWA's has been implemented in the business there, if you look at the loans and lending commitments, you'll see that where we've actually seen a lot of the growth is really on corporates.

Speaker Change: A very small but steady increase when you look back in history associated with RW is and a lot of that is just has to do with the lending growth and as we think about greater household penetration greater usage of those products.

Speaker Change: Assays and offering that to our client base that will probably that's kind of where youll see that capital allocation as we move forward. When you think about ISG, though and the <unk> has been implemented in the business. There. If you look at the loans and lending commitments Youll see that where we've actually seen a lot of the growth is really on corporate.

Speaker Change: <unk>.

Sharon Yeshaya: And a lot of that underlying is corporates and all of the FSL, so the FIDS secured lending. That is inherent to the integrated investment bank and the integrated firm. We've said over the course of the last two years that we expect this to be an investment banking-led recovery. We've also said, and we've invested in individuals, and when you think about talent in terms of the investment bank more broadly, that's where you're seeing the RWA's being put to work. And that's actually also where you're seeing the results. That's where you're seeing an increase in DCM, an increase in different parts of the balance of fixed income coming from more lending durable financing revenue.

Speaker Change: And a lot of that underlying is corporate and.

Speaker Change: All of the <unk>. So the FID secured lending that is inherent to the integrated investment bank and the integrated firm. We've said over the course of the last two years that we expect this to be a investment banking led recovery. We've also said and we've invested in individuals and when you think about.

Speaker Change: <unk>.

Speaker Change: Talent in terms of the investment bank more broadly, that's where you're seeing the <unk> being put to work and Thats actually also where youre seeing the results right. That's what you are seeing an increase in DCM and increase in different parts of.

Speaker Change: The balance of fixed income coming from more lending durable financing revenue. So it's very much alongside.

Sharon Yeshaya: So it's very much alongside what we're thinking about the stabilization and the durability of the investment bank, rather than something that's necessarily more episodic. Of course, it will ebb and flow as you see deals and transactions and that environment for those corporates. But that's how I would think about it broadly.

Speaker Change: What we're thinking about the stabilization and the durability of the investment bank rather than something that is necessarily more episodic of course, it will ebb and flow as you see deals and transactions and that.

Speaker Change: Environment for those corporates, but thats, how I would think about it broadly what I'd add to that is what is.

Sharon Yeshaya: What I'd add to that is what is important to, as you look through the metrics, Glenn, is that the revenues in the investment bank are up 20% year over year and roughly flat, down 2% sequentially. But in that same period, the trading bar, the value of risk across the investment bank is running flatish. And that is, in fact, it's slightly down. So we were able to put up some real operating leverage without taking up the underlying measured risk in the business, which speaks to sort of the type of durable revenue model that Sharon described across our integrated investment.

Speaker Change: Important too as you look through the the metrics Glenn is that the revenues in the investment bank are up 20%.

Speaker Change: Year over year and.

Speaker Change: Roughly flat down 2% sequentially, but in that same period, the trading bar the value at risk.

Speaker Change: Across the investment bank.

Speaker Change: Is running flattish.

Speaker Change: And that is in fact, it's slightly down so we were able to put up some real operating leverage without taking up the underlying measured risks in the business, which speaks to sort of the type of durable revenue model that Sharon described across.

Speaker Change: Our integrated investment bank.

Devin Ryan: Devin Ryan. Our next question comes from Devin Ryan with Citizens JMP. Hi, Devin. Hey, good morning, Ted and Sharon.

Speaker Change: Our next question comes from Devin Ryan with citizens JMP.

Speaker Change: Hi, Devin.

Devin Ryan: Hey, good morning, Scott and Sharon.

Sharon Yeshaya: The first question on NII in wealth, obviously a lot goes into that, but it would be great if you could maybe speak to some of the second-order impacts of lower interest rates we should be thinking about and maybe some that are a little bit less obvious, like changes in margin utilization or securities lending or securities-based loans or even customer engagement with certain types of products or really anything else I'm missing there. I just would love to kind of get some more flavor around the implications and how you guys are thinking about the second order impacts on NII as you look out over the next year or so.

Devin Ryan: First question on.

Devin Ryan: NII in wealth, obviously, a lot goes into that but it'd be great. If you could maybe speak to some of the second order impacts of lower interest rates, we should be thinking about maybe some that are a little bit less obvious what changes in margin utilization or securities lending securities based loans or even customer engagement with certain types of products are really any.

Devin Ryan: I would just love to kind of give some more flavor around the implications and how you guys are thinking about the second order impacts on NII as you look out over the next year or so.

Sharon Yeshaya: Yeah, we continue. As I mentioned, this is the second quarter that we've seen on loan growth. I wouldn't; you know, we've seen stronger quarters. So this is just the beginning. Basically, there's been a steady increase in mortgages, even though there's a rate high cycle where it is and the rates were higher. And over time, as rates would come down, you'd expect to begin to see refinancing activity, which will spur lending. You'll also likely see, as you get into tax cycles with asset levels where they are. An increase also in SBL. So there's those lending products have been relatively muted versus the historical basis.

Devin Ryan: Yeah, we continue as I mentioned is the second quarter that we've seen loan growth.

Devin Ryan: We've seen stronger quarters.

Speaker Change: So this is just the beginning basically there has been a steady increase in mortgages, even though that the rate high tech or where it is and the rates were higher and over time as rates would come down you would expect to begin to see refinancing activity, which will spur lending youll also likely see as you get into tax cycles with.

Speaker Change: Asset levels, where they are an increase also in SDL. So there is that.

Speaker Change: Those lending products have been relatively muted versus the historical basis and you it wouldn't be surprising to begin to see more and more of that activity on the forward.

Sharon Yeshaya: And it wouldn't be surprising to begin to see more and more of that activity on the foreword. Okay.

Speaker Change: Okay, great. Thanks, Ron and then just want to come back to the really nice quarter, you put up in net new assets in wealth and you touched on it.

Devin Ryan: Great. Thanks, Sharon. And then I just want to come back to the really nice quarter. You put up in net new assets and wealth, and you touched on a notable contribution from new clients in the advisor lead.

Speaker Change: A notable contribution from new clients and advisor widen so im just curious if theres anything else you can highlight that supported that momentum with new clients, specifically, whether it's new products or programs internally that youre running to support that because it sounds like.

Sharon Yeshaya: And so I'm just curious if there's anything else you can highlight that supported that momentum with new clients specifically, whether it's new products or if there were programs internally that you're running to support that because it's like, you know, it was a catalyst and just curious if that could continue. Sure. So specifically on new clients, Devon, I'd remind you of a conversation that Jed had when he spoke publicly recently, which was really about what we're doing on stock plan and different ways that we're introducing FAs to new clients. We call them, you know, human referrals.

Speaker Change: It was a catalyst so just curious if that could continue.

Sure so on specifically on new clients Devin.

Speaker Change: Remind you a conversation that <unk> had when he spoke publicly recently, which was really about what we're doing on stock plan and different ways that we're introducing fas to new clients, we call them human referrals. It's a place where you begin to think about if someone's calling for example into a call center.

Sharon Yeshaya: It's a place where you begin to think about if someone's calling, for example, into a call center or they've come to a different event and they'd like to actually be matched with a financial advisor. Remember, we're using technology, different parts of AI and different ways to begin to appropriately match individuals with FAs; we think we'll suit them. Those human referrals are double and over 100,000 year-to-date versus what you've seen in the past. So I think that that's a place where we've invested in technology. We understand now how to better match and understand individuals and their needs, and we're giving them an opportunity to see the value of advice on the forward.

Speaker Change: Or they've come to a different event and they'd like to actually be matched with a financial advisor remember, we're using technology different parts of AI and different ways to begin to appropriately match individuals with Fas. We think we will see that those human referrals are double in over 100000.

Speaker Change: Year to date versus what you've seen in the past. So I think that that's a place where we've invested in technology, we understand how to better match and understand individuals and their needs and we're giving them an opportunity to see the value of advice on the forward and thats, what youre seeing in those numbers in terms of the net.

Sharon Yeshaya: And that's what you're seeing in those numbers in terms of the net new assets. So it's really bearing fruit in terms of the investments we've made.

Speaker Change: New assets, so it's really bearing fruit in terms of the investments we've made.

Dan Fannon: Our next question comes from Dan Fanon with Jeffries. Morning, Dan. Hey, good morning.

Speaker Change: Our next question comes from Dan Fannon with Jefferies.

Speaker Change: Good morning, Dan.

Dan Fannon: Hey, good morning, I was hoping you could expand upon some of the strength of activity outside the U S. Some of the events you cited some country specific but can you talk to how you see the rest of the world participating in what you guys have said will be an investment banking recovery and certainly the U S is focused in terms of the potential cap markets will probably but.

Dan Fannon: Let's hope that you could expand upon some of the strengths of activity outside the US. You know, some of the events you cited seem, you know, country specific, but can you talk to how you see the rest of the world, you know, participating in what you guys have said will be an investment banking recovery. And certainly, we know the US is focused in terms of the potential cat market recovery, but curious is how you think about the broader, you know, based outside. U.S.

Speaker Change: Curious as how you think about the broader base.

Speaker Change: Base outside the U S.

Ted Pick: The Integrated Investment Bank premise that we built over the last 10 years and really intensified over the last five years was that it takes a real local commitment to have a global investment bank. We've made real investments on the continent, for example, in Iberia, in Italy, in France. We continue to be the largest presence actually as tenancy matter in Canary Wharf, so in the UK, so our European commitment is real across both investment banking and increasingly in the markets business. That's in the investment bank, but also we have a thriving investment management business, LPs who are well-scanced on the continent, and we're building that integrated capability with alternative solutions and the like.

Speaker Change: The integrated investment bank premise that we built over the last.

Speaker Change: 10 years, and really intensified over the last five years was that it takes a real local commitment to have a global investment bank. We've made real investments on the continent for example, in Iberia, and Italy, and France, we continue to be.

<unk>.

Speaker Change: The largest presence actually has tendency matter in Canary wharf. So in the UK. So our European commitment is real across both investment banking and increasingly in the markets business.

Speaker Change: In the investment bank, but also we have a thriving investment management business Lps, who are our well cost on the continent, and we're building that integrated capability with alternative solutions and the like.

Ted Pick: We have been strong, as you know, in Asia for really decades, and that spoke to the power of a global investment banking institution that when we had disruptive events, I Sharon alluded to in Tokyo, and then in China in the last couple of months leading into this quarter, it was important that we have a leading investment banking and markets presence both in Japan and in Hong Kong and mainland. So here the seamless execution will pay off as cross-border M&A intensifies as parts of the world outside of the US, where of course we have our concentrated bet as a regional matter.

Speaker Change: We have been strong as you know in Asia for <unk>.

Speaker Change: Really our decades and that.

Speaker Change: Spoke to the power of a global investment banking institution that when we had our disruptive events Sharon alluded too in Tokyo and then in.

Speaker Change: In China.

Speaker Change: In the last couple of months leading into this quarter. It was important that we have.

Speaker Change: Leading investment banking and markets presence, both in Japan, and in Hong Kong and mainland so here the.

Speaker Change: Seamless execution will pay off as as cross border M&A intensifies as parts of the world outside of the U S where of course, we have our concentrated bet as regional matter to the point you were asking you see good growth in revenue.

Ted Pick: To the point you were asking, you see good growth in revenues in both in Asia and in Europe. You saw your year-to-year growth of almost 25% for the firm in AMIA, Europe, Middle East, Africa, and then 30% plus in Asia. That speaks to having a local presence such that when the investment banking cycle really kicks in and companies wish to engage in strategic activity, which includes obviously getting bigger or making a sale, and potentially go public locally, that we are going to have the kind of presence to transact. So running the global investment bank is going to pay for years to come.

Speaker Change: Who's in both in Asia and in Europe.

Speaker Change: You saw.

Speaker Change: Year over year growth.

Speaker Change: Almost 25% for.

Speaker Change: For the firm in EMEA, Europe, Middle East Africa, and then 30% plus in Asia that speaks to having a local presence such that when the investment banking cycle really kicks in and companies wish to engage in strategic activity, which includes obviously getting bigger or making a <unk>.

Speaker Change: Rail.

Speaker Change: And <unk>.

Speaker Change: Potentially go public locally that were going to have the kind of presence to to transact so running the global investment bank.

Speaker Change: Is going to pay for free.

Speaker Change: For years to come.

Ted Pick: And I would add, by the way, that an important part, culturally, of what we've done at Morgan Stanley for many years, which is bearing fruit, is to mobilize some of our senior talent from one region to another, not just across businesses, but across regions, which is important when you have 30 of your 80,000 people outside the United States, that they're familiar with our operations in places like India and Budapest.

Speaker Change: And I would add by the way that important part culturally of what we've done at Morgan Stanley for many years, which is bearing fruit is to mobilize some of our senior talent from one region to another not just across businesses, but across regions, which is important when you have 30 of your 80000 people out.

Speaker Change: The United States that they are familiar with our operations in places like India and Budapest.

Speaker Change: Okay.

Ted Pick: Great, that's helpful.

Speaker Change: Great. That's helpful. And then just as a follow up within investment management longer term inflows certainly a positive but if we look at the backdrop markets were up significantly year to date revenues have moved modestly but still have expense and so as you think about the asset makes sense coming in the door thats skewed more towards lower fee.

Sharon Yeshaya: And it just is a follow-up with an investment management, longer in-term inflows, certainly a positive, but if we look at the backdrop, markets are up significantly year-to-date. Revenues have moved modestly but still have expenses. So, as you think about the asset mix that's coming in the door that's skewed more towards lower fee, whether that's within Parametric or fixed income, how do you expect or how do you plan on improving the overall profitability of that segment as you think about the longer-term trends that are putting more pressure on?

Speaker Change: Whether that's within parametric with fixed income how do you expect or how do you plan on improving the overall profitability of <unk>.

Speaker Change: That segment as you think about the longer term trends that are putting more pressure on fees.

Sharon Yeshaya: I'll take that. So you're right to identify that there is a mixed shift as we're seeing different types of flows. I'd also note, though, there are also investments being made when you think about to see expenses to help make sure that we're there to service the clients in terms of where we're seeing the secular growth trends. So it's an asset story on parametric. It's an asset story on alternatives. We're investing in both. Both of those are places we see secular growth trends, and we're making sure to be there with for our clients. Now, alternatives is going to be higher fees, just basically private credit, etc.

Speaker Change: I'll take that so you're right to identify that there is a mix shift as were seeing.

Speaker Change: Different types of flows I'd also note, though that there are also investments being made when you think about just the expenses to help make sure that we're there to service our clients in terms of where we're seeing the secular growth trends. So.

Speaker Change: It's an asset story.

Speaker Change: Parametric, it's an asset story on alternatives, we're investing in both both of those are places, we see secular growth trends and we're making sure to be there for our clients now are alternatives is going to be higher fees as basic private credit et cetera will be higher fees than you might see in parametric that being said I.

Sharon Yeshaya: will be higher fees than you might see in Parametric. That being said, I don't see it simply as a fee sort of game, but rather the greater the assets, the more opportunity and the more to be the leader in the space and to continue to attract new capital to seek new opportunities.

Speaker Change: Don't see it simply as a fee sort of game, but rather the greater the assets the more opportunity and more to be the leader in the space and to continue to attract new capital to seek new opportunities. So overall I see it more as a as a strategy associated with asset building aggregation.

Sharon Yeshaya: So overall, I see it more as a strategy associated with asset building, aggregation, and being there to service our clients, but also making sure that we have the capital there to invest. So things like parametric, you're going to need to spend money on more market data. You're going to need to build relationships with wealth.

Speaker Change: And being there to service our clients, but also making sure that we have the capital there to invest so things like parametric youre going to need to spend money on more market data youre going to need to build relationships with wealth.

Sharon Yeshaya: And that's going to cost money on the margin in the short term, but it will give us the opportunity for growth as we move forward over the long term.

Speaker Change: And thats going to cost money on the margin in the short term, but it will give us the opportunity for growth as we move forward over the long term.

Brennan Hawken: Our next question comes from Brennan Hawking with UBS. Morning, Brennan. Hey Ted, good morning.

Speaker Change: Our next question comes from Brennan Hawken with UBS.

Brennan Hawken: Morning, Brian.

Brennan Hawken: Hey, Ted good morning.

Brennan Hawken: All right, so I'm willing to risk the wrath of Sharon here and ask her a question on NII. Well, I totally appreciate it's just a part of the wealth business, right? So totally get that. But I thought it was really encouraging to see the end of period deposit costs tick down pretty decently, quarter to quarter. So maybe is that driven by the fact that you've seen a lot of those deposits shift into like the higher costs and therefore higher beta products? And so, you know, would that be sustainable? And then, you know, when we're thinking about a combination of, you know, that the fact of higher beta.

Brennan Hawken: Alright, so I'm willing to risk the Ras wrath of Sharon here.

Brennan Hawken: Quick question on NII.

Brennan Hawken: And.

Speaker Change: I totally appreciate it is just a part of the wealth business right. So so so totally get that but I thought it was really encouraging to see the end of period deposit costs ticked down pretty decently quarter over quarter.

Speaker Change: So maybe.

Speaker Change: Is that driven by the fact that you've seen a lot of those deposits shift until like the higher cost and therefore higher beta products and so.

Speaker Change: Would that be sustainable and then when we're thinking about a combination of that the facto higher beta.

Sharon Yeshaya: The potential for reinvestment tailwinds in the securities book and loan growth. Is it too optimistic to think that NII could grow next year?

Speaker Change: The potential for reinvestment tail winds in the Securities book and loan growth is it too optimistic to think that.

Speaker Change: I could grow next year.

Sharon Yeshaya: So thank you, Brennan. I appreciate that you do understand the business, and you do understand that there are multiple drivers of this business. I think what you're hitting on is that there are a lot of places that you can still see grows that is not specific only to the deposit mix. So yes, it's encouraging to see certain pieces. Now, of course, you also have a Fed rate cut in there. So that will continue to bring, you know, the cost of certain types of deposits. You think about the beta. The beta will really depend, like you alluded to, also on products.

Speaker Change: So thank you Brian I appreciate that you do understand the business and you do understand that there are multiple drivers of this business I think what you're hitting on is that there are a lot of places that you can still see growth that is not specific only to the deposit mix. So yes, it's encouraging to see certain pieces. Now of course, you also had a fed rate cut in there.

Speaker Change: That will continue to bring the cost of certain types of deposits you think about the beta the beta will really depend like you alluded to also on products.

Sharon Yeshaya: So things like a savings product will have a much higher beta than something like a sleep product, which will have a much lower beta. They just, you know, they're two different products with two different purposes in terms of the dynamics of what they're used for. Now, on the forward, it will, of course, depend on the Fed rate path. There are so many changes that have taken place over the course of the last quarter that make it very difficult to say, well, where will the Fed be and where will be those investment opportunities. So where I would sort of point to is there are three pieces that we've always talked about that will drive the NII.

Speaker Change: So things like a savings product will have a much higher beta than something like a sweeps product, which will have a much lower beta. They just they are two different products with two different purposes in terms of the dynamics of what they're used for now on the forward. It will of course depend on the fed rate path. There are so many changes that have taken place.

Speaker Change: Over the course of the last quarter that make it very difficult to say, well where will the F&B and where will be those investment opportunities. So we're I would sort of point to is there are three pieces that we've always talked about that will drive the NII two of them are encouraging that.

Sharon Yeshaya: Two of them are encouraging. That's the growth on the asset side in terms of where you're seeing us being able to actually deploy the capital, where you're seeing people ask for lending opportunities, etc. It's growing. It's encouraging sweeps what we know and what we've seen, especially since the first rate cut is also very encouraging. Particularly, as historically, if you look back, and I said this in the last quarter call, generally speaking, when you begin to see interest rate cuts, you do begin to see different parts of deposits rise. So, again, an encouraging side. Where will it be when you think about reinvestment and the rest of NII.

Speaker Change: The growth on the asset side in terms of where you are seeing us being able to actually deploy the capital where youre seeing people ask for lending opportunities et cetera, it's growing it's encouraging sweeps, what we know and what we've seen especially since the first rate cut is.

Speaker Change: Also very encouraging, particularly as historically, if you look back and I said this in the last quarter call generally speaking when you begin to see interest rate cuts you do begin to see different parts of deposits rise. So again, an encouraging side, where will it be when you think about reinvestment and the rest of NII that in and of itself is really.

Sharon Yeshaya: That in and of itself is really the Fed, and if we go back a quarter ago, no one, you know, it was a very low probability to see a 50 basis point rate cut, and lo and behold, we have one.

The fed and if we go back a quarter ago, knowing it was a very low probability to see a 50 basis point rate cut and Lo and Behold. We had won so why don't we see where we are after the November and December meetings, and then re stay kind of where we think will be over the course of the year just from a rate perspective, but.

Sharon Yeshaya: So, why don't we see where we are after the November and December meetings and then re-state kind of where we think will be over the course of the year just from a rate perspective. But those three building blocks, you know what they are and you know that the two that are under our control, or they have to do sort of, I wouldn't say under our control, but rather have to do with what our clients are doing. I've told you what I'm seeing from that. Howard Ada, and it's all possible. Okay. Totally.

Speaker Change: Those three building blocks you know what they are and you know that the two that are under our control or they have to do sort of I wouldn't say under our control, but rather has to do with what our clients are doing I've told you what I'm seeing from our data.

Speaker Change: And it's all part okay.

Totally.

Sharon Yeshaya: That's that's helpful.

Sharon Yeshaya: Thanks, Ron.

Speaker Change: It's helpful. Thanks, Sharon.

Sharon Yeshaya: And then for the fall of maybe shifting gears a little bit, you spoke to sponsor engagement. You know, we've seen some sponsors actually start to hit the IPO market.

Speaker Change: And then for the follow up maybe shifting gears, a little bit you spoke to sponsor engagement.

Speaker Change: We've seen some sponsors actually start to hit the IPO market.

Ted Pick: You know, given your strength in ECM and the strong franchise you have there, what are you seeing on the IPO pipeline front and how should we be thinking about that outlook into next year? Well, as you know, the sponsors have roughly a trillion three of dry powder. They have three to four trillion of portfolio companies in the ground by some measures, 10,000 companies in the ground. And for the first time in close to 15 years there, the deployment is outpacing the fundraising. So there is a need for that group to move. And they act as a liquidity source, but they also act as a competitive player to our traditional corporate community.

Speaker Change: Given your strength.

Speaker Change: In ECM and the strong franchise you have there what are you seeing on the IPO pipeline front and how should we be thinking about that outlook into next year.

Speaker Change: Well as you know the sponsors have.

Speaker Change: Roughly a trillion three of dry powder.

Have.

Speaker Change: Three to four trillion of portfolio companies in the ground by some measures 10000 companies in the ground and for the first time in close to 15 years there the.

Speaker Change: The deployment is outpacing the fundraising so there is a need for that group to move and they act as a.

Speaker Change: Yes.

Speaker Change: Liquidity source, but they also act as a competitive player to our traditional corporate community.

Ted Pick: I think much has been set about the barriers to entry to be a highly regulated Starbucks public company. But I would take the view that there are a whole bunch of great companies that are owned privately that do want to make their way into the public markets. That currency allows them to make acquisitions to set up long term compensation plans and the like to go global. So what I'd expect to see are larger companies going public, having been private for some time, reaching a level that makes them a tougher sale on the private front. There are private alternatives, but the going public phenomenon is not going away.

Speaker Change: I think.

Speaker Change: Much has been said about the barriers to entry to be a.

Speaker Change: Highly regulated SAR box public company, but I would take the view that.

Speaker Change: There are a whole bunch of great companies that are owned privately that do want to make their way into the public markets that currency allows them to make acquisitions too.

Speaker Change: To set up long term compensation plans and the like to go global So what I'd expect to see our larger companies going public having been private for some time, reaching a level that makes them a tougher sale on the private front.

Speaker Change: There are private.

Speaker Change: Alternatives, but the going public phenomenon is not going away and I made reference to this earlier I think there is a going public phenomenon that will exist around the world, whether it's select countries doing privatizations, whether it's exciting companies that for the first time our reach.

Ted Pick: And I made reference to this earlier; I think there is a going public phenomenon that will exist around the world, whether it's select countries doing privatizations, or whether it's exciting companies that for the first time are reaching global benchmarks. So I think we're going to see the IPO market slowly work its way back, larger names coming to market. And then when they do quite quickly needing the full service suite of a global investment bank, needing the treasury capabilities, needing hedging services, needing the kind of advice that a mid or large cap mature company needs. And that, of course, on a global scale, is right in our suite spot.

Speaker Change: <unk> global benchmarks. So I think we're going to see the IPO market slowly work its way back larger names coming to market and then when they do quite quickly needing the full service suite of a global investment bank need.

Speaker Change: Needing.

Speaker Change: The treasury capabilities needing hedging services needing the kind of advice that a mid or large cap mature company needs and that of course on a global scale is right in our sweet spot. So I'm I'm bullish on Ipos and M&A coming back it may take some time and <unk>.

Ted Pick: So I'm bullish on IPOs and M&A coming back. It may take some time, and the size of the companies when they come will be likely larger, so they'll be slower unit volume than the sort of the heyday of post-COVID stimulus and quick listings. But I think these are going to be global mature companies, which are going to very much need our advice.

Speaker Change: These are the companies when they come will be likely larger so there'll be slower unit volume than the sort of the.

Speaker Change: The heyday of post Covid.

Speaker Change: Stimulus and quick listings, but I think these are going to be a global mature companies, which youre going to very much need our advice.

Christian Bolu: Our next question comes from Christian Bolew with a ton- Moanie Christian, Moanie, Tedesirone, on wealth management. Really nice to see solid loan growth in the last two quarters. I'm just thinking a little bit looking forward here as rates come down. Kind of how are you thinking about maybe longer term growth? Do you think a loan growth can maybe reactivate back to pre-COVID levels where we've seen 20 plus percent growth per year, or is that business more mature today with less growth upside?

Speaker Change: Our next question comes from Christian <unk> with autonomous.

Speaker Change: Morning Christian.

Good morning, Sharon.

Speaker Change: On wealth management would be nice to see solid loan growth in the last two quarters.

Speaker Change: Just thinking looking forward here as rates come down that's kind of how you're thinking about maybe longer term growth do you think loan growth.

Speaker Change: Excellent read back to pre Covid levels, we've seen.

Speaker Change: Plus percent growth per year or is that business more mature today with less upside.

Sharon Yeshaya: No, I actually; thank you for the question. I don't think that it's more mature with less upside. I actually think there's more upside to go when you think about the penetration of FAs using those products. So we used to be sort of in the low double digits in terms of that penetration that moved up to somewhere in the teens. But we do think that there's opportunity to surpass that higher. And if you look sort of at peers, even in similar kinds of channels, so not lending through a commercial bank, but more on the wealth side, those numbers are higher.

Speaker Change: No I actually thank you for the question I don't I don't think that it's more mature with less upside I actually think there's more upside to go when you think about the penetration of Fas using those products. So we used to be sort of in the low double digits in terms of that penetration that's moved up to somewhere in the <unk>.

Speaker Change: <unk>.

Speaker Change: We do think that there is opportunity to surpass that.

Speaker Change: Higher and if you look sort of at peers, even in similar kinds of channels, so not lending through our commercial bank, but more on the wealth side. Those numbers are higher. So there are certainly opportunities there Christian so that's why I appreciate you asking the question.

Sharon Yeshaya: So there are certainly opportunities there, Christian. So that's why I appreciate you asking the question. I wouldn't say it's not just on the mortgage side; that certainly can come back. But SBLs have been relatively flat, and it's not surprising. We've talked a lot about the uses of those lines. And especially if rates are low, thinking about how to use those lines to pay taxes, for example, and think about what you're doing from an efficiency perspective with your portfolio as an individual investor.

Speaker Change: I wouldn't say, it's not just on the mortgage side that certainly can come back, but spl's have been relatively flat and its not surprising we've talked a lot about.

Uses of those lines and especially if rates are low and thinking about how to use those lines to pay taxes. For example, and think about what youre doing from an efficiency perspective with your portfolio as an individual investor.

Sharon Yeshaya: Okay, very helpful. Thanks.

Speaker Change: Okay very helpful. Thanks.

Sharon Yeshaya: Maybe one more deposit. Well, I'm going to deposit. Again, I appreciate this is maybe a smaller issue now and fading away. But how are you thinking about just the philosophy around deposit pricing within wealth management, you know, given some of the SEC scrutiny. And then, you know, maybe any data you can provide around how much of the street cash is in the advisory related assets.

Speaker Change: Maybe one more on deposits.

Speaker Change: Deposit again I appreciate this isn't Bbs smaller issue now leading the way but.

Speaker Change: How are you thinking about just the philosophy around deposit pricing within wealth management, given some of the SEC scrutiny.

And then.

Speaker Change: Maybe.

Speaker Change: Any data you can provide around how much of this cash is at the advisory.

Speaker Change: Good assets.

Sharon Yeshaya: Sure.

Speaker Change: Sure. So why don't we just take it to sort of I guess together, but answer it slightly backwards, which as we talked about different pricing changes and last quarter. We also said that that was a small portion in terms of where the changes or going to be made.

Sharon Yeshaya: So why don't we just I'll take it to sort of I guess together, but answer it slightly backwards, which is we talked about different pricing changes, and last quarter we also said that that was a small portion in terms of where the changes are going to be made. So it's small. It's in the run rate. You saw it over the course of the quarter, and it was in the results. When we think about deposit pricing, we take a number of factors into consideration. And one of the most important factors that we highlighted last quarter, and we've been looking at even through this cutting cycle or competitive dynamics and where competitive pricing is.

Speaker Change: So it's small it's in the run rate you saw over the course of the quarter and it was in our results. When we think about deposit pricing, we take a number of factors into consideration.

Speaker Change: One of the most important factors that we highlighted last quarter and we've been looking at even through this cutting cycle, our competitive dynamics and where competitive pricing is so that it's the market and it's also competition, it's the need for deposits and its where that is on a relative value perspective.

Sharon Yeshaya: So that's it's the market, and it's also competition. It's the need for deposits, and it's where that is on a relative value perspective. So all of those things that include the customer as well.

Speaker Change: So all of those things that include the customer as well.

Gerard Cassidy: Our next question comes from Gerard Cassidy with RBC. Morning, Gerard. Gerard, I didn't; I sure am. In your primary remarks, you guys talked about your prime brokerage revenues or historical above historical averages, this client's balance, this reached new peak. Thanks. Can you share with us how much of that is I'm driven by just existing clients or also, you know, you're expanding, you know, your client base where you're growing that as well. Can you compare the two areas of driving these numbers?

Speaker Change: Our next question comes from Gerard Cassidy with RBC.

Speaker Change: Good morning Gerard.

Speaker Change: Sure.

Gerard Cassidy: In your prepared remarks, you guys talked about your.

Gerard Cassidy: Prime brokerage revenues are at a historical above historical averages as client balances reached new peaks can you share with us.

Gerard Cassidy: How much of that is driven by just existing clients or also.

Gerard Cassidy: Our expanding client base, where youre growing that as well can you compare the two areas of driving these numbers.

Ted Pick: Well, I think the question is an interesting one because the barriers to entry to scaling a new as a manager are quite high. But we host, as you're aware, our cap intro conference every January down in Breakers. Have done that for decades and continue to draw enormous demand to try to get a slot because once you've made it, the platform economics of success and your ability to penetrate various distribution channels enables you to get big, quite, quite quickly.

Speaker Change: Well I think the.

Speaker Change: The question is an interesting one because the barriers to entry to scaling a new asset manager are quite high, but we host as Youre aware.

Speaker Change: Our cap intro conference every January down in breakers have done that for decades and continue to draw enormous demand to try to get a slot because once you've made it the platform economics of success and your ability to penetrate various distribution channels enables you to get.

Speaker Change: Be quite quite quickly so it's sort of tough to sort of tough to make it but once you have made it you can really scale into a large institution are by and large though the growth that we've seen across equities to hit the $3 billion Mark over the last couple of quarters <unk> seen has not been.

Ted Pick: So sort of tough to sort of tough to make it. But once you've made it, you can really scale into a large institution. By and large, though the growth that we've seen across equities to hit the $3 billion mark over the last couple of quarters you've seen has not been consuming additional var, is just staying close to our clients. These results indicate that we've increased wallet with predominantly the existing base. We've done that around the world, and the leverage levels for a lot of these clients in the client and platform space are actually running close to the typical range for that subgroup.

Speaker Change: Assuming additional vars, just staying close to our clients.

Speaker Change: These results indicate that we increased wallet with <unk>.

Speaker Change: Predominantly the existing base, we've done that around the world and the leverage levels for a lot of these clients in the Quant and platform space are actually running close to the typical range for that subgroup. So we've been able to interact with them in a productive way across not just prime brokerage but.

Ted Pick: So we've been able to interact with them in a productive way across not just prime brokerage, but cash and derivatives too. And then, importantly, across the markets business. So this is part of this integrated investment bank philosophy that you can have folks that are traditional players in one pocket moving across the assets spectrum, and the leadership in the markets business has done a great job facilitated that not just across underliers. But as I mentioned in the past quarter across regions and to extent that there are spinouts or others.

Cash and derivatives too and then importantly across the markets business. So this is part of.

Speaker Change: This integrated investment bank philosophy that you can have folks that are traditional players in one pocket moving across the asset spectrum in the leadership in the markets business has done a great job facilitated that not just across underlies, but as I mentioned in the past quarter across.

Speaker Change: Across regions and to the extent that there are spinouts or others, we have a vibrant business now in the middle East too.

Ted Pick: We have a vibrant business now in the Middle East too in Abu Dhabi and in Scandinavia in Copenhagen. Those are the two offices we recently opened, and I mentioned them because they are not just great possible for investment banking and for our investment management business, but they're also very interesting for our markets business too.

Abu Dhabi and in Scandinavia in Copenhagen, those are the two.

Speaker Change: Offices, we recently opened and I mentioned them because they are not just great possibles for investment banking and for our investment management business, but they're also very interesting for our markets business too.

Gerard Cassidy: Very helpful. Thank you.

Speaker Change: Very helpful. Thank you and then just as a quick follow up.

Gerard Cassidy: And then just as a quick follow-up, I always appreciate your guys' insights and others that really don't have big exposures to credit.

Speaker Change: I appreciate your guys' insights and others that really don't have big exposures to credit and so you mentioned that you had charge offs of $100 million in commercial real estate and corporate loans can you give us any color again.

Jerome: And so you mentioned that you had charged us of 100 million in commercial real estate and corporate loans. Can you give us any color again? You're not a big lender like a JP Morgan or a Bank America. So insights from folks like you I think are very helpful. Any color here? Sure, those are largely provisioned for, and so I think what you've seen is that it's almost as though some of the credit changes have been working themselves through the market. If you look back over the course of the last two years, we've had a lot of conversations.

Speaker Change: You are not a big lender like a Jpmorgan bank of America. So insights from folks like you I think a very helpful any color here.

Speaker Change: Sure.

Largely provisioned for and so I think what <unk> seen is that it's almost as though.

Speaker Change: Some of the credit changes have been working themselves through the market. If you look back over the course of the last two years, we've had a lot of conversations Gerard specifically talking about CRE, you've had some great questions as it relates to that space.

Jerome: We've had some great questions as it relates to that space. We saw that that was happening.

Speaker Change: We saw that that was happening we provision for it and over time, you will see that likely come through on the other side as charge offs and that's kind of where we are at this point in the cycle.

Jerome: We provisioned for it, and over time you will see that likely come through on the other side as charge-offs, and that's kind of where we are at this point. Cycle.

Mike Mayo: We'll take our next question from Mike Mayo with Wells Fargo. Morning, Mike. Hey, morning. Early you talked about, you know, your tech efforts.

Speaker Change: We will take our next question from Mike Mayo with Wells Fargo.

Speaker Change: Good morning, Mike.

Mike Mayo: Good morning, Earl you talked about.

Mike Mayo: Your tech.

Mike Mayo: Efforts.

Mike Mayo: And so Ted, as you think about AI, is Morgan Stanley a leader or a close follower? You wait for others to do it.

Speaker Change: And so Ken as you think about AI.

Speaker Change: This is Morgan Stanley a leader or a close follower you wait for others to do it.

Mike Mayo: And then, more specifically, what's going on with your partnership with OpenAI? I see a quote here from Morgan Stanley. OpenAI and perhaps the best example to date of empowering Morgan Stanley with the marriage of human advice and technology. I think you're unique in using OpenAI.

Speaker Change: And then more specifically what's going on with your partnership with open AI I see a quote here from Morgan Stanley Open AI at perhaps the Best example to date of empowering Morgan Stanley with the marriage of human and device and technology and I think you're unique in using open AI. If any color you can provide would be great.

Ted Pick: If any color, you can provide, it would be great.

Ted Pick: Sure, I'll take it because we continue to do work with OpenAI.

Speaker Change: Sure I'll take it because we continue to do.

Speaker Change: Work with open AI in terms of where we are overall on the technology side, Mike you saw a lot of our products.

Ted Pick: In terms of where we are overall on the technology side, Mike, you saw a lot of our products very early, say almost 10 years ago, at this point in time, when we did our first tech expo, and we looked at tools that we were using AI and different types of machine learning, etc. to give our advisors tools to give them more time to prospect business. As it relates specifically to that partnership, that partnership is going extremely well. We continue to look at new platforms and new applications that we can use with them. And there are new places that we're using AI that we've launched and we've discussed over the course of the last two quarters or so.

Speaker Change: Very early saved almost 10 years ago at this point in time, when we did our first pack Expo and we looked at tools that we were using.

Speaker Change: AI and different types of machine learning et cetera to give our advisors tools to give them more time to prospect business as it relates specifically to that partnership that partnership is going extremely well, we continue to look at new platforms and new applications that we can use with them.

Speaker Change: And there are new places that we're using AI that we've launched we've discussed over the course of the last two quarters or so one as we've obviously do have a tool where <unk> can use and speak to our research portal so to speak and understand and AI will basically read everything and then can help you answer.

Ted Pick: One, as we've obviously do have a tool where FAs can use and speak to our research portal, so to speak, and understand that AI will basically read everything and then can help you answer different questions associated with what's already been published in terms of that volume of data. In addition to that, as we've moved forward, we can have tools like debrief where an individual, of course, gaining permission in a meeting, can use what they've heard in a meeting through AI, translate languages, etc. Summarize, and then be able to send out emails as follow-ups based on the conversations had in those meetings with a draft.

Speaker Change: Different questions associated with what's already been published in terms of that volume of data. In addition to that as we move forward. We can have tools like debrief, where an individual of course, gaining permission in a meeting can use what they have heard in our meetings through AI translate languages.

Speaker Change: <unk> et cetera, summarize and then be able to send out E. Mails as follow ups based on the conversations had in those meetings with a draft obviously human interaction after in a human overlay, but just gives you the bare bones again to save time for the advisors as we move forward.

Ted Pick: Obviously, you have human interaction after in a human overlay, but just gives you the bare bones again to save time for the advisors as we move forward. We're doing that across the institution in different pockets and spaces as part of the, if we think back to the efficiency work that we started to call with. There will be places where we can use AI to also think through efficiencies. So it's a balance of understanding where to invest and then how to use that to gain time back from a productivity standpoint as we move forward.

Speaker Change: Doing that across the institution in different pockets in spaces as part of the if we think back to the efficiency work that we started this call with there will be places, where we can use AI to also think through efficiencies. So it's a balance of understanding where to invest and then how to use that to gain time back.

Speaker Change: From a productivity standpoint, as we move forward and I also like the I like the question because it suggests that they are going to be opportunities, where being a SaaS followers, just fine where you can take.

Ted Pick: And I also like the question because it suggests that there are going to be opportunities where being a fast follower is just fine, where you can take existing capability and make the digitalization process easier on a street cost effectiveness play, where to Sharon's Commons, where we are really digging in as a call of proprietary matter is around the productive efficiency inside of wealth management. This entire, we call it, aims, as you know, AI Morgan Stanley, the AI Morgan Stanley Assistant is just the first chapter of what we're going to do across the financial advisor platform, specific to our own offering with clients where we think we're going to have some real life.

Speaker Change: Existing capability and and make the.

Speaker Change: The digitization process easier on a street cost effectiveness play where to Sharon's comments, where we are really digging in as a I'll call. It proprietary matter is around the productive efficiency inside of wealth management. This entire we call. It aims as you know AI of Morgan Stanley.

Speaker Change: Stanley The AI Morgan Stanley Assistant is just the first chapter of what we're going to do across the financial adviser platform specific to our own offering with clients, where we think we're going to have some real edge.

Ted Pick: Edge.

Ted Pick: You say it's the first chapter; what just I know it's just looking forward, but what could be some other chapters as relate to AI. At our place. Well, it's going to be a tool, at the very least, that is going to help inform that phase on what is relevant at any given moment. Under any different, any given paradigm, they are going to have access to information across a whole bunch of data sets, ongoing conversations and interactions that are going to allow for crisper and more effective conversations with their clients. I think that will take us some time to play out, but when you think about it, extraordinarily effective in terms of the interactions.

Speaker Change: You say, it's the first chapter of what just I know this is.

Speaker Change: Looking forward, but what could be some other chapters as it relates to AI.

Speaker Change: At our place.

Speaker Change: Well, it's it's going to be a tool at the very least that is going to help and form.

Speaker Change: Days on what is relevant at any given moment.

Speaker Change: Under any different any given paradigm.

Speaker Change: They are going to have access to information across a whole bunch of data sets ongoing conversations and interactions that are going to allow for crisper and more effective conversations with their clients I think that will take us some time to play out but.

Speaker Change: When you think about it extraordinarily effective in terms of the interactions when there will be high.

Ted Pick: When there will be heightened proclivity to activity between the client and the FA, whether it's around an exogenous event or a life event for the FA to be well equipped to know what types of products and services might be available down the road is something that we think will be part of the embedded offering.

Speaker Change: Eitan.

Eitan: Proclivity to activity between the client and the FAA, whether it's around an exogenous event or a life event for the FAA to be well equipped to know what types of products and services might be available down. The road is something that we think will be part of the embedded offering.

Speaker Change: Yeah.

Saul Martinez: We'll take our last questions from Saul Martinez with HSBC. Good morning. You've had pretty sustained good fee-based asset flows for some time now, and maybe this quarter was a little bit outside.

Speaker Change: We will take our last question is from Sal Martinez with HSBC.

Speaker Change: Solid good morning morning.

Sal Martinez: Good morning.

Sal Martinez: Okay.

Sal Martinez: Sustaining good fee based asset flows.

Sal Martinez: For some time now and maybe this quarter was a little bit.

Saul Martinez: Inside, outside, in Toronto, you mentioned the trends of, you know, advisory-led brokerage moving to fee-based clients, diversifying to alternative to fixed income instrument or fixed income. Can you just comment on the extent to which you think these dynamics have legs where we are in terms of these dynamics occurring given, you know, the strength and asset prices and equities and rates coming down and what that might mean for your flow expectation. Yeah, I actually really appreciate the question. I appreciate that you took note of the comments that I gave in the prepared remarks, which is what we've been focused on: really migration and understanding migration of assets.

Sal Martinez: Syed outsized and Sharon you mentioned the.

Sal Martinez: The trends.

Sal Martinez: Advisor led brokerage moving to fee based clients diversify into alternatives and fixed income instruments or fixed income can.

Speaker Change: Can you just comment on the extent to which you think these dynamics have legs, where we are in terms of dynamics occurring given.

Speaker Change: The strength in asset prices in equities and rates coming down and what that might mean for your flow expectations into fee rates.

Speaker Change: Yes.

I actually really appreciate the question I. Appreciate that you took note of the comments that I gave in the prepared remarks, which is what we've been focused on is really migration and understanding migration of assets. So we look at theres brokerage accounts and self directed and Theres brokerage accounts. When you think about on the adviser side you have an advisor, but you also.

Sharon Yeshaya: So we look at, you know, there's brokerage accounts in self-directed and there's brokerage accounts when you think about on the advisor side. You have an advisor, but you also have a brokerage account, and not everything is in fee-based. The numbers from brokerage, those numbers are increasing in terms of what's actually migrating into fee-based. And why I think that's important is we've always said that we would expect, oftentimes, the way you see net new assets come into the institution. They come in maybe under an advisor or not, but let's say you're in the advisor's side. It comes into a brokerage account first.

Speaker Change: Have a brokerage account and not everything is in fee based the numbers from brokerage.

Speaker Change: Those numbers are increasing in terms of what's actually migrating into fee based and why I think that's important as we've always said that we would expect oftentimes the way you see net new assets come into the institution. They come in maybe under an advisor or not but lets say youre in the advisor side. It comes into a brokerage account.

Sharon Yeshaya: It doesn't go directly into fee-based. And so it's really the migration of assets coming in and then seeing that pick up, say, oh, I understand that there's a value to advice. And let me now figure out where I'd like to put it in what type of fee-based wrapper, so to speak, that is going.

Speaker Change: It doesn't go directly into fee based and so it's really the migration of assets coming in and then seeing that pick up say, Oh I understand that there's a value to advice and let me now figure out where I would like to put it in what type of fee based wrapper. So to speak that is going if I go back sort of 10 years.

Sharon Yeshaya: Now, if I go back sort of 10 years or so, it was really only in equities. That's where you saw most of those fee-based advice coming in. Now, that has changed over time. We began to talk about fixed income. Remember that I had to do some of, we would talk about fee degradation. We'd say it's not fee degradation, but it's mix. And it was mixed into fixed income. Now we're seeing that mix also into alternative. So that's what's interesting: is that there are more products also being offered under the fee-based wrapper that people can begin to think about.

Speaker Change: Or so it was really only in equities.

Speaker Change: That's where you saw most of those fee based advice coming in now that has changed over time, we began to talk about fixed income remember that had to do some of we would talk about fee degradation with its not fee degradation, but it's mix and it was mixed into fixed income now we're seeing that mixed also into alternatives. So that's what's interesting is.

Speaker Change: There are more products also being offered under the fee based wrapper that people can begin to think about and as those products increased and we have more products than others. We have more tools more opportunities to people for people to invest we will see more assets come in there's more value to advice and.

Sharon Yeshaya: And as those products increase, and we have more products than others, we have more tools, more opportunities for people to invest. We'll see more assets come in; there's more value to advice, and there are more places to put it in when you think about the fee-based offering. So I think that it has momentum, and as you know, those are the durable revenue streams that we expect to gain over time. Time.

Speaker Change: There are more places to put it in when you think about the fee based offering so I think that it has momentum and as you know those are the durable revenue streams that we expect to gain over time.

Sharon Yeshaya: Okay, that's helpful. Thanks a lot.

Speaker Change: Okay.

Speaker Change: That's helpful. Thanks, a lot.

Speaker Change: Yes.

Unknown Executive: Thank you.

Thank you 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 and have a great day.

Unknown Executive: There are no further questions at this time.

Unknown Executive: Ladies and gentlemen, this concludes today's conference call. Thank you, everyone, for participating.

Unknown Executive: You may now disconnect and have a great day.

Speaker Change: [music].

Speaker Change: Yes.