Q3 2025 Morgan Stanley Earnings Call

<unk> third quarter 2025 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 Morgan Stanley Dotcom today.

His presentation may include forward looking statements that are subject to risks and uncertainties that may cause actual results to differ materially Morgan Stanley does not undertake to update the forward looking statements. In this discussion. Please refer to our notices regarding forward looking statements and non-GAAP measures that appear in the earnings release.

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

Good morning, and thank you for joining us.

In the third quarter Morgan Stanley generated record top and bottom line performance with revenues of $18 2 billion and EPS of $2 80.

Robust returns on tangible of 23, 5% reflect the operating leverage of the integrated firm.

The capital markets flywheel is taking hold as the administration seeks to execute on our three pronged strategy to reshape the economy with fed rate cuts likely to continue into next year.

Across public and private markets institutional and retail clients are engaged seeking trusted advice and global access from investment bankers financial advisors and market specialists.

From the first quarter of 2024.

High priority for the teams continue to be the reaffirmation of Morgan Stanley's strategy to raise manage and allocate capital and over time to execute on a higher plane when favorable capital markets environment permit.

Our business model is activity based and while we cannot control the broader economic and market backdrop. The heart of the Morgan Stanley investment thesis remains are delivering earnings and returns durability alongside continued dividend growth through periods of uncertainty.

This focus on maintaining earnings durability and driving earnings growth is governed by execution rigor inside the lanes of the priorities outlined in our annual strategy deck.

The readout of sequential EPS results. During this period underscores ownership of earnings growth and durability against different economic backdrops.

202.

180 to 188 220 to $2 $62 13, and now $2 80.

Morgan Stanley is well positioned in each of our businesses and is demonstrating consistent execution total client assets across wealth and investment management are up one three trillion over the last year and have reached $8 nine trillion.

And wealth, our scale and client reach continue to drive performance reported margins were a full 30%.

We added 81 billion in net new assets of <unk> $42 billion of fee based flows in the quarter.

Investment management continues to scale.

Parametric.

Speaker #1: Good morning. Welcome to MORGAN STANLEY's third quarter, 2025 earnings call. On behalf of MORGAN STANLEY, I will begin the call with the following information and disclaimers.

Operator: Good morning. Welcome to Morgan Stanley's third quarter 2025 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. This presentation may not be duplicated or reproduced without our consent. I will now turn the call over to Chairman and Chief Executive Officer Ted Pick.

Across all three regions, our institutional securities business delivered outstanding results.

Our equities business affirmed its number one position with a standout quarter.

Speaker #1: 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.

Rebound in investment banking environment reopened the door to strategic M&A and renewed financing activity. The equity underwriting result was also industry, leading this quarter, which speaks to the power of our integrated investment bank.

With respect to the bank regulatory capital framework regulators are moving toward a more balanced approach executing on their prudential oversight responsibilities and more leveling the competitive playing field, where the largest best capitalized financial institutions can once again act as the primary engine to drive sustainable economic.

Speaker #1: MORGAN STANLEY does not undertake to update the forward-looking statements in this discussion. Please refer to our This call is being notices regarding forward-looking statements and non-GAAP measures that appear in the earnings release.

Speaker #1: This presentation may not be duplicated or reproduced without our consent. I will now turn the call over to Chairman and Chief Executive Officer Ted Pick.

Growth.

Morgan Stanley specifically appreciates the fed's recent reconsideration of our CCAR results and we look forward to ongoing dialogue and transparency, our excess CET one capital stands at over 300 basis points.

Speaker #3: Thank you. Good morning, and thank you for joining us. In the third quarter, MORGAN STANLEY generated record top and bottom line performance, with revenues of $18.2 billion and EPS of $280.

Ted Pick: Good morning and thank you for joining us. In the third quarter, Morgan Stanley generated record top and bottom line performance with revenues of $18.2 billion and EPS of $2.80. Robust returns on tangible of 23.5% reflect the operating leverage of the integrated firm. The capital markets flywheel is taking hold as the administration seeks to execute on its three-prong strategy to reshape the economy with Fed rate cuts likely to continue into next year. Across public and private markets, institutional and retail clients are engaged, seeking trusted advice and global access from investment bankers, financial advisors, and market specialists. From the first quarter of 2024, a top priority for the team has continued to be the reaffirmation of Morgan Stanley's strategy to raise, manage, and allocate capital, and over time to execute on a higher plane when favorable capital markets environments permit.

Periods of economic and geopolitical uncertainty would be expected as we transitioned from the post pandemic period, we called the end of the end of history to a period, we now could call the continuation of history, a period in which the push and pull of industrial policy national identity and technological.

Speaker #3: Robust returns on tangible of 23.5% reflect the operating leverage of the integrated firm. The capital markets flywheel is taking hold, as the administration seeks to execute on its three-pronged strategy to reshape the economy, with Fed rate cuts likely to continue into next year.

Innovation will continue to be front of mind for our clients and stakeholders Morgan Stanley will continue to capture opportunities around the world through cycles, staying close to our clients as they raise manage and allocate capital.

We are actively investing in the integrated firm across wealth and investment management institutional securities and across our bank in infrastructure units, we are deploying capital and expanding capabilities through the wealth funnel and enhancing the global distribution of our asset management offerings.

Across public and private markets institutional and Retail. Clients are engaged seeking trusted advice and Global access for investment bankers, financial advisors and Market specialists.

As macro uncertainty enormous opportunity on comfortably coexist or 2025 year to date results demonstrate both the capability and the capacity to deliver earnings durability and generate operating leverage against shifting economic and geopolitical backdrops.

Ted Pick: Our business model is activity-based, and while we cannot control the broader economic and market backdrop, the heart of the Morgan Stanley investment thesis remains our delivering earnings and returns durability alongside continued dividend growth through periods of uncertainty. This focus on maintaining earnings durability and driving earnings growth is governed by execution rigor inside the lanes of the priorities outlined in our annual strategy deck. The readout of sequential EPS results during this period underscores ownership of earnings growth and durability against different economic backdrops: 2.02, 1.82, 1.88, 2.22, 2.60, 2.13, and now 2.80. Morgan Stanley is well positioned in each of our businesses and is demonstrating consistent execution. Total client assets across wealth and investment management are up $1.3 trillion over the last year and have reached $8.9 trillion. In wealth, our scale and client reach continue to drive performance. Reported margins were a full 30%.

From the first quarter of 2024. A top priority for the team is continued to be the reaffirmation of Morgan Stanley strategy to raise manage and allocate capital and over time to execute on a higher plane when favorable Capital markets environments, permit.

Morgan Stanley strategy remains consistent and our durable earnings and capital strength are clear the quarter's performance across wealth and investment management alongside the strength across institutional securities in all three regions underscores the proposition of the integrated firm we're focused on generating.

Our business model is activity-based. While we cannot control the broader economic and market backdrop, the heart of the Morgan Stanley investment thesis remains our delivering earnings and returns durability. Alongside continued dividend growth, we aim for superior returns amid uncertainty.

This focus on maintaining earnings durability and driving earnings growth is governed by execution rigor, inside the lanes of the priorities outlined in our annual strategy deck.

Strong returns for our shareholders and have real degrees of flexibility to pursue growth opportunities across our core businesses. We are committed to advancing through 10 trillion in total client assets and onto the next phase of Morgan Stanley's growth trajectory.

The readout of sequential EPS results during this period underscores ownership of earnings growth and durability against different economic backdrops.

202.

182.

188.

222 260, 23 and now 280.

As the firm celebrates its 90 <unk> anniversary where is ever focused on executing first class business in a first class way across the integrated firm for our clients our shareholders and our colleagues.

Morgan Stanley is well positioned in each of our businesses, and is demonstrating consistent execution, total client assets, across wealth, and Investment Management are up 1.3 trillion over the last year and have reached 8.9 trillion.

Sharon, we'll now take us through the quarter in greater detail.

Ted Pick: We added $81 billion of net new assets and $42 billion of fee-based flows in the quarter. Investment management continues to scale capabilities with sustained leadership from Parametric. Across all three regions, our institutional securities business delivered outstanding results. Our equities business affirmed its number one position with a standout quarter. A rebound in the investment banking environment reopened the door to strategic M&A and renewed financing activity. The equity underwriting result was also industry-leading this quarter, which speaks to the power of our integrated investment bank. With respect to the bank regulatory capital framework, regulators are moving toward a more balanced approach, executing on their prudential oversight responsibilities and more leveling the competitive playing field where the largest, best capitalized financial institutions can once again act as a primary engine to drive sustainable economic growth.

Thank you and good morning, the firm delivered exceptional results in the third quarter underscoring the power of our global integrated firm and the scale of $8 nine trillion and total client assets.

In wealth. Our scale and client reach. Continued to drive performance reported margins, were a full 30%

We added $81 billion of net new assets and $42 billion in fee-based flows in the quarter.

Investment management continues to scale capabilities with sustained leadership from Parametric.

<unk> was very strong across the businesses and regions driving record revenues.

Across all 3 regions. Our institutional Securities business delivered outstanding results.

DVA of $2 87, and in our OTC of 23, 5% the.

Our equities business affirmed its number one position with a standout quarter.

The year to date efficiency ratio, 69%. The firm continues to demonstrate operating leverage while maintaining focus on longer term investments.

A rebound in the investment banking environment, reopened the door to strategic m&a and renewed financing activity. The equity underwriting result was also industry-leading this quarter, which speaks to the power of our integrated Investment Bank.

Our investments in workplace E trade and our investment banking franchise are yielding results.

Our early AI use cases, some live in southern pilot are showing progress.

These include the <unk> Gen AI tool, which enhances developer efficiency by modernizing code terrible and interactive tool they quickly analyzes and summarizes data and lead IQ, our AI powered lead distribution platform focusing on matching workplace and self directed relationships.

Ted Pick: Morgan Stanley specifically appreciates the Fed's recent reconsideration of our CCAR results, and we look forward to ongoing dialogue and transparency. Our excess CET1 capital stands at over 300 basis points. Periods of economic and geopolitical uncertainty were to be expected as we transitioned from the post-pandemic period we called the end of the end of history to a period we now could call the continuation of history, a period in which the push and pull of industrial policy, national identity, and technological innovation will continue to be front of mind for our clients and stakeholders. Morgan Stanley will continue to capture opportunities around the world through cycles, staying close to our clients as they raise, manage, and allocate capital. We are actively investing in the integrated firm across wealth and investment management, institutional securities, and across our bank and infrastructure units.

With respect to the bank regulatory capital framework, regulators are moving toward a more balanced approach, executing on their credential oversight responsibilities and more leveling the competitive playing field where the largest, best-capitalized financial institutions can once again act as a primary engine to drive sustainable economic growth.

Morgan Stanley specifically appreciates the Fed's recent reconsideration of our CAR results, and we look forward to ongoing dialogue and transparency. Our excess CET1 capital stands at over 300 basis points.

And facilitating engagement with our financial advisors together. These use cases are laying the foundation to drive productivity across the firm.

Now to the businesses.

Institutional Securities revenues were standout at eight 5 billion driving powerful operating leverage while the Americas led the year over year growth clients were active around the world. We are continuing to see attractive returns from steadily investing across the integrated investment bank.

Stakeholders.

Themes around emerging technologies and renewed investor appetite in Asia contributes.

Morgan Stanley will continue to capture opportunities around the world through cycles, staying close to our clients as they raise, manage, and allocate capital.

Yeah.

Investment banking activity has meaningfully improved after several years of muted volume capital markets reopened and supported underwriting issuance across both debt and equity products.

Ted Pick: We are deploying capital and expanding capabilities through the wealth funnel and enhancing the global distribution of our asset management offerings. As macro uncertainty and enormous opportunity uncomfortably coexist, our 2025 year-to-date results demonstrate both the capability and the capacity to deliver earnings durability and generate operating leverage against shifting economic and geopolitical backdrops. Morgan Stanley's strategy remains consistent, and our durable earnings and capital strength are clear. The quarter's performance across wealth and investment management, alongside the strength across institutional securities in all three regions, underscores the proposition of the integrated firm. We are focused on generating strong returns for our shareholders and have real degrees of flexibility to pursue growth opportunities across our core businesses. We are committed to advancing through $10 trillion in total client assets and onto the next phase of Morgan Stanley's growth trajectory.

We're actively investing in the integrated firm across Wealth and Investment Management, Institutional Securities, and across our bank and infrastructure units. We are deploying capital and expanding capabilities to the wealth funnel and enhancing the global distribution of our asset management offerings.

Pacifically market receptivity for Ipos encourage both sponsor and founder led companies to come to market. This combined with strong credit metrics set the stage for renewed strategic activity.

As macro uncertainty and enormous opportunity uncomfortably coexist, our 2025 year-to-date results demonstrate both the capability and the capacity to deliver earnings durability and generate operating leverage against shifting economic and geopolitical backdrops.

Investment banking revenues increased to $2 $1 billion.

Marking one of the strongest quarters in recent years.

Year over year improvement was driven by broad based strength with underwriting results up over 50%.

Advisory revenues increased year over year to $684 million driven by higher complete that activity.

Equity underwriting revenues increased 80% year over year to $652 million.

Driven by IPO activity.

And further supported by strength across equity products and sectors.

Ted Pick: As the firm celebrates its 90th anniversary, we are as ever focused on executing first-class business in a first-class way across the integrated firm for our clients, our shareholders, and our colleagues. Sharon will now take us through the quarter in greater detail.

Morgan Stanley, strategy remains consistent and our durable earnings and capital strength are clear. The quarter's performance across wealth and Investment Management alongside the strength across institutional Securities. In all 3 regions underscores the proposition of the integrated firm. We are focused on generating strong returns for our shareholders and have real degrees of flexibility to pursue growth opportunities across our core businesses. We are committed to advancing through 10 trillion in total client assets and on to the next phase of Morgan. Stanley's growth trajectory

Activity picked up materially in September on the back of record breaking post labor day issuance in the Americas.

Fixed income underwriting revenues were $772 million driven by higher non investment grade and investment grade loan issuance as.

As the firm celebrates, its 90th anniversary. Where is ever focused on executing first class business in a first class way across the integrated firm for our clients, our shareholders, and our colleagues.

Sharon Yeshaya: Thank you and good morning. The firm delivered exceptional results in the third quarter, underscoring the power of our global integrated firm and the scale of $8.9 trillion in total client assets. Performance was very strong across the businesses and regions, driving record revenues of $18.2 billion, record EPS ex-DVA of $2.80, and an ROTCE of 23.5%. The year-to-date efficiency ratio is 69%. The firm continues to demonstrate operating leverage while maintaining focus on longer-term investments. Our investments in workplace, E-Trade, and our investment banking franchise are yielding results. Our early AI use cases, some live and some in pilot, are showing progress. These include the DevGen AI tool, which enhances developer efficiency by modernizing code, Parable, an interactive tool that quickly analyzes and summarizes data, and LeadIQ, our AI-powered lead distribution platform, focusing on matching workplace and self-directed relationships and facilitating engagement with our financial advisors.

Sheeran will now take us through the quarter in greater detail.

Thank you and good morning.

The Firm delivered exception.

As the M&A market show signs of recovery and that lending commitments event related lending commitments met receptive markets.

<unk> or supported by higher flow activity as clients took advantage of refinancing opportunities.

Underscoring the power of our global integrated firm and the scale of $8.9 trillion in total client assets.

Secular themes and pent up demand have supported an increase in activity across the integrated investment bank clients are increasingly turning to Morgan Stanley to navigate complexity monetize opportunities and deploy capital decisively in.

Performance was very strong across the businesses and regions, driving record revenues of $18.2 billion and record EPS x DVA of $2.

Rotce of 23.5%.

The year-to-date efficiency ratio.

In the quarter robust pipelines translated into announcements and credit markets were resilient and open conducive to activity.

69%. The Firm continues to demonstrate operating leverage while maintaining focus on longer term investments.

We continue to selectively hire bankers and product specialists as the integrated firm culture is attracting opportunities to deepen the coverage footprint.

Our investments in workplace E-Trade and our investment banking franchise are yielding results.

Our early AI use cases, some live and some in pilot, are showing progress.

Our.

Our leading equities franchise generated $4 $1 billion in revenue propelled by broad based performance across products and regions.

Prime brokerage revenues drove results as average client balances and financing revenues reached new records.

Sharon Yeshaya: Together, these use cases are laying the foundation to drive productivity across the firm. Now to the businesses. Institutional securities revenues were a standout at $8.5 billion, driving powerful operating leverage. While the Americas led the year-over-year growth, clients were active around the world. We are continuing to see attractive returns from steadily investing across the integrated investment bank. Themes around emerging technologies and renewed investor appetite in Asia contributed to the results. Investment banking activity has meaningfully improved after several years of muted volumes. Capital markets reopened and supported underwriting issuance across both debt and equity products. Specifically, market receptivity for IPOs encouraged both sponsor and founder-led companies to come to market. This, combined with strong credit metrics, set the stage for renewed strategic activity. Investment banking revenues increased to $2.1 billion, marking one of the strongest quarters in recent years.

<unk> results were strong, reflecting active client engagement and an increase in global market volumes compared to the prior year derivatives.

These include the dev gen, AI tool, which enhances developer efficiency by modernizing code Parable, an interactive tool that quickly, analyzes, and summarizes data and Lead. IQ, our AI powered lead distribution platform, focusing on matching, workplace and self-directed relationships and facilitating engagement with our financial advisors together. These use cases are laying the foundation to drive productivity across the firm.

Now, to the businesses.

As a result, we're up year over year, driven by higher activity and regional strength in EMEA.

Fixed income revenues were $2 2 billion.

The business showed consistency driven by strong client engagement across credit and commodities, partially offset by lower results in foreign exchange.

Micro results increased year over year perf.

Performance was driven by strength in securitized products benefiting from robust securitization activity and historical growth and durable lending balances.

Institutional Security's revenues were a standout at 8.5 billion dollars driving powerful operating leverage. While the Americas led the year-over-year growth clients were active around the world. We are continuing to see attractive returns from steadily investing across the integrated Investment Bank, themes around emerging Technologies and renewed investor appetite in Asia contributed to the results.

Macro revenue decline versus the prior year volatility decreased in foreign exchange markets across developed market currencies, leading to reduced client activity and trading opportunities.

Investment banking activity has meaningfully improved. After several years of muted volume, capital markets reopened and supported underwriting issuance across both debt and equity products.

Results in commodities finished the quarter with strength, increasing year over year, driven by our North American power and gas business, which included structure transactions during the period.

Specifically market receptivity for IPOs. Encourage both sponsor and founder-led companies to come to Market this combined with strong credit metrics, set the stage for renewed strategic activity.

In the quarter ISG provisions were more modest at $1 million as a sequential improvement in the macroeconomic forecasts.

Sharon Yeshaya: The year-over-year improvement was driven by broad-based strength, with underwriting results up over 50%. Advisory revenues increased year-over-year to $684 million, driven by higher completed activity. Equity underwriting revenues increased 80% year-over-year to $652 million, driven by IPO activity and further supported by strength across equity products and sectors. Activity picked up materially in September on the back of record-breaking post-Labor Day issuance in the Americas. Fixed income underwriting revenues were $772 million, driven by higher non-investment grade and investment grade loan issuance. As the M&A market showed signs of recovery, event-related lending commitments met receptive markets. Results were supported by higher flow activity as clients took advantage of refinancing opportunities. Secular themes and pent-up demand have supported an increase in activity across the integrated investment bank. Clients are increasingly turning to Morgan Stanley to navigate complexity, monetize opportunities, and deploy capital decisively.

Investment banking revenues increased to $2.1 billion, marking one of the strongest quarters in recent years.

Set by portfolio growth in individual assessments net charge offs totaled $46 million, primarily driven by commercial real estate loans that had largely been provisioned for in prior quarters.

The year-over-year improvement was driven by broad-based strength, with underwriting results of over 50%.

Advisory revenues increased year-over-year to 684 million driven by higher completed activity.

Turning to wealth management, our franchise is growing with sustained momentum reinforcing our industry leading position.

Equity underwriting revenues increased 80% year-over-year to 652 million.

Driven by IPO activity.

A record seven trillion in total client assets record revenues of over $8 billion and continued operating leverage drove margins to 30%.

And further supported by strength across Equity products and sectors.

Activity picked up materially in September on the back of record-breaking post-Labor Day issuance in the Americas.

Another quarter of strong net new assets and robust fee based flows illustrate the power of the funnel and the scale of our client base, which spans over 20 million relationships assets that originated from workplace continue to migrate into our advisor led channel as a result of the consistent investments we have.

And investment grade loan issuance.

Made into our differentiated platform.

As the m&a market, shows signs of recovery event, lending commitments, event related, lending, commitments. Met receptive markets results were supported by higher flow activity as clients took advantage of refinancing opportunities.

Yes.

In the third quarter, we continued to invest deepening our competitive moats in areas like our expanded collaboration with BARDA and private markets and in digital assets through announced partnerships with zero harsh we continue to innovate reinforcing our leadership in the industry and.

Secular themes and pent-up demand have supported an increase in activity across the integrated Investment Bank.

Sharon Yeshaya: In the quarter, robust pipelines translated into announcements, and credit markets were resilient and open, conducive to activity. We continue to selectively hire bankers and product specialists as the integrated firm culture is attracting opportunities to deepen the coverage footprint. Our leading equities franchise generated $4.1 billion in revenue, propelled by broad-based performance across products and regions. Prime brokerage revenues drove results as average client balances and financing revenues reached new records. Cash results were strong, reflecting active client engagement and an increase in global market volumes compared to the prior year. Derivative results were up year-over-year, driven by higher activity and regional strength in EMEA. Fixed income revenues were $2.2 billion. The business showed consistency, driven by strong client engagement across credit and commodities, partially offset by lower results in foreign exchange. Micro results increased year-over-year.

Clients are increasingly turning to Morgan Stanley to navigate complexity, monetize opportunities, and deploy capital decisively.

<unk>, our ability to service our clients with unique capabilities.

Moving to our business metrics.

In the quarter, robust pipelines, translated into announcements and credit markets were resilient and open conducive to activity.

Record revenues were $8 $2 billion. The business continues to demonstrate operating leverage with a reported margin expanding to 33% DCP negatively impacted the margin by approximately 100 basis points this quarter.

We continue to selectively hire bankers and product specialists. As the integrated firm culture is attracting opportunities to deepen the coverage footprint.

Asset management revenues were a record at $4 8 billion fee based flows were exceptionally strong exceeding $40 billion for the second consecutive quarter.

Our Len, our leading equities franchise, generated $4.1 billion in revenue, propelled by broad-based performance across products and regions.

Prime brokerage revenues drove results as average client balances and financing revenues reached new records.

Transactional revenues were $1 3 billion and excluding the impact of DCP were up 22% year over year.

Throughout the quarter retail client, we're engaged across products and self directed activity was particularly strong we launched pro.

Cash results were strong, reflecting active client engagement and an increase in global market volumes compared to the prior year.

Derivative results were up year-over-year, driven by higher activity and regional strength in AMIA.

Excuse me, we launched power E trade pro which is a reflection of our investments to enhance our platform. These investments have helped support E trade transactional revenue, which is highly accretive to our margin.

Fixed income revenues were 2.2 billion. The business showed consistency driven by strong client engagement across credit and commodities partially offset by lower results in foreign exchange.

Bank lending balances rose 5 billion sequentially to $174 billion.

Sharon Yeshaya: Performance was driven by strength in securitized products, benefiting from robust securitization activity and historical growth in durable lending balances. Macro revenue declined versus the prior year. Volatility decreased in foreign exchange markets across developed market currencies, leading to reduced client activity and trading opportunities. Results in commodities finished the quarter with strength, increasing year-over-year, driven by our North American power and gas business, which included structured transactions during the period. In the quarter, ISG provisions were modest at $1 million, as a sequential improvement in the macroeconomic forecasts was offset by portfolio growth and individual assessments. Net charge-offs totaled $46 million, primarily driven by commercial real estate loans that had largely been provisioned for in prior quarters. Turning to wealth management, our franchise is growing with sustained momentum, reinforcing our industry-leading position.

Micro results increased year-over-year.

Reflecting our multi year investments to meet the full portfolio needs of our growing client base in the quarter, we deepened our client penetration with lending solutions inclusive of securities based lending and mortgages sequentially.

Performance was driven by strength. In securitized products benefiting from robust securitization activity and historical growth in durable. Lending balances.

Sequentially total end period deposits grew to 398 billion.

Macro Revenue declined versus the prior year. Volatility decreased in foreign exchange markets across development Market, currencies leading to reduced client activity and trading opportunities.

Results in Commodities. Finished the

Quarter with strength.

And net interest income increased to $2 billion.

The growth in NII was driven by the impact of our market environment and the cumulative loan growth.

Increasing year-over-year, driven by our North American Power and Gas business, which included structured transactions during the period.

Looking ahead to the fourth quarter, we expect to see a modest sequential gain in NII of course, the rate environment trajectory of loan growth and deposit mix will all come into play.

In the quarter, provisions were modest at $1 million, reflecting a sequential improvement in the macroeconomic forecasts.

Finally in the third quarter, we delivered net new assets of 81 billion.

A testament to the depth and breadth of our diversified platform all three channels contributed to our asset growth.

Was offset by portfolio growth and individual assessments, net charge-offs totaled $46 million, primarily driven by commercial real estate loans that had largely been provisioned for in prior quarters.

Turning to wealth management.

The reopening of the IPO market also supported results.

Sharon Yeshaya: A record $7 trillion in total client assets, record revenues of over $8 billion, and continued operating leverage drove margins to 30%. Another quarter of strong net new assets and robust fee-based flows illustrate the power of the funnel and the scale of our client base, which spans over 20 million relationships. Assets that originated from workplace continue to migrate into our advisor-led channel as a result of the consistent investments we have made into our differentiated platform. We are not standing still. In the third quarter, we continue to invest, deepening our competitive moats in areas like our expanded collaboration with Carta and private markets and in digital assets through announced partnerships with ZeroHash. We continue to innovate, reinforcing our leadership in the industry and enhancing our ability to service our clients with unique capabilities. Moving to our business metrics, record revenues were $8.2 billion.

Our franchise is growing, with sustained momentum reinforcing our industry-leading position.

Further evidence that our workplace channel serves as a powerful asset acquisition tool.

This quarter the business demonstrated exactly what it is built to do with over $20 million relationships and seven trillion in total client assets, our scale and connectivity set us apart positioning us to deliver.

A record $7 trillion in total client assets, record revenues of over $8 billion, and continued operating leverage drove margins to 30%.

Another quarter of Strong net, new assets and robust, fee-based flows illustrate, the power of the funnel and the scale of our client base, which spans over 20 million relationships.

Turning to investment management.

The business continues to perform well, we're seeing momentum for secular demand in our highly sought after parametric solutions and expanding our global reach and fixed income our investments have supported our growth to a record $1 eight trillion in total AUM and further position the business for the opportunity.

Assets that originated from the workplace continue to migrate into our advisor, Le Channel.

As a result of the consistent Investments, we have made into our differentiated platform.

We are not standing still.

<unk> ahead.

Long term net inflows were $16 $5 billion in the quarter over half. These inflows were driven by parametric and further supported by ongoing strength in fixed income parametric inflows were inclusive of a large partnership with a third party investment adviser seeking greater tax efficiency.

In the third quarter, we continue to invest in deepening our competitive moats in areas like our expanded collaboration with Carta and private markets, and in digital assets through announced partnerships with Zero Hash. We continue to innovate, reinforcing our leadership in the industry and enhancing our.

Ability to service our clients with unique capabilities.

Moving to our business metrics.

Sharon Yeshaya: The business continues to demonstrate operating leverage, with the reported margin expanding to 30.3%. DCP negatively impacted the margin by approximately 100 basis points this quarter. Asset management revenues were a record at $4.8 billion. Fee-based flows were exceptionally strong, exceeding $40 billion for the second consecutive quarter. Transactional revenues were $1.3 billion, and including the impact of DCP, were up 22% year-over-year. Throughout the quarter, retail clients were engaged across products, and self-directed activity was particularly strong. We launched Power E-Trade Pro, which is a reflection of our investments to enhance our platform. These investments have helped support E-Trade's transactional revenue, which is highly accretive to our margin. Bank lending balances rose $5 billion sequentially to $174 billion, reflecting our multi-year investments to meet the full portfolio needs of our growing client base.

<unk> for its clients.

Liquidity and overlay services had inflows of $24 8 billion.

Driven by demand for our liquidity strategies.

Record revenues were 8.2 billion. The business continues to demonstrate operating leverage with the reported margin expanding to 30.3%. DCP negatively impacted the margin by approximately 100 basis points. This quarter?

Revenues of $1 7 billion increased 13% compared to the prior year. The increase was driven by higher asset management and related fees on the back of higher average AUM.

Asset management revenues were a record at $4.8 billion. Fee-based flows were exceptionally strong, exceeding $40 billion for the second consecutive quarter.

Performance based income and other revenues were $117 million supported by gains in infrastructure private equity and real estate.

Transactional revenues were $1.3 billion and, including the impact of DCP, were up 22% year-over-year.

Turning to the balance sheet total spot assets grew to one four trillion.

Standardized <unk> increased sequentially to $536 billion as we actively supported clients explore.

Exposures rose intra quarter on greater levels of activity and reduced into quarter end as we syndicated risk our standardized CET one ratio stands at 15, 2%.

Which is a reflection of our investments to enhance our platform.

These Investments have helped support rates transactional Revenue, which is highly accretive to our margin.

We opportunistically bought back $1 1 billion of common stock in the quarter.

Our quarterly tax rate was 23, 6% excluding <unk>.

Sharon Yeshaya: In the quarter, we deepened our client penetration with lending solutions, inclusive of securities-based lending and mortgages. Sequentially, total end-period deposits grew to $398 billion, and net interest income increased to $2 billion. The growth in NII was driven by the impact of our market environment and the cumulative loan growth. Looking ahead to the fourth quarter, we expect to see a modest sequential gain in NII. Of course, the rate environment, trajectory of loan growth, and deposit mix will all come into play. Finally, in the third quarter, we delivered net new assets of $81 billion, a testament to the depth and breadth of our diversified platform. All three channels contributed to our asset growth. The reopening of the IPO market also supported results, further evidence that our workplace channel serves as a powerful asset acquisition tool. This quarter, the business demonstrated exactly what it is built to do.

That discrete tax benefits, we continue to expect our fourth quarter tax rate will be approximately 24%.

Bank lending balances rose $5 billion sequentially to $174 billion, reflecting our multi-year investments to meet the full portfolio needs of our growing client base in the quarter. We deepened our client penetration with Lending Solutions, inclusive of securities-based lending and mortgages.

The firm is operating with momentum across all segments.

We enter the fourth quarter from a position of strength with a combined $8 nine trillion and total client assets and engaged client base healthy pipelines and global reach we remained focused on continuing to invest in our business. As we look ahead and with that we will now open the lineup to questions.

Sequentially, total and period deposits grew to $398 billion, and net interest income increased to $2 billion. The growth in net interest income was driven by the impact of our market environment and the cumulative loan growth.

Looking ahead to the fourth quarter, we expect to see a modest sequential gain in Q4.

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.

Of course, the rate environment trajectory of loan growth and deposit, mix will all come into play.

If your question has been answered or you wish to remove yourself from the queue. Please press star and the number two on your Touchtone telephone you're allowed to ask one question and one follow up and then we'll move to the next person in the queue. Please.

Finally, in the third quarter, we delivered net new assets of $81 billion—a testament to the depth and breadth of our diversified platform.

All three channels contributed to our asset growth. The reopening of the IPO market also supported results.

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

We will take our first question from Dan Fannon with Jefferies. Please go ahead morning, Dan.

Further evidence that our workplace channel serves as a powerful asset acquisition tool.

Good morning, Dan Good morning.

Sharon Yeshaya: With over 20 million relationships and $7 trillion in total client assets, our scale and connectivity set us apart, positioning us to deliver. Turning to investment management, the business continues to perform well. We are seeing momentum for secular demand in our highly sought-after Parametric solutions and expanding our global reach in fixed income. Our investments have supported our growth to a record $1.8 trillion in total AUM and further positioned the business for the opportunities ahead. Long-term net inflows were $16.5 billion in the quarter. Over half these inflows were driven by Parametric and further supported by ongoing strength in fixed income. Parametric inflows were inclusive of a large partnership with a third-party investment advisor seeking greater tax efficiency for its clients. Liquidity and overlay services had inflows of $24.8 billion, driven by demand for our liquidity strategies. Revenues of $1.7 billion increased 13% compared to the prior year.

This quarter, the business demonstrated exactly what it is built to do.

Good morning.

So Ted I was hoping you could just talk about the environment <unk> been quite bullish all year, obviously, a great quarter. If you can talk about the sustainability of these trends maybe the context of the backlog in investment banking the diversity and how that compares to maybe prior periods.

With over 20 million relationships and $7 trillion in total client assets, our scale and connectivity set us apart, positioning us to deliver.

Turning to investment management.

Yes.

Okay.

<unk>.

The question is the right setup.

Whether we are.

<unk>.

A golden age of investment banking remains to be seen but it has been now several years of chat.

Chatter.

The business continues to perform. Well, we're seeing momentum for secular demand in our highly sought after parametric Solutions and expanding our Global reach and fixed income. Our investments have supported our growth to a record 1.8 trillion dollars in total AUM and further position, the business for the opportunities ahead.

Around green shoots and now the flywheel is is taking hold its happening across industry groups, it's happening across regions.

Long-term net inflows were 16.5 billion dollars in the quarter over half. These inflows were driven by parametrics.

Happening against a generally more favorable regulatory backdrop, it's happening at a time, where there is the globalization and re globalization, depending on where you are and how you're looking at it and obviously the need to the fees the cost of endogenous AI.

And further supported by ongoing strength in fixed income.

Parametric inflows, were inclusive of a large partnership with a third party investment. Advisor seeking greater tax deficiency for its clients.

So that sets up for <unk>.

Liquidity and Overlay Services had inflows of $24.8 billion, driven by demand for our liquidity strategies.

A very interesting environment for strategics, who now will compete for product with sponsors in each region and in each major industry. We've been spending considerable time and capital on building our investment banking core and the fruits of that are seen in both the X.

Sharon Yeshaya: The increase was driven by higher asset management and related fees on the back of higher average AUM. Performance-based income and other revenues were $117 million, supported by gains in infrastructure, private equity, and real estate. Turning to the balance sheet, total spot assets grew to $1.4 trillion. Standardized RWAs increased sequentially to $536 billion as we actively supported clients. Exposures rose intra-quarter on greater levels of activity and reduced into quarter-end as we syndicated risk. Our standardized CET1 ratio stands at 15.2%. We opportunistically bought back $1.1 billion of common stock in the quarter. Our quarterly tax rate was 23.6%, excluding $50 million of net discrete tax benefits. We continue to expect our fourth quarter tax rate will be approximately 24%. The firm is operating with momentum across all segments.

Revenues of $1.7 billion increased 13% compared to the prior year. The increase was driven by higher asset management and related fees, on the back of higher average AUM.

And debt underwriting number and an advisory number that continues to pick up and to what youre alluding to Dan the pipeline looks very good across all three regions. So we are we are optimistic now of course.

Performance-based income and other revenues were $117 million, supported by gains in infrastructure private equity and real estate.

Turning to the balance sheet, total assets grew to $1.4 trillion.

The World is a is an uncertain place and there could be pauses.

Standardized rwas, increase sequentially to 536 billion, as we actively supported clients.

Depending on how geopolitics field, but generally speaking the.

Exposures rose in recorded on greater levels of activity and reduced into quarter end as we syndicated risk.

The investment banking product category over the next couple of years should be generally up into the right.

Our standardized cet1 ratio stands at 15.2%.

We opportunistically bought back $1.1 billion of common stock in the quarter.

Great. Thank you that's helpful. And then Jerome I was hoping you could expand upon your comments around just the M&A growth within the wealth channel you talked about workplace.

In the IPO market being a contributor but maybe if there's a way to contextualize that a bit more and also just talk about the other channels in terms of the momentum there as well. Thank you absolutely Dan. Thank you for the question all the channels are strong self directed we've been increasing our marketing and business development you can see that our advisory.

Our quarterly tax rate was 23.6%. Excluding $50 million of net discrete tax benefits, we continue to expect our fourth quarter tax rate will be approximately 24%.

Sharon Yeshaya: We enter the fourth quarter from a position of strength, with a combined $8.9 trillion in total client assets, an engaged client base, healthy pipelines, and global reach. We remain focused on continuing to invest in our business as we look ahead. We will now open the line up to questions.

<unk> is also strong we have new clients existing clients both coming in so we're attracting assets held away, but we're also bringing in new clients and Thats a lot of the tools and that we've been giving to our advisors and as it relates to workplace. That's probably the most exciting part I think we're just scratching the surface of what we've seen in workplace, it's bringing in <unk>.

The firm is operating with momentum across all segments. We enter the fourth quarter from a position of strength, with a combined $8.9 trillion in total client assets, an engaged client base, healthy pipelines, and global reach. We remain focused on continuing to invest in our business. As we look ahead, we will now open the lineup to questions.

Operator: 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're allowed to ask one question and one follow-up, and then we'll move to the next person in the queue. Please stand by while we compile the Q&A roster. We'll take our first question from Dan Fannin with Jefferies. Please go ahead.

We are now ready to take in questions to get in the queue. You may press star and the number 1 on your touchtone telephone,

It's not just in M&A, but also directly into fee based flows. So people are we're seeing momentum as you have ipos come to market people are bringing their assets to Morgan Stanley Theyre dropping into their self directed accounts, yes, but they are also moving it directly into the advisor.

if your question has been answered, or you wish to remove yourself from the queue, please press star and the number 2 on your touchtone telephone,

You allowed to ask 1, question and 1 follow-up. And then we'll move to the next person in the queue.

Please stand by while we compile the Q&A roster.

And that's been a large part of the story I think you and I have talked about it Dan historically, you've asked about we've given a $300 billion number about that workplace migration and we've said that we've seen about $60 billion of migration per year, we're already three quarters into it and we're exceeding those numbers from a full year basis. So workplaces.

Ted Pick: Morning, Dan. Morning, Dan.

[Analyst 1]: Morning. Morning. Ted, I was hoping you could just talk about the environment. You've been quite bullish all year, obviously a great quarter. Can you talk about the sustainability of these trends, maybe the context of the backlog in investment banking, the diversity, and how that compares to maybe prior periods?

We'll take our first question from Dan Fannon with Jeffrey's please. Go ahead morning. Dan morning. Dan morning.

Been a contributor to net new assets to fee based flows and channel migration.

Environment. You've been quite bullish all year. Obviously, a great quarter. So, you can talk about the sustainability of these trends, maybe in the context of the backlog and investment banking diversity, and how that compares to maybe prior periods.

Ted Pick: Yes. The question is the right setup. Whether we are entering a golden age in investment banking remains to be seen, but it has been now several years of chatter around green shoots, and now the flywheel is taking hold. It's happening across industry groups. It's happening across regions. It's happening against a generally more favorable regulatory backdrop. It's happening at a time where there is de-globalization and re-globalization, depending on where you are and how you're looking at it, and obviously the need to defeat the cost of endogenous AI. That sets up for a very interesting environment for strategics who now will compete for product with sponsors in each region and in each major industry.

Our next question comes from Ebrahim <unk> with Bank of America. Your line is now open.

Hey, good morning.

Hi, Brian.

He did a I had a question on the fees.

Got it.

It can be.

I know youre going to have removed all the pluses and the signs when you took over.

As CEO, but.

It's coming up a lot more frequently in our conversations with investors is when we look beyond one do you think you achieved a point where the 30%.

Pre tax margin is sustainable and.

Again, I'm, not saying you're changing your guidance, but I'm just wondering when you think about the outlook in all the productivity improvements et cetera.

The 30% is lifting higher or.

Moving lower in terms of when you think about the medium term outlook.

Thanks for your question, it's incredibly important that we.

Ted Pick: We've been spending considerable time and capital on building our investment banking core, and the fruits of that are seen in both the equity and debt underwriting number and an advisory number that continues to pick up. To what you're alluding to, Dan, the pipeline looks very good across all three regions. We are optimistic. Of course, the world is an uncertain place, and there could be pauses depending on how geopolitics feel. Generally speaking, the investment banking product category over the next couple of years should be generally up and to the right.

Yes, uh, the, uh, the question is the right setup. Uh, whether we are, um, entering a, uh, a golden age of investment banking remains to be seen, but it has been now several years of, uh, chatter, uh, around green shoots. And now, the flywheel is, uh, taking hold. It's happening across industry groups, it's happening across regions. It's happening against a generally, uh, more favorable regulatory backdrop; it's happening at a time where there is, uh, deglobalization and reg globalization, depending on where you are and how you're looking at it. And obviously, the need to defease the cost of endogenous AI. Uh, so that sets up for a, uh, very interesting environment for strategic. So now, we will compete for product with, uh, sponsors, uh, in each region and in each major industry.

We continue to.

Understand that the investment dollars go into that wealth business two to.

To broaden and deepen the funnel flywheel that Sharon just described whether it is putting more dollars in the pro product.

E trade, where we're also focused on upping deposits, whether it's investing in adjacent digital asset product whether its in deepening our relationships at the corporate workplace center or it's ultimately in our financial advisers, we're going to continue to put investment.

We've been uh spending considerable time in capital, on building our uh, Investment Banking Corps, uh and uh the fruits of that are seen in both the equity and debt underwriting number, and an advisory number, that continues to pick up and to what, you're alluding to Dan the pipeline looks very good. Across all 3 regions. So we are, uh, we are optimistic now, of course. Uh, the world is a, uh, is an uncertain place. And, uh, there could be pauses, uh, depending on how geopolitics feel. But generally, uh, speaking the, uh, uh, the investment banking product category over the next couple of years, uh, should be generally up and to the right,

Into the system now whether that with continued operating leverage gets us to a number that is.

[Analyst 1]: Great. Thank you. That's helpful. Sharon, I was hoping you could expand upon your comments around just the NNA growth within the wealth channel. You talked about workplace and the IPO market being a contributor. If there's a way to contextualize that a bit more and also just talk about the other channels in terms of the momentum there as well. Thank you.

Other than 30 overtime, well, let's let's see how it goes.

But right now it was important for everyone to see that we had a reported number in a reasonably friendly environment that was I believe 33%, but that is an output not an input. So the continued input.

Sharon Yeshaya: Absolutely, Dan. Thank you for the question. All the channels are strong. Self-directed, we've been increasing our marketing and business development. You can see that. Our advisory is also strong. We have new clients, existing clients both coming in, so we're attracting assets held away. We're also bringing in new clients, and that's a lot of the tools that we've been giving to our advisors. As it relates to workplace, that's probably the most exciting part. I think we're just scratching the surface of what we've seen in workplace. It's bringing in assets not just in NNA, but also directly into fee-based flows. People are, you know, we're seeing momentum as you have IPOs come to market. People are bringing their assets to Morgan Stanley. They're dropping into their self-directed accounts, yes, but they're also moving it directly into the advisor-led accounts. That's been a large part of the story.

Great, thank you. That's helpful. I was hoping you could expand upon your comments around just the NNA growth within the wealth channel. You talked about workplace and the IPO market being a contributor. So, maybe if there's a way to contextualize that a bit more. Also, just talk about the other channels in terms of the momentum there as well. Thank you.

As our investment dollars to drive PBT growth and what is most exciting about what the wealth team has done.

Is to drive revenues and to drive overall growth in each piece of the funnel.

Got it.

I guess just in terms of you mentioned a friendly environment.

There's so much discussions around whether there is any a bubble.

Absolutely Dan, thank you for the question. Uh, all the channels are strong. Uh, self-directed, we've been increasing our marketing and Business Development. You can see that our advisory is also strong. We have new clients, existing clients both coming in so we're tracking assets held away but we're also bringing in new clients and that's a lot of the tools and the that we've been giving to our advisors and as it relates to workplace, that's probably the most exciting part. I think we're just scratching the surface.

And the lead Ninety's in terms of where we are in the cycle just talk to us when you think about both sides of the business banking and as Youre getting insight somehow.

Your clients on the wealth side of thinking about things just how do you handicap that risk of maybe might be in the cycle and what has history taught us of what that implies.

Sharon Yeshaya: I think you and I have talked about it, Dan. Historically, you've asked about, we've given a $300 billion number about that workplace migration, and we've said that we've seen about $60 billion of migration per year. We're already three quarters into it, and we're exceeding those numbers from a full-year basis. Workplace has been a contributor to net new assets, to fee-based flows, and channel migration.

For your revenue growth outlook.

So when do we think about our use of AI and what we're seeing is there are many places that one can use AI, it's not just around efficiency, but it's also productivity both on the expense line, but also on the revenue line I tried to note three different examples at the beginning opening comments and they were purposeful.

Surface of what we've seen in workplace. It's bringing in assets, not just in nna, but also directly into seabase flows. So, people are, you know, we're seeing momentum. As you have IPOs come to Market, uh, people are bringing their assets to Morgan Stanley. They're dropping into their self-directed accounts. Yes. But they're also moving it directly into the advisor Le accounts. Uh, and that's been a large part of the story. I think you, and I have talked about it, Dan historically, you've asked about, we've given a hundred billion dollar number about that, workplace migration. And we've said that we've seen about 60 billion dollars of migration. Uh, per year, we're already 3 quarters into it and we're exceeding uh those numbers from a full year basis. So workplace has been a contributor to net, new assets, to fee, based flows and channel migration.

Operator: Our next question comes from Ibrahim Punawala with Bank of America. Your line is now open.

Because they all represent different ways that one can begin to use AI for me full firm perspective.

Our next question comes from Ibrahim Poonawalla with Bank of America. Your line is now open.

[Analyst 2]: Hey, good morning.

[Analyst 1]: Hi, Ibrahim.

Hey, good morning.

[Analyst 2]: I just, hey, Ted. I had a question on the pre-tax margin hitting 30%. I know you kind of removed all the pluses and the signs when you took over as CEO, but it's coming up a lot more frequently in our conversations with investors. When we look beyond one, do you think you've achieved the point where the 30% pre-tax margin is sustainable? I'm not saying you're changing your guidance, but I'm just wondering, when you think about the outlook and all the productivity improvements, etc., is the risk that the 30% is drifting higher or moving lower in terms of when we think about the medium-term outlook?

One is just going through code and being able to work faster make sure that we can be more efficient with our time that coders can be more efficient as they go through lines of code that they that they are able to see and rewrite and so that's one example that we can all kind of see across different firms and I think different institutions have talked about it.

Hi Abraham. I just saw he did. Uh, I had a question on the pre-tax margin hitting 30%, I know you kind of removed all the pluses and the signs when you took over uh, as CEO but

It's coming up a lot more frequently in our conversations with investors. When we look beyond Q1, do you think we achieved a point where the 30% is relevant?

And then you have things that are specific to our Morgan Stanley which might be around.

pre-tax margin is sustainable and

Lead IQ and Thats very revenue driven right. So how do you give them more time to an advisor how do you make sure that you gave more matches that produce better results and that's how we've been using all sorts of technology forward.

Then you have things. They can you can see across all sectors terrible is something that we've been doing really in finance looking at our data piloting it through and finding ways to summarize key data that all other companies can also take advantage of and so I think for you take a step back in your question is well what does it mean there is a lot of.

Again, I'm not saying you're changing your guidance, but I'm just wondering, when you think about the outlook and all the productivity improvements, etc., if the risk that the 30% is drifting higher or moving lower, in terms of when we think about the medium-term outlook.

Ted Pick: Thanks for your question. It's incredibly important that we continue to understand that the investment dollars go into that wealth business to broaden and deepen the funnel flywheel that Sharon just described, whether it is putting more dollars in the pro product in E-Trade, where we're also focused on upping deposits, whether it's investing in adjacent digital asset product, whether it's in deepening our relationships at the corporate workplace center, or it's ultimately in our financial advisors. We're going to continue to put investment dollars into the system. Now, whether that with continued operating leverage gets us to a number that is higher than 30% over time, let's see how it goes. Right now, it was important for everyone to see that we had a reported number in a reasonably friendly environment that was, I believe, 30.3%. That is an output, not an input.

Ways to use this technology, it's extremely powerful.

And this is another place where I think we really are just scratching the surface of what it can do.

We'll move to our next question from Christian <unk> with autonomous.

Your line good morning Christian.

Good morning question Ed.

Good morning, Sharon.

Wanted to follow up on wealth management, you I'll put our business just given your leverage to private markets.

Technology and technology sectors.

So.

Parker partnership I'd imagine you should be an outsized beneficiary of the wealth creation neurons.

Hi, Tycho.

Okay.

I'm curious how you see that.

Then how does how does how does that influence your outlook for.

Ted Pick: The continued input is our investment dollars to drive PVT growth. What is most exciting about what the wealth team has done is to drive revenues and to drive overall growth in each piece of the funnel.

Sort of 5% to 7% organic growth over time.

So when we think about private markets say, we are obviously the largest provider of.

All of that the alternative space.

Yes for the wealth management businesses, just given our overall aggregate size.

Whether it's investing in uh adjacent digital asset product, whether it's in deepening our relationships at the corporate uh workplace uh Center or it's ultimately in our financial advisors, we're going to continue to put investment dollars into the system. Now, whether that, uh, with, uh, continued operating leverage gets us to a number that is, uh, higher than 30, uh, over time, uh, let's let's see how it goes. Uh, but right now, it was important for everyone to see that. We had a reported number, in a reasonably friendly environment. That was I believe 30.3%, but that is an output, not an input. Uh, so the continued input um, is our investment dollars to drive uh, pvt growth and what is most exciting about, what the wealth team has done, uh, is to drive revenues, uh, and to drive overall growth in each piece of the funnel.

[Analyst 2]: Got it. In terms of you mentioned a friendly environment, there's so much discussion around whether there's an AI bubble. We are in the late 1990s in terms of where we are in the cycle. Just talk to us when you think about both sides of the business, investment banking, and as you're getting insights from how your clients on the wealth side are thinking about things. How do you handicap that risk of where we might be in the cycle and what has history taught us of what that implies for your revenue or growth outlook?

Got it. And

It's about $250 billion of client assets.

But on the forward I think what's important here is that there is an education process, we don't look at it as something.

There's so much discussion around whether there's an AI bubble we've had.

Youre not going to necessarily flip the switch there is obviously places that we can continue to see asset asset growth and asset accumulation.

And we're offering new products to our clients such as just evergreen products or products that allow for lower denomination size, but this is a journey and it will take time as we think about the education process and re weighting of re basing individuals' portfolios, so absolutely a growth opportunity.

In the late '90s, in terms of where we are in the cycle, just talk to us when you think about both sides of the business, Investment Banking. And as you're getting insights from how your clients on the website are thinking about things, just how do you handicap that risk of where we might be in the cycle and what has ...

History taught us of what that implies, uh, for your revenue or growth Outlook.

Sharon Yeshaya: When we think about our use of AI and what we're seeing is there are many places that one can use AI. It's not just around efficiency, but it's also productivity, both on the expense line but also on the revenue line. I tried to note three different examples at the beginning opening comments, and they were purposeful because they all represent different ways that one can begin to use AI from a full firm perspective. One is just going through code and being able to work faster, make sure that we can be more efficient with our time, that coders can be more efficient as they go through lines of code that they're able to see and rewrite. That's one example that we can all kind of see across different firms, and I think different institutions have talked about it.

But again, one that will take time.

Okay. Thank you and then on <unk>.

Equities really nice nice growth there.

Sustained pattern of share gains in that business for a while now just remind us again whats driving share gains there.

Do you see further opportunities going forward.

So as it relates to equities, it's an incredible business, we've done an incredible amount of investing in our platform and our people.

And also our global regions.

What he is more broadly does speak to what we've talked about when we talk about durable share base gains for ISG. This is a durable business, where you have increases in prime brokerage balances. We have obviously spent the time and looking at our end clients and looking at the end at the end balances, but this is yet another place where you do see.

Sharon Yeshaya: You have things that are specific to Morgan Stanley, which might be around LeadIQ, and that's very revenue-driven, right? How do you give more time to an advisor? How do you make sure that you give more matches that produce better results? That's how we've been using all sorts of technology on forward. You have things that you can see across all sectors. Parable is something that we've been doing really in finance, looking at our data, piloting it through, and finding ways to summarize key data that other companies can also take advantage of. I think for, you know, you take a step back and your question is, what does it mean? There's a lot of ways to use this technology. It's extremely powerful. This is another place where I think we really are just scratching the surface of what it can do.

<unk> investment dollars going in you see that on the derivative side.

So when we think about our use of AI, uh, and what we're seeing is there are many places that 1 can use AI. It's not just around efficiency, but it's also productivity both on the expense line, but also on the revenue line, I tried to Note 3 different examples, uh, at the beginning opening comments and they were purposeful because they all represent different ways that 1 can begin to use AI from a, from a, uh, full firm perspective. You know, 1 is just going through code and being able to work faster. Uh, make sure that, you know, we can be more efficient with our time that coders can be more efficient as they go through, lines of code that they that they're able to see, uh, and rewrite. And so that's 1 example that you we can all kind of see across different firms and I think different institutions have talked about it. Then you have things that are specific to a Morgan Stanley, which might be around, um, lead IQ and that's very Revenue driven, right? So how do you give more time to an advisor?

And you see that on some of the cash based businesses and what we've offered internally in terms of trading tools to make our own business more efficient so for us Christian what's important is the consistency and the consistent growth that we've seen in that equities business and I would be remiss, if I don't mention yet again, the strength of the global nature.

How do you make sure that you give more matches that produce better results? Uh, and that's how we've been using all sorts of Technology on forward. Uh, and then you have things that can you can see across all sectors. Parable is something that we've been doing really in finance looking at our data, piloting it through and finding ways. To summarize key data that all other companies can also

<unk> of this franchise, we talk a lot about our competitive moats. Those modes are not built immediately so when we talk about these investment cycles, we've been investing in Asia throughout Asia for some time in different periods of time, you see different periods of growth across that region, sometimes it's Japan, sometimes it's China, sometimes it's India.

So, um, take advantage of. And so I think for, you know, you said, take a step back and your question is, well what does it mean? There's a lot of ways to use this technology. It's extremely powerful. Uh, and this is another place where I think we really are just scratching the surface of what it can do.

Operator: will move to our next question from Christian Bolu with Autonomous. Your line is now open.

And so that global reach and that investment is one that you are just seeing take place and take shape I should say as the global markets begin to reemerge in this capital market cycle.

We'll move to our next question from Christian beaulieu with autonomous

Ted Pick: Morning, Christian.

Your line is morning, Christian.

[Analyst 1]: Morning, Ted.

Ted Pick: Morning, Ted and Sharon. I wanted to follow up on wealth management and your outlook for that business. Just given your leverage to private markets and technology sector through Solium and your Carta partnership, I'd imagine you should be an outside beneficiary of the wealth creation around sort of the AI CapEx cycle. I'm curious how you see that, and then how does that influence your outlook for sort of 5 to 7% organic growth over time?

We'll move to our next question from Brennan Hawken with bank of Montreal.

Good morning, Good morning, Brendan questions, Hey, How're, you doing to talk to you again.

<unk>.

I'd love to drill into the cargo relationship. So you guys recently expanded that partnership you made reference to it in your prepared remarks, you speak to the experience that you've had with Carter carve out prior to that and your expectations for our larger relationships.

Good morning, Ted and Sharon um we're not just follow up on wealth management. Um and your outlook for that business, just giving you a leverage to private markets and and technology, technology sector through Solium your Carter partnership. I'd imagine you should be an outside beneficiary of the wealth creation around, sort of the AI kathak cycle. Um, curious, how you see that? Uh, and then how does how does, how does that influence your outlook for, um, sort of 5 to 7% of organic growth over time?

Sharon Yeshaya: When we think about private markets, we are obviously the largest provider of all the alternative space for the wealth management businesses, just given our overall aggregate size. It's about $250 billion of client assets. On the forward, I think what's important here is that there's an education process. We don't look at it as something you're not going to necessarily flip the switch. There are places that we can continue to see asset growth and asset accumulation. We're offering new products to our clients, such as evergreen products, products that allow for lower denomination size. This is a journey, and it will take time as we think about the education process and reweighting or rebasing individuals' portfolios. Absolutely a growth opportunity, but again, one that will take time.

Yeah, it's really nice to hear from you Brennan. So it's nice to hear you back on our calls.

This has been this has been a multi pronged approach in terms of the cargo relationship. So as you know a private Carter generally deals with the private markets side from the stock plan perspective.

You know that our platform deals with both the public and the private market side. So where are the original relationship started as a referral based model. So as companies began to move from a private side to a public side, there will be referred to Morgan Stanley and Thats working we've seen evidence we've had referrals with <unk>.

So when we think about um private markets, say we are you know obviously the largest provider of uh all that the alternative space. Um yes for the wealth management businesses just given our overall aggregate size. Um it's about 250 billion dollars of client assets. Uh but on the forward, I think what's important here is that there's an education process. We don't look at it as something, you know, you're not going to

Number of referrals since that original relationship I was started and we have seen conversions into into our space from the public side already over the course of this year. So it's been a great experience, but there's now a second prong of the approach as you know what makes our platform on the wealth management side.

Portfolio is so absolutely a growth opportunity. But again 1 that will take time

[Analyst 2]: Thank you. On equities, really nice growth there, and it's been a consistent pattern of share gains in that business for a while now. Just remind us again, kind of what's driving share gains there, and where do you see further opportunities going forward?

Handout is the value of advice, explaining the value of advice to our clients to our broader client base, which is a standout we often call. It a category of one where carda now does is it's been interested in being able to offer these services not just <unk>.

Thank you and then on equities. Um, really nice, nice growth there. And it's been a consistent pattern of share gains in that business for a while. Now, just remind us again, kind of what's driving, share gains there and then where do you see further opportunities um, going forward,

Sharon Yeshaya: As it relates to equities, it's an incredible business. We've done an incredible amount of investing in our platform, our people, and also our global regions. Equities more broadly do speak to what we've talked about when we talk about durable share-based gains for ISG. This is a durable business where you have increases in prime brokerage balances. We have obviously spent the time looking at our end clients and looking at the end balances. This is yet another place where you do see technology investment dollars going in. You see that on the derivative side, and you see that on some of the cash-based businesses and what we've offered internally in terms of trading tools to make our own business more efficient. For us, Christian, what's important is the consistency and the consistent growth that we've seen in that equities business.

so, as it

To the individual founders or the top providers the top to the company as a.

Relates to equities, it's an incredible business. We've done an incredible amount of investing, um, in our platform and our people. Uh, and in also our Global regions.

Okay.

To a public state, but throughout the entire journey. So we're offering our advice based service to those individuals and from that perspective. It also helps.

Solidify some of the other work that we've been doing right. We've done a lot of work on trying to service founders on trying to service our family offices. There is all different places when you can think about how we've grown our wealth management business and types in terms of the types of coverage, we give to the individuals and these this is.

Just one more place where our relationship with cargo can be helpful and it will allow us to better deepen relationships also with private companies.

Sharon Yeshaya: I would be remiss if I don't mention, yet again, the strength of the global nature of this franchise. We talk a lot about our competitive moats. Those moats are not built immediately. When we talk about these investment cycles, we've been investing in Asia, throughout Asia for some time. In different periods of time, you see different periods of growth across that region. Sometimes it's Japan, sometimes it's China, sometimes it's India. That global reach and that investment is one that you're just seeing take place and take shape, I should say, as the global markets begin to reemerge in this capital market cycle.

Thanks for that Sharon and thanks for the warm welcome back I appreciate it.

Equity is more. Broadly does speak to what we've talked about when we talked talked about durable, sharebase gains for isg. This is a durable business where you have increases in Prime brokerage balances, we have obviously spent the time looking at our end clients and looking at the end, uh, at the end balances, but this is yet another place where you do see technology investment dollars going in. You see that on the derivative side? Uh and you see that on some of the cash-based businesses and what we've offered internally uh in terms of trading tools to make our own business more efficient. So for us, Christian, what's important is the consistency and the consistent growth that we've seen in that equities business. And I would be remiss if I don't mention yet, again, the strength of the global nature of this franchise, we talk a lot about our competitive modes, those modes are not built immediately. So when

When you think about that added access right.

The strong.

Established business that you haven't sodium.

Here's a little bit more privates I know you guys.

You know what I mean.

How much more substantial is that base versus 2021, when we last saw robust capital markets.

We talk about these Investments Cycles. We've been investing in Asia throughout Asia, for some time in different periods of time. You see different periods of growth that region, sometimes it's Japan, sometimes it's China, sometimes it's India. Uh, and so that Global reach and that investment is 1, that you're just seeing take place and take shape, I should say as the global markets, begin to re-emerge in this Capital Market cycle.

Well I think that goes back I think it was Abraham I can't remember, maybe Dan Fannon and the first question that we answered about M&A.

Operator: will move to our next question from Brennan Hawkin with Bank of Montreal.

We'll move to our next question. From Brennan Hawin with Bank of Montreal.

It's just the beginning I mean, I don't know how else to say it is something when we look at what's going on in workplace.

[Analyst 2]: Good morning.

Ted Pick: Morning, Brennan.

[Analyst 2]: Thank you for the questions.

Ted Pick: Hey, how you doing, Ted? Talk to you again. I'd love to drill into the Carta relationship. You guys recently expanded that partnership. You made reference to it in your prepared remarks. Can you speak to the experience that you've had with Carta prior to that and your expectations for the now larger relationship?

Good morning. Thank you. Brandon questions.

Hey, how you doing? Ted

talk to you again. Um,

Cross net new assets across Ipos. These are all ways for us to build out the integrated firm.

And we talked a lot about it over the course of the last two years and more recently over this year. When we spoke about the integrated firm effort. This is a place that youre seeing that build from a wealth management creation side, we have people around it to help shepherd individuals across the entire firm as you think about institutional securities.

I'd love to drill into, uh, the Carter relationship. So, uh, you guys recently expanded that partnership you made reference to it in your prepared remarks. You speak to the experience, uh, that you've had with Carter Carter prior to that, and your expectations for now larger relationship.

Sharon Yeshaya: Yeah, it's really nice to hear from you, Brennan. It's nice to hear you back on our calls. This has been a multi-pronged approach in terms of the Carta relationship. As you know, Carta generally deals with the private markets side from the stock plan perspective, and you know that our platform deals with both the public and the private market side. Where the original relationship started is a referral-based model. As companies began to move from a private side to a public side, they would be referred to Morgan Stanley. That's working. We've seen evidence. We've had referrals. We've had a number of referrals since that original relationship was started. We have seen conversions into our space from the public side already over the course of this year. It's been a great experience. There's now a second prong of the approach.

If you think about underwriting et cetera, so there's a lot more to go.

In the entire ecosystem of being able to work with companies and their founders understand them from beginning to end and then bring them to market and service them throughout the lifecycle of that Corporation.

Yeah, it's really nice to hear from you Brandon. So it's nice to hear you back on our calls. Um, this has been a, this has been a multi-pronged approach in terms of the Carter relationship. So as you know, private, uh, Carter generally deals with, uh, the private markets side from the stock plan perspective. Uh, and you know that our platform deals with both from the public and the private Market side. So where are the original, uh, relationships started is the referral base model. So, as companies began to move from a private side to a public,

Our next question comes from Glenn Schorr with Evercore.

Good morning, Glenn Hi, quick one.

Good morning.

A quick one for Sean I was very intrigued by your comment on that.

Domestic inflows and the large partnership with third party investment advisor.

Mike My question is how much it's grown a lot.

Sharon Yeshaya: As you know, what makes our platform on the wealth management side stand out is the value of advice, explaining the value of advice to our clients, to our broader client base, which is a standout. We often call it a category of one. What Carta now does is it's been interested in being able to offer these services not just to the individual founders or the top providers, the tops of the companies as they go from a private to a public state, but throughout their entire journey. We're offering our advice-based service to those individuals. From that perspective, it also helps solidify some of the other work that we've been doing, right?

And I feel like we're still scratching the surface, but and that was a direct thing.

Direct sales into your wealth channel.

Can you differentiate your growth mindset going forward.

<unk> penetrated Europe huge client base and then B is there a big white label opportunity.

Starting to scratch the surface of.

So the way that I would describe it is what youre seeing is you have our wealth channel, where <unk> seen growth, but that and that has done that has been.

Based on multiple years of what we call tax University. So when we first bought parametric we work within our system to explain the product and the benefits of what you can use certain tax harvesting et cetera within your portfolio. How is parametric used to our financial advisors, So our financial advisors.

Side, they would be referred to Morgan Stanley, and that's working. We've seen evidence. Uh, we've had referrals, we've had number of referrals since that original relationship, uh, was started. And we have seen conversions into into our space from the public side already over the course of this year. So it's been a great experience. But there's now a second prong of the approach, as you know, what makes our platform on the wealth management side. Stand Out is the value of advice, explaining the value of advice to our clients, uh, to our, you know, broader uh client base, which is a standout. We often call it a category of 1. What Carta now does is, it's been interested in being able to offer these services, not just to the individual Founders or the top providers, you know, the tops of the, the companies, as they as they go from a private to a public state. But throughout the entire

Sharon Yeshaya: We've done a lot of work on trying to service founders, on trying to service family offices. There are all different places when you can think about how we've grown our wealth management business in terms of the types of coverage we give to the individuals. This is just one more place where a relationship with Carta can be helpful, and it will allow us to better deepen relationships also with private companies.

<unk> to use it more and better understand that actual product. So that's one channel of growth. Then you have other retail distribution channels that are also using it and what I spoke to specifically here that was a newer opportunities that we haven't seen before in such size is we've started to work with third party asset managers as well we had a press release out.

Journey. So, we're offering our advice based service to those individuals. And from that perspective, it also helps, um, solidify. Some of the other work that we've been doing right, we've done a lot of work on trying to service Founders on trying to service a family offices. There's all different places when you can think about how we've grown our wealth management business in types, in terms of the types of coverage we we give to the individuals and these this is just

It's close to a year ago at this point, where we did discuss that this is something we're working towards.

1 more place where our relationship with, Carter can be helpful and it will allow us to better deepen relationships. Also with private companies,

Ted Pick: Excellent. Thanks for that, Sharon, and thanks for the warm welcome back. I appreciate it. When you think about that added access, plus the strong and established business that you have in Solium that bears a little bit more privates, I know you guys don't call it. You know what I mean. How much more substantial is that base versus 2021 when we last saw robust capital markets act?

<unk> talked about different types of asset managers, who can look at their own portfolios and say for my own portfolio and the assets that I cover maybe this would be a good tool and thats. What we saw in terms of the inflow those will be lumpier or not saying that thats necessarily something that youre going to see every quarter, which is why we called it out.

An established business that you have in sodium, that has that veers a little bit more private. I know you guys don't go.

But it is certainly another place in another channel, where we see the opportunity for parametric overtime.

Awesome I appreciate that.

You know what I mean? Um, how much more substantial is that base versus 2021 when we last saw robust capital markets?

Sharon Yeshaya: I think that goes back, I think it was Abraham. I can't remember. It may have been Dan Fannin. The first question that we answered about NNA, it's just the beginning. I mean, I don't know how else to say it. It's something when we look at what's going on in workplace across net new assets, across IPOs. These are all ways for us to build out the integrated firm. We talked a lot about it over the course of the last two years and more recently over this year when we spoke about the integrated firm effort. This is a place that you're seeing that build from a wealth management creation side. We have people around it to help shepherd individuals across the entire firm as you think about institutional securities, you think about underwriting, etc.

Pictured Ted.

I'm curious.

I agree with everything he said the regulatory capital.

Capital framework.

They are going to be more balanced you've got an 80 basis point refund recently.

As you mentioned you have over $300 of excess capital and you are making.

Of money.

The buybacks and dividends are good.

But my Big question is are there.

Yes.

Most of our capital at a higher pace into to drive growth. Your your return on tangible equity is hardly anything to complain about but it is a big denominator are there areas that you could deploy at a faster pace, whether it be organic or inorganic that will just broaden the platform make the company better drive future growth.

Sharon Yeshaya: There is a lot more to go in the entire ecosystem of being able to work with companies and their founders, understand them from beginning to end, and then bring them to market and service them throughout the lifecycle of that corporation.

Well Glenn as you say that's the key question.

The dividend is now $1 share that is sacrosanct and we will continue to grow that along the buyback has been opportunistic.

Well, I think that goes back, I think it was Abraham. I can't remember, maybe Dan Van the first question that we answered about nna. It's just the beginning. I mean, I don't know how else to say it? It's something when we, we look at what's going on in workplace, IPOs, these are all ways for us to build out the integrated firm. Um, and we talked a lot about it. Uh, over the course of the last 2 years and more recently over this year when we spoke about the integrated firm effort, this is a place that you're seeing that build from a wealth management. Creation side, we have people around it to help Shepherd individuals across the entire firm as you think about institutional security, to think about underwriting. Etc. So there's a lot more to go um in the entire ecosystem of being able to work with companies and their Founders, understand them from beginning to end and then bring them to Market and service them throughout the the the life cycle.

You buy shares back maybe at a slightly higher cadence, but we're going to continue to view that as a tactical lever.

Of that Corporation.

Operator: Our next question comes from Glenn Schorr with Evercore.

Over the last.

Our next question comes from Glenn Shaw with evercore.

Ted Pick: Morning, Glen.

[Analyst 2]: Hi, quick one. Good morning. A quick one first. Sharon, I was very intrigued by your comment on the Parametric inflows and the large partnership with third-party investment advisors. My question is, Parametric's grown a lot, and I feel like we're still scratching the surface. Are you, and that was a direct thing and a direct sales into your wealth channel. Can you differentiate your growth mindset going forward for A, penetrating your huge client base, and then B, is there a big white label opportunity that this is starting to scratch the surface of?

Year, plus we've accreted <unk>.

Morning Glenn. Hi quick. 1

$110 billion of capital dating back a number of quarters. So that of course has been effectively capital putting the piggy bank.

As we think about investment you heard <unk> talk about a whole bunch of that are the best uses of capital continue be internal investment into the business into the integrated firm those are they can either be adjacent.

Good morning. A quick one first, Shon. I was very interested in your comment on the parametric inflows and the large partnership with third-party investment advisors. So my question is, parametrics have grown a lot, and I feel like we're still scratching the surface. But are you... and that was a direct thing and a direct sales into your Wealth Channel.

Investments or they can be a little more thought going to digital assets or something that is kind of new and offers diversification effect, but they're all in the cylinders of the strategy around the wealth investment manager and then the investment bank.

Sharon Yeshaya: The way that I would describe it is what you're seeing is you have our wealth channel where you've seen growth, but that has been based on multiple years of what we call tax university. When we first bought Parametric, we worked within our system to explain the product and the benefits of what you can use, sort of tax harvesting, etc. within your portfolio. How is Parametric used to our financial advisors? Our financial advisors started to use it more and better understand that actual product. That's one channel of growth. You have other retail distribution channels that are also using it. What I spoke to specifically here that was a newer opportunity that we haven't seen before in such size is we've started to work with third-party asset managers as well.

can, can you differentiate your growth mindset going forward for a pan, penetrating Euro your huge client base and then B, is there a big white label opportunity that this is starting to scratch the surface of

The mantra has been to scale with our key clients to build out our product capabilities to invest in technologies. That's why it's always great to Sharon when it some detail on some of the technologies that are that are being born as we speak some of them are efficiency driven some of them are effectiveness driven.

If you think about the.

Lucas of.

We're the integrator firm is it's around.

The key decision makers at these or banking or.

Asset management clients or.

Our wealth management clients, where they are the primary decision maker for financing or catalyst events, which of course dovetails with the investment banking wave.

Well, so the way that I would describe it is what you're seeing is you have our wealth Channel where you've seen growth but that, and that has done that has been, um, based on multiple years of what we call tax University. So when we first bought parametric, we worked within our system. To explain the product and the benefits of what you can use, sort of tax, harvesting, Etc within your portfolio. How is parametric used to our financial advisors. So our financial advisors started to use it more and better understand that actual product. So that's 1 channel of growth, then you have other retail distribution channels

That is kicking in now and we are investing a lot of dollars, whether it's in the markets business intra quarter or it is through our wealth clients either directly or indirectly. So E trade pros effectively investment and it just happens to be an internal one Sharon has spoken at some length around workplace and connectivity of private companies in Canada.

Sharon Yeshaya: We had a press release out close to a year ago at this point where we did discuss that this is something we're working towards. We've talked about different types of asset managers who can look at their own portfolios and say, for my own portfolio and the assets that I cover, maybe this would be a good tool. That's what we saw in terms of the inflow. Those will be lumpier. We're not saying that that's necessarily something that you're going to see every quarter, which is why we called it out. It's certainly another place and another channel where we see the opportunity for Parametric over time.

Think about what we're doing with Azure hash and building out the full wallet. Some of this stuff we can either harkening back to the equity days of 15 years ago, we might we might build we might lease but those are investments that are made inside the business and eventually for the benefit of our of our financial advisors. We're also building out our <unk>.

That are also using it. And what I spoke to specifically here, that was a newer opportunity that we haven't seen before in such size, is we've started to work with third-party asset managers as well. We had a press release out close to a year ago at this point where we did discuss that this is something we're working towards, and we've talked about different types of asset managers who can look at their own portfolios and say, for my own portfolio and the assets that I cover, maybe this would be a good tool. And that's what we saw in terms of the inflow; those will be lumpier, or not saying that that's necessarily something that you're going to see every quarter, which is why we called it out, but it's certainly another place and another channel where we see the opportunity for Parametric over time.

[Analyst 2]: Okay, awesome. I appreciate that. Bigger picture, Ted, I'm curious. I agree with everything you said. The regulatory capital framework is hopefully going to be more balanced. You got an 80 basis point refund recently. As you mentioned, you have over $300 million of excess capital, and you're making tons of money. I think the buybacks and dividends are good. My big question is, are there areas that you could deploy more capital at a higher pace to drive growth? Your return on tangible common equity is hardly anything to complain about, but it is a big denominator. Are there areas that you could deploy at a faster pace, whether it be organic or inorganic, that would just broaden the platform, make the company better, drive future growth?

Bank that has a.

Key channel that we are much focused on as you know Glenn and that's gotten a lot of dollars and attention too.

The organic opportunity.

Is the one that clears the bar and checks those boxes and that's going to be the continuing.

Okay, awesome. I appreciate that. Uh, bigger picture, Ted, I'm, I'm curious. Um, you I agree with everything. You said the regulatory frame Capital framework is, is hopefully going to be more balanced. You've got an 80 basis point refund recently. You, as you mentioned, you have over 300 of excess cap on and you're making tons of money. So I think the BuyBacks and dividends are good.

Strong buys of the group that having been said we are.

Well aware of the capital cushion.

We do have.

Thanks to <unk>.

The better part of 15 years.

<unk>.

Mr. Gorman we.

Have been well versed and trained around.

Um, but my big question is, are there areas that you could deploy more Capital at a higher Pace into to drive growth? Your your return on tangible Equity is hardly anything to complain about but it is a big denominator um are there areas that you could deploy at a faster Pace? Whether that be organic or inorganic that would just run the platform? Make the company better drive future growth.

The thinking on the inorganic.

Ted Pick: Glen, as you say, that's the key question. The dividend is now $1 a share that is sacrosanct, and we'll continue to grow that along. The buyback has been opportunistic. We'll continue to buy shares back, maybe at a slightly higher cadence, but we're going to continue to view that as a tactical lever. As you know, over the last year plus, we've accreted $7, $8, $10 billion of capital dating back a number of quarters. That, of course, has been effectively capital put in the piggy bank. As we think about investment, you heard Sharon talk about a whole bunch of that. The best uses of capital continue to be internal investment into the business and to the integrated firm.

Whether it fits in the strategy, whether the cultures right, whether the timing makes sense and then ultimately whether the price works strategy culture timing price and.

And right now there is a lot of product that is coming at us but in virtually every case, Glenn we feel we can do the build internally or organically.

And for the last two years I think you'd agree what's been most important in the delivery of our management team, which has worked together for 10 15 20 years, beginning of course, Dan and Andy leaving the firm and then Sharon Eric Charles and then the rest of the operating committee.

Ted Pick: Those are, they can either be adjacent investments or they can be a little more orthogonal, like digital assets or something that is kind of new and offers diversification effect. They're all in the cylinders of the strategy around the wealth investment manager and then the investment bank. The mantra has been to scale with our key clients to build out product capabilities to invest in technologies. That's why I thought it was great that Sharon went into some detail on some of the technologies that are being born as we speak. Some of them are efficiency-driven. Some of them are effectiveness-driven.

For the last two years, we've been focused on saying, what we're going to do and putting up the numbers.

And that Hasnt been at the total expense of the inorganic but we've felt comfortable continuing to make the case that there is growth both in wealth and investment management, and then durably inside the investment bank and that the sum of those two would be greater than the whole and.

The context of the integrated firm that it would not just be kind of sales, but it will be something that in the right kind of market environment, where offer operating leverage.

Since it's been a little picture the little picture of both kind of squarely ways from <unk>, but then also building out the income statement, making sure that there's manifestly operating leverage against the uncertainty of geopolitics and transitioning economy.

Ted Pick: If you think about the kind of locus of where the integrated firm is, it's around the key decision makers at these banking or asset management clients or our wealth management clients where they are the primary decision maker for strategic financing or catalyst events, which of course dovetails with the investment banking wave that is kicking in now. We are investing a lot of dollars, whether it's in the markets business intra-quarter or it is through our wealth clients either directly or indirectly. Power E-Trade Pro is effectively an investment. It just happens to be an internal one. Sharon has spoken at some length around workplace and connectivity of private companies and Carta. Think about what we're doing with ZeroHash and building out the full wallet.

Um, as we think about investment, you heard your own talk about a whole bunch of that. Uh the best uses of capital continue to be internal investment into the business and to uh, the integrated firm, those are. They can either be adjacent uh Investments. Or they can be a little more orthogonal like digital assets or something. That is kind of new and offers diversification effect but they're all in the cylinders of the strategy around uh the wealth investment manager and then the Investment Bank uh the the the the Mantra has been to scale with our key clients to build out, uh, product capabilities to invest in Technologies. It's why I thought it was great, the Chiron. When it's some detail on some of the technologies that are, uh, that are being born as we speak, some of them are efficiency driven. Some of them are Effectiveness, uh, driven. Uh, if you think about the, the kind of locus of uh where the integrated firm is, it's around. Uh, the key decision makers at these uh,

Over time, we can consider carefully whether the inorganic.

Ticks, all four boxes strategy culture timing price and whether we want to.

Bold something in as you well know this firm has.

Has successfully integrated Smith, Barney sodium E trade and Eaton Vance, but there is such a thing as winners curse in the financial services space and we were not about to make that mistake, we don't need to put up a print for sake of it. We are very excited by the way on our announcement on zero, how should we think it's great.

Banking or uh Asset Management clients or uh our wealth management clients where they are the primary decision maker for strategic financing or Catalyst events, which of course, dovetails with the investment banking wave, uh, that is kicking in now and we are investing a lot of dollars. Whether it's in the markets business, Central quarter, or it is uh, through our wealth clients, either directly or indirectly. So E-Trade Pro is effectively an investment that just happens to be

Ted Pick: Some of this stuff we can either, hearkening back to the equities days of 15 years ago, we might buy, we might build, we might lease, but those are investments that are made inside the business and eventually for the benefit of our financial advisors. We're also building out our bank. That is a key channel that we are much focused on, as you know, Glen, and that's gotten a lot of dollars and attention too. The organic opportunity is the one that clears the bar and checks the most boxes. That's going to be the continuing strong bias of the group. That having been said, we are well aware of the capital cushion. We do have, thanks to the better part of 15 years of Mr.

We're building up a full wallet and we will be ready to go as we move into 2026, but.

Whether we.

Continue to compound the wealth and asset management base through 10 truly inorganically.

Or whether we do something inorganically it'll have to fit the test, but I wanted to give you a sense that of course, we think very much about the big picture for us of the trees, but we also in this two year period had been very much focused on the little picture the spec on the rug and making sure that we have numbers that are clear.

And that sustained the valuation that the market has awarded US and then we move forward with a capital buffer that is 250 to 300 basis points plus.

Uh an internal 1 Chiron has spoken to some lengths around workplace and connectivity of private companies in Carta. Think about what we're doing with zero hash and building out uh, the full wallet. Some of this stuff we can either hearkening back to the equities days of 15 years ago. We might buy. We might build. We might lease, but those are investments that are made inside the business and eventually, for the benefit of our of our financial advisors, we're also building out our bank, uh, that is a, uh, a key, uh, channel that we are much focused on as, you know, Glenn and that's gotten a lot of dollars and, and attention too. Uh, so the, the organic opportunity um, is the 1 that clears the bar and checks the most boxes and that's going to be the continuing, uh, strong bias of the group that having been said, uh, we are well aware of the capital cushion. Uh, we do have, uh, thanks to uh, the better part.

We will move to our next question from Erika Najarian with UBS.

Ted Pick: Gorman, we have been well-versed and trained around the thinking on the inorganic, whether it fits in the strategy, whether the culture is right, whether the timing makes sense, and then ultimately whether the price works. Strategy, culture, timing, price. Right now there is a lot of product that is coming at us. In virtually every case, Glen, we feel we can do the build internally, organically. For the last two years, I think you'd agree what's been most important in the delivery of our management team, which has worked together for 10, 15, 20 years, beginning of course with Dan and Andy leading the firm, and then Sharon, Eric, Charles, and then the rest of the operating committee, that for the last two years we've been focused on saying what we're going to do and putting up the numbers.

Yes, good morning, Eric just one follow up good morning, just had one follow up question.

On the back of the first question on the investment banking backlog.

As we think about the sustainability of the investment banking strengths.

Can't help but notice that of course markets are at all time highs and and spreads are quite tight it.

It seems like the right pre condition for the realization pipeline for sponsors to.

Of 15 years of, uh, Mr. Gorman, uh, we have been well versed and trained around, uh, the thinking on the inorganic, uh, whether it fits in the strategy, whether the culture is right, whether the timing makes sense, and then ultimately whether the price works. Strategy, culture, timing, price, and, uh, right now there's a lot of product that is coming at us, but in.

Also take hold and Ken I'm, just wondering what other preconditions do you think are needed for that to be.

To beat for the realization pipeline to spill into 2006 activity.

We're seeing it.

So thank you Eric for the question, but we're beginning to see it already we saw in the third quarter and it continues to be a big part of our backlog as you think about and pipeline for the forward and the reason that we think that it's coming to fruition. As you said, we are seeing the capital markets kick in as Ted said he says the capital flywheel is working capital.

Ted Pick: That hasn't been at the total expense of the inorganic, but we have felt comfortable continuing to make the case that there is growth both in wealth and investment management and then durably inside the investment bank, and that the sum of those two would be greater than the whole in the context of the integrated firm, that it would not just be kind of salesy, but it would be something that in the right kind of market environment would offer operating leverage. In a sense, it's been the little picture, the little picture of both kind of squirreling away from chestnuts, but then also building out the income statement, making sure that there's manifestly operating leverage against the uncertainty of geopolitics and transitioning economy. Over time, we can consider carefully whether the inorganic ticks all four boxes: strategy, culture, timing, price, and whether we want to fold something in.

Uh, virtually every case Glenn, we feel we can do uh, the build internally organically. Um, and for the last 2 years, I think. Uh, you'd agree what's been most important uh, in the delivery of our management team which is work together for uh, 1015, 20 years, uh, beginning of course to Dan and Andy leading the firm and then Chiron. Eric Charles and then the rest of the operating committee that for the last 2 years uh we've been focused on saying what we're going to do and putting up the numbers.

Firewall is working specifically when we have ipos that provides another lean for exit.

And so that provides two sort of places that are financial sponsor can look both of the acquisition opportunity and exit from the perspective, an advisory or from the perspective of IPO and so what we've seen is that that's been helpful to help the engagement and its certainly something thats already beginning to play out in the marketplace.

And the bigger picture here is that being a private company a successful private company.

Over the last number of years as you know Erika the old rule of thumb was when you had a certain number of beneficial owners or a certain level wealth created you needed to go public if for no other reason to to fees.

Employee stock option plans and to have currency to get bigger through acquisition. The reality is that the.

And that hasn't been at the total expense of the own organic, but we have felt comfortable continuing to make the case that there is growth both in wealth and investment management and then durably inside the investment bank. And that the sum of those two would be greater than the hole in the context of the integrated firm, that it would not just be kind of salesy, but it would be something that in the right kind of market environment would offer operating leverage. So in a sense, it's been the little picture, the little picture of both, uh, kind of, you know, scrolling away from chestnuts. But then also building out the income statement, uh, making sure that there's manifestly operating leverage against, uh, the uncertainty of geopolitics and transitioning economy. And then over time we can, uh, consider carefully whether the inorganic, uh,

Ted Pick: As you well know, this firm has successfully integrated Smith Barney, Solium, E-Trade, and Eaton Vance. There is such a thing as winner's curse in the financial services space, and we were not about to make that mistake. We don't need to put up a print for the sake of it. We are very excited, by the way, on our announcement on ZeroHash. We think it's great. We're building out the full wallet, and we will be ready to go as we move into 2026. Whether we continue to compound the wealth and asset management base through $10 trillion organically, or whether we do something inorganically, it'll have to fit the test.

The democratization of the private channel and the ability for companies to stay private longer has been.

It has been one that has very much taken a hold and for lack of a better word it's been institutionalized our last 510 years, so being a private company a good private company has been a good thing and the street has been helpful. In offering sponsors additional space beyond the 10 year fund to continue to keep.

The winners in house.

At the same time being a public company has not been that great.

The regulation.

As you know much tougher and the just sort of the.

Ted Pick: I wanted to give you a sense that, of course, we think very much about the big picture, you know, forests of the trees, but we also, in this two-year period, have been very much focused on the little picture, the speck on the rug, and making sure that we have numbers that are clean and that sustain the valuation that the market has awarded us. We move forward with a capital buffer that is 250 to 300 basis points plus.

The reality of being a mid cap and small cap company that may be orphaned and still has to comply with the regulatory burden.

<unk> is tough.

So one of the things that we think is going on here is that with some rebalancing of the regulatory framework.

<unk> ability to go public the ability to go public perhaps earlier and to draw the attention.

By the way, on our announcement on zero hash we think it's great, uh, we're building out the full wallet and we will be ready to go, uh, as we move into 2026, but uh, whether we, uh, continue to compound, uh, the wealth and asset management base through 10 trillion organically, uh, or whether we do something inorganically. Uh, it'll have to fit the test, but I wanted to give you a sense that, of course, we think very much about the big picture, you know, far so the trees. But we also in this 2 year period, have been very much focused on the little picture, the spec on the rug and making sure that we have numbers that are uh, clean and that sustain the evaluation that the market has awarded us. And then we move forward with a capital buffer that is 250 to 300 basis Points. Plus

Investors not cleaning up a secondary sale of a financial sponsor, but empowers strategic investor, but in fact are coming in where theres still plenty of growth in our sort of going public discount premium that makes it an exciting asset class again.

Operator: We'll move to our next question from Erica Najarian with UBS.

We'll move to our next question from Eric and Nagar with UBS.

[Analyst 3]: Yes, hi.

Ted Pick: Morning, Erica.

[Analyst 3]: I just had one follow-up. Good morning. Just had one follow-up question on the back of the first question on the investment banking backlog. As we think about the sustainability of the investment banking strengths, can't help but notice that, of course, markets are at all-time highs and spreads are quite tight. It seems like the right precondition for the realization pipeline for sponsors to also take hold. Ted, I'm just wondering, what other preconditions do you think are needed for that to be, you know, for the realization pipeline to spill into 2026 activity?

We're optimistic about that.

<unk> is the sponsors have have not moved as fast.

Because they've had the ability to sustain these.

Capital structures as private companies.

That has its pluses that has its minuses what's changed though is that as we notwithstanding all of the concerns with elements of the <unk>.

Yes. Hi Erica. 1 follow good morning. Just had 1 follow up question. Um, on the back of the first question on the investment banking backlog. You know, as we think about the sustainability of the investment banking strengths, uh, can't help. But notice that, of course, markets are at all-time highs and and and spreads are quite tight. Um, it seems like the right precondition um, for the realization pipeline for sponsors to um, also take, hold and ten. I'm just wondering.

Three pronged strategy the demonstrated success of pronghorn and now are much pronged to include a pronged three I E deregulation, which will be very much a pro business.

Um, what other preconditions do you think are needed for that to be, uh, you know, for the realization pipeline to spill into Q2 activity?

Sharon Yeshaya: Thank you, Erica, for the question. We're beginning to see it already. We saw it in the third quarter, and it continues to be a big part of our sort of backlog as you think about the pipeline for the forward. The reason that we think that it's coming to fruition is, as you said, we are seeing the capital markets kick in. As Ted said, he says the capital flywheel is working. The capital markets flywheel is working. Specifically, when we have IPOs, that provides another lane for exit. That provides two sort of places that a financial sponsor can look, both an acquisition opportunity and exit from the perspective of an advisory or from the perspective of IPO. What we've seen is that that's been helpful to help the engagement, and it's certainly something that's already beginning to play out in the marketplace.

And hopefully pro broader economy phenomenon.

It makes it more interesting.

Strategic buyer to or the seller in fact, if they want to purify their portfolio to go in and do something to do something on a cross border basis ought to know that the regulator is going to give it a thumbs up thumbs down versus timing. It for uncertain periods are there may be deals in the national interest there.

Won't go through but the entire proposition of mid to large to Mega cap.

M&A has been one that has not been on the table for a long time, if there is going to be large cap M&A across growth industries around the world. There will also be an IPO market as they work symbiotically in terms of attracting growth capital to grow the winners.

Ted Pick: The bigger picture here is that being a private company, a successful private company, over the last number of years, as you know, Erica, the old rule of thumb was when you had a certain number of beneficial owners or a certain level of wealth created, you needed to go public if for no other reason to defeat employee stock option plans and to have a currency to get bigger through acquisition. The reality is that the democratization of the private channel and the ability for companies to stay private longer has been one that has very much taken hold and, for lack of a better word, has been institutionalized over the last five, ten years.

We're seeing it. Um, so thank you, Erica for the question, but we're beginning to see it already. We saw it in the third quarter and it continues to be a big part of our, uh, sort of backlog. As you think about and pipeline for the, the forward and the reason that we think that it's coming to fruition is as you said, we are seeing the capital markets kick in uh as Ted said, he said the capital flywheel is working the capital markets flywheel is working specifically when we have IPOs that provides another Lane for exit. Uh and so that provides 2, sort of places that a financial sponsor can look, both and acquisition opportunity and an exit from the perspective of an advisory or from the prospect of IPO. And so, what we've seen is that that's been helpful, uh, to help the engagement. And it's certainly something that's already beginning to play out in the marketplace.

Great. Thanks for the complete answer.

That's it for me.

Thanks, Eric.

We will move to our next question from Devin Ryan with citizens.

Hey, good morning, good morning, Gerard how are you.

Good morning, David.

I want to start with a question on wealth management net interest income, obviously really benefited short term rates rose in prior years and heard Sharon's comment for a modest increase.

And the bigger picture here is that, uh, being a private company, a successful private company, uh, over the last number of years. As, you know, Erica, the old rule of thumb was when you had a certain number of beneficial owners or a certain level of wealth created you needed to go public if for no other reason to the fees, uh, uh, employee stock option plans, and to have a currency to get bigger through, uh, acquisition. The reality is that the, um, the democratization

Ted Pick: Being a private company, a good private company, has been a good thing, and the street has been helpful in offering sponsors additional space beyond the 10-year fund to continue to keep the winners in-house. At the same time, being a public company has not been that great. The regulation got, as you know, much tougher, and just sort of the reality of being a mid-cap or even small-cap company that may be orphaned and still has to comply with the regulatory burden is tough.

NII and <unk>, even as the fed is now starting to lower rates and so I think what's becoming more clear is there's a lot of natural hedges in the model there margin balances second one being pledged assets stabilization and kind of the brokerage sweep balances. So I'm just curious as we think about you.

Youre right now starting to move lower and perhaps the first 100 basis points of cuts do you see a scenario where GW NII can actually grow and then can you just talk little bit more about some of these hedge impacts as we get the other side of this thanks.

Yes, absolutely I'll take the question.

We will revisit 2026 guidance in 2026 with fitting for where we are today, yes. There is room for an inflection as you're continuing to move higher you can ask me well how could you know to your point on what are these offsets.

Ted Pick: One of the things that we think is going on here is that with some rebalancing of the regulatory framework, the ability to go public, the ability to go public perhaps earlier and to draw the attention of new issue investors who are not cleaning up a secondary sale of a financial sponsor or a strategic investor, but in fact are coming in where there's still plenty of growth and a sort of going public discount premium that makes it an exciting asset class again, we're optimistic about that. The reality is the sponsors have not moved as fast because they've had the ability to sustain these capital structures as private companies. That has its pluses, that has its minuses. What's changed, though, is that as we, notwithstanding all of the concerns with elements of the three-prong strategy, the demonstrated success of prong one and now.

Of the private Channel and the ability for companies to stay private longer has been. Uh, has been 1 that has very much uh, taken hold and for lack of a better word. It's been institutionalized over the last 5, ten years. So, being a private company, a good private company, has been a good thing. And, and the street has been, uh, helpful in offering sponsors additional space beyond the 10-year fund to continue to keep the winners, uh, in house. Uh, at the same time, being a public company is not been that great. Um, the, uh, the regulation, uh, got as you know, much tougher, uh, and, uh, the just sort of the, um, uh, the the reality of being a midcap or even small cap company, that maybe orphaned and still has to comply with the, the regulatory burden, uh, is, uh, is tough. Um, so 1 of the things that we think is going on here is that with some uh, rebalancing of the uh regulatory framework.

And how can you get there even if rates begin to move down of course, it will depend on how quickly rates move.

And if it's prices is from the forward curve, we sit in today. So all of my answers are predicated on that on kind of this moment in time, but at this moment in time. The reason that you can have that outlook really has to do with the lending balances that we've seen and the consistent growth in lending balances.

CLS for example is something that I talked about this quarter I think we've talked about it over the course of the last couple of quarters and a place of growth.

The ability to go public, the ability to go public, uh, perhaps earlier. And to draw the attention of new issue, investors who were not cleaning up a secondary sale of a financial sponsor, but in our strategic investor, but in fact, are coming in where there's still plenty of growth and a sort of going public discount premium. That makes it an exciting asset class again. Um, we're we're we're optimistic about that. Uh, the reality is the sponsors uh have

And that is coming not just from existing clients. So you could say well your existing clients aren't they tapped out we're getting new balances were getting new client participation and there is more to do to help the bank itself grow as Ted said, so that's a place where you can have that potential growth. The other offset that I would note to you is historically when <unk>.

Ted Pick: Much pronged to and clearly pronged three, i.e., deregulation, which will be very much a pro-business and hopefully pro-broader economy phenomenon, makes it more interesting for the strategic buyer to, or the seller, in fact, if they want to purify their portfolio, to go in and do something. To do something on a cross-border basis, to know that their regulator is going to give it a thumbs up or thumbs down versus stymieing it for uncertain periods. There may be deals in the national interest that won't go through, but the entire proposition of mid to large to mega-cap M&A has been one that has not been on the table for a long time. If there is going to be large-cap M&A across growth industries around the world, there will also be an IPO market as they work symbiotically in terms of attracting growth capital to grow the winners.

We've seen rates come down we've also seen an increase in balances. So yes. There is a trade off in terms of how quickly will those interest rates come down and what will that mean, but that is from a sense of models behavior. Another natural point, then you could see in terms of the potential upside rather than downside on the forward.

That's great color. Thanks, Sharon just a quick follow up on the equities trading results, obviously feels like the bar keeps moving higher here and you referenced.

The growth in financing and kind of record results. There can you just give us a sense of kind of what the growth function has looked like in financing relative to intermediation over the past couple of years and then just what the mix kind of looks like there today and how that's evolved as well because it just feels like you're you're building kind of a higher base overall in equities and love to just get a little more.

Thank you.

Certainly I mean, we talked about record balances.

But that should obviously you should think about that relative to where markets are a year gaining client share of wallet share, but you're also benefiting one is benefiting from increased balances as the markets have risen as it relates to the more transactional level of activity that is going to really be based on what's going on in the marketplace in that time and you can see that more based on a vault.

Now, a much prong to and clearly prong 3, IE deregulation, which will be very much a pro business uh, and hopefully Pro broader economy phenomenon. Um, makes it more interesting for the Strategic buyer to or the seller. In fact, if they want to purify their portfolio, to go in and do something to do something on a cross border basis. Uh, to know that there are Regulators going to give it a thumbs up, or thumbs down versus stymying, it for uncertain periods. Uh, there may be deals in the National interest that won't go through, but the entire proposition of mid to large to Mega cap. Uh, m&a has been 1, that has not been on the table for a long time. If there's going to be large cap m&a across growth industries around the world, there will also be an IPO Market, uh, as they work, symbiotically in terms of attracting growth Capital, uh, to grow the winners.

Sharon Yeshaya: Great. Thanks for the complete answer. That's it from me.

Great. Thanks for the complete answer. That's it from me.

Ted Pick: Thanks, Erica.

Sharon Yeshaya: will move to our next question from Devin Ryan with Citizens.

Thanks Eric.

We'll move to our next question from Devin Ryan, with citizens?

Operator: Hey, good morning, Ted. Good morning, Sharon. How are you?

<unk> driven approach I E. Our volumes rising or are they falling and client activity more broadly so that might be more idiosyncratic to your point and so yes. The base will rise as those prime brokerage balances will rise assuming that there's not sort of some major market decline, which would cause a contraction in balances.

Ted Pick: Morning, Devin. I want to start with a question on wealth management and that interest income. Obviously, you know, really benefited as short-term rates rose in prior years. I heard Sharon's comment for a modest increase in NII in Q4, even as the Fed is now starting to lower rates. I think what's becoming more clear is there's a lot of natural hedges in the model there, margin balances, sec lending, pledge assets, stabilization, and kind of the brokerage sweep balances. I'm just curious, as we think about rates now starting to move lower and perhaps the first 100 basis points of cuts, do you see a scenario where GWM NII can actually grow? Can you just talk a little bit more about some of these hedge impacts as we get the other side of this? Thanks.

Hey, good morning, Ted. Good morning, how are you?

Tycho that we're at 6700 S&P and <unk>.

Index asset price highs around the world. So if there is a deleveraging event.

Or just lower let's say there is a.

Sort of recession scare and.

The markets are lower.

By definition, the financing revenues will be lower I mean, they are they are linked in that sense as you know.

Inextricably.

Sharon Yeshaya: Yeah, absolutely. I'll take the question. We will revisit 2026 guidance in 2026. Sitting for where we are today, yes, there is room for an inflection as you continue to move higher. You could ask me, to your point, what are these offsets and how can you get there even if rates begin to move down? Of course, it will depend on how quickly rates move, and if it's prices from the forward curve we sit in today. All of my answers are predicated on that, on kind of this moment in time. At this moment in time, the reason that you can have that outlook really has to do with the lending balances that we've seen and the consistent growth in lending balances. SDLs, for example, is something that I talked about this quarter.

Morning, David. Um, I want to start with a question on Wealth Management in that interesting come. Um, obviously, you know, really benefited as short-term rates Rose in, in Prior years and, uh, heard Insurance comment, uh, for a modest increase in, um, knee and Fork you even as the FED is now starting to lower rates. And so I think, you know, what's becoming more clear is there's a lot of natural Hedges uh, in in the model their margin balances second lending pledge assets, you know, stabilization and kind of The Brokerage sweep balances. So I'm just curious as we think about, um, you know, rates now starting to move lower, and perhaps the first 100 basis points of cuts. Do you see a scenario where gwm knee can actually grow? And then can you just talk a little bit more about some of these hedge impacts as uh we get the other side of this. Thanks.

What is what is an interesting development inside of equities.

Is first of all as globals ever Sharon has talked about.

We have a business that is thriving both in in Asia, which as you know multiple locations and then also in Europe again multiple locations. But then also the development of our derivatives business, all liquid derivatives and the cash business one.

<unk> thought to be one that would be totally electronic side that is being run very much as a barbell with a best in class.

Product as you are aware of but also one where the high touch.

Yeah, absolutely. I'll take the question. Um, there, you know, we'll revisit 2026 guidance in 2026. But fitting for where we are today, yes, there is room for an inflection as you continue to move higher. You can ask me, "Well, how could you, you know, to your point? Well, what are these offsets?" Um, and how can you get there? Even if rates begin to move down, of course, it will depend on how quickly rates move, you know, and if it's price, as it is from the forward curve we sit in today. So all of my answers are predicated on that, on kind of this moment in time. But at this moment in time, the reason that you can have that outlook really has to do with the lending balance.

Old School, our research sales driven product with a world Class Research Department with folks who have been at Morgan Stanley for 2025, 30 years, who are embedded with our asset managers and are able to help them capitalize on a market now that is rewarding dispersion across.

Sharon Yeshaya: I think I've talked about it over the course of the last couple of quarters and a place of growth. That is coming not just from existing clients. You could say, your existing clients, aren't they tapped out? We're getting new balances. We're getting new client participation. There's more to do to help the bank itself grow, as Ted said. That's a place where you can have that potential growth. The other offset that I would note to you is historically, when we've seen rates come down, we've also seen an increase in balances. Yes, there's a trade-off in terms of how quickly will those interest rates come down and what will that mean. That is from a sense of modeled behavior, another natural point that you could see in terms of a potential upside rather than downside on the forward.

<unk> strategies and across.

Our weighted so the first time in generation.

Real dispersion amongst our clients, which means they are looking for intellectual capital, we can offer that and that there is real.

The real ability now to monetize that not just in the classic financing pie, but also across cash and derivatives.

We will move to our next question from Mike Mayo with Wells Fargo.

That we've seen and the consistent growth in lending balances. SBLs, for example, is something that I talked about this quarter. I think we've talked about it over the course of the last couple of quarters, and it is a place of growth. That growth is coming not just from existing clients. So you could say, well, your existing clients, aren't they tapped out? We're getting new balances. We're getting new client participation, and there's more to do to help the bank itself grow, as Ted said. So that's a place where you can have that potential growth. The other offset that I would note to you is that historically, when we've seen rates come down, we've also seen an increase in balances. So yes, there's a trade-off in terms of how quickly will those interest rates come down and what will that mean? But that is, from a sense of model to behavior, another natural point that you could see in terms of a potential upside rather than downside on the forward.

Operator: That's great color. Thanks, Sharon. Just a quick follow-up on the equities trading results. Obviously, it feels like the bar keeps moving higher here. You referenced the growth in financing and kind of record results there. Can you just give us a sense of what the growth function has looked like in financing relative to intermediation over the past couple of years and what the mix looks like there today and how that's evolved as well? It just feels like you're building a higher base overall in equities. I'd love to get a little more sense there. Thank you.

Good morning, Mike.

In the past you've said at the moment I think boat Wow I guess, it's playing out and you mentioned ipos mergers. The flywheel you mentioned U S Europe Asia mid <unk>.

Florida's major corporate so it seems like a lots going on but.

I think the question is can you size, where we are in the capital market cycle like what inning are we in.

Are you over earning under earning.

Just if you could dimension this force thanks.

Sharon Yeshaya: Certainly. We talked about record balances in financing. We talked about that. That should obviously, you should think about that relative to where markets are. You're gaining client share, wallet share. You're also benefiting, one is benefiting from increased balances as the markets have risen. As it relates to the more transactional level of activity, that's going to really be based on what's going on in the marketplace in that time. You could see that more based on a volume-driven approach, i.e., are volumes rising or are they falling and client activity more broadly? That might be more idiosyncratic to your point. Yes, the base will rise as those prime brokerage balances will rise, assuming that there's not sort of some major market decline which would cause a contraction in balances.

Uh that that's great caller saying Sheeran um and just a quick follow up on the equities trading results. Obviously feels like the bar keeps moving higher here and you referenced uh the growth in financing um and and kind of record results there can you just give us a sense of kind of what the growth function has looked like in in financing relative to intermediation over the past couple years and then just what the the mix kind of looks like there today and how that's evolved as well because it just feels like you're You're Building kind of a higher base overall in equities and love to just get a little more sense there. Thank you.

Well I mean, you've been App is long enough to know that.

The typical answer that one would give would be driven by where we are in the economic cycle and I'm just not sure. It's working that way this time Theres clearly pent up.

Pent up supply of product.

And idea flow that as we've talked about stems back from the earliest days of the pandemic, whether it's embedded in sponsor portfolios or it has been sort of ideas in the making inside of the EU or greater China, or Japan, or obviously in the United States. So some of that inventory is meant to come. There's also the reality of almost like a <unk>.

Ted Pick: Yeah, I mean, to echo that, we're at 6,700 S&P and, you know, index asset price highs around the world. If there is a deleveraging event or just lower, let's say there's a sort of recession scare and the markets are lower, by definition, the financing revenues will be lower. I mean, they are linked in that sense, as you know, inextricably. What is an interesting development, though, inside of equities is, first of all, as global as ever, Sharon has talked about, we have a business that is thriving both in Asia, which is, as you know, multiple locations, and also in Europe, again, multiple locations.

<unk>.

Big size creates category killers, and the the regulatory commission on large cap M&A has also been kind of an unnatural constrained to the supply of large cap mergers that now need to happen to defease the cost of AI. So I think those are all tailwind.

What I would I am less certain about and I wouldn't want to be caught on the wrong side of kind of.

And <unk>.

Take on the World is there is a lot of geopolitical uncertainty by definition and there is considerable uncertainty around how our K economy manifests itself in terms of fed policy and then physical response function.

So just ignore that would be silly.

Ted Pick: Also, the development of our derivatives business, liquid derivatives, and the cash business, once thought to be one that would be totally electronified, that is being run very much as a barbell with a best-in-class M-SET product, as you're aware of, but also one where the high-touch, old-school research sales-driven product with a world-class research department with folks who have been at Morgan Stanley for 20, 25, 30 years, who are embedded with our asset managers and are able to help them capitalize in a market now that is rewarding dispersion across strategies and across weighting. For the first time in a generation, you have real dispersion amongst our clients, which means they are looking for intellectual capital. We can offer that and there is real ability now to monetize that, not just in the classic financing pie, but also across cash and derivatives.

And the markets have come a long way and then there's also the reality that the private capital class has been democratized over a relatively short period of time. So there will be there will be occasions, where folks are going to find out things.

Uh, you know, uh, index asset price highs around the world. So uh, if there is a deleveraging event, uh, or just lower, uh, let's say there's a, a, a, a sort of recession scare and uh, the markets are lower, uh, well by definition, the financing revenues will be lower. I mean, they're they they are they are linked in that sense as you know, uh, inextricably. Um, what is, what is an interesting development though? Inside of equities, uh, is first of all, uh, as Global's ever Sheeran has talked about, uh, we have a business that is thriving, uh, both in, uh, in Asia, which is as, you know, multiple locations. And then also in Europe, again, multiple locations. But then also, uh, the development of our derivatives business uh liquid derivatives, and the uh, cash business. Uh, once thought to be 1, that would be totally electronic that is being run very much as a barbell.

Right.

Or issues, whether by the way those are public or private companies. So I don't think it's just.

Blue Sky all boats steaming what I do think is that for the first time in a long time, the largest investment banks that have global enterprises that have invested in world class corporate finance bankers, who can offer the full set of.

With a best-in-class, uh, mset product as you're aware of, but also, uh, 1 where the high touch, uh, uh, old school, uh, research sales driven, uh, product with a world-class research Department, uh, with folks, who have been at Morgan Stanley, for 20, 2530 years, who are embedded with, our asset managers, and are able to help them capitalize on the market. Now, that is rewarding dispersion across strategies.

Global idea flow and then risk management around uncertainty through an M&A announcement, which is not just regulatory uncertainty, but it could be foreign exchange it could be the hedging of interest rates and then through to the complexity of our rights offering or sub IPO that entire Daisy chain.

Mike probably takes us back to something that feels like the mid nineties for example.

And across, um, uh, waiting. So the first time in a generation, uh, you have real, uh, dispersion amongst our clients, which means they are looking for intellectual capital. We can offer that. And there is real, uh, uh, uh, real ability now to monetize that, uh, not just in the classic uh, financing pie, but also across cash and derivatives.

Sharon Yeshaya: We'll move to our next question from Mike Mayo with Wells Fargo.

It could take us back to periods that are in the mid <unk> before credit got out of hand, where you have real companies that are getting out and doing back to basis corporate finance. The difference now is you need the full kit you need the full global support and it has been as you pointed.

Ted Pick: Morning, Mike.

We'll move to our next question from Mike Mayo with Wells Fargo.

Ted Pick: Hi, Ted. In the past, you said it's the moment of, I think, quote, wow. I guess it's playing out. You mentioned IPOs, mergers, the flywheel. You mentioned U.S., Europe, Asia, mid, large, major corporate. It seems like a lot's going on. I think the question is, can you size where we are in the capital market cycle? What ending are we in? Are you over-earning, under-earning? If you can mention this for us. Thanks.

It out and rightly pointed out a lot of talk about a lot of green shoots for a heck of a long time. So some folks have blinked and other folks have continued to invest and we feel good about that opportunity over the next three to five years, but will there be periods, where the windows coldwell shot because the GOP.

Morning, Mike. Hi. Uh, Ted. Hey, uh, in the past you said, it's the moment of I think boat. Wow, I guess it's playing out, and you've mentioned IPOs, mergers the flywheel, you mentioned us Europe, Asia, mid large major corporate so it seems like a lot's going on. But

I think the question is, can you size where we are in the capital market cycle? Like what ending are we in?

Uh, are you over earning under earning? Um just if you can Dimension this for us. Thanks.

Ted Pick: You have been at this long enough to know that the typical answer that one would give would be driven by where we are in the economic cycle. I'm just not sure it's working that way this time. There is clearly pent-up supply of product and idea flow that, as we've talked about, stems back from the earliest days of the pandemic, whether it's embedded in sponsor portfolios or it has been sort of ideas in the making inside of the EU or greater China or in Japan or obviously in the United States. Some of that inventory is meant to come. There is also the reality of almost like a Meeker-esque, you know, big size creates category killers. The regulatory kibosh on large-cap M&A has also been kind of an unnatural constraint to the supply of large-cap mergers that now need to happen to defeat the cost of AI.

Political uncertainty takes us to risk off our asset prices correct, absolutely in which case, which which companies you bank, which.

Which ideas are going to actually be the ones that win the day, that's we're winning or losing is going to be is going to be made amongst the global investment banking group.

Well, I mean, you you, you, you, you've been at this, uh, long enough to know that, uh, the, the, the, the, the, the, the typical answer that 1 would give would be driven by where we are in the economic cycle and I'm just not sure it's working that way. This time there is clearly pent up, uh, pent up supply of product, uh, and ideal flow that as we've talked about stems back from the earliest days of the pandemic, whether it's in,

Junior staffing and Resourcing for this capital market cycle for the next year.

Sure.

Four years or so.

Yes, we have.

We have the kind of.

Tension.

Inside where on the one hand, we have.

We have an installed base because as you know introducing new bankers on what is sort of the longest sale, it's like a financial adviser.

As like the key events for the CEO the CFO, the founder or they don't want to meet someone new so the installed base has to have been there which is why a lot of the hiring we did we did over the last three to five years on the other hand, you don't want to over hire because you know that investment banks tend to behave cyclically. So is there some tension in the.

Ted Pick: I think those are all tailwinds. What I am less certain about, and I wouldn't want to be caught on the wrong side of kind of an ambulant take on the world, is there is a lot of geopolitical uncertainty by definition. There is considerable uncertainty around how a key economy manifests itself in terms of Fed policy and then fiscal response function. To just ignore that would be silly. The markets have come a long way. There is also the reality that the private capital class has been democratized over a relatively short period of time. There will be occasions where folks are going to find out things they don't like around liquidity or issues, whether, by the way, those are public or private companies. I don't think it's just a blue sky, all boats steaming.

<unk> from folks who want us to have more bodies in front of $3 billion to $5 billion market cap companies to get that sell side. Yes. There is and I think that's a good thing when the tension is like a three or four that feels right. If it's one that means youre, probably overdone and as you would point out then you've got a purge and reach.

Embedded in sponsor portfolios or it has been sort of ideas in the making inside of the EU or greater China, or in Japan, or obviously in the United States. So, some of that inventory, uh, is meant to come. There's also the reality of almost like a Meek risk. Um, you know, big size, uh, creates category killers and the, uh, the regulatory kibosh on large cap. M&a is also been kind of an unnatural constraint to the supply of large cap mergers that now need to happen to defeat the cost of AI. Uh so I think those are all Tailwind. What? I what I am less certain about and I wouldn't want to be caught on the wrong side of kind of a, an nebulon. Um, Take On The World Is there is a lot of geopolitical uncertainty by definition and there is, um, considerable uncertainty around. How a k economy manifests itself in terms of fed policy and then fiscal response function. I mean, to just ignore that would be

<unk> and it kind of messes up the narrative.

And if it is seven or eight that means obviously, we haven't made a decision about where we want to have leadership and we want to have leadership in the core trusted advisor bracket.

The integrated firm proposition of course is that you may be trusted advisor, a founder and that found or may have a relationship with a wealth manager and that wealth manager then can work with the investment banker and its not force behavior, it's behavior that.

Ted Pick: What I do think is that for the first time in a long time, the largest investment banks that have global enterprises that have invested in world-class corporate finance bankers who can offer the full set of global idea flow and then risk management around uncertainty through an M&A announcement, which is not just regulatory uncertainty, but it could be foreign exchange. It could be the hedging of interest rates. Through to the complexity of a rights offering or a sub-IPO, that entire daisy chain, Mike, probably takes us back to something that feels like the mid-1990s, for example. It could take us back to periods that are in the mid-2000s before credit got out of hand, where you have real companies that are getting out and doing back-to-basics corporate finance. The difference now is you need the full kit. You need the full global support.

Silly. Uh, and the markets have come a long way. And then there's also the reality that the private capital class has been democratized over a relatively short period of time. So there will be, uh, there. There will be occasions where folks are going to find out things they don't like around, uh, liquidity or issues, whether by the way those are public or private companies. So I don't think it's, um, just uh, Blue Sky, all boats. Steaming what I.

Is something that is a natural because we've been at it together for a long time.

We will move to our next question from Christopher <unk> with K B W.

Great. Good morning, Thank you.

Good morning, Craig.

Good morning.

Ed you talked about the 300 basis points of excess relative to minimums.

I guess a two part question just to follow up number one what's the right level of management buffer there how that might be evolving in <unk>.

Perhaps the algebra behind that is the first question.

Okay.

I think that he gave.

We've highlighted where we have excess capital and that's obviously on a risk weighted basis.

Honestly like our risk asset base basis, we also have excess capital as it relates to SLR in terms of how and where it's evolving it will really depend on everything that we see on the forwards. So you think about the models that were supposed to get from a CCAR perspective, that's going to help us understand based R. W. A R. <unk> you think about <unk>.

Ted Pick: It has been, as you've pointed out and rightly pointed out, a lot of talk about a lot of green shoots for a heck of a long time. Some folks have blinked and other folks have continued to invest. We feel good about that opportunity over the next three to five years. Will there be periods where the windows could well shut because the geopolitical uncertainty takes us to risk off or asset prices correct? Absolutely. In which case, which companies you bank, which ideas are going to actually be the ones that win the day, that's where winning and losing is going to be made amongst the global investment banking group.

<unk> that will help us understand what its base. Our W. Is then you have to understand the overlap.

And G. SIB. So those are all three pieces on a risk based capital framework that we're waiting for and that will help inform us on the forward look as well as the finalized rule on SLR, which.

Regulatory uncertainty, but it could be foreign exchange. It could be the hedging of interest rates and then through to the complexity of a rights offering or sub IPO that entire daisy chain. Mike, probably takes us back to something that feels like, uh, the mid-90s. For example, uh, it could take us back to periods that are in the in the mid oos before, uh, credit got out of hand, where you have, uh, real companies that are getting out and doing back to basic Corporate Finance. Uh, the difference now, is you need the full kit. You need the full Global support and it has been as you pointed out and rightly pointed out. A lot of talk about a lot of green shoots for a heck of a long time. So some folks have blinked and other folks have continued to invest. And uh we feel good about that opportunity over, uh, the next 3 to 5 years. But will there be periods where the windows could? Well shut because the geopolitical uncertainty

Strange looking forward.

So we can move away from that being a binding constraint and a backstop.

And I don't know if this is algebra.

Chris, but the way I would I would I would sort of think about it is in line with what Sharon just said is I believe on the last call. It 200, plus and we were at 15 for the quarter and obviously that there is.

Journey takes us to risk off or asset prices. Correct. Absolutely, in which case, uh, which, which companies you Bank, uh, which, uh, uh, which ideas are going to actually be the ones that win the day. That's where winning and losing is going to be, uh, is going to be made amongst the global Investment Banking group.

Ted Pick: You're staffing and resourcing for this capital market cycle for the next three or four years or so?

There is a solution from period to period, but we were at 200.

To your staffing and resourcing for this Capital Market cycle for the next 3 or 4 years or so.

Ted Pick: Yeah, we have the kind of tension inside where, on the one hand, we have an installed base because, as you know, introducing new bankers on what is sort of the longest sale, it's like a financial advisor. This is like the key event for the CEO, the CFO, the founder. They don't want to meet someone new. The installed base has to have been there, which is why a lot of the hiring we did, we did over the last three to five years. On the other hand, you don't want to overhire because you know that investment banks tend to behave procyclically. Is there some tension in the system from folks who want us to have more bodies in front of $3 to $5 billion market cap companies to get that sell side? Yes, there is. I think that's a good thing.

Plus I said, we said right and then.

yeah, we have um we have the kind of uh tension

And then this quarter, we went from 15% to 15 to now.

Notwithstanding obviously the payout of the dividend and the buyback because we just created more capital. We also during the period.

Received the reconsideration on CCAR from the fed to the tune of another 80 basis points. So a plus 20, that's 100 and so I'd say the 200 goes to $2 50, plus in the spirit of conservatism taking.

Taking 50 out of the 100, alright. So 200 on was sort of 200 plus was the prior $2 50, plus feels like the way to say it sure we could say more because the actual number 340, the implied buffers there I think others have said.

Ted Pick: When the tension is like a 3, 4, that feels right. If it's 1, that means you're probably overdone. As you would point out, then you've got a purge and reset, and it kind of messes up the narrative. If it's a 7 or 8, that means obviously we haven't made a decision about where we want to have leadership. We want to have leadership in the core trusted advisor bracket. The integrated firm proposition, of course, is that you may be trusted advisor to a founder, and that founder may have a relationship with a wealth manager. That wealth manager then can work with the investment banker. It's not forced behavior. It's behavior that is something that is a natural because we've been at it together for a long time.

Colleagues on prior calls and I would much agree with and repeat the the algebra as you say around the number by definition you need to have effectively a buffer on our buffer because of the regulatory uncertainty, which which nodule is the governor.

Inside where on the 1 hand, we have uh we have been installed base because as you know introducing new Bankers on what is sort of the longest sale. It's like a financial advisor. That this is like the key event for the, for the CEO, the CFO, the founder, they don't want to meet someone new. So the install base has to have been there, which is why a lot of the hiring we did. We did over the last 3 to 5 years, on the other hand, you don't want to over higher because you know that investment Banks tend to behave Pro cyclically. So is there some tension in the system? From folks who want us to have more bodies in front of 3 to 5 billion dollar market cap companies to get that sell side? Yes there is and I think that's a good thing. When the tension is like uh 34 that feels right if its 1 that means you're probably overdone and as you would point out then you've got a purge and reset and it kind of messes up the narrative uh and if it's a 7 or 8 that means obviously we haven't made a decision about where

And then the entire process of going through submissions and the like we're hoping some simplification some additional transparency, which were much seeing from the fed and the other regulators, which we are it's early days, but we're really heartened by that there's more of a common sense approach to this.

Should by definition over time prudently lower the size of any one buffer because they just know predictably what framework they are being measured by as opposed to the uncertainty underlying the test itself in times that are relatively not uncertain for large well.

We want to have leadership and we want to have leadership in the core trusted advisor bracket, uh, the the integrated firm proposition, of course, is that you may be trusted advisor to a founder, and that founder may have a relationship with a wealth manager, and that wealth manager, then can work with the investment banker, and it's not forced Behavior. Its Behavior that, uh, is something that is a natural because, uh, we've been at it together for a long time.

Sharon Yeshaya: We'll move to our next question from Chris McCratty with KBW.

We'll move to our next question. From Christopher, Karate with K.

Operator: Oh, great. Good morning. Thank you.

Ted Pick: Morning, Chris.

Operator: Good morning. Ted, you talked about the 300 basis points of excess relative to minimums. I guess a two-part question just to follow up. Number one, what's the right level of management buffer there? How that might be evolving and perhaps the algebra behind that? That's the first question.

Capitalized banks 15 years after Dodd, Frank so that would be the way to think about it in terms of the size of the buffer, but if you wanted to just jot down a number I'd say $2 50, plus.

Oh, great. Good morning, thank you. Um, morning Chris said you, you're good morning. Um, Ted, you talked about the 300 basis points of excess relative to minimums. Um, I guess a two-part question just to follow up. Um, number one, what's the right level of management buffer there? How might that be evolving and um, perhaps the algebra behind it? That's the first question.

Sharon Yeshaya: I mean, I think that, you know, we've highlighted where we have excess capital. That's obviously on a risk-weighted basis, on a risk asset-based basis. We also have excess capital as it relates to SLR. In terms of how and where it's evolving, it will really depend on everything that we see on the forward. You think about the models that we're supposed to get from a CCAR perspective. That's going to help us understand base RWA or stress RWAs. You think about Basel. That will help us understand what is base RWAs. You have to understand the overlap and GSIB. Those are all three pieces on a risk-based capital framework that we're waiting for.

Comfortable way to to go from here.

Did you have another question on up looks like it looks like were moving here.

We'll move next question comes from Saul Martinez with HSBC.

Okay. Okay. So it's all youre the last the last one up I'm getting I'm getting signals that youre.

So let's make it a really.

Softball, softball, softballs here at 10 <unk>.

<unk>.

I'll do my best I think I'll try to ask a question.

Well, that's obviously on a risk weighted basis. Um, honestly like a, a risk asset based basis. We also have excess Capital as it relates to SLR in terms of how and where its evolving. It will really depend on everything that we see on the forward. So you think about the models that we're supposed to get from a c car perspective, that's going to help us understand based rwa or trust rwas. You think about Basel? That will help us understand what is base RW.

Whether you've been you've been asked a few times.

Sharon Yeshaya: That will help inform us on the forward look, as well as a finalized rule on SLR, which I think the industry is really looking forward to seeing so that we can move away from that being a binding constraint and a backstop.

The sustainability.

The results in institutional securities, but I guess I'll ask it a little bit more.

Lee.

You did 20% R&D TCE this quarter through nine months, 17%.

Ted Pick: I don't know if this is algebra, Chris, but the way I would sort of think about it is in line with what Sharon just said. I believe in the last call I said 200 plus, and we were at 15 for the quarter. Obviously, there's oscillation from period to period. We were at 200 plus, I said, we said, right? This quarter went from 15 to 15.2, notwithstanding the payout of the dividend and the buyback because we just accreted more capital. We also, during the period, received the reconsideration on CCAR from the Fed to the tune of another 80 basis points. 80 plus 20, that's 100. I'd say the 200 goes to 250 plus in the spirit of conservatism, taking 50 out of the 100. 200 plus was the prior. 250 plus feels like the way to say it.

Then you have to understand the overlap of the U.S. Global Systemically Important Banks (G-SIBs). So those are all three pieces on a risk-based capital framework that we're waiting for, and that will help inform us on the forward look, as well as the finalized rule on the Supplementary Leverage Ratio (SLR), which I think the industry is really looking forward to seeing so that we can move away from that being a binding constraint and a backstop.

I guess.

Can you sustain.

This type of profitability.

In institutional securities because it would imply that.

Given your business mix.

You would imply that your raw fear consolidated level would be above 20% and <unk>.

This quarter very strong at levels, we haven't seen since 2021, obviously a lot of room for optimism.

A lot of reasons.

Highlighted 10, but we are really we bought a huge new market.

We're also having in doing it.

Extremely well so I'm just curious your perspective as an environment where.

Banking continues to grow over a multiyear period is it consistent with a backdrop where.

Market's revenues can be sustained at these levels or even grow given.

As to.

Benefit from volatile.

Economic and market backdrop.

Ted Pick: Sure, we could say more because the actual number is 340. The implied buffer is there. I think others have said, colleagues on prior calls, and I would much agree with and repeat the algebra, as you say, around the number. By definition, you need to have effectively a buffer on a buffer because of the regulatory uncertainty, which nodule is the governor and then the entire process of going through submissions and the like. We're hoping some simplification, some additional transparency, which we're much seeing from the Fed and the other regulators, which we are, it's early days, but we're really heartened by that. There's more of a common sense approach to this.

Youre recognizing that there are many sources of durability to perhaps more than ever happened in the past, but I don't know if thats, a softball question, but I'll try to put a bow on the conference call.

Leave you at that one.

Yes, I know you set a nicely I wouldn't know call softball.

Is it a sort of medium ball, but a very fair.

Very fair question and sort of it.

And then this quarter went from 15 to 152, um, that was standing. Obviously the path of the dividend and the buyback, uh, because we just created more Capital. Uh, we also During the period, uh, uh, received the reconsideration on car from the FED to the tune of another 80 basis points. So 80 plus 20, that's 100 and so I'd say, the 200, goes to 250 Plus in the spirit of conservatism uh taking 50 out of the 100. All right, so 200 on was sort of 200 plus was the prior, 250 plus feels like the way to say it. Sure we could say more because the actual number is 340, the implied buffer is there. I think others have said uh, uh, uh, colleagues on prior calls and I I would much agree with and repeat the, um, the algebra. As you say, around the number by definition, you need to have effectively a buffer on a buffer because of the regulatory uncertainty. Uh which uh which nodule

Kind of a cousin of Mike's question look again 6700 S&P.

You are going to have businesses that are going to have your proxy.

Okay.

Assuming the operating model is well functioning.

And tight credit spreads the financing.

Hi will.

Good work, if you have lower asset prices and deleveraging and credit spreads widen because there is a recession concern or an inflation scare my guesses markets businesses generally are going to perform less well I mean theres no on tying that links to some of this has to be driven by whether you think we're at the early.

Ted Pick: Should, by definition, over time, prudently lower the size of anyone's buffer because they just know predictably what framework they are being measured by, as opposed to the uncertainty underlying the test itself in times that are relatively not uncertain for large, well-capitalized banks 15 years after Dodd-Frank. That would be the way to think about it in terms of the size of the buffer. If you wanted to just jot down a number, I'd say 250 plus is a comfortable way to go from here. Did you have another question? No, looks like we're moving here. We're moving.

The governor, um, and then the entire process of going through, um, submissions and the like, we're hoping for some simplification, uh, some additional transparency, which we're much seeing, uh, from the Fed and, uh, the other regulators. It's early days, but I'm really heartened by that. There's more of a common-sense approach to this. I should, by definition, over time, prudently lower the size of anyone's buffer because they just...

Stages.

A reacceleration of growth in the U S economy, and then the global economy and there are signs that that is happening or you think you're actually in a later stage of <unk>.

Market evolution I E. The economy may be okay for the market as it had a huge run risk assets have had a huge run and we are going to chop around or even trade lower in which case then.

No predictively what framework they are being measured by, as opposed to the uncertainty underlying the test itself in times that are relatively not uncertain for large, well-capitalized banks, 15 years after Dodd-Frank. So, uh, that would be, um, the way to think about it in terms of the size of the buffer. But if you wanted to just jot down a number, I'd say $250 million plus is a comfortable way to go from here.

Sharon Yeshaya: Our next question comes from Saul Martinez with HSBC.

Do you have another question? Oh, no. Looks like we’re moving here. We're moving to our next question.

The markets businesses are generally on the street going to have to work through that.

Comes with HSBC.

Ted Pick: Hey, good morning. Saul, you're the last one up. I'm getting signals that you're...

That having been said we spent a lot of time.

Everything we can to make sure that there is durability inside of these businesses that we are in.

Ted Pick: Let's make it a really...

Ted Pick: A softball here at 10:40, please.

In our central 123 partner to the largest asset managers with whom we are wedded to and that we are doing business that we think is right in line with advising our clients that we have you see it the var ticks up but not dramatically that the use of capital is.

Ted Pick: I think I'm going to ask a question you, I think, in a way you've been asked a few times about the sustainability of the results in institutional securities. I guess I'll ask it a little bit more bluntly. You know, you did 20% ROTCE this quarter. Through the nine months, 17%. I guess can you sustain this type of profitability in institutional securities? It would imply that given your business mix, it would imply that your ROTCE or consolidated level would be above 20%. You know, IBC's obviously this quarter, very strong at levels we haven't seen since 2021. Obviously, a lot of room for optimism for a lot of the reasons you've highlighted, Ted. We are really in a sweet spot, it seems, because markets businesses are also humming and doing extremely well.

Is prudent.

But that we are connecting not just inside of equities, but across fixed income I'd call out by the way that the performance of the fixed income business for the last whole bunch of quarters has been remarkably stable that speaks to the management of that business as a part of a durable narrative inside of the investment bank.

Hey, good morning. Okay. So, so you're you're the last, you're the last 1 up. I'm getting, I'm getting signals that you're, you're, you're, you're, you're cleaning up. So, let's make it. A really, um, a softball softball softball here at 10:40 please. I'll I'll I'll do my best. I think. Oh, I'm gonna ask a question. You think in a way you've been you've been asked, uh, a few times about, uh, the sustainability of of the results and institutional security, but I I guess I'll ask you a little bit more bluntly. Um, you know you did 20% rotce this quarter through 9 months, 17%.

Um, you know, I guess.

Can you sustain?

But then across across the firm.

In investment banking.

I will again is also activity based in an economically sensitive, but we do think that the pent up supply there is going to have to come and we do believe that in the investment banking and capital markets New issue Arena, we are gaining share we would be seeking to do.

Ted Pick: I'm just curious to your perspective, is an environment where investment banking continues to grow over a multi-year period, is it consistent with a backdrop where markets revenues can be sustained at these levels or even grow, given these businesses do benefit from a volatile economic and market backdrop, recognizing that there are many sources of durability too, and perhaps more than there have been in the past. I don't know if that's a softball question, but I'll try to put a bow on the conference call and leave you with that one.

That globally over the next year or two years and then as it relates to the markets business I E sales and trading of stocks and bonds of we want to do it prudently. We are now looking to overreach, we are well aware of what the underlying valuation narrative is for Morgan Stanley.

This type of profitability in in institutional security because it would imply that giving your business makes, you know, um, you wouldn't apply that your Roxy or consolidate level would be above 20%. And, you know, ibc's obviously this quarter, you know, very strong at level gaming since 2021, obviously, a lot of room for optimism for for a lot of the reasons you've highlighted Ted but we are, you know, really a sweet spot is huge because markets businesses are are also humming and doing, you know, extremely well. So I'm just curious that your perspective is is is an environment where

You know, Investment Banking continues to grow over a multi-year period, is it consistent with, you know a backdrop where markets revenues can be sustained at these levels or even grow given these businesses too. Um,

We want to serve our clients, we want to help fill capacity and capability for them, but we're going to continue to have a high bar on what new business, we take on and how it generates generates incremental margin.

Ted Pick: Yeah, I thought you said it nicely. I wouldn't call it a softball. I'd say it's sort of a medium ball, but a very fair, a very fair question and sort of a kind of a cousin of Mike's question. Look, again, 6,700 S&P, you are going to have businesses that are going to, if you execute well, you're going to have performance, assuming the operating model is well-functioning and tight credit spreads. The financing flywheel should work. If you have lower asset prices and deleveraging and credit spreads widen because there's a recession concern or an inflation scare, my guess is markets businesses generally are going to perform less well. I mean, there's no untying that link. Some of this has to be driven by whether you think we are at the early stages of re-acceleration of growth in the U.S.

Benefit from a volatile, uh, economic and market backdrops, you know, um, recognizing that there are, you know, many sources of durability too and perhaps more than there have been in the past, but I don't know if that's a softball question, but I'll try to put a bow on the conference call and, um, leave you with that 1.

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

Ted Pick: economy and then the global economy, and there are signs that that is happening, or you think you're actually in a later stage of market evolution, i.e., the economy may be okay, but the markets have had a huge run, risk assets have had a huge run, and we are going to chop around or even trade lower, in which case then the markets businesses are generally on the street going to have to work through that.

Ted Pick: That having been said, we spent a lot of time doing everything we can to make sure that there is durability inside of these businesses, that we are an essential one, two, three partner to the largest asset managers with whom we are wedded to, and that we are doing business that we think is right in line with advising our clients, that we, you see it, the VAR ticks up, but not dramatically, that the use of capital is prudent, but that we are connecting not just inside of equities, but across fixed income. I'd call out, by the way, that the performance of the fixed income business for the last whole bunch of quarters has been remarkably stable. That speaks to the management of that business as a part of a durable narrative inside of the investment bank, but then across the firm.

Has to be driven by whether you think we are at the early stages of, uh, re-acceleration of growth in the U.S. economy, uh, and then the global economy. Uh, and there are signs that that is happening, or you think you're actually in a later stage of, uh, market evolution.

Ted Pick: The investment banking flywheel, again, is also activity-based and economically sensitive, but we do think that the pent-up supply there is going to have to come. We do believe that in the investment banking and capital markets new issue arena, we are gaining share. We would be seeking to do that globally over the next year, two years. As it relates to the markets business, i.e., sales and trading of stocks and bonds, we want to do it prudently. We're not looking to overreach. We are well aware of what the underlying valuation narrative is for Morgan Stanley. We want to serve our clients. We want to help fill capacity and capability for them. We are going to continue to have a high bar on what new business we take on and how it generates incremental margin.

VAR ticks up, but not dramatically. Uh, that the use of capital is uh, is prudent. Um, but that we are connecting uh, not just inside of equities, but across fixed income. I'd call out. By the way, that the performance of the fixed income business for the last whole bunch of quarters has been remarkably stable, that speaks to, uh, the management of that business, as a part of a durable narrative inside of the Investment Bank, but then across, um, across the firm

The investment banking. Uh flywheel again is also um activity based and and economically sensitive. But we do think that the pent up Supply there is going to have to come. And we do believe that in the investment banking and capital markets, new issue Arena, we are gaining share. We would be seeking to do that globally over the next year, 2 years. And then as it relates to the markets business, IE sales and trading of stocks and bonds. We want to do a prudently. Uh, we're not looking to overreach. We are well aware of what the underlying valuation, uh, narrative is for Morgan Stanley. Uh, we want to serve our clients. We want to help fill capacity and capability for them, but we are going to continue to have a high bar on what new business we take on and how it generates. Uh generates incremental margin.

Sharon Yeshaya: Ladies and gentlemen, this concludes today's conference call. Thank you, everyone, for participating. You may now disconnect and have a great day.

Ladies and gentlemen.

May now disconnect and have a great day.