Morgan Stanley (NYSE:MS) Q2 2016 Earnings Conference Call - Final Transcript

Jul 20, 2016 • 08:30 am ET

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Morgan Stanley (NYSE:MS) Q2 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good morning. This is Sharon Yeshaya, Head of Investor Relations. During today's presentation, we will refer to our earnings release and financial supplement, copies of which are available at www.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. 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, James Gorman.

Executive
James Gorman

Good morning, everybody. Thanks for joining us. I'll make a few brief introductory remarks, and then Jon would take you through the numbers. And of course, we both, as always, look forward to your questions. Our results this quarter reflect solid performance in an improved but obviously still relatively fragile environment. Our team had several objectives coming into the quarter as follows: managing the uncertain macroeconomic environment, continuing the momentum we're building in Fixed Income while preserving stability in our other businesses; maintaining expense discipline; and obtaining approval for our capital plan under CCAR.

By and large, we met these objectives, and despite the overall lack of conviction in the market, we executed on our strategic plan and performed well in the areas of traditional strength. We saw continued stability and progress in our core businesses with each performing roughly in line with expectations given the environment. We made particular progress in Fixed Income & Commodities, where we generated approximately $1.3 billion in revenue, up significantly from the first quarter. Jon would take you through each of our businesses in a moment.

On expenses, we remain focused on our cost discipline both tactically and through Project Streamline. We're now a simpler organization and therefore must be leaner and more efficient in our spend. We discussed initiatives that are currently underway last month at our Financials Conference and are pleased with Project Streamline's progress to-date.

Our ROE for the quarter was 8.3% and demonstrated progress towards that 2017 target. Finally, we received the non-objection from the Federal Reserve on our 2016 capital plan. We believe this decision reflects the changes we undertook as well as our business mix stability. The approval enables us to increase our dividend to $0.20 per quarter and a repurchase up to $3.5 billion in common stock over the next 12 months, commencing in the third quarter.

CCAR's outcome reinforces our aim to steadily increase the return of capital to shareholders over time. And indeed, it marks the fourth consecutive year in which we have done so. We were also asked to resubmit our plan due to certain deficiencies that the Federal Reserve found in our capital planning process. We're working extremely hard to ensure a successful resubmission towards the end of this year.

On the macro environment, a lot was going on. Britain's decision to leave the European Union created uncertainty that is likely to persist for some time as the market grapples