Morgan Stanley (NYSE:MS) Q2 2019 Earnings Conference Call - Final Transcript

Jul 18, 2019 • 08:30 am ET

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Morgan Stanley (NYSE:MS) Q2 2019 Earnings Conference Call - Final Transcript

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Q & A
Analyst
Operator

Thank you. [Operator Instructions] Our first question comes from the line of Brennan Hawken of UBS. Your line is open.

Analyst
Brennan Hawken

Good morning. Thanks for taking the question. I would like to start -- Jon, you walked through some of the deposit dynamics that impacted NII this quarter, that was helpful. Curious about what you're seeing since tax season and your outlook for deposits. Do you think that that remixes is effectively going to remain off the balance sheet or do you think there will be some return of some of those lower cost deposits as we go forward from here?

Executive
Jonathan Pruzan

Sure. Let me try to give you a little bit more color, Brennan. In terms of the actual deposits, remember there are three buckets that sort of impact NII, which is really the mix of deposits, the rate profile and then obviously the balance. In terms of our deposits, we saw about $10 billion of outflows in BDP, some from larger tax payments as we mentioned, some other just as people continue to look at their cash as an investment vehicle and they've seen some higher yielding alternatives, but they're still pretty defensive. We did have lower rates that obviously impacted both yields and prepayments. And then lastly, we had increased balances, so that was a positive.

The one thing that we would say on the deposit side that was positive is that the replacement of those $10 billion of deposits, although at a higher rate, were primarily driven from our wealth channel, so we had a lot of demand for our different products as we continue to build out that product set. And so that continues to be a nice source to bring new money into the Firm.

In terms of what happens going forward, I think that's a trickier question. We've seen post the tax payments probably the last five or six weeks of stabilization in those deposit levels, but again, customer behavior, the forward curve, what happens to rates in the competitive dynamic will drive ultimately that outcome. But I think we feel very good about the deposit products that we've been rolling out. We've been continuing to enhance our cash management products. We came out with a new high yield savings product that had a lot of interest from the field. So again, we should be able to source deposits pretty easily if that trend continues.

Analyst
Brennan Hawken

Okay, terrific. Thank you for all that color. That's really helpful. And then another question. You identified the trade web mark, which is -- and tailwinds, which was great to see clarification on that. Another point that we had -- questions we had heard from investors on the back of the results were around the mark in Investment Management that seemed strong again this quarter. Are the -- is that just primarily monetizations and we should think about as chunky? Was there anything unusual in that larger revenue line this quarter? Thanks.

Executive
Jonathan Pruzan

Again, I think chunky is the right word. But