Morgan Stanley (NYSE:MS) Q3 2019 Earnings Conference Call - Final Transcript

Oct 17, 2019 • 08:00 am ET

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Morgan Stanley (NYSE:MS) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Sharon Yeshaya

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 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 P. Gorman

Good morning, everyone and thank you for joining us. The firm's results in the third quarter was strong. Fee based client assets and lending balances continue to build in wealth management, contributing to a 28% margin. Institutional Securities revenues were $5 billion with solid performance across all divisions despite a mixed trading backdrop and Investment Management, Assets Under Management surpassed $0.5 trillion, a strong performance continues to attract positive long-term net flows.

In aggregate, the firm produced an ROE and ROTCE of 11.2% and 12.9% for the quarter. Before Jon takes you through our results and answers your questions, let me share a couple of thoughts. The Wealth Management business is powerful. A $2.6 trillion of assets annualizing over $17 billion revenues and margins at historic highs, the business is clearly stabilized in the firm.

I am convinced there remain several meaningful add [Phonetic] growth. The biggest is we look to aggregate assets held away. Our core client segment should see significant asset growth over the next decade. Further at consumer services across the wealth spectrum from the highest end family offices to employees service through Morgan Stanley at work provides us with the potential $4 trillion asset opportunity.

Also international opportunities, particularly Asia and continued growth of our loan portfolios are among the exciting opportunities that remain in this business. But the most attractive part is every incremental dollar revenue is arriving at a high margin than the margin of the existing business. And while you may not see this expansion over any individual quarter, over time, the business will grow and the margin will expand.

Our Institutional Securities business mix has proven to be very resilient, against a relatively difficult trading environment characterized by some seasonality and volatile markets, we performed well. This segment made $5 billion in revenues and for the fifth time out of the last seven quarters, and it underscores the strength of our client franchise in all three lines of the business, Investment Banking, Fixed Income and Equities.

We've been the beneficiary of client share consolidation to date and expect this to continue as competitive dynamics evolve. Finally, our asset management business is well positioned in the most attractive growth segments in the public and private markets with our leading active equity strategies and significant alternatives and solutions platforms. The growth in assets and profitability of the last few years are a testament to the refocus on this business and as