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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Q & A
Analyst
Operator

Thank you. [Operator Instructions] Our first question comes from Mike Mayo with Wells Fargo. Your line is now open.

Analyst
Michael Mayo

Hi.

Executive
James P. Gorman

Hey, Mike.

Analyst
Michael Mayo

You're certainly making progress over time with the ROTCE, 13%. But you're doing that, when you look at year-over-year where expenses grew faster than revenues. And I know it's just one quarter, but non-comp expenses were up 7%, comp was up a little bit. What sort of confidence do you have, that revenues will grow faster than expenses, if not just for the quarter, but for the next year, and how are you thinking about that relationship?

Executive
James P. Gorman

Mike, firstly, that's what we're paid to do. If we're in a business where we're growing expenses faster than revenues long term, we are not kind of very good business. So we are maniacally focused on it. And you're right, in any given quarter, obviously, you're going to see bumps and bounces a little bit. We had slightly higher litigation this quarter relating to some stuff way back 10 years ago from the crisis and some of that just sort of makes its way through the pipes at different moment. So and the BC was quite active given the activity, particularly in September.

Some of the integration stuff relating to Solium various other things, some of the tech spend we've been doing, developing out our tech platform, but I'm not -- frankly I wasn't concerned about that. And I would say, I'm certainly not concerned about it, for the next year. We intend to maintain the discipline that we've brought to this place for the last several years and that's not going to change.

Analyst
Michael Mayo

All right. And then just as a follow-up, I guess -- I guess there were some one-time or you didn't really specify the amount. But so just generally as it relates to technology and improving efficiency, where can you see the efficiency ratio going over the next one or two years?

Executive
James P. Gorman

Well, I'm not going to get ahead of what we do at the earnings call in January where we lay out our expense targets. I think we've taken the efficiency ratio, forget where we started this. But it was certainly in the '80s and target originally was $0.79 on the $1 than $0.77, $0.75 and I think we've been -- last year was this year's $0.73. We listen, we are generating scale economics, look at the wealth management business. I think non-comps were down about $10 million or $20 million including some costs that we're absorbing relating to the integration.

There is no reason why those non-comp numbers need to grow in that business. We've made a lot of investments for the last few years, we're starting to realize the benefit of those. Rob Rooney is leading a major reformation of our technology platform internally and it has the full focus for the organization and while we are having to -- and wanting to spend on some of the new technologies that are obviously coming to the