Morgan Stanley (NYSE:MS) Q3 2020 Earnings Conference Call - Final Transcript

Oct 15, 2020 • 08:30 am ET

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Morgan Stanley (NYSE:MS) Q3 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning. I will be reading a statement on behalf of Morgan Stanley.

Today's presentation will refer to Morgan Stanley's 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. For a decade now, we've been rebuilding Morgan Stanley from the depths of the crisis to a firm position to withstand whatever comes our way. Our performance this year has validated that approach and third quarter revenues were $11.7 billion, the second highest quarterly result in our history. The balanced business mix continues to deliver consistent results and high returns. We report an ROTCE of 15% with the year-to-date ROTCE of 14.3%.

On October 2, we closed the acquisition of E TRADE, and last week, we announced our intent to acquire Eaton Vance, which serves as the large -- latest strategic step in that transformation. We added these acquisitions from position of strength, and we have a strong momentum across each of our businesses.

Institutional Securities has been pivotal to our performance. In 2018, '19 and again in '20, year-to-date, extremely strong. This quarter ISG reported over $6 billion of revenues and $2 billion of pre-tax. Strength in Asia, equity underwriting and fixed income sales and trading and our overall equities business powered our performance. Asia had its best quarter in nearly a decade as we continue to see the benefits of the investments we have made in that region. Fixed income delivered the highest third quarter revenues in 10 years, excluding DVA. I see revenues today at $19 billion, up 24% over last year, and we continued to believe our institutional securities business has meaningful organic growth opportunities.

Wealth management continues to grow both organically and inorganically. On a year-to-date basis, fee-based flows have been exceptional $53 billion, with $24 billion in this quarter alone. Lending balance growth was a quarterly record of $6 billion versus the prior year, lending balances have increased nearly 20%. While we did not own E TRADE in the third quarter, it is important to note how they performed, delivering strong client activity in asset growth in the quarter as they have all year. With the E TRADE, our total client assets are now $3.5 trillion. That is up from $600 billion approximately we oversaw before we bought Smith Barney a decade ago, representing an increase of nearly 6 times.

Our investment management business serves as the third leg of the stool and produced over $1 billion of revenues on its own this quarter. Assets under management reached a record $715 billion. Important to note that is compared to $460