The Zhitong Finance App learned that Morgan Stanley (MS.US) announced the results for the third quarter of 2026 before the US stock market on Wednesday, and then held a conference call.
Morgan Stanley's third quarter results were strong, with revenue of $20.3 billion and earnings per share of $3.03. The return on tangible common stock (ROTCE) was 22.6%, higher than 20% for the fifth consecutive quarter. Wealth management set a record, with total client assets of 10.5 trillion US dollars, net new assets of 232 billion US dollars, and fee-type asset flows of 80 billion US dollars; institutional securities revenue was 10 billion US dollars, up 18% year on year, of which stock business revenue was 5.8 billion US dollars, up 41% year on year.
Management pointed out that the current market is intertwined with both optimistic and cautious narratives, and believes that the two “known unknowns” of AI acceleration and geopolitical conflict will dominate investor and corporate behavior at the end of the year and the first half of 2027. The company believes that the AI capital expenditure cycle is still in its early stages. The annual expenditure of hyperscale cloud vendors is about 1 trillion US dollars, contributing about 50 to 70 basis points to the actual GDP of the US, and claims that AI opportunities are “double overallocated.” In terms of wealth management, the company relied on a funnel formed by E*TRADE, Workplace, and financial advisors, and had net new assets of $1 trillion over the past three years. In terms of capital, the standardized CET1 is 14.9%, has about 300 basis points of excess capital, and maintains repurchase and flexible allocation capabilities.
Below are the details of Morgan Stanley's third-quarter earnings call.
Management statement
Ted Pick (Chairman and CEO): Third-quarter revenue of $20.3 billion EPS $3.03, ROTCE 22.6%
According to Ted Pick, Morgan Stanley performed strongly on both revenue and profit sides in the third quarter, with the company's revenue of US$20.3 billion and earnings per share of US$3.03. The return on tangible common stock (ROTCE) was 22.6%, the fifth consecutive quarter above 20%, reflecting the continued strength of the global business platform.
The total client assets of the wealth management and investment management business grew by nearly $400 billion during the quarter, reaching a record $10.5 trillion. In a complex context, the overall performance of this quarter reflected the momentum of integrated companies. Wealth management continues to scale, with clients entrusting more assets to Morgan Stanley and deepening relationships.
Wealth management set a record for the quarter, with revenue exceeding US$9 billion, net new assets of US$232 billion, and fee-type asset flows of US$80 billion. This continued performance reflects the strength, unique capabilities, and breadth of product supply of financial advisors, as well as the trusting partnerships of integrated companies. Institutional securities business revenue was US$10 billion, up 18% year over year. The equity business led another excellent quarter of $5.8 billion.
Overall, customers remain active, and global business participation deepens. Looking ahead, investment bank reserves are still high, strategic dialogue at the corporate board level is active, and generally willing to act. Customers are seeking advice to take advantage of the current dynamic growth environment while accepting some additional structural fluctuations. Repressed demand, catalysts driving scale and productivity, and a more constructive regulatory background support the continued favorable future of investment banking business. Simply put, Morgan Stanley remains active in continuing to monetize the corporate finance life cycle.
The third quarter was divided into two distinct phases. July and August were extremely active, and risk appetite was mainly dominated by hyperscale cloud vendor investments in the AI ecosystem. Instead, as Labor Day approaches, tension in the Middle East heats up again, global interest rates rise, and central banks are busy curbing inflation. Market volume across asset classes slowed as investors and institutional participants assessed risk and return for the fourth quarter and end of the year.
Entering October, the two “known unknowns” mentioned in Morgan Stanley's March shareholder letter — the acceleration of enterprise-level AI and the risk of geopolitical conflict — have reached a critical point. In the “cup is mostly full” camp, the AI ecosystem continues to raise and deploy huge amounts of capital to drive efficiency, resilience, and productivity, and drive the nominal GDP growth of the US by 5% to 6%. Large corporate profits continued to rise. The economy is in full employment. The Federal Reserve focuses on managing long-term inflation expectations, and the positive effects of common sense regulation are showing.
In the “half empty cup” camp, the ongoing conflict between the Middle East and Ukraine, significant increases in benchmark interest rates and energy prices in developed markets, high asset prices in the fourth year of the stock market bull market, and uncertain US and global election and policy responses are all reasons to be more cautious. Entering the fourth quarter, how these two known unknowns interact, and what kind of narrative prevails in the third quarter, will drive investor and corporate behavior into the end of the year and the first half of 2027.
Regardless of the background, financial strength remains a key pillar of Morgan Stanley. The company continues to actively support customers while maintaining sufficient capital. Excess CET1 capital of 300 basis points contributed to financial strength and brought great flexibility. We look forward to continued dialogue and transparency after regulators finalize the banking capital supervision framework.
Entering the final quarter of this year, Morgan Stanley remained united and focused on achieving higher highs and higher lows during the cycle. Especially in complex environments, it is essential to continue to implement a clear and consistent strategy to raise, manage, and allocate capital within an integrated company as the customer's trusted advisor.
Sharon Yeshaya (Executive Vice President and Chief Financial Officer): Revenue of $20.3 billion EPS $3.03, ROTCE 22.6%
Sharon Yeshaya said that the company's performance in the third quarter was strong, with revenue of US$20.3 billion, earnings per share of US$3.03, and ROTCE 22.6%. The growth momentum of the second quarter continued until the beginning of the third quarter, and the market focused on AI investment and continued economic expansion. However, September was shortened after Labor Day, and rising energy prices and interest rates dragged down market activity. Despite market uncertainty, corporate activity remains strong, reflecting ongoing strategic dialogue. Continued customer engagement strengthens opportunities for integrated companies to deepen relationships and support future activities.
Since the beginning of the year, the company's efficiency ratio is 66%. Strong revenue drives operating leverage, which is enough to offset the costs associated with execution higher than the previous year. The company continues to invest in the technology stack, using AI tools to support infrastructure, business growth, and people. Together, these investments strengthen the competitive moat for integrated companies.
Institutional securities
Institutional securities revenue was $10 billion, up 18% year over year. The year-on-year increase was driven by a recovery in leading stock business and consulting business. The second-quarter exit momentum continued until July, then customer activity and markets slowed in September, but board conversations remained strong throughout the quarter, supporting strategic reserves and future capital market financing.
Investment bank revenue of US$2.2 billion, up 2% year over year, reflecting strong growth in the Americas and Asia, in line with expectations for a broadening of global activity sequentially. Consulting revenue of US$887 million drove performance. The year-on-year increase reflects an increase in completed activities in most industries. Stock underwriting revenue of $525 million was lower than the broad-based strength in the same period last year, when a few large transactions dominated the market.
Fixed income underwriting revenue continued to be strong, at US$747 million, supported by an active new issuance market. The reserves remain strong and diversified in products, industries and regions. Strategic activity is healthy, supported by ongoing corporate investment, portfolio repositioning, and capital allocation priorities. AI continues to drive consulting and capital market momentum, but activities are wide-ranging across industries and products.
Stock business
Stock revenue was US$5.8 billion, up 41% year over year, reflecting growth in various products and Asia. As customer needs become more complex and global, integrated platforms are well positioned. Technology and talent investments strengthen capabilities, enable companies to serve on a larger scale and manage risk more effectively in rapid markets. Main brokers lead the business, increase in financing revenue, and increase in average customer balance. The year-on-year increase in derivatives results was driven by increased customer activity and strong risk management at the beginning of the quarter.
Cash business results increased year-on-year, driven by increased customer turnover in various regions. Fixed income revenue of $2 billion reflects a decline in credit and commodity structural activity. Macro results increased slightly year over year, aided by foreign exchange. Micro results declined year over year, hampered by lower performance of securitized products. Commodity results were steady, but declined over a comparable period benefiting from strong structured trading.
ISG loans and provisions
ISG allocated US$141 million for the quarter, mainly driven by portfolio growth. The net write-off of US$105 million is mainly related to certain corporate and commercial real estate loans, most of which have been previously accrued.
wealth management
Wealth management set records in key growth indicators, including net new assets of $232 billion and fee-type asset flows of $80 billion. In the first nine months of this year, the company achieved about 500 billion US dollars in net new assets and about 175 billion US dollars in fee-type asset flows. These results demonstrate the reach of the multi-channel model and its ability to connect customers with trusted recommendations. Revenue of $9.1 billion and pre-tax profit of $2.8 billion also set records. The pre-tax profit margin of 30.4% indicates continued strength, while the company invests in technology, marketing, and banking capabilities to support future growth.
Asset management revenue increased 16% year over year to US$5.5 billion, benefiting from the cumulative impact of higher markets and strong fee-type asset flows. The fee-type asset flow of $80 billion set an organic record, with nearly half of it coming from a corporate pension commission. The company continues to expand retirement capabilities, deepen interaction with plan participants, and create more opportunities to establish consultative relationships. Transactional revenue of US$1.2 billion, up 6% year over year, excluding previous year's DCP revenue.
Although trading activity slowed from the second quarter, retail customer participation in the supply of differentiated products remained healthy, and alternative products continued to sell at record levels. Bank loan balances grew by $5 billion month-on-month, driven by securities mortgages and mortgage loans. Total deposits increased by nearly US$30 billion month-on-month to US$465 billion, reflecting investments to strengthen bank supply. Net interest income of $2.2 billion declined slightly due to deposit growth and structural changes. Looking ahead, a slight increase in the fourth quarter is expected, depending on interest rates and customer behavior.
Net new assets of $232 billion reflect core business strength and differentiated growth opportunities created by Workplace and integrated companies. IPO-related flows once again contributed slightly more than half of the overall NNA. As the IPO calendar becomes active, the funnel pace accelerates, and customer interest in proposals increases. Although the expiration of the lockdown period, fund allocations, and the consumption of personal assets can cause liquidity fluctuations, pipelines and cross-channel connections enable companies to establish relationships early and deepen over time.
Since acquiring e*trade and expanding WorkPlace 6 years ago, the company has added more than $2 trillion in net new assets. Years of experience have shown the differentiating customer acquisition funnel and its durability. Currently, the company has $8.4 trillion in customer assets and serves nearly 21 million customer relationships. The platform and broad product supply enable the company to serve a wide range of customer needs, and the scale supports continued investment in future technology, including AI and digital tools. Together, these advantages provide a strong competitive advantage, enabling companies to lead the future of wealth management.
investment management
Continued strength in parametric and fixed income contributed to long-term inflows of $15.8 billion. Parametric continues to benefit from distribution through large-scale wealth management platforms, and fixed income is supported by strong performance. Revenue of $1.5 billion reflects a steady increase in asset management and related expenses. A carry reversal involving mainly two investments in a private equity fund weighed down the overall results. Looking ahead, the company continues to invest in opportunities related to global distribution and financial advisor connectivity.
balance sheet
Total spot assets ended the quarter at $1.7 trillion. Standardized RWA increased to US$596 billion month-on-month as the company actively supports market business customers and continues to grow corporate loans. The quarter's $1.5 billion common stock was repurchased, with a standardized CET1 ratio of 14.9%. The quarterly tax rate is 23.3%. In the fourth quarter, the tax rate is expected to be slightly higher than in the third quarter, and the guidance remains unchanged throughout the year.
Amidst changing interest rate environments and geopolitical uncertainties, the company remains a trusted advisor to clients. This environment highlights the value of integrated companies, which use various business capabilities to respond to the changing needs of customers. The total assets of wealth and investment management clients were $10.5 trillion, laying the foundation for the end of the year.
Q&A session
Steven Chubak (Wolfe Research): Digital infrastructure capital expenditure and future revenue growth
Q: GF is leading the way in digital infrastructure financing, and the ECM and DCM rankings are visible. Can investment banking expenses related to digital infrastructure continue to grow from the current level in the future, even if more equity and debt financing shifts from the open market to private placement? Also, in addition to core investment banks, what are the auxiliary revenue streams brought about by digital infrastructure construction? SpaceX and NNA should be a lasting source of wealth for the business. Are there any other revenue streams overlooked by investors?
Ted Pick Answer: The AI capital expenditure cycle is still relatively early. Whether it ends up being $10 trillion or more or less remains to be seen, but the capital expenditure of hyperscale cloud vendors is currently around $1 trillion per year. Morgan Stanley's role as an advisor in all aspects will be a key differentiator. The company advises customers on strategies and the entire ecosystem of capital market alternatives to help innovate, finance throughout the lifecycle, and partner with chip, data center, or power providers. Activities may not be accelerating, but the power of AI as a tool for efficiency, productivity, and resilience is undisputed; it is a generational technological transition. The relationships and innovation that Morgan Stanley brings are critical. Friends become friends in certain situations, and may not be permanent friends, but permanent interests depend on who deals with whom, how they are structured, and where they are in the market and capital structure. This requires real structural knowledge, expertise, and trust. The Morgan Stanley team has demonstrated outstanding differentiation; what matters is what clears the market. Sometimes technology leads market acceptance; other times, on the contrary, it is necessary to recognize what the market is accepting at a specific point in time. Empirical judgment is critical.
Regarding net new assets, the IPO event brought significant growth, but in addition to the IPO channel, Workplace and its presence with many private companies convinced the company that this cycle is still many years away. NNA fluctuates in specific quarters, but looking back 6 years ago, it completed the funnel by acquiring ETRADE. The funnel includes extraordinary self-help channels, workplaces, and financial advisors. The acquisition of ETRADE generated net new assets of $1 trillion in 3 years. It has attracted another 1 trillion dollars over the past 3 years. Three trillion US dollars, two or three consecutive three-year cycles, showing that scaling brings the ability to scale, as well as reinvestment within the funnel. Lockdown periods and fund allocations present further opportunities to preserve assets. I'm excited to finally bring the customer to the point of attachment to E*TRADE, get close to the customer in the company's stock plan, Workplace, and eventually, when appropriate, fee-type asset flows into advisors. This is why the $80 billion fee-type asset flow is so important.
Brennan Hawken (BMO Capital Markets): IPO-related NNA follows and deposit growth
Q: The net new assets of $232 billion are impressive, and despite the slowdown in issuance, the IPO proceeds contributed. How much is from previous trading trailing and how much from the current quarter? How do you think about trailing in the coming quarter? Also, deposit growth is strong, although driven by higher-cost products, what is the relationship with banks and ISG financing? When will the benefits be reflected, and are there any delays?
Sharon Yeshaya's answer: The IPO stream is not a one-season event; it has a trailing one. The second-quarter IPO flow was mainly employee-related. This quarter was a continuation of the IPO flow. The company has a complete shareholding structure to understand early investors. For example, an endowment fund receives IPO shares and may transfer to a Morgan Stanley proposed relationship through a transfer agent. The stream now enters the proposed channel and passes through various share structure tables. Funds may also be allocated to individual accounts and distributed to lower-level investors after the lockdown period expires. Many places in the funnel are beginning to turn into suggestion-type relationships. The future will fluctuate, and people may sell stocks to buy different physical assets after the lockdown period expires. But this is the top of the funnel, continuing to aggregate new assets and new employee relationships. Some IPOs are in the first or third quarter, and consultant-led relationships are now being established. This is just the top part of the funnel. There are also corporate pension flows as fee-type assets, and conversations with individuals. It's the big picture of a multi-year investment involving workplaces, individuals, and the life cycle of corporate wealth.
Regarding deposits, NII declined slightly month-on-month, but deposits increased by nearly $30 billion month-on-month. This is an intentional strategic choice to develop banks. twofold: An integrated company perspective and wealth management perspective. The company discusses banks and uses banks more strategically as a source of capital. If qualified assets are transferred to banks during the year, capital costs and benefits will be reflected next year. They are not immediate; they will be shown in numbers over time. One-third of bank priority customers end up as digital customers or advisory relationship customers. Furthermore, they bring several times more NNA. Therefore, opportunities for bank growth come not only from wealth management and the top of the funnel, but also from the capital side, and will emerge over time.
Glenn Schorr (Evercore ISI): Technology's Impact on Wealth Management
Q: How are technological changes affecting the wealth business? The company invested in OpenAI very early. In addition to normal efficiency and recommended productivity, as a wealth leader, how do you view the evolution of wealth advice services in a technical context? Investment direction?
Ted Pick Answer: This is a key strategic question for Morgan Stanley. The company is in a unique position in the industry and sees the large-scale integration of funnels: self-service channels continue to innovate; differentiated workplaces continue to expand and acquire new relationships; and deep trusting relationships between financial advisors and customers. Establishing multiple advantages on this platform not only protects the moat, but also makes technology beneficial and differentiated. Four points: First, unique product capabilities, the world's largest distributor, and the most important wealth partner in the asset management industry. Alternative platforms Some products and pricing are not available elsewhere. Morgan Stanley clients have access to research, calendars, private equity markets through EquityZen, co-investment opportunities, and ultra-high net worth family office infrastructure solutions. Scale provides differentiation and is even enhanced by agents. Second, unique data. Wealth management of $8.4 trillion in assets, with nearly 21 million households, has great insight into the company and knows what works and what doesn't. Customers want to understand risk-reward sentiment for a day, month, or year, partly guided by other people's behavioral data. The scale and size give financial advisors insight, tailor recommendations, and equip them with tools to help clients achieve their goals. Third, the ability to protect customer assets. Few companies can continue to invest in protecting customers. You can't compete head-on with AI from the garage. The topic of resilience is super important for future clients with real net worth. Fourth, it boils down to human business. Technology is world-class, but people make decisions based on the complexity of their financial needs, involving parents, children, charity, taxes, etc. Technology can help with a lot of upfront work. But at the end of the day, do you trust financial advisors. The consultant retention rate is over 99%, and the customer is satisfied. Therefore, the important thing is to continue scaling up, not quarterly, but over many years and see the funnel to reinvest. The funnel not only protected the moat, but also became a technology winner. The management team is most excited about further scaling up and achieving operational leverage in the wealth management business over time.
Chinedu Bolu (Autonomous Research): IPO flow outlook and AI costs
Q: Are incremental IPO flows expected in the fourth quarter and 2027? How economical are these streams, and can they be retained and converted into annualized fee-type assets? Also, non-comp fees remained flat month-on-month, despite lower revenue. AI investment details? Is it a token or structured AI investment? Is it a multi-year investment plan?
Sharon Yeshaya A: I can definitely see retained assets. Seeing the increase in capacity, the second-quarter IPO now establishes a consultant-led relationship. I have a chance, and I'm very interested. The relationship will continue to be built, not only starting now, but there are more opportunities. A stable retention rate means a larger amount of assets. If retention is maintained, more top funnel flows and assets will eventually help fee-based consultant flows or advisors dominate products/relationships. There are no significant expectations for the second quarter, and assets will fluctuate. Individuals may sell assets to buy something, or they may have a suggestion type relationship and begin to aggregate external assets. This is a multi-year strategy, and there are great opportunities for external assets. Individuals have just entered wealth, begun to combine assets, and understand the value of comprehensive recommendation relationships.
Regarding expenses, any US company is using technology budgets to think about AI, increase productivity, support revenue growth on existing expenses, and partly transform it into technology itself. Reallocation of funds. Remarkable productivity: Financial reconciliation, which usually requires many manual hours, now has fewer errors and fewer checks. Manual processes and EUC (spreadsheets, etc.) can be automatically written, understood, coded, and moved into the productivity lifecycle. Salespeople in the stock business can use different AI tools. Productivity is real, big spending is here.
Michael Mayo (Wells Fargo): AI Capital Spending Supercycle Confidence and Resource Allocation
Q: Half full and half empty. The half-empty column includes AI capital expenditure supercycle excessive construction, electricity, financing, politics, etc. Confident about the AI capital expenditure supercycle? Last quarter, $800 billion to $1.3 trillion to $1.5 trillion was mentioned. Resource Allocation: More or Fewer AI Opportunities? What about the backlog?
Ted Pick Answer: This question will be asked over and over again because of the large scale of quantification, the US and even the global economy is driven by AI capital expenditure cycles. I don't know if it will accelerate from 1 trillion dollars, probably 1 trillion or 1.2 trillion, but it accounts for 50-70 basis points of the actual GDP of the US, which is significant. How many years will it take? Sometimes technology leads financing, and financing leads technology. Efficiency, productivity, and protection are unarguably important to every large organization. The key is that we continue to be advisors. As an advisor, structor, and financing partner, it effectively acts as a clearing mechanism in a complex ecosystem and is regarded as a fair party. If the deal doesn't clear on the open market, what's next? Private equity financing? How to satisfy LPs, etc.? There will be uncertain times. Undoubtedly, sometimes it feels too fast, and some aspects are overbuilt; sometimes it's not fast enough; the ecological bottlenecks are different; maybe electricity. But capital must provide for multi-generational change. The S&P 500 is worth 65-70 trillion US dollars, and the global GDP is about 120 trillion US dollars. One trillion dollars a year is a lot, but the cash flow is still positive compared to the best modern companies, and participation is necessary to win. In 5 to 10 years, it could be around 1 trillion dollars a year. The role is to consider appropriate when it's too fast and the market isn't ready for the next financing/structure/innovation; adjust accordingly when it's not fast enough and capital is needed. Continue to be humble and ask whether the 2028 hyperscale capital expenditure will be $1.2 trillion, $1.4 trillion, or $1 trillion. However, the figure will be about 1 trillion dollars, or at some level of a platform, and will continue to be an important part of the capital market, acting as a sponsor, delivering content, and bringing about real continuous efficiency and productivity improvements.
Regarding resource allocation, the company initially overequipped AI in jobs such as Fortune and OpenAI, and cooperated with other complexes to overallocate resources. Now it's “double overrated.” The existence of AI is important. The company is viewed as a trusted advisor in the ecosystem, with clear strategies: wealth managers, asset allocators, bankers. Participating in content, thinking, and evolution is a top priority for the company, while using and maintaining resilience on its own. Thanks for the question.
Daniel Fannon (Jefferies): Fee-Based Asset Flows and NII
Q: Is fee-type asset flow the key to expanding profit margins of wealth. Workplace customers switch suggestions, and total flow and fee-type flow converge? Or is there always a difference in price? Also, in the NII, Q4 outlook, is the 2027 loan NII growth reasonable?
Sharon Yeshaya's answer: It depends on what kind of advice the stream is looking for and whether they want to enter a fee-paying ecosystem. Part of this quarter's fee-type flow came from corporate pension entrustments. Bring in a complete corporate pension entrustment and calculate net new assets because it immediately enters as a fee-type stream. In other cases, the large backlog of funds is accumulated in brokerage accounts, on the advisory side and on the self-service side, and then moved into a fee-type stream. personal account. In the relationship with stock plans, people aggregate assets and move directly into a fee type. Depends on the flow. What matters is the recommended value, either directly entering as a fee-based account, or migrating from self-service, etc. According to statistics from earlier this year, more than 20% of consultant-led streams are fee-type streams, which are still being established or even growing. The pay-per-display model and the suggestion-led model are powerful.
Regarding NII, it is expected that NII will expand next year, mainly driven by loan growth.
Ebrahim Poonawala (BofA Securities): Wealth Management Pre-Tax Margins and Tokenized Shares
Q: Wealth Management Workplace transformation is excellent. How do you think about profit margins before tax in a world that is concerned about downside income risks? 30%. The company invests for the future and does not pursue higher goals in the short term. Does the conversion lead to better pre-tax profit margins? If it slows down, will it increase the defensive ROE of the business and the entire company?
Sharon Yeshaya Answer: Yes. Profit margins before tax will expand as the scale increases. The intention is not to manage on a quarterly basis, but rather to invest in the long term. Channel investments: Workplace, self-help, advisors. Expanding the breadth of the funnel and shifting to a fee-paying model, profit margins have expanded since the establishment of a larger business model more than 10 years ago.
Ted Pick added: The company strives to be disciplined in terms of slides, goals and objectives, and achieve and exceed them. ROTCE was over 20% in 5 quarters, some people asked if it had increased. The company truly has a basic dialogue with long-term real capital shareholders. They want returns over the years, with higher highs and higher lows all season long. If risk is avoidable and difficult, three-fourths of an empty cup will be slower because there is little you can do. But it's close to all-weather, and over time it's driven higher through scaling and activation funnels. The team is most concerned. If there is one in all CF statistics, net new assets of 1 trillion US dollars in the past 3 years, and 1 trillion US dollars in the previous 3 years. The key is whether these assets end up in the financial advisors' fee-type stream. In many cases, yes. Monetize unique experiences with financial advisors, make technology a long-term friend, and create incremental operating leverage. The answer is, in the end.
Regarding SEC tokenized stock rules, Sharon Yeshaya answered: Part of future wealth. The tokenized world means that assets move faster and easier. Suggestions are needed to think about assets and how to move assets quickly, properly use assets, and tokens. From a company perspective, it's an opportunity that has invested in the digital space, across Wealth and ISG. Will continue to lead, and investors and clients in particular need advice.
Devin Ryan (Citizens JMP): Institutional Stock Cycles and Structures
Q: Institutional stock revenue is almost double what it was in 2024. Cycles and structures? Large companies have consolidated shares, good prime business, and a larger Asian structure. How many cycles and how many shares of the bigger cake and new fields?
Ted Pick Answer: Still in the stock world. Stocks remain an attractive asset class. If interest rates rise further and squeeze corporate profits, the valuation multiples shrink, and the attractiveness of stocks declines. But it's still the stock world, seeing growth and healthy returns on capital for large companies. In addition, private equity and other private equity underwriters need to reap portfolios through an open market are beneficial. 9 boxes were created 15 years ago: cash, derivatives, main brokers, three regions. After the financial crisis recovered, do Prime early, and connect MSET world-class technology to high-touch cash products. Continued until now. The recent establishment of a world-class derivatives business under the leadership of Alan and Gokul is a missing link. A global business that connects cash and Prime through derivatives. As a result, the stock business is more stable than it was 7-8 years ago. But it would be foolish to say that it is unaffected by cycles and investor sentiment. Volume in Asia dried up in September, making it a time for the US to re-underwrite. The quantity is low, and the ecological output is low. But it has found an enviable position as a trusted advisor for asset managers in 9 boxes level 2 situations. Similar to wealth, the existence of scale is important. It must be faster, better, cheaper, win customer trust, and have a global layout. London, Paris, Hong Kong, Tokyo, Seoul, India, USA. The business benefits the biggest players and continues to focus on scale. It also focuses on the use of capital. Except for 1 trillion dollars every 3 years, the 300 basis point CET1 buffer is not small. Work with business units to achieve it. There are other usage measures, SLR, etc., but they like capital buffers. Different periods allow more capital to be invested in customers through stocks and fixed income businesses.
Christopher McGratty (KBW): Geography and Product Capital Allocation
Q: What capital allocation direction are you most excited about in the next few years? Domestic, international, product?
Ted Pick Answer: The geographic answer is global configuration. You can't decide if you want to grow in Hong Kong in the past 3 years; you must have had a world-class team for the past 20-25 years. The company has always been around. Tokyo is very hot and has partnered with MUFG. Japan's largest capital market franchise, clearing foreign exchange and stocks among global companies. Europe, a lot of people have been there in recent weeks. It needs to expand in the UK and mainland Europe. The US continues to be fertile, especially scattered around the world, and wants to have new releases and surpass beta. Geography matters. Asia has an advantage, but the answer is global. The products are similar, and the integrated solution spans cash, derivatives, and main brokers. Don't just be the primary broker of choice. Appropriate risk management and security deposits are required around the right customers. Monetization is required through financing products, low and high exposure to cash execution, and derivatives. The most important thing in the critical period is market business integration. Some customers, returning to the AI problem, are not only a banking phenomenon, but also a phenomenon of fixed-income guaranteed loans and securitized loans. The company has a world-class team. Micro, macro, commodities and stocks are closely integrated, and people have sat in every position to generate optimal risk-adjusted returns for customers. Not only is it a technocratic exercise, but it is also a behavioral exercise. It has been tested over time, people get along well, and customers see it.
Erika Najarian (UBS): The impact of higher interest rates on capital raising
Q: Investors are worried about continued higher interest rates, the Federal Reserve, and the 10-year term. Talk to clients in various industries and capital needs, how do higher interest rates and 10-year sustained levels impact capital raising decisions?
Ted Pick Answer: Not only are there higher nominal interest rates, but higher real interest rates. The cost of capital is not like years after financial depression or the pandemic and stimulus. There must be a real capital structure. If not, it is sometimes similar to an investment-grade capital structure, and sometimes a sub-investment-grade capital structure. The traditional basis is the previous investment cost. If not, the market finds out right away. As a structor and underwriter, I want to choose winners and give suggestions in the right place. However, pledging capital or help as a lender and using one's own balance sheet is one of the meanings of double overallocation. Double overallocation not only sends bankers to find business, but also requires extremely strict and sharp allocation of risk capital. Bridge or relationship loans theoretically turn debt into equity, and ultimately calculate provisions. Imagine making mistakes, and generational change is inevitable. But the job is to reduce stupidity, ensure activity, and help bridge capital when appropriate. Ultimately, value-added is M&A proposals, strategic proposals, not just balance sheets. You're right, when interest rates rise, if it's due to higher productivity and GDP, everything is fine. Back before the financial crisis, real GDP was 2% or 3%. If it helps stimulate, health is necessary. People are unwilling to invest in illiquid risk capital if high interest rates get out of control due to uncontrolled inflation expectations or the supply of geopolitical tail risks. This is a reality where the public and private equity markets check and balance each other, so GCM in the capital market business has keen personnel and ecological cooperation to see what works, not only in the long term, but also by opening and closing the market window.
Scott Siefers (TD Cowen): Sponsor backlog and impasse
Q: The state of the capital market, backlog of sponsor authorizations, how can the impasse be broken? A hindrance?
Ted Pick Answer: Two answers. First, the final portfolio needs to be reaped. Second, a large number of projects, continuation of funds, and placement of assets into new funds. To be fair, some very smart private equity investors have decided to keep some of their investments on the balance sheet. These investments are effective in a high-interest world. If they can generate as low as medium double digit IRR and proper leverage, they may want to keep them or reap them later. This is a positive response. Not a very positive response: It's a bit disheartening. Some sponsors stuck on Marks and MOIC will not achieve this because the market is sensitive to portfolios and new WACC, country risk, supply risk, and AI risk. The question is when and how. Some of the leading PEs are smart and flexible, bringing something that may not have a higher mark but is ready to go with big winners. Combinations form blends. Other holding hopes are better. Low interest rates, low inflation, and the probability of a non-recession environment is low, and no bets will be placed. Old-school corporate finance must be thought out. The smartest and most important PE partners will continue to find ways to market, IPO, or M&A in a favorable regulatory context. Put simply, to conditionally continue to think that it is a positive tailwind. Perhaps the mistake of a few years ago was to think that it could lead the corporate finance life cycle. It is clear that the strategic entity business community leads the life cycle, and sponsors must try to keep up with strategic bids and strategic capital requirements.
Benjamin Gerlinger (Citi): FICC and Stock Investment Opportunities
Q: The league table shows that stocks, FICC, and investment banks stand out in strong fields. Compared to its peers, FICC appears to have excess capital and unique financing opportunities. Does FICC have significant investment opportunities to seize share, or is it more focused on stocks because global stocks have more opportunities to expand?
Ted Pick Answer: Fixed income has been the Achilles' heel of Morgan Stanley Investment Bank for the past 15 years. Jay and Jakob's leadership brought extraordinary stability and generated efficient capital returns in the face of headwinds of $2 billion per quarter. It was intended to reach 1 billion per quarter. Importantly, the business is integrated with investment banks and the private equity side of the capital market and stocks, which has never been seen before. A lot of time helps promote stock products or banking products. They may not be recorded in fixed income external departments, but they are definitely recorded in underwriting, consulting, and stock lines. World-class business. It is not a traditional commercial bank, but it continues to invest in commodity, macro, and micro businesses by introducing assets into banks, capital costs comparable to the group, talent, the importance of AI ecology, and global product construction. These people understand the integrated company proposition and will continue to invest.
terminations
Moderator: The conference is over. Thank you for participating.