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spk04: Good morning. On behalf of Morgan Stanley, I will begin the call with the following disclaimer. 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.
spk08: Thank you. Good morning, everyone. Thanks for joining us. I know you have a very, very busy morning, so we did our best to keep these earnings uncomplicated for you. Heading into 2022, we anticipated, as everybody did, a more volatile market, and obviously we saw that in the first quarter. The year started with rising inflationary pressures, accelerated expectations for tightening of monetary policy, and most notably, and sadly, the invasion of the Ukraine. This backdrop injected significant uncertainty into the markets and further tested resiliency of our franchise. Against this quickly evolving market environment, our diversified business model again generated high returns. The firm produced revenues of $14.8 billion and an ROTCE of 20%. I'm pleased to report that our first quarter results continue to exemplify Morgan Stanley's strength and affirm our long-term strategy. First, institutional securities delivered another very strong quarter, with revenues of $7.7 billion making it one of its highest performances ever. Compared to last year's record first quarter, we saw a different mix of businesses driving the strength of this segment. While underwriting was muted, advisory was a highlight. Equity and fixed income again delivered exceptional results, particularly in Asia and Europe, as we supported our global clients amid a turbulent backdrop. Global balance institutional businesses are complex, They require many years to build and an enormous amount invested in human capital. The breadth and depth of our franchise today is a competitive differentiator. Wealth management showcased its resiliency in the quarter. Notwithstanding fluctuating market levels, the business generated a margin of approximately 28% excluding integration-related expenses. The E-Trade integration continues to go very well, and given the current path we're on, a significant portion of the integration will be done by the end of this year. By the end of 2022, we expect to no longer separate our integration expenses. Net new assets for the quarter were $142 billion. That included an asset acquisition. Nonetheless, organic growth in our existing business remained very strong. In a volatile market, this is very affirming of the model. Further, we saw our first rate hike of the year in the first quarter. And with our strong and growing deposit base, this will have a near immediate economic impact to our business, and it supports our path to delivering the margins that we projected in excess of 30%. In investment management, the increased diversification of the business supported results in a very choppy market. Fee-based asset management revenues, which were 1.4 billion in the quarter, have grown with the addition of Parametric, Calvert, and the broadening of our alts and fixed income platforms. We've performed better with these franchises than we would have without it, and it has brought much more balance to our asset management business. And with respect to the advanced integration, it progresses very smoothly as well. The teams remain stable, and culturally, it's a terrific fit. While markets continue to evolve, we remain confident about our position and the many opportunities ahead. Finally, a brief word on the Russian invasion of the Ukraine. In managing a global business, particularly a markets-based global business, we must always remain vigilant about the potential for shocks or unexpected events. Obviously, the invasion of the Ukraine is one such event. First of all, and most importantly, our hearts go out to the Ukrainians and all those who have been impacted. As it relates to the business, apart from the volatility it's created, there's been very limited financial impact to Morgan Stanley. A few years ago, we decided to give up our banking license, and we significantly scaled back operations in Russia. Further, as a result of these actions and the current war, we're not entering into any new business in the country, and our activities are limited to helping global clients address and close out pre-existing obligations. I'm very proud of how our team has managed through a difficult market backdrop, and going forward, we continue to navigate the turbulent markets and broader geopolitical environment with confidence. I'll now turn the call over to Sharon to discuss the quarter in greater detail, and together we'll take your questions.
spk01: Thank you, and good morning. The firm produced revenues of $14.8 billion in the first quarter, representing the second highest quarter in our firm's history. Excluding integration-related expenses, our EPS was $2.06 and our ROTCE was 20.3%. The firm's first quarter efficiency ratio, excluding integration-related expenses, was 67.9% and reflects our expense discipline while continuing to invest in the businesses. Results of the first quarter illustrate resiliency and durability. Equity and fixed income supported our clients while navigating volatile markets. Wealth management proved resilient and investment management benefited from diversification. Now to the businesses. Institutional securities revenues of $7.7 billion represented the third highest quarter on record. Results declined 11% from the record set in the prior year. This quarter's performance again demonstrated the power of our global integrated investment bank, with balance across businesses and a strong presence across geographies. We remain a global diversified leader. Europe delivered its best quarter in over a decade, while Asia saw its second highest result, with strength in both equities and fixed income. Investment banking revenues were $1.6 billion, led by strength in advisory. Compared to the prior year, revenues declined by 37%. Advisory revenues were $944 million, almost double the prior year's first quarter, reflecting higher completed M&A volumes. Equity underwriting revenues were $258 million, a meaningful decline from last year's elevated results, in line with market volumes. Heightened volatility led clients to delay issuance activity. Fixed income underwriting revenues were $432 million, down compared to the prior year, as macroeconomic conditions contributed to lower bond issuances. Investment banking pipelines remain healthy across sectors and regions. However, the conversion from pipeline to realized will be largely dependent on market conditions going forward. Equity revenues were $3.2 billion, reflecting broad-based strength in performance against the backdrop of volatile markets. We continue to be a global leader in this business. Cash revenues were solid, with particular strength in Europe, consistent with market volumes by geography. Derivative revenues were robust, and the business navigated the volatility well. Prime brokerage revenues were strong, while inter-quarter balances were impacted by uncertainty. We saw balances rebound alongside markets. Fixed income revenues of $2.9 billion were in line with the very strong prior year. In the quarter, commodities and macro, particularly foreign exchange, led the strength. Macro revenues increased meaningfully from the prior quarter. Clients remained engaged, and the trading environment proved constructive. Micro results were strong, but reflected lower revenues compared to the prior year. Commodities delivered a more diversified result, with revenues notably higher than the previous first quarter, benefiting from the heightened levels of activity. Turning to wealth management, revenues were $5.9 billion, declines in DCP, negatively impacted the revenues by approximately $300 million. Excluding the impact related to DCP, revenues increased 6% versus the prior year's first quarter results. Results underscore the resilience of the franchise, the value offered to clients during uncertain times, and the benefits of our scaled multi-channel model. Retail clients remained invested with allocations across asset classes consistent with last year. PBT was $1.6 billion, and the margin was 26.5% or 27.8%, excluding integration-related expenses. This strong result should continue to be supported as we realize the benefits of rising rates. Asset management revenues were $3.6 billion, up 14% versus last year, benefiting from the growth in fee-based assets. This growth continues to reflect the investments we have made into the business over time and affirms our strategy is working. Net new assets were $142 billion for the quarter. NNA was inclusive of an asset acquisition, which I will touch on shortly. Absent this asset acquisition, annualized growth was 5.4%. And despite the volatility, net new assets were generated from all channels. The advisor-led channel benefited from an even split of existing and new clients, as well as positive net recruiting. Fee-based flows were also strong, and inclusive of the asset acquisition were $97 billion. Workplace continues to benefit from the establishment of companion accounts. Retention of assets also continued to rise as a result of incremental companion account adoption and the value of the platform. In the quarter, we added $75 billion of retirement assets through an asset acquisition of an institutional retirement consultant. We remain a platform of choice, and this is the second institutional retirement plan to join us in the last nine months. We continue to view these asset acquisitions as incremental opportunities to reach the expanded audience through education and financial wellness. The acquired team's client base includes nearly 1 million of plan participants. Transactional revenues were $635 million. Excluding the impact of DCP, which is reflected in this line, revenues were strong. Although activity moderated from the prior year, self-directed daily average trades remained above 1 million in the quarter, over three times E-Trade's pre-asset acquisition record. We have also seen meaningful interest in our alternatives offering, given our broad-based access to managers and their retail-oriented products. Loan growth remains strong in the quarter, with bank lending balances growing $7 billion, driven by securities-based lending and mortgages. We expect loan growth over the remainder of the year to be consistent WITH OUR PRIOR GUIDANCE OF APPROXIMATELY $5 BILLION PER QUARTER. DEPOSITS INCREASED $6 BILLION IN THE QUARTER TO $352 BILLION. THE AVERAGE RATE ON DEPOSITS DECLINED TO NINE BASIS POINTS. WE HAVE COMPLETED THE NET RUNOFF IN WHOLESALE DEPOSITS AND DO NOT ANTICIPATE FURTHER DECLINES IN DEPOSIT COSTS. NET INTEREST INCOME WAS $1.5 BILLION. Excluding prepayment amortization, NII increased 15% from the prior year driven by loan growth. Back in January, we indicated that the fourth quarter NII was a reasonable base to inform 2022, and that we would expect $500 million of incremental NII on the back of rising rates. Due to the further moves in rate expectations since January, We should see this benefit at least double if the forward curve and our modeled assumptions are realized over the remaining nine months of the year. Moving to investment management, my remarks will refer to quarter-over-quarter changes as the timing of the Eaton Vance acquisition makes the prior quarter a more relevant benchmark. Revenues were $1.3 billion. The sequential decline reflects the seasonally lower performance fees which are mostly recognized in the fourth quarter, and a more challenging market environment. Despite headwinds, this business is benefiting from increased scale and a more diversified product offering. Total AUM of $1.4 trillion declined 8% quarter over quarter as a result of market declines and outflows. Long-term net outflows reflected approximately $9 billion of institutional outflows in our solutions business. including the expected redemption of a large asset manager who brought their equity trading implementation in-house. Equity strategies saw a giveback of some of the prior year's asset appreciation as the broader market experienced a rotation out of growth. This was partially offset by the continued strong flows into parametric customized portfolios, as well as our inflation-related and interest rate-sensitive products. Asset management and related fees decreased sequentially to $1.4 billion on the back of the aforementioned seasonality and market volatility. Performance-based income and other revenues were a loss of $53 million in the quarter, driven by markdowns in one of the Asia private equity funds, declines in deferred compensation plan investments, and negative marks associated with legacy international real estate investments. Away from these specific markdowns, we saw broad base gains across our alternatives platform, reflecting the strength and diversity of the platform. Turning to the balance sheet, total spot assets increased to $1.2 trillion. Our standardized CET1 ratio sequentially declined and now stands at 14.5%. Multiple factors contributed to this change. Standardized RWAs increased as client activity returned after the more moderated levels at the end of 2021, and volatility increased. OCI related to our available for sale securities portfolio reflected an increase of an unrealized loss of $2.4 billion as a result of higher interest rates. While this should earn back over time, it impacted our CET1 ratio by 50 basis points in the quarter. We continue to return capital to our shareholders. We are executing on our $12 billion buyback authorization as we repurchase $2.9 billion of stock in the quarter. We remain in a strong capital position. Our tax rate was 19% for the quarter. The vast majority of share-based award conversions takes place in the first quarter, creating a tax benefit. We continue to expect our full year tax rate will be in line with full year 2021. The first quarter again tested the resiliency of our franchise. We are pleased with how our team navigated the volatile environment and stayed close to clients during times of uncertainty. While the outlook for the remainder of the year is difficult to predict, the second quarter has started constructively and clients remain engaged. With that, we will now open up the line to questions.
spk04: We are now ready to take questions. To get in the queue, you may press star and then the number one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. You're allowed to ask one question and one follow-up, then we'll move to the next person in the queue. Please stand by while we compile the Q&A roster. The first question is from Glenn Shore with Evercore.
spk06: Hi, thank you. Maybe just start off big picture. So putting up a 20% ROTC in this tape, I'm sure it is good performance and it is affirmation of the strategy and what you built. So my question is, you have enough capital, you have a lot of earnings power, rates are going up. I'm curious how you think about, is there a what's next? I mean, what do you do with this higher earnings production with all the capital that's being produced to you? continue to chip away and find both on acquisitions. Are you thinking about a next act? I mean, organic growth alone can power this, but I'm just curious, you know, the next couple of years, how are you thinking about that, James?
spk08: Glenn, it's a high class problem. And, you know, it's a great position to be in. We've been very protective of keeping a sort of buffer on a buffer because you never know in this world. And I think what we've experienced with the markets in the last quarter is We're extremely volatile, and you have to anticipate the worst and make sure you're prepared for that. We clearly have done that. We've been chipping away at the excess capital. You know, if you add back the OCI, we're running about 15% CET1. We were, you know, well above 16%. So clearly, you know, we'll see where our CCAR results are. I think last year they were around 13.2 or 13.3. I'd be surprised if there's material changes, but let's see. So we're still sitting on a significant buffer. Listen, we're clearly going to keep pushing capital distribution through buyback and dividend to shareholders. That's clearly the case. We've just done two major acquisitions worth about $21 billion. We would do more deals if they fit with our strategy. We won't do things that take us offline, off-piste. We want to stay true to our strategy and our strengths and our three core businesses. So, yeah, continued buyback, but also a lot of investment in the business. I mean, we're doing a lot on the tech side. Obviously, we want to stay completely compliant with our regulatory responsibilities, and we'll continue to invest to make sure we're best in class there. A lot of investment technology and a lot of investment around the retirement workplace platform, which I think is sort of the next frontier. And we're just in baby steps. We're at very early days of that. But I think that's a huge opportunity. And finally, you know, I do think that there are opportunities outside of the U.S., even though we're along the U.S. and that's served us incredibly well and I think will serve us very well for the next decade. But I think in the wealth and asset management spaces internationally, We punch it below our weight. On institutional securities, we don't. And we had a very strong quarter in Europe and Asia in institutional securities. But I think there's clearly more we can do internationally. So sort of watch that space.
spk06: Okay. I appreciate all of that. Thank you. Maybe just one follow-up. Sharon, you mentioned alternatives on the wealth management platform. I think you're the largest in the world, but yet it's still, in terms of distributor of alternative products, but it's still at a low level, percentage-wise, of client assets. So I'm curious, James mentioned building technology, building people. How much do you have to prepare the platform, or is it there waiting for this deluge of products that's coming? I'm trying to get a window into... what's coming in terms of alternative distribution on your platform?
spk01: I think it's a great question, and as you said, we continue to invest in it. We've obviously seen the alternative players creating more product, and you see that from peers, but you also even see that from our own, from EMSIM as a secular growth trend at a place that we're investing in. They've obviously created products now that are more appropriate or more suitable for retail, and our platform is there. We're working very closely together. There's clearly more that we can do. As James said, we're continuing to invest, but I agree with you that this is a place where we've seen an uptick. We noted it over the course of this quarter. It was interesting to us, as I know we've discussed it individually as well, Glenn, and I think it's a place where you'll just continue to see that kind of growth, investment from both us and also on the product side.
spk04: Thank you. Our next question is from Brennan Hawken with UBS.
spk09: Okay. Good morning. Thanks for taking my questions. Sorry, the desk is covered with paper. Couldn't even find the handset. So, I had a question first on the wealth management deposits. And thanks, Sharon, for that indication of, you know, updating the NII outlook. When we think about the deposits and the potential beta, what's your expectation for beta this time around, and what percentage of your deposits are actually on the self-directed platform? We get the asset percentages, but it's my sense that self-directed runs with a higher percentage of cash. I'm guessing the percentage of deposits would skew higher than the assets do on that platform, and could that impact your beta this time around? Thanks.
spk01: Sure. I think it's a great question. I think about it as two parts, probably actually a bit separately. One with beta. Beta for us is informed by the last rate hike cycle. So we've given you historically, and we stand by it, sort of a 50 beta is an end state, but obviously beta also moves through time as you see different rate cycles. And so that's stage sort of point A if you think about just where the beta is. Your point on deposits is also interesting. I think that we think about deposits as we look at the composition of the deposits and obviously what E-Trade did and the self-directed channel did is it offered us more deposits from smaller accounts with smaller levels. And that might, to your point, that might have a different beta. So there's a beta obviously holistically But then there's a beta, as you've mentioned, that might depend on where you are within the size of the account and the stickiness that you might see associated with those deposits. So we're looking at it from two ways. Overall, beta the same, but the deposits themselves and the way that we think about the runoff of the deposits might be different this time around, just given our own composition of the deposits as they've been acquired by E-Trade.
spk09: Great. That makes a lot of sense. And then For the follow-up, sticking with the rate sensitivity, SBL growth has been quite remarkable for the past many years. When we think about what happened last rate hiking cycle, I went back and I looked through. The interesting thing is the SBLs were often thought of as rate sensitive, but they continued to grow through the last rate hiking cycle. How do you think about this time around if the product is obviously mature but more mature and so maybe could be more subject to some rate sensitivity but also like advisors and and customers probably understand the value of the product better too and and so i there's there's a couple cross currents i and i can't quite get my head around exactly how to think about it what what are your thoughts on that
spk01: Thanks for the question. I think your points are, I think, appropriate. You're looking at, obviously, yes, it was nascent. What I'd say about our profile is we didn't have the same size of household penetration across lending products. Then and even today, there's still, I'd say, room to run in better understanding, educating products and educating our clients about the different products that are available to them. Now, of course, the pace may change, and that's not impossible given what we're seeing or what you might think could happen. That's not really the prediction. But the idea is there's still more education that can be done, and that's why I think we feel comfortable that even though we might see rates rise, the actual amount that we gave you as guidance from a lending perspective should continue, part of that obviously being SBL, part of that being mortgages. But when you look at the household penetration, even five, six years ago, you were in very low double digits for us, and you've only reached that mid-teen number. So still a lot more to go, as I said, around the education of that product for clients where that's suitable.
spk04: Thank you. Our next question is from Dan Fannin with Jefferies.
spk11: Thanks. Good morning. The $75 billion acquisition of AUM that you got within wealth management, this is the second transaction, I think, over the last 12 months. Can you talk about the capabilities that you're getting with this and how this is being integrated more broadly into the wealth platform? And also just thinking about the backdrop and strategy, should we see more of these type of transactions going forward?
spk01: So why don't I start with just saying, We'll see more when it's appropriate for our, you know, we're obviously continuing to look at this space. What these are, and as James said, when we're looking at retirement, we're looking at defined benefit, we're looking at understanding how workplace coincides with the FA advisor-led space together. And the way that I would think of this is just an extension of our strategy. So the best kind of concept that you can say is, yes, we had a proof point in the third quarter of last year. We're obviously in a situation where we've acquired a similar plan and group of advisors. The group of advisors covered defined benefit contribution plans. Those defined benefit contribution plans have corporations associated with them that may also have participants. In this case, we have a million participants that were added. Those participants, if you go back to our strategy of the funnel, they're a top portion of that funnel that we begin to advise or educate or learn or teach people about financial wellness. We give them access to our services, particularly that we've already developed in the workplace channel. And so that educational content has a crossover. And as they now understand better what financial wellness is, they can say, I'm interested in speaking to a financial advisor. So that's where the channels begin to converge and merge and where you're beginning to really think about the top of the funnel into potentially providing access and advice to clients over time.
spk11: Got it. That makes sense. And you did talk about within the workplace, higher retention rates and more companion accounts. I don't know if you can give some stats around that, but Maybe you're also, I think, highlighted that the integration costs will be done with E-Trade by the end of the year. So maybe what's left in terms of milestones with that and then within the kind of workplace, you know, some of the momentum and progress, any numbers would be helpful. Thank you.
spk01: Sure. So the companion accounts, what we've said is that by the end of this year, approximately 90% of U.S. stock participants will be in a position to access a companion account. Should they want to or should they have the stock to vest into the account? So that's the point there. The question around the retention of assets, we had given that metric at the beginning in the January deck, and we talked about aiming towards 30%, and we have made improvements from the 24% that we gave you at the end of the quarter. So all of those are milestones as you think about integration and integration-related expenses, and also the points that James had made around the investment in our business, in technology, and in the integration more broadly.
spk04: Thank you. Our next question is from Steven Schubach with Wolf Research.
spk03: Hi, good morning. So I wanted to start off with a question on NNA Outlook. Organic growth is moderated, granted versus what immediately was a neck-breaking pace that we had seen last year. And to what extent did the market volatility disrupt advisor movement across the wealth space? And have you seen any improvement in breakaway broker trends or just the recruiting backlog more broadly as volatility has started to moderate versus the level seen in Jan and Feb?
spk01: Thanks for the question, Steve. So as it relates to net recruiting, still seeing inflows on the back of net recruiting. In fact, All three channels, as you think about NNA, were contributors to the NNA number, excluding the asset retention. So if you just take that other piece or the asset acquisition. And if you look just at the advisor-led channel, a couple of factors. So one, net recruiting positive. Two, on the actual advisor side, evenly split. between existing accounts or existing clients and new clients. So continuing to see consolidation of assets held away as well as new client relationships going forward. And then we had a contribution from workplace, which is obviously impacted by both the companion accounts and also retention of assets and self-directed. So really broad-based contributions from the different channels. And net recruiting, as I said, remains in a solid place.
spk03: Understood. And just for a follow-up, just trying to clarify some of the NII guidance, I was hoping you could provide, Sharon, an update on the loan growth outlook, whether you're still comfortable with the mid-teens loan growth you had guided to previously, and does the more than $1 billion NII benefit that you alluded to in your prepared remarks contemplate some continued loan growth, or is that on a static balance sheet?
spk01: It's the same loan growth number that I gave you. So the percentage that you gave, if you take that and you think it was basically about $5 billion a quarter, so we just gave you in dollars this time around. So it's the same that I gave in January. And then that is what's the point around the, you know, I don't know if it was illusion. I actually gave you that it was double. So I said at least double in terms of the NII guidance increase. That really has to do with the realization of the forward curve and the change in the forward curve.
spk04: Thank you. Our next question is from Ibrahim Poonawalla with Bank of America.
spk00: Hey, good morning. Just a quick couple of follow-ups. One, Sharon, if you could remind us in terms of the NII guide, how big is the money market? We were kind of coming back now that we've had the first Fed hike. And is there any additional improvement that we should expect if the Fed hikes by 50 bps in May?
spk01: So our money market guidance we gave you was about plus 200, and we stand by plus 200 by states for the full year. It's really based on two factors that are contributing to that. One is the balances as well as the industry and the waivers, how quickly those waivers roll off. So we're at $200 million for the remainder of the year for the increase for investment management.
spk00: Understood. And just as a follow-up, when you think about it's a tougher question around the macro outlook when you think about M&A, IPOs coming back, any sense in terms of when you look at the world, it feels like volatility is going to be high, which bodes well for trading. But how do you handicap just talking to sort of your corporate clients around appetite for deal-making given just the current geopolitical backdrop? Any color would be helpful.
spk01: So a couple of things. First, on the advisory pipeline in particular, pipeline remains healthy and diversified. So taking a look at the underlying pipeline, still diversified across sectors, which I think is another healthy sign in terms of the marketplace. As it relates to the underwriting calendar, that obviously you do have deals that didn't necessarily come to market in the first quarter. that pipeline to realize, that was associated really with the volatility and the uncertainty in the first quarter. As that recedes to the extent that it does, that would move things from the pipeline state to the realized state.
spk04: Thank you. Our next question is from Mike Mayo with Wells Fargo.
spk05: Hi. I have a question and a follow-up. I guess no good deed goes unpunished. Going back to, you said core Net new asset growth for the quarter was 5.4%, if I got that right, excluding the deal. And so that is down from where you were before, but it's certainly up from where you guys had been a few years ago. So where do you expect that to settle out? And what's the relative contribution, say, E-Trade versus the other legacy businesses?
spk01: We've given what I think where we started, Mike, is we said, and James said it in January, Eleven percent, which we saw last year, was exceptional, and we didn't expect that to be repeated in the near term, or we weren't sure we wanted to see how the pipeline moved out and how these different channels work together. But what we did say is three to four percent is where we used to be, and we weren't expecting to see that. Obviously, we're also at a higher base now, and so that's also something to bear in mind. So I think we feel very good about where we are. well within that range that we had basically given you. We said we would spend time better understanding the channels to provide guidance over time. The contribution from each of the channels, as I said, three different channels all contributed very, very nicely. We don't break it out into different pieces, but I would say that the integration is going well and the E-Trade client and client usage is also doing well.
spk05: Okay. And my follow-up question is on the block trading investigation, which you guys highlighted in your filings. And I know you're limited about what you want to say. I know you can't and shouldn't give any expectations, but there might be some things that you could disclose around this. This might wind up being a non-event. I mean, there's investigations all the time. We get it. But every now and then, one of these investigations leads to something. I'm not saying that this is the case, but I just want to When investors ask me, what do you think the impact of the block trading investigation on Morgan Stanley could be, it would be nice for me and investors to have that answer. So with that big windup, how much do you make from block trading per year? And were these issues self-disclosed by Morgan Stanley to the regulators, or did it come from an outside party? Thank you.
spk08: Hey, Mike. Certainly preferred your first question about the net new money growth and high-class problems of not achieving 11% organic, 5.4% is generating something like $200 to $250 billion net a year, so it's actually a great problem. And I think, as Sharone said, the various channels there are going to continue to contribute. My telling you all of this is to say I can't talk about ongoing investigations of block trades, obviously, and And we're not going to do that on an earnings call. But you can look at our equities business and how it performs generally and how it has done over many, many years and its current performance and draw whatever conclusions might be appropriate. But right now, we can't talk about ongoing investigations. And it doesn't matter whether it's this one or any other one from any authority. It's always the same rule.
spk04: Thank you. Our next question is from Gerard Cassidy with RBC Capital Markets.
spk07: Thank you. Hi, Sharon. Sharon, can you share with us when you take a look at the equities business as well as the FIC business and all the disruption we saw in the quarter, has there been any opportunity for you guys to grab market share from maybe some other competitors that are weaker and are unable to handle the volatility the way you guys did?
spk01: Thanks, Gerard, for the question. Actually, I know a lot of the peers have released this morning. So I haven't looked specifically at this quarter's number in terms of the public market share, but what I can tell you is that we have seen increased share over time. I think we're really proud of the positions that we've made in both of the sales and trading franchises. A lot of that has to do with what James discussed more directly in his script, which is building these, investing our people and talent both geographically and also making sure that we have it across different functions. So all of these things are important. I think it's decades in the making rather than just one quarter. And we're really proud of the way that we've thought about the continuous velocity of all of our resources to make sure that we can better and more efficiently support client flows.
spk07: And then the second, following up on your commentary about your pipeline, and we all understand the volatility, what's going on out there. If the markets settle down, but they settle down at lower valuations, in the underwriting area, do you still think that could come back, or do we need higher valuations so that there's not basically almost like a down round where private has to go public if that's their intention at a lower price than what they've raised money at on the private side?
spk01: I think that will be very, I think individual companies will make their own decisions in terms of where they have that from an advice-driven perspective.
spk08: I just, you know, if you look at pipeline and you look at investment banking revenue through cycles, it's actually remarkably stable on an annual basis. On a quarterly basis, it's extremely volatile. I mean, look at the change between fourth quarter ECM and first quarter ECM. but then look at what M&A did, the advisory business, I think over 800 million. But if you go through the end of the year, I'm sure you'll find it's much more stable and reflective of what we've done in, you know, 2020, 21 periods. So I don't think that – it's a very interesting question you raised, but I don't think that individual companies – They don't make their decisions, obviously, based on averages of what the markets are based on, based on what their own equity capital needs are or debt capital needs or M&A needs. And listen, we have one of the best franchises in the world. It is global. So any cross-border deals, any global companies, we're in it. That won't change. It's just a question, is it Q1 or Q3? So I'm really unfazed by the volatility in banking on a quarterly basis.
spk04: Thank you. Our next question is from Jeremy Siggy with BNP Paribas.
spk10: Hi there. Thank you. I wanted to talk about the lower transaction revenues in wealth management and not so much about what happened in the quarter, but just looking at March and April, what's the state of mind in your wealth management clients? Is this an environment where they're going to stay active or become more active again, or is this a sort of wait and see kind of mood among your clients?
spk01: So actually, it's a really interesting question. Two things that struck me as we sort of went through and thought about the quarter. One is the fact that when you look at allocations of investors in the retail space in terms of where their positions were in equities, fixed income, cash, cash equivalents, et cetera, on a proportional basis, over the last year or two, actually, those percentages have actually also remained relatively stable. So the retail investors' investment is something that hasn't necessarily fluctuated based on the data that we have that we've seen. Those positions have remained there despite the fact that there's been volatility. The second point is specifically on self-directed is the E-Trade, the fact that this is what I tried to mention in the script was where we are from the daily average trades levels, still very, very high, three times the high from when E-Trade was a standalone company. And so I think it highlights the change that we've seen in the retail sentiment over the course of the last two or three years.
spk08: I'd just add two points to that. Number one, the transaction revenue line in wealth management has the DCP impact in it, which was actually very big this quarter. that bounces around. And secondly, if you look at the P&L of wealth management, actually the transaction revenues as a driver of the overall health of the business is relatively small. I mean, the much more important are the fee-based revenues, the net interest income, what we're doing in the banking side, and then some of the new issue stuff. So I just put that out there. Again, it's one of these things that Honestly, I'm not very phased by much more interested in asset growth, net new asset growth, and what we're doing in the bank and the deposits. Transactions will bounce around given market volatility.
spk10: That's very helpful. Thank you. Could I just ask a follow-up? I'm sitting in Europe. You mentioned Europe was strong. Could you talk about which bits were driving that? What was so great in Europe this quarter?
spk01: I think that this is really based on the advice-driven model, right? You have uncertainty in Europe. There's a lot going on. Obviously, there are pieces of commodities, for example, is very specific. But then you also just see client engagement as it relates to various parts of Europe. And being able to service that advice is all part of this diversified model.
spk04: Thank you. Our next question is from Devin Ryan with JMP Securities.
spk02: Great. Good morning, everyone. A question on the family office strategy. There was an interesting article recently, and I figured to dig in here a little bit more, I know it's always been a focus for Morgan Stanley and really firms uniquely positioned, in my opinion, to really take advantage of that. But I'm curious kind of what is new in the strategy and how you guys would maybe frame the evolution and kind of where the opportunity is accelerating.
spk01: Absolutely. I'm actually glad you asked the question. I think it's a really interesting space. And I think it's an example of connecting the dots. So over the course of the last couple of years, what we've realized is there's a need for family offices to have access to services that we already offer institutional securities clients through our fund services platform. And so bringing together those conversations between what's happening in the institutional securities group and what strategy we're driving in wealth management is just an example of how the business is working more closely together to find those opportunities to service clients as, you know, family offices begin to feel more like institutional accounts. And that back and forth and dialogue is really amongst the team, the leadership, and then throughout the organization.
spk02: Okay, great. Thanks, Sharon. Quick follow-up just on the digital asset strategy and maybe how you would frame where you are today, both in GWM and institutional and what we could expect over the next year.
spk01: Absolutely. As you know, we're obviously offering some – we have some offerings for different qualified investors that we have. But in this space, we're obviously taking the lead from regulators as it relates to what we can and can't offer various clients.
spk04: Thank you. There are no further questions at this time. Thank you, presenters. Ladies and gentlemen, this concludes today's conference call. Thank you again for participating and have a wonderful day. You may all disconnect.
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