Morgan Stanley · NYSE:MS
Morgan Stanley — Corporate Update (January 2016)
22 slides from Morgan Stanley's corporate update, Jan 19, 2016
Slide 1: Strategic Update
Strategic Update James P. Gorman, Chairman and Chief Executive Officer January 19, 2016
Slide 2: Notice
Notice The information provided herein may include certain non-GAAP financial measures. The reconciliation of such measures to the comparable GAAP figures are included in this presentation or in the Company’s most recent Annual Report on Form 10-K, Definitive Proxy Statement, Quarterly Reports on Fo
Slide 3: Strategy: Multi-Year Transformation of Business Mix
Investment Management Investment Management 3 Full Year 2009 Net Revenues, ex-DVA: $28.7Bn(1)(2) Full Year 2015 Net Revenues, ex-DVA: $34.5Bn(1)(2) Wealth Management Fixed Income and Commodities (ex-DVA) Investment Banking Equity Sales and Trading (ex-DVA) Wealth Management Fixed Income and Commodit
Slide 4: Continued Execution in Areas of Leadership in Institutional Securities
Continued Execution in Areas of Leadership in Institutional Securities 2.2 2.2 3.2 4.3 2012 2013 2014 2015 118 166 252 188 2012 2013 2014 2015 Industry Industry Announced M&A Volumes(1) ($Tn) IPO Volumes(1) ($Bn) Morgan Stanley – #2 in Global Announced M&A in 2015 Morgan Stanley – #1 in IPOs in 2015
Slide 5: Execution: Mark to Market on 2015 Strategic Plan
Execution: Mark to Market(1) on 2015 Strategic Plan 1 Achieved FY 2015 22% pre-tax margin(2) Ongoing Wealth Management upside through additional margin improvement 2 Achieved 46% NII growth in U.S. Banks versus 2014 in a flat rate environment(3) Continued execution of U.S. Bank strategy in Wealth Ma
Slide 6: Results: Performance and Return on Equity
Results: Performance and Return on Equity(1) Target = 10% ROE Gap = ~300bps 2015 Earnings: $4.7Bn = 7% ROE 2015 Avg. Common Equity: $67Bn (1) The End Notes are an integral part of this Strategic Update. See slide 19 for information related to the financial metrics presented on this page.6
Slide 7: Path to 10% ROE
Path to 10% ROE A Capital Sufficiency B Expense Efficiency C Wealth Management Revenue Growth 7 D Capital Return
Slide 8: De-Risked Balance Sheet, Increased Capital Return and Grew Capital
8 De-Risked Balance Sheet, Increased Capital Return and Grew Capital $460Bn $397Bn 2012 2015 Advanced Fully Phased-in Pro Forma RWAs(1)(2) $0.4Bn $3.2Bn 2012 2015 $60Bn $67Bn 2012 2015 Buyback & Common Dividend Average Common Equity, ex-DVA(3) $781Bn $788Bn 2012 2015 Assets +1% (14%) +740% +12% (1)
Slide 9: Firm Has Sufficient Capital to Support Our Business
9 Firm Has Sufficient Capital to Support A Our Business (1) The End Notes are an integral part of this Strategic Update. See slide 20 for information related to the financial metrics presented on this page. Pro Forma Common Equity Tier 1 Ratio Advanced, Fully Phased-in 11.6% 14.1% 10% in 2019 Pro Fo
Slide 10: Reducing Capital Allocated to Fixed Income and Commodities
Reducing Capital Allocated to Fixed Income and Commodities 10 3Q15 YE 2017 End State Reduction Pro Forma $158Bn <$120Bn <$110Bn Advanced RWA $50Bn Pro Forma SLR Exposure $417Bn $300Bn <$250Bn $170Bn $5Bn-$8Bn of excess capital over time 4Q15(2)(3) $136Bn $354Bn We significantly exceeded our 2015 RWA
Slide 11: Restructuring the Fixed Income and Commodities Businesses
Restructuring the Fixed Income and Commodities Businesses 11 • Recently announced management changes will strengthen FIC team • Headcount reduction of 25% on strategic lines; significant compensation run-rate savings • Ongoing reduction of capital, balance sheet and expense base • Exit / unwind area
Slide 12: Continued Compensation Expense Discipline
Continued Compensation Expense Discipline 12 39% 37% 37% 2015 Target 2015 2017 Target in Flat Revenue Institutional Securities, ex-DVA(1) 57% 56% 2015 2017 Target 41% <40% 2015 2017 Target Wealth Management(1) Investment Management(1) B (1) The End Notes are an integral part of this Strategic Update
Slide 13: Next Phase of Expense Reduction: Project Streamline
Next Phase of Expense Reduction: Project Streamline 2016 - 2017 13 · Ongoing area of focus and execution with benefit over the medium term Ongoing Focus on Structurally Simplifying the Organization Location Strategy · Acceleration of ongoing efforts to further optimize location strategy in first hal
Slide 14: Expense Efficiency
Expense Efficiency 14 79% 77% 74% Previous Expense Efficiency Target 2015 2017 Target on Flat Revenues Firm Expense Efficiency Ratio, ex-DVA(1) • The 2015 Firm expense efficiency ratio of 77% exceeded the target of 79% • Through the FIC restructuring, a renewed Firmwide expense reduction plan, and c
Slide 15: Continued High Quality Lending in Wealth Management
Continued High Quality Lending in Wealth Management 19 25 16 3 21 4 YE 2014 YE 2015 Pro-Forma YE 2016 Pro-Forma YE 2017 $38Bn $49Bn ~$60Bn $70Bn Wealth Management Lending in US Banks(1) Percentage of Wealth Management Clients With a Loan at Morgan Stanley(2) 1.3% 1.6% 1.9% 2013 2014 3Q15 YTD 9% 12%
Slide 16: Wealth Management Margin Potential Driven By Revenue Growth and Expense Discipline
16 Wealth Management Margin Potential Driven By Revenue Growth and Expense Discipline FY 2015 Pre-tax Margin 22% 2017 Pre-tax Margin Potential 23%-25% Net Interest Income Growth • Wealth Management $20Bn lending growth through YE 2017 will drive NII upside in US Banks • Deposits in Bank Deposit Prog
Slide 17: Continued Return of Capital to Shareholders
Continued Return of Capital to Shareholders 17 $0.5Bn $1.0Bn $2.5Bn $0.20 $0.20 $0.40 $0.60 2012 CCAR 2013 CCAR 2014 CCAR 2015 CCAR • Our goal is to continue to increase our dividends and buybacks over time, subject to regulatory approval Annual Dividend per Share (cents) 4-Quarter Share Repurchases
Slide 18: Path to a Return on Equity of 10% and Higher
7% 9%-11% 2015 2017 Path to a Return on Equity of 10% and Higher 18 Target Return on Equity Key Drivers · $1Bn+ compensation and noncompensation savings, assuming flat revenue environment (not including any one-time outsized litigation expense or penalties) Tangible Expense Targets Modest Revenue Gr
Slide 19: End Notes
End Notes These notes refer to the financial metrics presented on Slide 3. 1. 2009 and 2015 Net Revenues of $28,693 million and $34,537 million, respectively, excluding the negative impact of $5,510 million and the positive impact of $618 million from Debt Valuation Adjustment (‘DVA’), respectively.
Slide 20: End Notes
End Notes These notes refer to the financial metrics presented on Slide 8. 1. The pro forma estimate of Advanced Fully Phased-in Risk weighted assets (‘RWA’) is based on the Company’s current understanding of U.S. Basel III and other factors, which may be subject to change as the Company receives ad
Slide 21: End Notes
End Notes These notes refer to the financial metrics presented on Slide 14. 1. Firm Expense Efficiency ratio represents total non-interest expenses as a percentage of Net Revenues excluding DVA. For 2015, the 77% Expense Efficiency ratio was calculated as non-interest expenses of $26,660 million div
Slide 22: Strategic Update
Strategic Update James P. Gorman, Chairman and Chief Executive Officer January 19, 2016