Morgan Stanley · NYSE:MS
Morgan Stanley — Debt Investor Presentation (August 2014)
35 slides from Morgan Stanley's debt investor presentation, Aug 1, 2014
Slide 1: Morgan Stanley 2Q14 Fixed Income Investor Conference Call
Morgan Stanley 2Q14 Fixed Income Investor Conference Call August 1, 2014
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 the Company’s Annual Report on Form 10-K, Definitive Proxy Statement, Quarterly Reports on Form 10-Q and the Company’s Current Re
Slide 3: Agenda
Agenda A Business Update B Prudent Liability Management C Liquidity Management D Regulatory Topics E Capital Management 3
Slide 4: Strategic Moves Enhance Business Outlook and Funding Profile
Strategic Moves Enhance Business Outlook and A Funding Profile Revenue Split (1) Funding Stack <1% Repositioned Business Mix & Balance 15% Sheet… 32% Powerful set of businesses 15% Enhanced earnings consistency 20% Durable funding; strong balance 30% sheet 8% …Result & Looking Forward 24%
Slide 5: Wealth Management Benefits From Scale, Revenue Consistency and Significant Asset Growth
Wealth Management Benefits From Scale, Revenue Consistency and Significant Asset Growth Total Client Assets ($Tn)(1) Assets by Client Segment ($Bn) 4Q09 1Q14 %∆ $2.0 $10MM or more 410 701 +71% $1MM - $10MM 613 789 +29% $1.6 $100K - $1MM 408 412 +1% <$100K 51 41 -20% Wealth Management Approximate Dai
Slide 6: Wealth Management Revenue Mix and Expense Discipline Drive Margins Higher
Wealth Management Revenue Mix and Expense Discipline Drive Margins Higher Wealth Management Net Interest Income ($Bn)(1) Wealth Management Pre-tax Margin (%)(1),(2) 2.0 30% 25% 22-25% (4) 1.5 21% 20% 19% 18% (3) 1.0 15% 14% 10% 10% 0.5 5% 0.0 0% 2010 2011 2012 2013 2011 2012 2013 1Q14 2Q14 4Q15 (1)
Slide 7: Powerful Growth Opportunity As We Execute Bank Strategy
Powerful Growth Opportunity As We Execute Bank Strategy In Wealth Management & Institutional Securities Lending growth enhancing stability of revenues and earnings Firmwide Deposits ($Bn)(1),(2) Funded U.S. Banks Loans ($Bn)(3) ~$75 ~$140 $118 ~$60 $37 $64 $28 $28 2006 2010 2Q14 Pro-forma 2012 2013
Slide 8: Investment Banking: Revenues Stable in Low Growth Environment
Investment Banking: Revenues Stable in Low Growth Environment – Upside As Pipelines Strengthen Total Investment Banking Revenues ($Bn) Growth Opportunities $4.5 $4.4 Increased M&A activity in areas of strength: $4.3 $4.2 $3.9 • Large transactions • Cross-border deals • Situations requiring complex a
Slide 9: Equity Sales and Trading: Consistent, Leading Franchise
Equity Sales and Trading: Consistent, Leading Franchise Total Equity Sales and Trading Revenues ex-DVA ($Bn)(1),(2),(3),(4) Morgan Stanley 10 Competitor 1 Competitor 2 Competitor 3 8 6 4 2 0 2010 2011 2012 2013 1H14 Morgan Stanley 3 2 2 2 1 Rank (1) Revenues ex-DVA for fiscal years ending December 3
Slide 10: Fixed Income and Commodities Sales and Trading: Executing Against Strategy
Fixed Income and Commodities Sales and Trading: Executing Against Strategy Delivering for clients with an appropriately sized franchise • Global platform sized to meet client demands, with attractive returns in credit and securitized products • Upside from: Synergies with Wealth Management, Invest
Slide 11: Have Successfully Reduced RWAs and Capital In Certain Areas of Fixed Income
Have Successfully Reduced RWAs and Capital In Certain Areas of Fixed Income RWAs down by >50% since 3Q11 Fixed Income and Commodities U.S. Basel III Risk-Weighted Assets ($Bn)(1),(2) $390 $320 $280 $210 $199 $192 <$180 3Q11 2Q12 Year End Year End 1Q14 2Q14 Year End 2012 2013 2015 Target (1) For the
Slide 12: Investment Management: Steady Growth in AUM
Investment Management: Steady Growth in AUM With Continued Upside From Fundraising and Asset Gathering Increased AUM driven by higher flows and markets Total Assets Under Management or Supervision ($Bn) 380 373 Merchant Banking and Real Estate 360 • Raising new funds 338 • Wide range of products 340
Slide 13: Disciplined Expense Management
Disciplined Expense Management Compensation Metrics Will Continue to Improve • Target Future Compensation/Net Revenue ratios(1): – Institutional Securities ≤ 40% – Wealth Management ≤ 55% – Investment Management ≤ 40% Non-Compensation Ratios Declining Non-Compensation Efficiency Ratio(2) Target: Dec
Slide 14: Prudent Liability Management: Centralized Structure and Strict Governance
B Prudent Liability Management: Centralized Structure and Strict Governance Prudent Liability Management & Funding Durability – Setting the Stage A prudent liability management framework supported by centralized, strong governance ensuring funding durability, providing critical stability in all en
Slide 15: Prudent Liability Management: Illustrative Asset-Liability Funding Model
Prudent Liability Management: Illustrative Asset-Liability Funding Model (1) Funding governance requires alignment of more liquid assets with shorter-term liabilities and less liquid assets with longer-term liabilities and equity Liabilities & Assets Equity Bank Deposits Assets(2) Deposits Equity
Slide 16: Prudent Liability Management: Maturity Profile of Long-Term Debt
Prudent Liability Management: Maturity Profile of Long- Term Debt Total Short-Term and Long-Term Maturities(1),(2),(3) ($Bn) 40 35 34 30 26 25 25 24 23 22 20 20 16 15 12 10 8 8 5 5 5 5 5 3 3 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025-292030-34 2035+ 2011 – 2013 2014
Slide 17: Four Pillars of Secured Funding Ensure Durability and Stability
Four Pillars of Secured Funding Ensure Durability and Stability 1 Significant Weighted Average Maturity Enhances durability 2 Maturity Limit Structure Reduces roll-over risk 3 Investor Limit Structure Minimizes concentration with any single investor, in aggregate and in any given month 4 Spare
Slide 18: Strict Governance Framework Ensures Appropriate Term Consistent with Asset Fundability
Strict Governance Framework Ensures Appropriate Term Consistent with Asset Fundability Rules-Based Criteria Determine Asset Fundability… Highly Liquid (Governments, Fundability Criteria Agencies, Open Market Operations and Central Eligible for financing through Open Market Operations (OMO) and/or
Slide 19: Secured Funding Pillar 1: Longer WAM Provides Appropriate Flexibility
Secured Funding Pillar 1: Longer WAM Provides Appropriate Flexibility …Fundability Category Determines Required Weighted Average Maturity: >120 Days(1) Criteria-based model sources appropriate term funding consistent with liquidity profile of underlying assets Assets tiered by fundability Matu
Slide 20: Weighted Average Maturity: Importance of Durability
Weighted Average Maturity: Importance of Durability– Morgan Stanley Early Leader The Federal Reserve Bank of New York published a study(1) in June 2014 on weighted average maturity (WAM) of risk assets(2) within the U.S. tri-party repo market The study concluded that while the maturity in tri-pa
Slide 21: Secured Funding Pillars 2 and 3: Maturity and Investor Concentration Targets
Secured Funding Pillar 2: Monthly Maturity Target Secured Funding Pillar 3: Investor Concentration Target Monthly Maturity Target: Target less than 15% of non-Super Green liabilities maturing in any given month Investor Concentration Target: Maximum total exposure per investor of 15% of non-Supe
Slide 22: Secured Funding Pillar 4: Spare Capacity Provides Flexibility
Secured Funding Pillar 4: Spare Capacity Provides Flexibility in Both Favorable and Stressed Markets Spare Capacity is equivalent to total non-Super Green liabilities in excess of non-Super Green inventory Spare Capacity has created excess contractual term-funding, which provides valuable flexib
Slide 23: More Durable Liquidity: Significant Global Liquidity Position
C More Durable Liquidity: Significant Global Liquidity Position Highly Liquid and Unencumbered - Changes in bank liquidity levels reflect execution of bank strategy Period End Liquidity Composition of the Liquidity Reserve ($Bn) at 2Q14 $198 $202 $203 $ 200 $192 Type of Investment ($Bn) $182 $186 $1
Slide 24: More Durable Liquidity: Build and Stress Test Liquidity on a Legal Entity Basis
More Durable Liquidity: Build and Stress Test Liquidity on a Legal Entity Basis • Stress testing sizes contingency outflow requirements at a legal entity level (1) Liquidity (% of Total) Contingent cash outflows are (1),(2) measured independently from the Parent 30% inflows resulting from mitigatin
Slide 25: Estimated LCR Reflects Benefits of Funding Governance & Liquidity Risk Management
D Estimated LCR Reflects Benefits of Funding Governance & Liquidity Risk Management Basel III Liquidity Coverage Ratio (LCR)(1) • Morgan Stanley’s Position: Pro-forma LCR estimate based on the Basel Committee’s final standards continues to be >100% The Firm’s stress test scenarios incorporate and
Slide 26: Composition of Morgan Stanley's Deposits
Composition of Morgan Stanley’s Deposits Deposits are primarily sourced from the Firm’s Wealth Management clients Default sweep for clients’ excess cash – effectively working capital in client accounts – rooted in deep and broad franchise relationships anchored in investment advice; highly tenur
Slide 27: Capital Management: Strong Capital Under Basel I and Basel III Regimes
Capital Management: Strong Capital Under Basel I and E Basel III Regimes Tier 1 Common Ratio & Common Equity Tier 1 Ratio(1) (Common after deductions and adjustments) / RWA (%) 14.1% 13.8% 12.6% 12.8% Common Equity Tier 1 capital ratio is 11.8% 11.5% 13.8%(1) 10.6% Tier 1 Capital ratio is 15.2%(
Slide 28: Capital Management: Optimizing Capital Stack Under Basel III
Capital Management: Optimizing Capital Stack Under Basel III Morgan Stanley Total Capital 4Q12 2Q14(1) Issued ~$1.7Bn of preferred stock in 2013 and ~$1.8Bn <1% in 2014 to date 4% 7% 5% 6% 1% TruPS qualify as either Tier 6% 2% 6% 1 or Tier 2 capital in 2014; TruPS phase-out of capital over time
Slide 29: Strong Risk-Based And Leverage Capital Ratios
Strong Risk-Based And Leverage Capital Ratios Risk-Based & Leverage Capital Ratios(1),(2) 2Q14 Basel III CET1 Under Advanced Approach Fully Phased-in (Pro-forma): 12.1% Transitional: 13.8% 2Q14 Basel III CET1 Under Standardized Approach Fully Phased-in (Pro-forma): 10.8% Transitional: 14.4%
Slide 30: Appendix
Appendix Morgan Stanley
Slide 31: Pro-Forma Top U.S.-Based Depository Institution With Remaining Deposits
Pro-Forma Top 10 U.S.-Based Depository Institution With Remaining Deposits Top U.S.-Based Depositories as of 1Q14(1),(2) ($Bn) 1. JPMorgan Chase & Co. 1,283 2. Bank of America Corporation 1,134 3. Wells Fargo & Company 1,095 4. Citigroup Inc. 966 5. U.S. Bancorp 261 6. Bank of New York Mellon Corpor
Slide 32: Securities Available for Sale
Securities Available for Sale At March 31, 2014 ($MM) Gross Gross Other-than- Amortized Unrealized Unrealized Temporary Cost Gains Losses Impairment Fair Value Debt Securities Available for Sale Total U.S. Government and Agency Securities $44,823 $78 $304 – $44,597 Corporate and Other Debt Commercia
Slide 33: Orderly Liquidation Authority
Orderly Liquidation Authority Well positioned for “minimum bail-in capacity” rules Long-term debt issued at Parent was approximately 17% of total consolidated assets and 36% of consolidated U.S. Basel 1+2.5 risk-weighted assets as of March 31, 2014 Long-Term Borrowings (% of Total) (1) Senior de
Slide 34: Loans and Lending Commitments
Loans and Lending Commitments Quarter Ended Percentage Change From: June 30, 2014 Mar 31, 2014 June 30, 2013 Mar 31, 2014 June 30, 2013 Institutional Securities Corporate Funded Loans Loans held for investment, net of allowance $ 9.3 $ 8.4 $ 6.6 11% 41% Loans held for sale 5.3 4.7 5.5 13% (4%) Loans
Slide 35: Morgan Stanley 2Q14 Fixed Income Investor Conference Call
Morgan Stanley 2Q14 Fixed Income Investor Conference Call August 1, 2014
Morgan Stanley — Debt Investor Presentation (August 2014) on 6ix