Morgan Stanley · NYSE:MS
Morgan Stanley — Venice Credit Summit 2008
15 slides from Morgan Stanley's conference presentation, Apr 26, 2008
Slide 1: Venice Credit Summit
Venice Credit Summit Colm Kelleher Executive Vice President and Chief Financial Officer April 26, 2008 This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does
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 Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8- K, including any amendme
Slide 3: Agenda
Agenda • Market Environment/Developments • Morgan Stanley’s 1Q08 Results • Managing Net Exposures • Leverage, Capital & Liquidity • Outlook This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information gener
Slide 4: Market Environment
Market Environment Pre-Crisis Credit Crisis Resolution ● High leverage ● De-leveraging ● Recognize losses ● Securitization growth ● Lack of liquidity ● Raise capital ● Expansion of derivatives ● Asset price deterioration ● Extend loans ● Insurance by monolines ● Capital constrained ● Asset dispositi
Slide 5: Market Developments
Market Developments • Credit markets to remain challenged for at least several more quarters • Challenging implications for Broker-Dealer model − More active Fed and regulatory environment − Intensified focus on leverage, capital and liquidity − ROEs likely to be constrained • Market environment als
Slide 6: Consolidated Financial Highlights – 1Q08
Consolidated Financial Highlights – 1Q08 Highlights Net Revenue Composition(1) Asset Net Revenues $8.3Bn Management PBT $2.2Bn Global Wealth 6% Management Diluted EPS $1.45 Equity 19% Pre-tax Margin 27% 40% Other Institutional 1% ROE – Annualized Cont. Ops. 19.7% Securities 12% Investment 22% Adjust
Slide 7: Business Segments Growth
Business Segments Growth 2005 to 2007 Business Segments Net Revenue CAGR (%) 35 34 32 31 14 15 9 NM Firmwide Net Fixed Income Equity Sales Advisory Equity Debt Global Wealth Asset Revenue and Other and Trading Underwriting Underwriting Management Management Sales and Trading (1) Source: Morgan Stanl
Slide 8: Regional Net Revenue Growth
Regional Net Revenue Growth Americas(1) ($Bn) 18.8 • Americas net revenues grew 40% between 15.4 13.4 12.2 2004 and 2006 3.8 − Excluding the mortgage related loss, 2004 (2) 2005 2006 2007 1Q08 2007 net revenues grew 10% from 2006 % Total 66% 65% 63% 43% 46% Europe, Middle East and Africa ($Bn) 10.0
Slide 9: Risk Managing Net Exposures
Risk Managing Net Exposures Non-Investment Grade Corporate Mortgage Related Net Exposure(1) Funded Loans plus Lending Commitments ($Bn) ($Bn) 43.2 36.2 26.0 35.0 13.9 11.6 10.4 8.7 15.9 1.8 ABS CDO / CMBS Other Mortgage- 3Q07 1Q08 Subprime Related Leveraged Lending 3Q07 1Q08 Source: Morgan Stanley S
Slide 10: Agencies and Regulators Concerned Over Leverage and Liquidity
Agencies and Regulators Concerned Over Leverage and Liquidity Rating Cuts (July 30, 2007 to April 22, 2008) – S&P • Concerns about Liquidity, Leverage, Risk Management Change From/To Outlook and Revenue Replacement MS – AA- / AA- Negative GS – AA- / AA- Negative MER AA- / A+ Negative LEH – A+ / A+ N
Slide 11: Capital and Liquidity
Capital and Liquidity Three Key Tenets Capital Liquidity Balance Sheet ● ROE of nearly 20% in 1Q08 ● Reduced re-financing risk ● Reduced both gross and adjusted leveraged ratios during 1Q08 ● Temporarily suspended ● Strengthened liquidity share buyback program position at the parent level ● CIC Inve
Slide 12: Active Capital Management
Active Capital Management Total Assets ($Bn) 1,121 1,091 1,045 899 747 638 566 637 410 482 2004 2005 2006 2007 1Q08 Adjusted Assets Gross Leverage Ratio(1) 25.9x 30.5x 30.5x 32.6x 27.4x (2) Adjusted Leverage Ratio 14.2x 16.4x 17.3x 17.6x 16.0x Source: Morgan Stanley SEC Filings and Earnings Releases
Slide 13: Liquidity
Liquidity Average Liquidity Reserve per Quarter ($Bn) 120 122 93 51 56 68 44 52 30 6 64 71 46 49 38 1Q07 2Q07 3Q07 4Q07 1Q08 Parent Bank & Other Subsidiaries Source: Morgan Stanley SEC Filings This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that present
Slide 14: Outlook
Outlook ● Balance sheet de-leveraging ● Industry de-risking ● Regulatory evolution ● Credit markets to remain challenged ● Transparency of exposures industry-wide This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is bas
Slide 15: Venice Credit Summit
Venice Credit Summit Colm Kelleher Executive Vice President and Chief Financial Officer April 26, 2008 This slide is part of a presentation by Morgan Stanley and is intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does