Morgan Stanley · NYSE:MS
Morgan Stanley — Debt Investor Presentation (April 2015)
27 slides from Morgan Stanley's debt investor presentation, Apr 30, 2015
Slide 1: Morgan Stanley 1Q15 Fixed Income Investor Conference Call
Morgan Stanley 1Q15 Fixed Income Investor Conference Call April 30, 2015
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 Regulatory Topics D Capital Management E Liquidity Management 3
Slide 4: Morgan Stanley: Looking Forward
A Morgan Stanley: Looking Forward • Multi-year transformation of business mix has led to earnings consistency and balance sheet strength • Notable topics today: Upside from U.S. Bank(1); funding cost optimization; and return of capital subject to regulatory approval Full Year 2006 Net Revenues(2) Fu
Slide 5: 2015 Roll-Forward: Realizing Benefit of Strategic Initiatives
2015 Roll-Forward: Realizing Benefit of Strategic Initiatives Ongoing Wealth Management upside through additional margin 1 improvement Continued execution of U.S. Bank strategy in Wealth Management and 2 Institutional Securities 3 Progress in Fixed Income and Commodities ROE 4 Tailwind from lower fu
Slide 6: Ongoing Wealth Management Upside Through Additional Margin Improvement
1 Ongoing Wealth Management Upside Through Additional Margin Improvement (1),(2) Pre-tax Margin Target Wealth Management Pre-tax Margin (%) Includes: 30% • Revenue and operating (4) 22-25% leverage from deposit 25% 22% deployment 20% • Continued investments in 20% 18% leading technology platform 14%
Slide 7: NII Upside Driven by Ongoing Execution of U.S. Bank Strategy
2 NII Upside Driven by Ongoing Execution of U.S. Bank Strategy In Wealth Management & Institutional Securities • Sizable, underpenetrated Combined U.S. Bank Assets ($Bn) (1),(2) and embedded client ~$180 base supports balanced ~$170 1% 1% 9% loan growth $151 • Higher interest rates 1% 15% (eventuall
Slide 8: Improve Fixed Income and Commodities Returns on Lower Risk-Weighted Assets
3 Improve Fixed Income and Commodities Returns on Lower Risk-Weighted Assets • RWAs meaningfully down to $174Bn in 1Q15; retaining $180Bn year-end 2015 target • Optimize ~$25Bn of RWAs beyond $180Bn target, primarily passive roll-down • RWAs to be redeployed to maximize returns, either within Fixed
Slide 9: Tailwind from Lower Funding Costs
4 Tailwind from Lower Funding Costs • Meaningful reduction in funding costs due to spread tightening and roll-off of older more expensive debt Issuance and New Issue Levels Weighted Average Cost of Unsecured Funding ($Bn) (Spread to UST, bps) Peak Cost 50 400 of Funding Projected 40 300 ~25% 30 from
Slide 10: Ongoing Focus on Expense Management, Resulting in Greater Efficiency
5 Ongoing Focus on Expense Management, Resulting in Greater Efficiency Compensation Expenses and Targets(3) Non-Compensation Expenses Non-Compensation Efficiency Ratio(1) • 4Q14 change in compensation structure enabled meaningful reduction in Institutional Securities compensation/net revenue ratio 3
Slide 11: Returning Capital – Our Philosophy
6 Returning Capital – Our Philosophy • We intend to continue to increase our capital return to shareholders over time, subject to regulatory approval • Qualitative process benefits from our Continuous Improvement Program (CIP) Morgan Stanley’s Capital Returns(1) Dividends In 2012 and 2013, the Firm
Slide 12: Prudent Liability Management: Centralized Structure and Strict Governance
B Prudent Liability Management: Centralized Structure and Strict Governance Liability management framework supported by centralized, strong governance ensuring funding durability, providing stability in all environments Durability of Funding Sources Liabilities should be considered across a range
Slide 13: Continue to Optimize Funding Stack
Continue to Optimize Funding Stack Funding Stack(1) We continue to enhance our funding (%) profile by shifting to more durable sources 21% YE 2010 – YE 2013 37% 37% Significantly increased 55% shareholders’ equity 76% 33% Materially grew deposit base 29% Meaningfully extended the WAM of 38
Slide 14: Prudent Liability Management: Extending Maturity Profile of Long-Term Debt
Prudent Liability Management: Extending Maturity Profile of Long-Term Debt • Since the end of 2013, issued debt at a weighted average cost below the weighted average cost of debt maturing, while also extending our weighted average maturity by approximately one year Total Short-Term and Long-Term Mat
Slide 15: Further Upside To Deposit Growth
Further Upside To Deposit Growth Since the beginning of 2012, we increased our deposit base through onboarding deposits from former JV partner, Citi Prospectively, given the scale of our Wealth Management client base, we have opportunity to grow deposits to the extent it is consistent with prude
Slide 16: 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 17: 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 18: 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 19: Secured Funding Pillars 2 and 3: Monthly 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 20: 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 21: Discipline Around Central Clearing and Compression Important Driver of Reaching SLR Target
Discipline Around Central Clearing and Compression Important Driver of Reaching SLR Target of 5% Morgan Stanley Backloading & Compression: Our Achievements OTC Derivative Notionals(1) • Central clearing and compression of OTC derivatives ($Tn) were key levers to reaching our SLR target Peer Average
Slide 22: Strong Risk-Based Capital Ratios, Leverage Ratios, Liquidity Ratios and Stress Test Outcome
Strong Risk-Based Capital Ratios, Leverage Ratios, C Liquidity Ratios and Stress Test Outcome(1) 1Q15 Basel III CET1 Ratios U.S. Supplementary Leverage Ratio(3) Pro-forma 1Q15: 5.1% Advanced Standardized 13.1% 13.1% Liquidity Coverage Ratio(4) 11.6% 11.6% Pro-forma 1Q15: > 100% 2015 CCAR Results
Slide 23: Capital Management: Efficient Capital Stack
D Capital Management: Efficient Capital Stack Optimizing capital with issuance of non-common capital since 2013 Morgan Stanley Qualifying Capital 5% 14% 13% Issued $2Bn of Tier 2 subordinated debt 11% in 2Q15 and ~$6.3Bn in 2013 and 2014 TruPS phase-out of capital over time(2) Issued $1.5Bn of
Slide 24: Significant Global Liquidity Position
E Significant Global Liquidity Position Highly Liquid and Unencumbered - Changes in bank liquidity levels reflect execution of U.S. Bank strategy Period End Liquidity Composition of the Liquidity Reserve ($Bn) at 1Q15 $202 $ 200 $193 $195 Type of Investment ($Bn) $182 $182 $171 Cash / Cash Equivalen
Slide 25: Build and Stress Test Liquidity on a Legal Entity Basis
Build and Stress Test Liquidity on a Legal Entity Basis Stress testing sizes contingency outflow requirements at a legal entity level Contingent cash outflows are measured independently from the inflows resulting from mitigating actions Parent stress test model represents the sum of all legal
Slide 26: Agenda
Agenda A Business Update B Prudent Liability Management C Regulatory Topics D Capital Management E Liquidity Management 26
Slide 27: Morgan Stanley 1Q15 Fixed Income Investor Conference Call
Morgan Stanley 1Q15 Fixed Income Investor Conference Call April 30, 2015
Morgan Stanley — Debt Investor Presentation (April 2015) on 6ix