Morgan Stanley · NYSE:MS
Morgan Stanley — FY2017 Earnings Presentation
29 slides from Morgan Stanley's earnings presentation, Jan 18, 2018
Slide 1: Strategic Update
Strategic Update James P. Gorman, Chairman and Chief Executive OfficerJanuary 18, 2018
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 Annual Report on Form 10-K, Definitive Proxy Statement, Quarterly Reports on Form 10-Q and
Slide 3: Operating Performance Metrics
Operating Performance Metrics(1) To provide further transparency and a better understanding of operating performance, our reported results are adjusted below to exclude the aggregate impact of the net discrete tax provision in the fourth quarter of $1,158MM that resulted from the enactment of the Ta
Slide 4: Evolution of Our Key Strategic Objectives
Evolution of Our Key Strategic Objectives Acquire 100% of WM JV and Improve WM Pre-Tax Margin(1) from 17% Post Integration(2) Significantly Reduce RWAs in Fixed Income Lower Expenses and Resize Business Footprint Firm Specific Opportunities:Deeper ISG and WM PartnershipBuild Bank Strategy Strategy R
Slide 5: Mark to Market: 2016-2017 Strategic Objectives
Mark to Market: 2016-2017 Strategic Objectives(1) 1 Streamline: $1Bn Expense Reduction, <74% Efficiency Ratio 2 Complete Fixed Income Restructuring and Maintain Revenue Footprint 3 Wealth Mgmt. Pre-Tax Margin(4): 23 – 25% 4 Increase Capital Return to Shareholders 5 ROE(6): 9 – 11% 2017 Results Objec
Slide 6: 2017 Results in Perspective
2017 Results in Perspective Results(3) Mixed Operating Environment Revenues: $37.9Bn10% YoY Growth Expenses: $27.5Bn73% Efficiency Ratio(4)7% YoY Growth S&P 500: +19% Strong Equity Market Performance Average VIX: 11 Depressed Equity Market Volatility Federal Funds:+75bps Continuation of U.S. Monetar
Slide 7: Execution of Our Strategic Plan – Increased Profitability
Execution of Our Strategic Plan – Increased Profitability(1) Net Income to Common ($Bn) Return on Equity(4) (%) ** Return on Tangible Common Equity(5) (%) Book Value Per Share($) Tangible Book Value Per Share(6)($) Earnings Per Diluted Share ($) +49% +9% +11% Improving Profitability… …Results in Imp
Slide 8: Execution of Our Strategic Plan – Increased Stability
Execution of Our Strategic Plan – Increased Stability $6.6**Bn 2012 2017 $2.9Bn Net Income to CommonBy Segment, ex. DVA and Discrete Tax Items ($Bn)(1)(2)(3)(4) Return on EquityBy Segment, ex. DVA and Discrete Tax Items (%)(1)(2)(3)(4) Wealth Management Investment Management Institutional Securities
Slide 9: Lending Strategy
Lending Strategy Continue to Focus on Execution Opportunities Wealth Management Margin Expansion Maintain Deep Institutional Securities Group Footprint Realize Potential of Investment Management Platform Drive Operating Leverage Through Expense Discipline Maintain Capital Return Profile 2 3 4 6 5 1
Slide 10: Lending Strategy Produces Organic Revenue Growth
Lending Strategy Produces Organic Revenue Growth 1 Attractive Loan Growth Opportunity... Wealth Management Institutional Securities U.S. Bank(1) Loans ($Bn) ...Supported by Strong Deposit Franchise U.S. Bank(1) Deposits ($Bn) Third Party Deposits(2) Savings & Other Deposits Sweep Deposits Time Depos
Slide 11: Wealth Management Scale Benefits & Secular Trends
2 Shift to Fee Based AssetsFee Based Assets ($Tn) Increasing Lending PenetrationTotal Client Liabilities ($Bn) Rationalized Expense BaseNon-Compensation Expense ($Bn) Compensation Leverage Compensation Ratio(1) (%) % of Total Client Assets 37% 44% Wealth Management Scale Benefits & Secular Trends, D
Slide 12: Wealth Management Benefits from High Quality Revenue Profile
Wealth Management Benefits from High Quality Revenue Profile 2 Net Revenues ($Bn) Transactional(1) Net Interest Income Asset Management 2013 $14.1Bn 2017$16.8Bn Other Decreased Dependence on More Volatile Revenues Stability and Growth Daily Revenue Distribution(2) 2016 2017 2015 0% 0% <$50MM 0% 52%
Slide 13: Wealth Margin Expansion, While Investing in Growth
Wealth Margin Expansion, While Investing in Growth 2 Pre-Tax Margin(1)(2)(3) (%) Margin Drivers: 2018 and Beyond Consistent Margin Improvement Since 2010 Revenue DriversFee Based Flows Wallet ConsolidationClient SegmentationLending PenetrationRising RatesExpense LeverageRetention Note Roll-off(5)Rec
Slide 14: Gained Wallet Share Across All ISG Businesses
Gained Wallet Share Across All ISG Businesses(1)(2)(3) Fixed Income Sales & Trading Wallet, ex-DVA(5)($Bn) Investment Banking Wallet($Bn) Equity Sales & Trading Wallet, ex-DVA(4)($Bn) Morgan Stanley Wallet Share % 16% 21% 6% 9% 11% 13% 3 (6) (6) (6)
Slide 15: Continue to Maintain Fixed Income Revenue Footprint
Continue to Maintain Fixed Income Revenue Footprint 3 Fixed Income Sales & Trading Net Revenues – ex. DVA(1) ($Bn) Solid Revenue Footprint... Total Wallet – ex. DVA(2) ($Bn) ...Despite Smaller Industry Wallet… Headcount BalanceSheet Capital Expenses ...and Fewer Resources ~$1Bn QuarterlyAverage Wall
Slide 16: Investment Management: Attractive, High Return Growth Business
Investment Management: Attractive, High Return Growth Business 4 2017 Net Revenue by Asset Class(%) Focus on Execution 2017 Key MetricsManagement fees: +6%Total net revenue: +22%Long-term organic growth(2): +5%Positioned in businesses with attractive economics and secular growth prospects Meaningful
Slide 17: Global Capabilities Driving Growth
Global Capabilities Driving Growth 4 Global Client Footprint is Critical... EMEA Asia North America Net Flows, excl. Liquidity(1) (% of Beginning of Period Assets) EMEA Asia …Paired with Top-Tier Performance, Results in Material AUM Growth Solutions Strategy – London(3)AUM ($Bn) Concentrated Public
Slide 18: Remain Fiscally Disciplined, Drive Operating Leverage
Remain Fiscally Disciplined, Drive Operating Leverage 5 Firm Expense Efficiency Ratio, ex DVA(1) (%) 2018 – 2019 Target: <73%
Slide 19: Morgan Stanley Capital Return
6 Morgan Stanley Capital Return ($Bn) Common Dividends $ 2015 2016 2017 Dividend 0.15 0.20 0.25 Buyback 2.5Bn 3.5Bn 5.0Bn CCAR Non-Objection(1) Buybacks Considerations Uncertain Impact of Regulatory Reform and CCARBalance Sheet to Support Growth Initiatives Increase Capital Return, While Investing f
Slide 20: Morgan Stanley will Benefit from U.S Corporate Tax Reform
Morgan Stanley will Benefit from U.S Corporate Tax Reform Effective Tax Rate, (%), excl. Intermittent Net Discrete Tax Items 2017:$10.4Bn U.S Non-U.S. $1.2Bn net discrete tax provision due to enactment of the Tax Act Primarily driven by re-measurement of deferred tax assets at lower corporate tax ra
Slide 21: Summary of Strategic Objectives
Summary of Strategic Objectives 1 Deliver Wealth Management Pre-Tax Margin(2) of 26-28% 2 Expand ISG Penetration and Leadership 3 Position Investment Management for Growth 4 Realize Firm Expense Efficiency Ratio(3) of ≤73% ROE(4): 10-13% ROTCE(5): 11.5%-14.5% 2018 – 2019 Objectives(1) 5 Maintain Att
Slide 22: End Notes
End Notes These notes refer to the financial metrics presented on Slide 3.Operating Performance Metrics, which exclude the impacts of the Tax Cut and Jobs Act (the ‘Tax Act’) and other intermittent net discrete tax benefits, are non-GAAP financial measures that the Firm considers useful for investor
Slide 23: End Notes
End Notes These notes refer to the financial metrics presented on Slide 5.Represents results against the 2017 Strategic Objectives established at the beginning of 2016.Firm Efficiency ratio represents total non-interest expenses as a percentage of Net Revenues. The Firm Efficiency ratio is a non-GAA
Slide 24: End Notes
End Notes These notes refer to the financial metrics presented on Slide 7.Operating Performance Metrics, denoted by double asterisk (**), refer to Slide 3 and note 1 thereto.2015 earnings applicable to Morgan Stanley common shareholders (‘Net Income to Common’) exclude the net of tax positive impact
Slide 25: End Notes
End Notes These notes refer to the financial metrics presented on Slide 8 (continued).2012 earnings applicable to Morgan Stanley common shareholders (‘Net Income to Common’) and ROE by Segment have been adjusted to exclude the impact of Debt Valuation Adjustment (‘DVA’) and intermittent discrete tax
Slide 26: End Notes
End Notes These notes refer to the financial metrics presented on Slide 10.U.S. Bank represents the Firm’s U.S. Bank operating subsidiaries, Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association.Third party deposits include time deposits issued outside of the Firm’s Wealth
Slide 27: End Notes
End Notes These notes refer to the financial metrics presented on Slide 15.Fixed Income Sales & Trading Net Revenues adjust for Debt Valuation Adjustment (‘DVA’) as follows: 2013 excludes the negative impact of $603 million; 2014 excludes the positive impact of $419 million and a negative impact fro
Slide 28: End Notes
End Notes These notes refer to the financial metrics presented on Slide 19.In June 2017, we received a non-objection from the Federal Reserve to our 2017 Capital Plan. The Capital Plan includes the repurchase of up to $5 billion of outstanding common stock for the four quarters beginning in the thir
Slide 29: Strategic Update
Strategic Update James P. Gorman, Chairman and Chief Executive OfficerJanuary 18, 2018