Morgan Stanley(MS) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Morgan Stanley generated record revenues of $48 billion in 2020, up from $34 billion in the period from 2010 to 2014, reflecting a significant increase in performance [4][6] - The firm reported a Return on Tangible Common Equity (ROTCE) of 15.4% for the full year and 18.7% for the fourth quarter, with earnings per share (EPS) of $6.58 for the year and $1.92 for the fourth quarter [18][19] - The efficiency ratio improved to 70%, down from 73% in the previous year, indicating better cost management [19][15] Business Line Data and Key Metrics Changes - Institutional Securities achieved record revenues of $26 billion, a 25% increase from the previous best year, with significant contributions from Asia [19][21] - Wealth Management revenues were $5.7 billion in the fourth quarter, with a full-year margin of 24.2%, reflecting strong client engagement and activity [24][25] - Investment Management reported revenues of $1.1 billion in the fourth quarter, with total assets under management (AUM) reaching a record high of $781 billion [30][29] Market Data and Key Metrics Changes - The firm saw over $200 billion in net new assets for the year, representing 6% of beginning period assets on a pro forma basis, indicating strong market demand [11][26] - The investment banking pipeline remains healthy, with robust activity in equity issuance and M&A, particularly in healthcare and technology sectors [20][44] - Fixed income sales and trading revenues increased 59% to $8.8 billion for the year, reflecting heightened client activity amid market volatility [21][22] Company Strategy and Development Direction - Morgan Stanley's strategy focuses on growth through acquisitions, including ETRADE and Eaton Vance, to enhance its wealth management capabilities and reach younger demographics [6][7] - The company aims to achieve a long-term ROTCE exceeding 17% and maintain an efficiency ratio below 70% while investing in growth [17][15] - The firm is positioned to capitalize on market opportunities and expand its client base through integrated services across its business segments [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic recovery and market activity, driven by fiscal stimulus and vaccine distribution [44][43] - The firm anticipates continued strong performance in 2021, supported by a healthy pipeline and increased client engagement [31][46] - Management highlighted the importance of maintaining expense discipline while pursuing growth opportunities through strategic investments [15][17] Other Important Information - The firm announced a $10 billion share buyback program for 2021, reflecting confidence in its financial position and commitment to returning capital to shareholders [4][15] - Integration costs related to the ETRADE acquisition are expected to be around $800 million over three years, with significant synergies anticipated [29][14] Q&A Session Summary Question: What is driving the net new asset growth in the wealth business? - Management noted that the growth is due to capturing a greater share of existing clients and expanding the client base, with E*TRADE contributing significantly to this growth [33][34] Question: What is the outlook for the industry wallet in trading? - Management indicated that while it is difficult to predict, there is optimism for continued market activity and share gains, particularly in fixed income and equity markets [42][44] Question: What is the plan for integrating the stock plan platforms? - Management confirmed that the sales teams have been integrated and that they will converge the platforms over time, with expectations of continued growth in corporate relationships [38][39] Question: How does the firm prioritize buybacks versus dividends? - Management emphasized a balanced approach, considering investments in the business, dividends, and share buybacks, with a focus on maintaining a strong capital position [51][55] Question: What are the expectations for organic growth in the wealth management business? - Management expressed caution about projecting growth rates but indicated that the firm is in a growth phase and expects to maintain higher growth levels than in the past [50][49]