Morgan Stanley’s (MS) Q3 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Jonathan Pruzan – CFO

IPO activity is picking up

“Equity underwriting revenues were $236 million, down 11% versus 2Q. Debt underwriting revenues were $364 million, up 6% sequentially. Equity underwriting activity remains well below historical levels. We saw a slight pick-up in IPO activity toward the end of the quarter and we will have to see if that trend continues.”

On corporate credit

“The benign credit environment with tightening spreads broadly and in Europe in particular following the Brexit vote yielded stronger sequential performance in corporate credit”

On compliance with the Volcker rule

“We currently have approximately $2.3 billion of investments in and relationships with legacy covered funds subject to the Volcker Rule across the firm. While we expect to request additional extensions for the overwhelming majority of these investments, we continue to consider various alternatives to be in compliance with the rule, including sales, redemptions, and liquidations where the amounts we ultimately realize on these investments may be less than their current carrying values.”

 

James Gorman – Chairman & CEO

They feel they are back on track

“After a challenging end to 2015, and frankly difficult start to this year, Morgan Stanley is back on track and delivered solid results in the third quarter.”

Very low transaction levels

“I think as having watched this business over two or three decades, I don’t think I’ve seen transaction levels lower than this. And just supposed against that that the business had record revenues is a testament to the managed money side of it, the banking side of it, the deposit side of it, things that frankly 15 years ago really didn’t exist to a highly dependent transaction activity. And the world has changed, investors have changed but we’re sitting on $2.1 trillion of assets. And their behavior has changed whether the transaction stuff picks up; I don’t know post the election, post the Fed moving it remains to be seen. My guess is over time it does, I feel just intuitively, it feels like a low but can it go low…”

On the DOL Fiduciary rule

“I don’t think that giving clients choice heightens one legal exposure in fact it’s — that just seems a lower counterintuitive. So I’m not — we run a large complicated business and we do it in full compliance with the regulatory rules and we try and optimize what’s always in the best interest of the clients. So that’s the basic principle.”