AI CapEx and Investment Banking
Q: Steven Chubak of Wolfe Research asked about the potential for digital infrastructure IB fees to grow and ancillary revenue streams outside the core franchise.
A: Ted Pick explained that the AI CapEx cycle is running at $1 trillion a year and that Morgan Stanley acts as a critical adviser across the full ecosystem. He noted that the firm helps clients innovate and finance through the life cycle, stating, "The relationships and innovation that Morgan Stanley brings to our clients will absolutely be critical."
Q: Mike Mayo of Wells Fargo asked for the firm's conviction on the AI CapEx super cycle and how it is allocating resources.
A: Ted Pick stated that AI CapEx is meaningful, contributing 50 to 70 basis points of real GDP. He noted that the firm is double overweight on the AI opportunity as both an adviser and an internal user of the technology.
Wealth Management Funnel and Flows
Q: Brennan Hawken of BMO Capital Markets asked about the sustainability of IPO-related net new assets and the tail of these flows.
A: Sharon Yeshaya explained that IPO flows have a tail as assets move from employee stock plans to advice-based relationships. She noted that these flows are not just a one-quarter event.
Q: Christian Bolu of Autonomous asked about the sustainability of IPO flows and the firm's ability to retain them as fee-based assets.
A: Sharon Yeshaya stated that retention rates are steady and the firm sees opportunities to convert these flows into fee-based assets as clients consolidate their holdings.
Q: Daniel Fannon of Jefferies asked if the convergence of total flows and fee-based flows will continue.
A: Sharon Yeshaya noted that it depends on client choices, but the value of advice remains a key driver for fee-based growth, with over 20% of advisor-led flows being fee-based.
Technology and Wealth Strategy
Q: Glenn Schorr of Evercore ISI asked how wealth advice is evolving in the current technological backdrop.
A: Ted Pick explained that technology is a differentiator, but the business relies on four pillars: unique products, unique data, asset protection, and the human element of financial adviser trust.
Q: Christian Bolu of Autonomous asked for details on AI-related non-comp expenses.
A: Sharon Yeshaya explained that spending is focused on productivity tools like automated reconciliation and coding to support growth with the current expense base.
Q: Ebrahim Poonawala of Bank of America asked about the impact of SEC rules on tokenized equities.
A: Sharon Yeshaya stated that tokenization is an opportunity that the firm is investing in to maintain its leadership position in the future of wealth management.
Bank Funding and NII
Q: Brennan Hawken of BMO Capital Markets asked about deposit growth and funding for ISG operations.
A: Sharon Yeshaya noted that growing the bank is a strategic choice that will provide funding benefits starting next year.
Q: Daniel Fannon of Jefferies asked for the outlook on loan NII growth in 2027.
A: Sharon Yeshaya stated that NII is expected to expand next year, driven by loan growth.
Institutional Equities and FICC
Q: Devin Ryan of Citizens Bank asked about the cyclical versus secular drivers in institutional equities.
A: Ted Pick explained that the equities business is more robust due to the derivatives build-out, and the firm's 300 basis point CET1 buffer provides flexibility to support clients.
Q: Ben Gerlinger of Citi asked about investment opportunities in FICC versus equities.
A: Ted Pick stated that FICC is a world-class business that is now integrated with banking and equities, and the firm will continue to invest in it over time.
Capital Allocation and Macro Environment
Q: Chris McGratty of KBW asked about geographic and product capital allocation priorities.
A: Ted Pick emphasized a global allocation strategy and the importance of integrated solutions across cash, derivatives, and prime brokerage.
Q: Erika Najarian of UBS asked how higher interest rates are impacting capital raising decisions.
A: Ted Pick noted that higher rates require rigorous capital structures, and the firm is being sharp about where it allocates risk capital.
Q: Scott Siefers of TD Cowen asked about the backlog in sponsor mandates.
A: Ted Pick explained that sponsors need to harvest portfolios, but the strategic corporate universe is currently leading the capital cycle.
