Morgan Stanley MS
Q1 2012 Earnings Call Transcript

Celeste Mellet Brown - IR: Good morning. This is Celeste Brown, Head of Investor Relations at Morgan Stanley. Welcome to our First Quarter Earnings Call.

Today's presentation may include forward-looking statements, which reflect management's current estimates or beliefs and are subject to risks and uncertainties that may cause actual results to differ materially.

The presentation may also include certain non-GAAP financial measures. Please see our SEC filings at www.morganstanley.com for a reconciliation of such non-GAAP measures to the comparable GAAP figures and for a discussion of additional risks and uncertainties that may affect the future results of Morgan Stanley.

This presentation, which is copyrighted by Morgan Stanley and may not be duplicated or reproduced without our consent, is not an offer to buy or sell any security or instruments.

I will now turn the call over to Chairman and Chief Executive Officer, James Gorman.

James P. Gorman - President and CEO: Thank you, Celeste. Good morning, everyone. I'm pleased to be here with Ruth to discuss our first quarter results today. There were a several significant highlights in the quarter, but it's important to remind you of some of the steps we've taken to reach this point.

For the past two years, our team has systemically executed in a number of areas, including selling certain assets and eliminating legacy positions to move beyond the crisis; rebuilding and investing in the client footprint in Institutional Securities; implementing the MSSB integration, increasing fee-based assets and improving the profit margin in the business; deepening and strengthening our partnership with MUFG; building and maintaining a conservative capital, liquidity and leverage profile; and finally and not unimportantly, maintaining strong expense discipline.

While this has been a long and at times arduous journey, our results this quarter are evidenced around the right track. Ruth will take you through the GAAP results in detail, but let me underscore a few things.

Ex DVA, our revenue, net earnings, EPS and ROE for the quarter were among the highest into financial crisis. ROE was over 9%. ISG revenues were particularly strong with significant progress in fixed income, driven by improved balance sheet velocity and VaR efficiency. This was coupled with continued strength in equities despite challenging markets.

We reached an important milestone in the quarter with the successful move with the first wave of legacy Smith Barney Advisors to our new technology platform, with the rest to follow in early May and early July. We are just 11 weeks away from completion of this integration. Our strategic partnership with MUFG continues to grow as we deepen client relationships and leverage our combined balance sheet to deliver financial solutions.

Finally we have delivered on the promise of expense control. We were disciplined in the approach to compensation and while overall compensation expense rose of course with high revenues and the actions we have taken in the last few years we meaningfully reduced the ratio, striking a balance between driving ROE and investing in the franchise. Similarly, our rigorous non-compensation expense program allowed us to keep a tight rein on spending and thus drove significant operating leverage. Clearly, we still have work to do to reach our goals. Well I believe the progress we have made further underscores the strength of this franchise globally.