Morgan Stanley · NYSE:MS

Morgan Stanley — Debt Investor Presentation (August 2015)

25 slides from Morgan Stanley's debt investor presentation, Aug 19, 2015

  1. Slide 1: Morgan Stanley 2Q15 Fixed Income Investor Update

    Morgan Stanley 2Q15 Fixed Income Investor Update August 19, 2015

  2. 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 the Company’s Annual Report on Form 10-K, Definitive Proxy Statement, Quarterly Reports on Form 10-Q and the Company’s Current Re

  3. Slide 3: Agenda

    Agenda  A Business Update  B Prudent Liability Management  C Regulatory Topics  D Capital Management  E Liquidity Management 3

  4. Slide 4: Morgan Stanley: Looking Forward

    A Morgan Stanley: Looking Forward • Multi-year transformation of business mix has led to earnings consistency and balance sheet strength • Notable topics: Upside from U.S. Bank(1); funding cost optimization; and return of capital subject to regulatory approval Full Year 2006 Net Revenues(2) Full Yea

  5. Slide 5: 2015 Roll-Forward: Realizing Benefit of Strategic Initiatives

    2015 Roll-Forward: Realizing Benefit of Strategic Initiatives Ongoing Wealth Management upside through additional margin 1 improvement Continued execution of U.S. Bank strategy in Wealth Management and 2 Institutional Securities 3 Progress in Fixed Income and Commodities ROE 4 Tailwind from lower fu

  6. Slide 6: Ongoing Wealth Management Upside Through Additional Margin Improvement

    1 Ongoing Wealth Management Upside Through Additional Margin Improvement (1),(2) Pre-tax Margin Target Wealth Management Pre-tax Margin (%) Includes: 30% • Revenue and operating (4) leverage from deposit 25% 22% 23% 22-25% deployment 20% • Continued investments in 20% 18% leading technology platform

  7. Slide 7: NII Upside Driven by Ongoing Execution of U.S. Bank Strategy

    2 NII Upside Driven by Ongoing Execution of U.S. Bank Strategy In Wealth Management & Institutional Securities • Sizable, underpenetrated Combined U.S. Bank Assets ($Bn) (1),(2) and embedded client ~$180 base supports balanced ~$170 1% 1% 9% loan growth $151 • Higher interest rates 1% 15% (eventuall

  8. Slide 8: Improve Fixed Income and Commodities Returns on Lower Risk-Weighted Assets

    3 Improve Fixed Income and Commodities Returns on Lower Risk-Weighted Assets • RWAs meaningfully down to $157Bn in 2Q15; retaining $180Bn year-end 2015 target Fixed Income and Commodities Basel III Risk-Weighted Assets ($Bn)(1) $370 <$180 ~$25 $157 ~$155+ 3Q11 2Q15 Year End (2) Additional Passive Fu

  9. Slide 9: Tailwind from Lower Funding Costs

    4 Tailwind from Lower Funding Costs Issuance and New Issue Levels ($Bn) (Spread to UST, bps) • Meaningful reduction in 50 400 funding costs due to: − Roll-off of older, 40 more expensive debt 300 − Spread tightening resulting in lower 30 cost of new issuance 200 20 100 10 0 0 2010 2011 2012 2013 201

  10. Slide 10: Ongoing Focus on Expense Management, Resulting in Greater Efficiency

    5 Ongoing Focus on Expense Management, Resulting in Greater Efficiency Compensation Expenses and Targets(3) Non-Compensation Expenses Non-Compensation Efficiency Ratio(1) • 4Q14 change in compensation structure enabled meaningful reduction in Institutional Securities compensation/net revenue ratio 3

  11. Slide 11: Returning Capital – Our Philosophy

    6 Returning Capital – Our Philosophy • We intend to continue to increase our capital return to shareholders over time, subject to regulatory approval • Qualitative process benefits from our Continuous Improvement Program (CIP) Morgan Stanley’s Capital Returns(1) Dividends In 2012 and 2013, the Firm

  12. Slide 12: Prudent Liability Management: Centralized Structure and Strict Governance

    B Prudent Liability Management: Centralized Structure and Strict Governance Liability management framework supported by centralized, strong governance ensuring funding durability, providing stability in all environments Durability of Funding Sources  Liabilities should be considered across a range

  13. Slide 13: Continue to Optimize Funding Stack

    Continue to Optimize Funding Stack Funding Stack(1)  We continue to enhance our funding (%) profile by shifting to more durable sources 21%  YE 2010 – YE 2013 37% 37%  Significantly increased 55% shareholders’ equity 76% 33%  Materially grew deposit base 29%  Meaningfully extended the WAM of 38

  14. Slide 14: Prudent Liability Management: Extending Maturity Profile

    Prudent Liability Management: Extending Maturity Profile Total Short-Term and Long-Term Maturities(1),(2),(3) ($Bn) 40 2Q15 Weighted Average 35 34 Maturity: 5.9 years 30 26 25 24 23 22 19 19 20 18 17 16 15 10 9 9 7 7 7 8 5 5 3 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2

  15. Slide 15: Four Pillars of Secured Funding Ensure Durability and Stability

    Four Pillars of Secured Funding Ensure Durability and Stability 1 Significant Weighted Average Maturity  Enhances durability 2 Maturity Limit Structure  Reduces roll-over risk 3 Investor Limit Structure  Minimizes concentration with any single investor, in aggregate and in any given month 4 Spare

  16. Slide 16: Strict Governance Framework Ensures Appropriate Term Consistent with Asset Fundability

    Strict Governance Framework Ensures Appropriate Term Consistent with Asset Fundability Rules-Based Criteria Determine Asset Fundability… Highly Liquid (Governments, Fundability Criteria Agencies, Open Market Operations and Central  Eligible for financing through Open Market Operations (OMO) and/or

  17. Slide 17: Secured Funding Pillar 1: Longer WAM Provides Appropriate Flexibility

    Secured Funding Pillar 1: Longer WAM Provides Appropriate Flexibility …Fundability Category Determines Required Weighted Average Maturity: >120 Days(1)  Criteria-based model sources appropriate term funding consistent with liquidity profile of underlying assets  Assets tiered by fundability  Matu

  18. Slide 18: Secured Funding Pillars 2 and 3: Monthly Maturity and Investor Concentration Targets

    Secured Funding Pillar 2: Monthly Maturity Target Secured Funding Pillar 3: Investor Concentration Target  Monthly Maturity Target: Target less than 15% of non-Super Green liabilities maturing in any given month  Investor Concentration Target: Maximum total exposure per investor of 15% of non-Supe

  19. Slide 19: Secured Funding Pillar 4: Spare Capacity Provides Flexibility in Both Favorable and Stressed Markets

    Secured Funding Pillar 4: Spare Capacity Provides Flexibility in Both Favorable and Stressed Markets  Spare Capacity is equivalent to total non-Super Green liabilities in excess of non-Super Green inventory  Spare Capacity has created excess contractual term-funding, which provides valuable flexib

  20. Slide 20: Discipline Around Central Clearing and Compression Important Driver of Reaching SLR Target of 5%

    Discipline Around Central Clearing and Compression Important Driver of Reaching SLR Target of 5% Morgan Stanley Backloading & Compression: Our Achievements OTC Derivative Notionals(1) • Central clearing and compression of OTC derivatives ($Tn) were key levers to reaching our SLR target Peer Average

  21. Slide 21: Strong Risk-Based Capital Ratios, Leverage Ratios, Liquidity Ratios and Stress Test Outcome

    Strong Risk-Based Capital Ratios, Leverage Ratios, C Liquidity Ratios and Stress Test Outcome(1) 2Q15 Basel III CET1 Ratios U.S. Supplementary Leverage Ratio(3)  Pro-forma fully phased-in 2Q15: 5.3% Advanced Standardized 14.0% 14.3% 12.5% 12.7% Liquidity Coverage Ratio(4)  Pro-forma 2Q15: > 100% 2

  22. Slide 22: Capital Management: Efficient Capital Stack

    D Capital Management: Efficient Capital Stack Optimizing capital with issuance of non-common capital since 2013 Morgan Stanley Qualifying Capital 4% 14% 13%  Issued $2Bn of Tier 2 subordinated debt 10% in 2Q15 and ~$6.3Bn in 2013 and 2014  Redeemed $2.0Bn of TruPS in 2Q15  TruPS phase-out of capi

  23. Slide 23: Significant Global Liquidity Position

    E Significant Global Liquidity Position Highly Liquid and Unencumbered - Changes in bank liquidity levels reflect execution of U.S. Bank strategy Period End Liquidity Composition of the Liquidity Reserve ($Bn) at 2Q15 $202 $ 200 $193 $188 Type of Investment ($Bn) $182 $182 $171 Cash / Cash Equivalen

  24. Slide 24: Agenda

    Agenda  A Business Update  B Prudent Liability Management  C Regulatory Topics  D Capital Management  E Liquidity Management 24

  25. Slide 25: Morgan Stanley 2Q15 Fixed Income Investor Update

    Morgan Stanley 2Q15 Fixed Income Investor Update August 19, 2015

Morgan Stanley — Debt Investor Presentation (August 2015) on 6ix