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DATE

Wednesday, Oct. 14, 2026

CALL PARTICIPANTS

• Chairman and Chief Executive Officer - Ted Pick
• Head of Finance - Sharon Yeshaya

TAKEAWAYS

• Net revenues -- $20.3 billion, representing an increase from $18.2 billion in the prior year period driven by momentum across the integrated firm.
• Earnings per diluted share -- $3.03, compared to $2.80 in the third quarter of 2025 reflecting higher net income.
• Return on tangible common equity -- 22.6%, marking the fifth consecutive quarter the firm reported this metric above 20%.
• Total client assets -- $10.5 trillion, a record level across Wealth and Investment Management reflecting $400 billion in growth during the quarter.
• Wealth Management revenue -- $9.1 billion, a record driven by higher asset management fees and growth in the bank offering.
• Net new assets -- $232.4 billion, representing a record quarterly level for the Wealth Management segment.
• Fee-based asset flows -- $80.5 billion, a milestone level supported by a new corporate retirement mandate.
• Institutional Securities revenue -- $10.0 billion, increasing 18% year over year driven by strength in equities and advisory.
• Equities revenue -- $5.8 billion, a 41% increase year over year reflecting growth in financing and higher client activity in derivatives.
• Investment Banking revenue -- $2.2 billion, up 2% from the prior year period supported by strength in the Americas and Asia.
• Advisory revenue -- $887 million, reflecting higher completed mergers and acquisitions activity across most sectors.
• Equity underwriting revenue -- $525 million, which decreased from the prior year period as a few large deals drove market activity.
• Fixed income underwriting revenue -- $747 million, supported by a new issue market that remained active.
• Fixed Income revenue -- $2.0 billion, a 7% decline from the prior year reflecting lower structured activity in credit and commodities.
• Total deposits -- $465 billion, increasing by nearly $30 billion sequentially as part of a strategic initiative to grow the bank.
• Standardized CET1 capital ratio -- 14.9%, providing approximately 300 basis points of excess capital over regulatory requirements.
• Wealth Management pretax margin -- 30.4%, demonstrating consistent profitability despite continued investments in technology and marketing.
• Long-term net flows -- $15.8 billion, driven by inflows in Parametric and fixed income products.
• Common stock repurchases -- $1.5 billion, representing seven million shares repurchased during the quarter.
• Provision for credit losses -- $148 million, primarily reflecting growth in corporate and secured lending portfolios.
• Net charge-offs -- $105 million, primarily related to corporate and commercial real estate loans largely provisioned for in prior periods.
• Bank lending balances -- $201.1 billion, increasing $5 billion sequentially driven by securities-based lending and mortgages.
• Expense efficiency ratio -- 66% year to date, reflecting operating leverage even as the firm continued to invest in AI and infrastructure.
• Asset Management revenue -- $5.5 billion, growing 16% year over year due to higher market levels and cumulative fee-based flows.
• Standardized RWAs -- $590 billion, which increased sequentially as the firm supported client activity in its markets business.

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RISKS

• Pick stated, "In the glass is half empty camp, persisting conflicts in The Middle East and Ukraine, meaningfully higher benchmark interest rates and energy prices around the developed world... and uncertain electoral and policy responses in both The US and globally are reasons to be more cautious," noting these factors could drive investor behavior into 2027.
• Pick indicated that clients are "accepting some additional structural volatility" while navigating the current growth environment, which may impact market stability.
• Yeshaya noted that net interest income was $2.2 billion, "down modestly as deposits grew and the mix shifted," indicating sensitivity to client behavior and interest rate changes.

SUMMARY

Morgan Stanley (MS -2.75%) reported quarterly results characterized by record asset levels in its wealth management division and growth in the institutional equities franchise. Management indicated that the integrated firm model allowed for continued scaling of client relationships across global regions. The company maintained a capital position above regulatory requirements and stated its intention to act as a lead advisor for infrastructure investments related to the artificial intelligence ecosystem.

• CEO Pick stated that the firm is "double overweight" on AI infrastructure, identifying it as an existential priority for the firm's strategic advisory and capital allocation efforts.
• Since acquiring E*TRADE six years ago, the firm has added over $2 trillion in net new assets through its integrated funnel spanning self-directed, workplace, and advisor-led channels.
• Management reported a strategic decision to grow the bank, increasing deposits by nearly $30 billion sequentially to $465 billion to support future funding benefits.
• The institutional equities business grew 41% year over year, which Pick attributed to the successful integration of cash, derivatives, and prime brokerage products.
• Head of Finance Yeshaya indicated expectations for a modest increase in net interest income during the fourth quarter, depending on interest rate levels and client deposit behavior.
• Management noted that investment banking pipelines are diversified across products, sectors, and regions, with active strategic dialogues continuing in corporate boardrooms.

INDUSTRY GLOSSARY

• Carry reversal: An accounting adjustment where previously accrued performance-based fees are reduced due to a decrease in the value of underlying private fund investments.
• CET1 Ratio: Common Equity Tier 1 capital ratio, a measure of a bank's core equity capital compared to its total risk-weighted assets.
• DCP: Deferred cash-based compensation programs for employees.
• E*TRADE: An electronic brokerage platform owned by Morgan Stanley that provides self-directed trading and workplace stock plan services.
• MSAT: Morgan Stanley's proprietary electronic trading technology platform used for high-speed execution and client connectivity.
• Net New Assets (NNA): A metric representing the total value of new assets brought into a firm by clients, excluding market appreciation or depreciation.
• Parametric: A subsidiary of Morgan Stanley that specializes in systematic investment strategies and customized portfolio solutions.
• Pretax margin: A financial ratio that measures a company's operating efficiency by showing how much profit it makes for every dollar of revenue before taxes.
• Risk-Weighted Assets (RWA): A bank's assets or off-balance-sheet exposures, weighted according to their risk levels to determine capital requirements.
• ROTCE: Return on tangible common equity, a financial ratio measuring profit generated from money shareholders have invested, excluding intangible assets like goodwill.
• SLR: Supplementary Leverage Ratio, a regulatory measure of a bank's tier 1 capital relative to its total leverage exposure.
• Standardized Approach: A regulatory method for calculating a bank's capital requirements based on fixed risk weights determined by regulators.

Full Conference Call Transcript

Operator: Thank you for joining the Morgan Stanley Earnings Conference. Please continue to stand by as we will be going live shortly. Good morning. Welcome to Morgan Stanley's Third Quarter 26 Earnings Call. On behalf of Morgan Stanley, I will begin the call with the following information and disclaimers. This call is being recorded. During today's presentation, we will refer to our earnings release and finance supplement, copies of which are available at morganstanley.com. Today's presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Morgan Stanley does not undertake to update the forward-looking statements in this discussion.

Please refer to our notices regarding forward-looking statements and non GAAP measures that appear in the earnings release. This presentation may not be duplicated or reproduced without our consent. I will now turn the call over to chairman and chief executive officer, Ted Pick.

Ted Pick: Thank you, operator. Good morning, and thank you for joining us. In the third quarter, Morgan Stanley delivered strong performance on the top and bottom lines with firm wide revenue of $20.3 billion and earnings per share of $30.03. With a return on tangible equity of 22.6%, this quarter marks our fifth consecutive quarter above 20% speaking to the consistent strength of our global franchise. Total client assets across Wealth and Investment Management grew by $400 billion during the quarter, to a record $10.5 trillion Against the complicated backdrop, the quarter's overall performance speaks to the momentum of the integrated firm. Wealth management continues to scale, as clients entrust us with additional assets and deepen their relationships with Morgan Stanley.

Wealth had a record quarter with revenues of over $9 billion with milestone levels of net new assets of $232 billion and fee-based flows of $80 billion This sustained performance reflects the strength of our financial advisers. The breadth of our unique capabilities and product offerings, and the trusted partnerships that distinguish our integrated firm. Institutional Securities delivered $10 billion of revenue up 18% year-over-year, Equities led the way with another outstanding quarter at $5.8 billion Clients largely remained active as we deepened engagement across our global franchise. On the forward, banking pipelines remain high and strategic dialogues inside corporate boardrooms are active, and generally receptive to action.

Clients are seeking advice to capitalize on the current dynamic growth environment while accepting some additional structural volatility. Pent up demand and catalysts to drive scale and productivity in a more constructive regulatory backdrop support an ongoing favorable outlook for investment banking activity. In short, we remain positive about the ongoing ability to monetize the corporate finance life cycle across the investment bank. Stepping back, the third quarter unfolded in 2 distinct phases. July and August were unusually brisk, as risk appetite was dominated by hyperscaler investment in the build out of the AI ecosystem.

In contrast, as Labor Day approached, we observed the headwinds of renewed tensions in The Middle East and higher interest rates globally as central banks move to keep inflation at bay. Market volumes were slower across asset classes as investors and institutional actors gauged risk reward into the fourth quarter and year end. As we move through October, the 2 known unknowns that we wrote about in our March shareholder letter. Namely the acceleration of AI at the enterprise level and the risks associated with geopolitical conflict have reached a critical juncture.

In the glass is mostly full camp, the enormous capital which continues to be raised and deployed across the AI ecosystem toward efficiency, resiliency, and productivity is driving US nominal GDP growth of 5% to 6%. Large cap corporate earnings continued to move higher The economy is at full employment The Fed is focused on managing long term inflation expectations. And the salutary effects of common sense regulation are kicking in. In the glass is half empty camp, persisting conflicts in The Middle East and Ukraine, meaningfully higher benchmark interest rates and energy prices around the developed world.

Elevated asset prices in a fourth year of a bull market for equities, and uncertain electoral and policy responses in both The US and globally are reasons to be more cautious. As we move into the fourth quarter, it is clear to us now that these 2 known unknowns and how they interact and which of the third quarter's narratives half full or half empty holds the upper hand will drive investor and corporate behavior into year end and into the first half of 2027. Against either backdrop, financial strength remains a key pillar of Morgan Stanley. We continue to actively support clients while remaining well capitalized.

Our very healthy level of excess capital with 300 basis points of excess CET1 contributes to our financial strength and affords us with substantial flexibility ahead. We look forward to continued dialogue and upcoming transparency as our regulators finalize the bank capital regulatory framework. As we enter the final quarter of the year, Morgan Stanley remains aligned and cohesive, focused on delivering higher highs and higher lows through the cycle. Particularly when the environment is as complex as it is today it is essential that we continue to execute on our clear and consistent strategy to act as trusted adviser to our clients, raising, managing, and allocating capital across the integrated firm.

With that, I will turn it over to Sharon to take you through the quarter in greater detail.

Sharon Yeshaya: Thank you, and good morning. In the third quarter, the firm delivered strong results. Revenues of $20.3 billion EPS of $3.03 and an ROTCE of 22.6%. Growth momentum from the second quarter carried into the early part of the third quarter, with markets focused on AI investment and continued economic expansion. However, rising energy prices and interest rates weighed on market activity following a shortened post Labor Day September. Despite market uncertainty, corporate activity remains strong, reflecting continued strategic dialogue. Ongoing client engagement reinforces the opportunity for our integrated firm to deepen relationships and support future activity. Year to date, the firm's efficiency ratio was 66%. Strong revenues drove operating leverage.

More than offsetting elevated execution related costs compared to the prior year. We continue to invest across our technology stack, embracing AI tools to support our infrastructure, business growth, and people. Together, these investments position us to strengthen our competitive moats across the integrated firm. Now to the businesses. Institutional securities revenues were $10 billion up 18% versus the prior year. The year-over-year increase was driven by our leading equities franchise and a pickup in advisory. Exit momentum from the second quarter carried into July, before client activity and markets moderated through September. But boardroom dialogue remained strong through the quarter. Supporting the build of strategic pipelines and future capital markets financing.

Investment banking revenues were $2.2 billion up 2% from the prior year. Reflecting strength in The Americas as well as in Asia. Consistent with our expectations of a sequential broadening out of global activity. Advisory revenues of $887 million drove results, The increase relative to the prior year period reflect higher completed activity across most sectors. Equity underwriting revenues were $525 million down compared to broad based strength in the prior year, with a few large deals driving the market. Fixed income underwriting revenues continue to be strong at $747 million. Supported by a new issue market that remained active. Pipelines remain robust and diversified across product, sectors, and regions. Strategic activity remains healthy.

Supported by ongoing corporate investment, portfolio repositioning, and capital allocation priorities. AI continues to contribute to the advisory and capital momentum, but activity is broad based across sectors and products. Turning to equity. Revenues were $5.8 billion increasing 41% versus the prior year. Reflecting growth across products and across Asia. As client needs become more complex and global, our integrated franchise is well positioned. Our investments in technology and talent have strengthened our capabilities. Allowing us to serve at greater scale and manage risk more effectively in fast moving markets. Prime brokerage drove results led by growth in financing on higher average client balances.

Derivative results increased versus the prior year, driven by higher client activity early in the quarter and strong risk management. Cash results were higher year-over-year, driven by increased client volumes across the fixed income revenues were $2 billion, reflecting lower structured activity and credit and commodities. Macro results modest increased modestly compared to the prior year aided by foreign exchange. Micro results declined year-over-year driven by lower performance in securitized products. Commodity results were solid, though declined against a strong comparative period that benefited from structured transactions. Turning to ISG lending and provisions. In the quarter, ISG provisions were $141 million driven primarily by portfolio growth. Net charge offs were $105 million.

Primarily related to certain corporate and commercial real estate loans, which were largely provisioned for in prior periods. Turning to wealth management. The business delivered records across key growth indicators, including net new assets, of $232 billion and fee-based flows of $80 billion. In the first 9 months of the year, we have delivered roughly half a $1 trillion of net new assets. And about $175 billion in fee-based flows. These results demonstrate the reach of our multichannel model. And our ability to connect clients with trusted advice. Revenues of $9.1 billion and pretax profit of $2.8 billion were also records.

The pretax margin of 30.4% shows consistent strength, as we invest in technology, marketing, and our banking capabilities to support future growth. Asset management revenues grew 16% year-over-year to $5.5 billion benefiting from higher markets and the cumulative impact of robust fee-based flows. Fee based flows of $80 billion set a new organic record with nearly half coming from a corporate retirement mandate. We continue to expand our retirement capabilities and deepen engagement with plan participants, creating more opportunities to build advice based relationships over time. Transactional revenues were $1.2 billion up 6% year-over-year, excluding the prior year's DCP benefit. While trading activity moderated from the second quarter, retail engagement across our differentiated product offering remains healthy.

With alternatives delivering another quarter of record sales. Bank lending balances grew $5 billion sequentially, driven by securities based lending and mortgages. Total deposits grew by nearly $30 billion sequentially to $465 billion. Reflecting investments to strengthen our bank offering Net interest income was $2.2 billion down modestly as deposits grew and the mix shifted. Looking ahead, we expect a modest increase in the fourth quarter. Subject to rates and client behavior. Lastly, net new assets of $232 billion reflect strength of our core business and the differentiated growth opportunities created by Workplace and the integrated firm. IPO related flows once again contributed to just over half of the overall NNA.

With an active IPO calendar, the pace of our funnel accelerates. And client interest in advice increases. While flows will fluctuate as lockups expires, funds make distributions, and individuals use assets for consumption, our pipeline and our connectivity across channels allows us to build relationships early and deepen them over time. Since acquiring E*TRADE and expanding our workplace offering, 6 years ago, we have added over $2 trillion of net new assets. Our multiyear track record demonstrates our differentiated client acquisition funnel and its durability. Today, we have $8.4 trillion in client assets and serve nearly 21 million relationships. Our platform and broad product offering enabled us to serve our clients across a wide range of needs.

While our scale supports continued investment in future technology. Including AI and digital tools. Together, these strengths provide us with a powerful competitive advantage. That positions us to lead as the future of wealth management takes shape. Turning to investment management. Consistent strength from Parametric and fixed income contributed to long term flows. Inflows of $15.8 billion. Parametric continues to benefit from distribution through our scaled wealth management while fixed income was supported by strong performance. Revenues of $1.5 billion reflect steady growth in asset management and related fees, Carry reversal primarily related to 2 investments in a private fund muted overall results.

Looking ahead, we continue to invest in opportunities related to global distribution and connectivity with our financial advisers. Turning to the balance sheet. Total spot assets ended the quarter at $1.7 trillion Standardized RWAs increased sequentially to $590 billion as we actively supported clients in our markets business and continued to grow corporate lending. We repurchased $1.5 billion of common stock in the quarter. Our-- and our standardized CET1 ratio ended at 14.9%. Our quarterly tax rate was 23.3%. For the fourth quarter, we expect our tax rate to be slightly above the third quarter's tax rate, and our full year guidance remains unchanged. Amid a changing rate environment and geopolitical uncertainty, we remain a trusted adviser to clients.

This environment underscores the value of the integrated firm. As we leverage capabilities across businesses to address evolving client needs. With $10.5 trillion in total client assets across wealth and investment management, we have the foundation to build on as we close out the year. With that, we will now open the line up to questions.

Operator: We are now ready to take in questions. To get in the queue, you may press *1 on your touch tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press *2 on your touch tone telephone. You are allowed to ask 1 question and 1 follow-up then we will move to the next person in the queue. Please stand by while we compile the Q and A roster. We will take our first question from Steven Chubak with Wolfe Research.

Steven Chubak: Hi. Good morning, and thanks for taking my question. So this is a meaty 1, so I am just going to limit it to 1 question, but a 2 parter. Just on the topic of digital-infra CapEx spending and the implications for future revenue growth. So you guys have been the leader just in digital-infra financing activity. We see that in the lead table numbers for both ECM and DCM.

As we look ahead, do you think there is room for digital info related ID fees to continue to grow off the current base even as larger portion of equity and debt financing is expected to migrate from the public to the private market, And then for the second part, was hoping you could just speak to some of the ancillary revenue streams tied to a lot of this digital-infra build out. That exists outside of the core IB franchise. So certainly, SpaceX and the NNA tailwind it should be a durable source of strength and wealth. But whether there is other sources of revenue related to this opportunity, that might be overlooked by the investor community.

Ted Pick: Yes. Meaty questions. On AI, of course, we are still relatively early in the CapEx cycle. Whether it ends up being $10 trillion or more or less, we will see as it plays out. But the hyperscaler CapEx is running as we speak at around $1 trillion a year. And our role as an adviser in all pieces of this will remain to be a critical differentiator. We are advising clients on the full ecosystem of their strategic and capital markets alternatives. We are helping them innovate helping them finance through the life cycle.

And we are-- working really across the full ecosystem, whether it is our teams, working to help build public solutions or private solutions to act as an innovator across the world and whether we are working with the chips folks, the data centers, or the power providers, the activity from here may not accelerate, but I think we all see that the power of AI as a.

An efficiency and productivity and resiliency tools, an incontrovertible generational jump in technology, the relationships and innovation that Morgan Stanley brings to our clients will absolutely be critical as, friends become friends in certain contexts maybe not permanent friends, but permanent interests in the context of who does deals with whom and how they are structured, in what market, where on the capital structure, That requires real structuring knowledge, real expertise, and real trust. And the Morgan Stanley team has shown itself to be quite excellent here. As a differentiator and, importantly, what clears the market. Sometimes the technology will be ahead of what the market will accept and sometimes vice versa.

And we have to be cognizant of what the market will accept at a given time. So some judgment there is, of course, experiential judgment is critical. Steven, on your net new asset question, we see a lot of growth associated with IPO events, but beyond the IPO, channel, when we look at workplace and our presence with so many private companies, we believe that this cycle has many years to come. Net new assets will ebb and flow in a given quarter, but as Sharon said, but let's take a step back and remember, that we bought E*TRADE 6 years ago. This completed the funnel. The funnel is this extraordinary self-directed piece.

Workplace, and then, of course, the financial adviser. And we generated a $1 trillion of net new assets in the 3 years the subsequent to the acquisition of E*TRADE. And then the last 3 years, we drew in another $1 trillion. So a trillion over 3 years 2, 3 year sets running, shows not only our ability to make the proposition the case that scale begets scale, but the reinvestment from within the funnel is clearly here. And, of course, as lockups and funds make distributions, there are further opportunities to retain assets.

So we are very excited about the attachment points ultimately that bring clients to E*TRADE, that we are close with them in the corporate stock plan context, I. E. Workplace. Then ultimately where it is appropriate fee-based flows that make their way to the advisers, which is why that $80 billion number that Sharon speaks to the fee-based flows is such an important statistic.

Operator: We will take our next question from Brennan Hawken with BMO Capital Markets.

Brennan Hawken: Good morning. Thanks. Hey, Ted, how are you doing? Good, man. what is the having to follow-up on that last point the net new at $232 billion, really quite impressive. You flagged the benefits from the IPOs, you know, despite a slower quarter for issuance. So could you speak to how much of that was a tail from prior deals versus the current quarter? And what is the best way that we should be thinking about that tail as we think about quarters still to come?

Sharon Yeshaya: Sure. Thanks, Brennan. I will take it. In terms of you highlighted a really good point that we talk about IPOs and we talk about them as not just 1 quarter, but you use a word that I use as well, which is there is a tail to this process. So in the second quarter, you will note, as specifically even in the press release, I think I spoke about it in my prepared remarks, we talked about the flows that came from the IPOs being largely employee related. In this quarter, what you saw is a continuation of these flows that come from IPOs, which is not necessarily just a 1 quarter event.

So as you know, we have a full cap table. We understand early investors. You can think, for example, of an endowment that might receive a stock associated with an IPO. He or she might take, you know, that and put the. It through from a transfer agent into a Morgan Stanley advice based relationship. So now you have flows that are under the advice based channel and are through, say, a, a different portion of the cap table. You might, as Ted said, also have flows that are now distributed from funds that go into individual based accounts. Right?

So the fund takes it, and the lockup expires, and they are distributed to the underlying investor, he or, you know, an. On an individual level. So there is a lot of places where that funnel begins to move into an advice based relationship. Of course, you know, as we move forward, Ted said it, you can ebb and flow, and you can see people actually as lockup expire, selling stock and using it for different acquisitions of different real assets. But the point is that this is the top part of the funnel. it is really a way to continue to aggregate new assets, new employee relationships, and we are seeing that.

We are seeing with some of these IPOs, the first or the third quarter. So now that some of these IPOs have come to market, real relationships, adviser led relationships, being built. And that is just 1 piece. Right? that is 1 piece of the top of the funnel. You also have, as you probably saw, these corporate retirement flows that are coming through as fee-based assets where we are also talking to the individuals. So it is all a very big picture that we have been investing in for many, many years that has to do with both the work and the individual and the corporate life cycle of wealth.

Brennan Hawken: Thanks for all that color, Sharon, and good to see the funnel operating so well. I would I would love to also ask another question on wealth. The deposit growth was really robust. Here. And although it was driven realistically by the sort of higher cost variety, could you speak to maybe how this growth is related to the bank and what you are doing there with funding of ISG operations. And how we should think about those benefits playing through, whether there is a lag in and how long that might take. Thank you.

Sharon Yeshaya: Sure. Yeah. Absolutely. So thank you for. You know, you hit the nail on the head in terms of what you see from NII which is a very modest decline in the NII from a quarter over quarter basis, but a very large increase in the deposits of nearly $30 billion on a sequential basis. Is a very intentional decision, a strategic choice that we have made to grow the bank. We saw an opportunity to do so. I would say that it is twofold, both from an integrated firm perspective, but also from a wealth management perspective.

So from the integrated firm, we have talked a lot about the bank and using the bank more strategically as a source of funding and we saw that as we have begun to move assets into the bank, eligible assets, moving to the bank over the course of the year. And, yes, I think I spoke about it in the first quarter call that will be something that we will see from a funding benefit as we enter into next year. So it is not immediate. It will come over time, and you will see that play in through our numbers over the course of next year.

But in addition to the funding benefit, it also, you know, should mention that we do see really strong attachment points that are coming from the bank So those clients that are bank first clients, over time, we have seen that 1 third of them end up being a digital client or in a relationship, an adviser based client as well. So that also helps. In addition, they end up also having more, multiples more of NNA that comes to the institution So we see a real opportunity to grow the bank both from the wealth management perspective and the top of the funnel but also from the funding side that will play out over time.

Operator: We will move to our next question. From Glenn Schorr with Evercore ISI.

Glenn Schorr: Hello, there. So we have we have all asked the banks on AgenTek cash and all that movement. But from time to time, people have the same questions on how change in technology are gonna impact the wealth business going forward. So I know you guys invested in OpenAI before I knew that was a company. But outside of just the normal efficiency and advisory productivity that you are getting, I am curious on, as the leaders in wealth, how you see what investments you are making, how you see the wealth, wealth advice as a service evolving. In this technological, backdrop. Thanks.

Ted Pick: Glenn, it is a critical question for Morgan Stanley. As a strategic matter. We are now in a singular position in the industry where the. Where we see the integrated scaling of the funnel that you just described. We have the self-directed channel that continues to innovate for clients. We have, as Sharon was describing, a differentiated workplace offering that continues to expand and source new relationships, and we have ultimately the deep trust based relationships between the financial advisers and their clients and I. And against that platform, we have built a number of advantages that not only allow us to preserve our mode but actually make technology a differentiator in our favor. I would highlight 4.

The first is we all bear in mind that we have got a unique set of products and capabilities as the largest distributor in the world. We are the most important wealth partner to the entire asset management industry. There are significant parts of our Alts platform, both product and pricing. That are not available to clients anywhere else. You are a Morgan Stanley client. You have access to our research. You have access to the calendar. Have access to private markets via EquityZen. Have co investment opportunities. And then importantly, for ultra high net worth, family office infrastructure solutions. So the scale that we have offers differentiation that will remain and even be aided by agents. Second, unique data.

With $8.4 trillion of assets in wealth management and now getting to 21 million households, we have tremendous insights into what works and what does not when you talk to your financial adviser. You wanna gauge on a particular day or particular month or particular year. what is your risk reward sentiment ought to be, how you should be thinking about life, and some of that can be governed by what others are doing through the use of data It gives us insights given our size and scale that allow our FAs to tailor advice and equip our own tools to deliver that advice to help clients achieve their goals.

Third, and this is critical, is the ability to protect client assets, where 1 of a very few number of firms that could continue to invest whatever it takes to protect our clients. Others you cannot you cannot engage head to head with AI out of your garage. So there will be a resiliency theme will be super important to clients with real net worth as we go forward. And then fourth point, and this is really where it begins, where it ends is, it is it is a people business.

At some level, if the technology is world class, folks wanna make decisions with their financial advisors based on the complexity and singularity of their own financial needs at a particular point in life. With respect to their parents, their kids, how they wanna go about philanthropy, how they wanna go about taxes, the whole thing.

That is something that technology can help do a lot of the early work, but ultimately, once you know that you have the ability to allocate across the entire asset spectrum, given that we are the largest distributor in the world of any kind of asset management product, given that we have insights from the unique data and given that we are a protective shield for those assets, ultimately comes down to do I trust my financial adviser? And if I do, I am at a place where the adviser retention rate is above 99%.

And the clients obviously are quite happy, which is why over time, it is so important that we continue to scale not quarter to quarter, over multiple years and that we see the reinvestment in the funnel, that the funnel becomes not only a way to preserve our moat, but actually to be a technology winner, which is dating back to some of what you talked about, but continues today. So I would say of all the many things to be excited about, I would say now what the management team is most excited about is our ability now to further our scaling and, over time, our operating leverage in the wealth management business.

Glenn Schorr: Well, I appreciate that very full answer. I will pass on to my peers. Thanks.

Ted Pick: Thanks, Glenn. Appreciate it.

Operator: We will take our next question from Christian Bolu with Autonomous.

Christian Bolu: Good morning, Ted and Sharon. Maybe first, I have a question on the impressive flows into wealth management. Sorry if I missed Sharon on your earlier answer, but are you still expecting incremental flows in Q4 and 2027 from what you have had so far. And then more broadly, how should we think about the economics of these flows? Are you seeing any signs that you can ultimately retain and turn them into annuitized fee-based assets?

Sharon Yeshaya: Absolutely. Why do not I take it? And I will take the last 1 first, which is that we are absolutely seeing that we can retain the assets. And we are seeing a pickup in the ability-- this is what I am trying to allude to in the last answer is those IPOs that came to fruition in the second quarter, that we are building relationships, adviser led relationships, And there is a lot of opportunities to do so, and there is a lot of interest to move forward. And we continue. We will continue to build on those relationships not just with where we have started now, but I think there is more opportunities to go with those individuals.

As it relates to retention rates, we are seeing steady retention rates. So what does that mean? It actually means that the dollars of assets is greater. So if you can keep the retention rates where they are, even as you get more flow, you know, more assets at the top of the funnel, yes, that means that eventually that will help from a fee-based advisory flow as well or an adviser led product, or an adviser led relationship. Now as it relates to the second quarter, there is nothing material to call out in terms of expectations for those flows as you move forward. But as we said, assets will ebb and flow.

You can think of an individual who might sell assets in order to buy something, but you can also think of individuals that now have those advice based relationships and begin to aggregate assets held away. And that has been a lot of the strategy even over the course. You go back 10 years we just talk about that, Chris, which is we see a great opportunity with assets held away. These individuals have just stepped into wealth. They begin to consolidate assets and understand the value of a fulsome advice based relationship.

Christian Bolu: Great. Great. Thank you, Sharon. On expenses, I guess, non comp expenses were flat q o q firm wide despite some lower revenues. I think you spoke about some AI investments in your prepared remarks. Mhmm. Give me a sense of, like, more detail here. What are you spending on? Is it sort of tokens? Or are there more structural AI investments? And should we think about this as a sort of multiyear investment program?

Sharon Yeshaya: Yes. I think that you will see that from any company in America. Is using their technology dollars to think about how to use AI how to be more productive, and how to support greater growth and revenues. With their current expense base with some of that translating into technology itself. So sort of a re redistribution of dollars as you move forward, and how do you actually see that productivity? Again, anybody who works in a senior management role can tell you how much AI is fundamentally changing what our sleeves do, I can speak as sort of just as head of finance What we are seeing is remarkable.

The reconciliation that you can see across different books, things that usually take so many manual human hours and can have. You know, obviously, are controls in place, but the ability to see it with fewer errors and fewer mistakes and fewer checks is real. And in addition to that, there are just manual processes and manual-- what we call EUCs, which are spreadsheets and others. They can automatically be written, understood, coded, and then moved into our real productivity life cycle sort of front to back of product. So it is an incredible tool. We are seeing it in the actual business themselves, even within our equities business, where you have different AI tools that salespeople can use.

And I think that is real, and that is where a lot of the spend is being seen.

Operator: We will take our next question from Mike Mayo with Wells Fargo.

Mike Mayo: Hi. Hey, you talked about half full, half empty. In the half empty column, you have had concerns about the AI CapEx super cycle as it relates to overbuilding power financing, politics, and you can probably complete that list a lot more. Where is your conviction on the, like, AI CapEx super cycle in light of all these headlines, and you have had some pulled IPOs. And last quarter, you talked about CapEx. I think you had numbers $800 billion to $1.3 trillion to $1.5 trillion. I am just kind of marking the market where you are thinking about it. Thank you.

Ted Pick: Yeah. And, Mike, I actually think, this question is just gonna have to be asked. Over and over again. Because the quantums are so big and the, the growth of the US economies-- is at some level and even the global economy being powered by this AI CapEx cycle. I do not know that it necessarily accelerates from the trillionaire rat It could be 1 trillion. It could be a trillion too, but we are at a level where it is meaningful. 50, 70 basis points of real GDP in The US. That is no small matter. And then how many years it takes.

I mean, as we have talked about, sometimes the technology is gonna be ahead of the financing, the financing of the technology. But the efficiency and productivity then obviously the need to protect all of these are incontrovertibly important for every large cap institution over time. Every institution, of course, it is not just at the enterprise level. it is at the individual level. The key is our ability to continue to act as an adviser.

That is what we are most focused on, that we are able to effectively act as the clearing mechanism in this very complicated ecosystem between all of the players, such that we are viewed as a fair hand in acting as the adviser the structure, the financing partner. If a deal does not clear the public markets, what do they do next? Do they raise private capital? How do they do that? How do they satisfy the needs of their LPs and other constituencies? So it will be complicated. I. E, there will be moments of uncertainty.

And I have no doubt there will be times when it will feel like it is going too fast, and there is a sense of, overbuilding in some respects. And then there can be other times when it is not fast enough. And that there is a different bottleneck in the ecosystem perhaps it is power. But the reality is the capital is going to have to be provided for this once a multigeneration change. As we talked about, S&P 500 value is somewhere between 65 and $70 trillion. Global GDP is, let's say, $120 trillion. These are sort of the denominators 1 can talk about.

So a trillion is a heck of a lot in a given year, but $1 trillion against some of the best performing companies of modern times that are still running cash flow positive to something that becomes gotta be in it to win it. That is conceivable, really. Over the course of 5, 10 years that it could be at a run rate that is plus or minus $1 trillion. And our role is when things feel like they are going too fast, the market's not ready for the next financing or structure innovation, we have to effectively consider what is appropriate. And then when it is not fast enough because the capital is needed, we throttle accordingly.

So I am. I continue to be humble. And, as queering as anyone with respect to whether the right number for, let's say 2028, on hyperscaler CapEx is a trillion 2 or a trillion 4. Or trillion, but the number is going to be we see, a trillion and at some kind of plateau level continue to be a very important part of what we all do. In the capital markets, as originators, in delivering content, and, again, in bringing real sustained just efficiency, but productivity improvement to large cap companies.

Mike Mayo: Where the rubber meets the road, you have to allocate resources for the AI opportunity. So in light of what you just said, you know, the risks and opportunities, are you allocating more or less to the AI opportunity? And how are your backlogs?

Ted Pick: We were, as you know, over overweighted to AI from the early days in wealth with some of the work we did with OpenAI. We have been overweighted working with other complexes. You know who they are. In terms of banking coverage, in terms of usage. In our plan, in terms of wealth relationships, in terms of thinking about what it is like to go public. I would say that we were overweight. And in light of it being something that matters not just to our clients, but to us, I would say we are now double overweight.

There is just no question that this is existentially important that we are viewed as a trusted adviser in the middle of the ecosystem given that we have a very clear strategy where we are acting as the wealth manager, the asset allocator, the banker. And, for us to be part of the content and the thinking and the evolution of this I is absolutely the top priority for the firm. As the adviser and then also that we are eating our cooking and that we are providing resiliency and all that comes with the need to keep up with all of the innovation. And I appreciate the question, Mike.

Operator: Our next question comes from Daniel Fannon with Jefferies.

Daniel Fannon: Thanks. Good morning. You guys have talked about fee-based flows being key to the margin expansion within the wealth channel. And as you have more success with migrating, you know, workplace clients to advice, did we see this convergence of the total flows and the fee-based flows continue? Or is that something that will always, you know, kinda have some spread to it?

Sharon Yeshaya: that is a great question, Daniel. it is going to depend really on what flows end up you know, seeking what type of advice. And those that wanna be part of the fee-based ecosystem. What we have seen is it can. It let's take this quarter as an example. Right? So the fee-based flows, we talked about portion of those fee-based flows coming from a corporate retirement mandate. As you bring a full corporate retirement mandate on board, those will also be net new assets. Right? Because it is coming in immediately as a fee-based flow.

But you can have other situations, and we saw big backlogs where we had dollars accumulate just in brokerage, both on the advisory side and on the self-directed side that then move into fee-based flows, and those are just individual accounts. And then you might have also relationships between stock plan where people aggregate assets and move them directly into fee based. So I think it just will depend on what flows you are discussing. But importantly, we do see that value of advice either they come in directly as a fee-based account, or they come in and they migrate over time from self-directed you know, or otherwise is critically important. The.

I think a statistic that I gave you guys earlier in the year was that a little bit over 20% of all of the adviser led flows are fee-based flows. I mean, that still holds if not growing. And so that just shows you how powerful the fee-based model and the advice led model is.

Daniel Fannon: Thank you. that is helpful. And then just a follow-up on NII We heard your outlook for 4Q. But as you look at the rate backdrop today, trends in loan growth still seem to be positive. Is it reasonable to think about loan NII growth as we think about 2027 based upon, you know, kind of where things sit today?

Sharon Yeshaya: Yes. We do expect to see NII over the. over next year, expand. And to your point, that is largely on the back of loan growth.

Operator: Our next question comes from Ebrahim Poonawala with Bank of America.

Ebrahim Poonawala: Good morning. Hey, Ted, morning. Hey, Sharon. I guess just 1 question. First, on when we think about, the wealth management business, like, the conversion from work place seems to be going extremely well. All the investments you talked about, a world where, like, there is a lot of focus on just downside risks to the revenue environment, how should we think about that pretax margin? Mike, it 30%. I get you are making investments. For the foreseeable future. So you are not, like, short term targeting a higher pretax margin, I am trying to get to, like, is all this conversion gonna translate into a better pretax margin environment?

And if things were to slow down, does it add to defensibility of earnings within that business and to the firm wide ROE. If you could help us sort of think through that.

Sharon Yeshaya: Yes. And the answer is yes. The pretax margin will expand over time with scale. And to your point, our intention is not to manage it on a quarter by quarter basis. it is to make investments over the long term. You have seen us make those investments across our channels, workplace, self directed, and advisory that increases the breadth of the funnel, moves it to fee-based, and we see an expansion of margins since the beginning of this inception of this larger business model well over a decade ago.

Ted Pick: I mean, Ebrahim, just to add to that, we have we have really tried to be very disciplined about the slide deck and you know, these targets, these objectives, and to really meet them and beat them. And as you know, 5 quarters of above 20, ROTCE, and some would say, okay. Then are you gonna raise that? And then you are 30. You are gonna raise that. And we are really trying to, again, speak to, as you know, the core of our very long term real money shareholder base. They want multiple year returns, higher highs, higher lows, in all seasons.

Now, obviously, for risk off, and things are really tough and the glass is more than half empty, it is 3 quarters empty, we are gonna be slower because it will be less to do. But this idea of having something that really is close to all weather but then can actually power higher over time just on scaling. And the ability to actually activate the funnel. That is what the team is most focused on.

So if there was 1 statistic of all of the CF statistics and I know that the market backdrop in the last couple days has been more mixed, But if there is 1 takeaway, it is a trillion of net new assets over the last 3 years. Which was preceded by $1 trillion of net new assets in the preceding 3 years. And the key then is will those assets make their way ultimately to fee-based flows into the financial adviser? And in many cases, yes. And the ability for us to, with the financial adviser, monetize that singular experience and actually have technology act as our friend here over the long expanse of time.

The long expanse of time, create incremental operating leverage. So the answer is ultimately, yes.

Ebrahim Poonawala: that is good color. And maybe separately, mean, it still seems like a sandbox, but the SEC put out some rules around tokenized equities. Just talk to us, what does that mean for your business? How are you investing in the ability of the firm to 1, defend share, and 2, gain share if we move. If it gains steam as far as just broad based tokenization of equities is concerned.

Sharon Yeshaya: Sure. I think that Ted, in 1 of his comments, said we are excited about the future. Of wealth and investing in this, and what does it mean to think about the future of wealth management? The tokenized world is just a portion of that, and the tokenized world means it is faster and easier to move assets around, and you will need advice to think about those And how do you move those assets quickly? What are the right assets to move, and how do you think about token usage? So from our perspective, it is just an opportunity, another opportunity that we have been investing in.

We have been investing in the digital space more broadly across both wealth and ISG. And I think we will continue to be a leader, specifically as investors and clients demand advice.

Operator: Our next question comes from Devin Ryan with Citizens Bank.

Devin Ryan: Good morning, Ted. Good morning, Sharon. I want to start on institutional equities. Obviously, as we continue to see these really impressive results come through, revenues are almost double where they were in 2024. I think a lot of us and clients are trying to understand and better contextualize the cyclical versus secular elements. And, yeah, obviously, we see the large firms consolidating share The prime businesses are doing great. And seems like geographies like Asia are structurally larger.

But can you help us unpack, like, from your lens, how much of this feels cyclical versus just you are seeing a bigger pie and there is new areas that are contributing that were not historically, and you are gaining market share in those areas?

Ted Pick: Well, we are still in a stock-based world. Equities are still, all things being equal, the attractive asset class. The question would be if interest rates were to back up further, it would start pinching corporate earnings, would you see earnings multiple contraction then it becomes less attractive to be allocated to equities? I mean, just sort of vanilla. We are still in an equities world, and we are seeing growth and we are seeing the returns on capital being generated by very healthy large cap corporates. So when you put that together with the need for private equity and other private capital, underwriters to effectively harvest their portfolio through the to the public markets.

That is all kind of in our favor. If we go way back in time, this is, I guess, 15 years ago, when we created the 9 boxes, cash derivatives and prime brokerage in 3 regions, We were recovering post GFC, and we got the prime brokerage piece right early because we had world class technology in MSAT. That linked us to a world class high-touch cash product. That continues today. You see it in our mandates to stabilize IPOs. You see it in our ability to work large transactions for asset managers.

You see it in our ability to deliver research content. what is changed here in recent years under the leadership of Alan and Gokul is really to build the build out of a world class derivatives business. This is something that I just did not get done, and they have figured it out. it is really the missing link in a world that has gone way beyond cash product to hedge, to express a customized view. it is a global business, and they have done a wonderful job knitting cash to prime brokerage through the derivatives product. So in that sense, I would say the equities business is more robust than it was 7 or 8 years ago.

It would be silly to say that it is not subject to cycles and investor sentiment. We saw in September when volumes were drying up in Asia, and that, became sort of the reunderwriting moment in The US, of course, the volumes are lower, which means the output is gonna be lower for everybody in the ecosystem. But we clearly have found a position now that is an enviable 1 where we act as a trusted adviser now in the secondary context to asset managers, across the 9 boxes. And here, a little like wealth, actually much like wealth, scale is existentially important.

You have to be faster, better, cheaper in addition to having the ability to, to get the trust of the client, and you gotta be global. Is why it matters that we are big in London and we are big in Chris. But so too in Hong Kong, Tokyo, in Seoul. In India, and, of course, in The US. So it is it is a business that I think ignores the benefit of the largest players We will continue to focus on scaling that. We are also very focused on use of capital. 1 of the underlying themes of today for us in addition to the trillion every 3 years.

And I know there is a potential for distraction with all that is going on in the world. And the whole group are reporting. Is the fact that we have a 300 basis point CET 1 buffer. That is not a small matter. That is something we have worked to achieve assiduously at the top of house in partnership with the business unit. And, of course, there are other ways to measure usage, SLR, and the like, but we like the capital buffer because it in different periods, will allow us to actually put more capital to clients through the equities and fixed income businesses when the opportunity arises.

Devin Ryan: that is great. I will leave it there, Ted, but I appreciate the color, and I will pass it along.

Operator: Thank you, sir. We will now take 1 question, and then we will move to the next person in the queue. Please rejoin the queue for additional questions. Our next question comes from Chris McGratty with KBW.

Chris McGratty: Hey, Great. Thanks. Hey, Ted. Just going back to the prior question, it is more of a geography capital allocation. where are you most excited about next couple years to lean into capital allocation? Domestically, internationally? By product. So maybe just a few comments there would be great. Thanks.

Ted Pick: I will take a crack at it. I am interested if Sharon will improve my answer. I think the answer geographically is a global allocation. I think part of this is you cannot decide you wanted to be big in Hong Kong over the last 3 years. You already in Hong Kong for the last 20, 25 years. With a world class team or you were not. And we have been there. Tokyo, of course, is super hot. We have been there with our partners at MUFG. We have the largest capital markets franchise in Japan. Both clearing FX and also working in the equity space. Amongst the global firms.

And you could sort of go down the tick list A number of us have been in Europe the last couple weeks. Need to be big across the UK and the continent. And, of course, The US continues to be fertile, especially in a world of dispersion where you wanna own new issues and have a performance that is just beyond beta. So I think the answer, as a geographic matter, We have had edge in Asia for sure, but I think the answer is global. And, again, I would give a similar answer with respect to the products. I think it is the integrated solution across cash derivatives and prime brokerage.

I do not think you can just be the prime broker of choice. You have to have proper risk management and margin around the right clients. And you need to be able to monetize them not just through the financing product, but through your ability to execute low- and high-touch cash. And, the derivatives product as well.

Sharon Yeshaya: And I would add, that what is most critically important in this period is the integration across the markets businesses. Some clients and this goes back to some of the AI questions, it is not just a banking phenomenon. It becomes a fixed income secured lending a securitized lending phenomenon where we have a world class group. So the micro and macro and commodities folks working closely with equities in an integrated markets offering. Where folks have sat in each seat, they wanna generate the best risk adjusted return for the client. that is something that is not just kind of a technocratic exercise, but also a behavioral 1.

Something that is tried and true here because people get along real well. And that, actually matters, and the clients see it.

Operator: Our next question comes from Erika Najarian with UBS.

Erika Najarian: Thank you for taking my question. Just to take a step back. You know, Ted, you are asked a lot about the pipeline as it relates to the AI super cycle, and I appreciate your prepared remarks. Just to, zoom in on this a little bit, you know, clearly, you know, the equity market or at least bank investors are starting to worry about the impact of you know, sustainably higher rates, you know, obviously, both in the direct of the Fed and the 10 year.

And as you talk to your clients broadly, you know, know, across and across, you know, the type of capital mean, you know, how are higher rates, you know, in this sort of sustained level in the 10 year, you know, impacting, if at all, sort of their decisions in terms of capital raising?

Ted Pick: An excellent question. it is not just higher nominal rates, as you are saying. it is also higher real rates. The reality that the cost of capital is nothing like it was during a financial repression or the years following with COVID and stimulus. So you have to have real capital structure. And if it does not work, it is something that resembles, in some cases, an investment grade capital structure. In other cases, a subinvestment grade capital structure at subinvestment costs of capital on a traditional basis. If that is not working, the immediacy of the market is gonna find that out.

And we, as a structure, as an underwriter, of course, we wanna try to pick winners, and we wanna be giving advice at the right place. But where we are committing capital as a lender or helping in any respect again, putting our own balance sheet to work. This is part of the implication of double overweight. Double overweight does not mean just that we are gonna send bankers out to try to get business, but that we are being incredibly rigorous and sharp about where we wanna allocate risk capital. Where a bridge or where a relationship loan that in theory was a piece of debt turns into a piece of equity, which eventually gets provisioned.

I imagine there are gonna be cases where we are going to make mistakes. That is just an inevitable reality of something that is a generational change. But our job is to minimize the foolishness and to make sure that we are active and where it makes sense for us to help bridge capital But ultimately, our value add, again, is the m and a advice. The strategic advice versus just putting a bunch of balance sheet out But you are right. When there is elevated an elevated interest rate world, if interest rates are higher as a function of higher productivity and higher GDP, all is good.

That is back to a world that we saw pre GFC where we see real GDP at 2% or 3%. And if this is helping stimulate that, think that would be viewed as a very healthy and necessary phenomenon. If higher interest rates are the result of a lack of control over inflationary expectations, or supply side shocks as a result some of the geopolitical tail risk? Well, then, obviously, people are going to be less excited about putting up illiquid risk capital.

And that is just the reality of private and public markets checking each other, and that is why we have super sharp people in our capital markets business, GCM, constantly working with the entire ecosystem to see what works, not just in the long term, but whether a market window opens or closes.

Operator: We will take our next question from Scott Siefers with TD Cowen.

Scott Siefers: Thank you, guys. Thanks for taking the question. A little bit of a follow-up on the capital state of play. I do have to say the glass half full, half empty analogy is probably the clearest and most balanced short form commentary I have heard sort of regarding where we are and can go. Was just hoping you could speak specifically to

Ted Pick: Thank you for that. Could you repeat that? Could you repeat that? Yeah. I wanna make sure that we. There are probably some listeners left. Just. If you do not mind, give me a feedback of that. Whether you wrote it or others, it was a it was a good 1. Dude. I wrote it. I wrote it. Yeah. I wrote it. No, Chad. Well done. Well done. Middle Middlebury College. Excellent. Excellent.

Scott Siefers: Was hoping you could speak to the backlog in sponsor mandates specifically. You know, that is an area that it does not necessarily have been flowed as much. Feels like it is been more of a waiting game for the last couple of years. You know? How does that logjam break? what is sort of the holdup as you see it? I mean, is the answer the same as what you just said in response to the last question, or is it anything different as you see it?

Ted Pick: Yeah. Yeah. I will give you 2 answers on that. The first 1 is that at some point, the piper must be paid, I. E, the investment portfolio needs to be harvested. On the other hand, there is been, of course, a ton of engineering continuation funds, the ability to put some assets in new funds.

And in fairness, there are some very smart private equity investors and others in the private universe who have decided they actually wanna keep some of these investments on their balance sheet, that these investments work in a higher interest rate world back to Erika's question, and that actually, over time, if they can generate low to mid double digit IRRs with whatever they think is the appropriate leverage, they wanna keep it for themselves, or maybe they wanna bring the harvesting out later. that is my positive response. My less positive, less salutary response would be it is a little frustrating.

There are some sponsors in the universe that are stuck on marks. and MOICs that are just not going to come to pass. Given the market is very sharp to what is in folks' portfolio and very sharp to the reality of what the new weighted average cost of capital regime is. Around the world and what incremental country risk or supply risk or AI risk means for that asset. So the question's gonna be, what point are they gonna come? And how are they gonna come?

And I think in some cases, the leading private equity firms and others have been incredibly smart and agile about bringing some stuff that maybe does not have a higher mark, but it is a ready for prime time. And maybe they bring that along with stuff that is a big winner. They have had sort of portfolio composition mix. And then in other cases, they are holding on and hoping for better. And I think it is it is probably a long. longer-odds bet that we are going to have a low interest rate low inflation, nonrecessionary environment.

I think that I would not bet on that, in which case you really have to think about what old school corporate finance looks like for these companies. And I think the smartest and most important private equity partners that we have will be continuing to find ways to bring these companies to market. Against a favorable regulatory backdrop, whether they IPO them or go the M and A route.

So in short, I think it is with some conditionality here I continue to think it is a positive tailwind where perhaps I was mistaken was a couple years ago thinking it might lead the corporate finance life cycle it is very clear to all of us that it is the strategic real corporate universe that is leading the life cycle. And the sponsors have to hustle to keep up with effectively the strategic bid and the strategic demand for capital.

Operator: We will take our next question from Ben Gerlinger with Citi.

Ben Gerlinger: Hello. How are you? I am good. Good morning. Well, it is admittedly not the easiest or best way to look at your franchise others. But if you just look at league tables of equities or FICC or investment banking, You guys have stood out well in the areas that have been strong. it is obviously not trying to say the pie has gotten bigger, so you. You have you have clearly made strategic investments. But when you look you guys versus peers within FICC itself, it seems like you have excess capital.

You have it, but that unique funding opportunity in front of you, but is FICC an area where there is a substantial amount of investment opportunity to take market share? Or is it an area more so focused on equities because equities are on global scale so much more expansionary opportunity in front of you?

Ted Pick: Appreciate the question. As you may recall, there was a time when fixed income was an Achilles heel of the Morgan Stanley Investment Bank dating back 15 years. What is extraordinary about the leadership that Jay and Jakob have brought to bear is the utter stability of this business. Against some headwinds and crosswinds These folks are generating efficient returns on capital. And $2 billion a quarter. There was a time when we wanted to get to $1 billion a quarter. Importantly, the business is integrated with investment banking and capital markets on the private side and equities in a way that this institution has never seen. Which is an extraordinary thing.

So there is a lot of time that is spent helping to prosecute equities product or banking product that may not bulk into fixed income as an external segment matter, but absolutely books, existentially in the underwriting line the advisory line, the equities line. So I think it is a world class business. We are not a traditional natural in the sense we are not a bank dating back to all that.

But given the work that we have done to bring assets on the bank, and given now the cost of funding is more pari pass through with the group and given the talent we have, given the importance of the AI ecosystem and important importantly, that we have built the product out globally. I think our commodities business with the 2 Niles, our macro business, and our micro business Salvin Europe and others. These are folks that get the entire proposition of the integrated firm. And it is a business that we will continue to invest in over time.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you everyone for participating. You may now disconnect. And have a great day.