Morgan Stanley Earnings Call

11:02 Call starting now… operator making comments.

11:03 Morgan Stanley CFO Colm Kelleher joins the call. Says tightening in credit spreads hurt profitability, but that it was a good sign for the bank’s health.

11:05 Bank economists see 2% worldwidw GDP contraction. Already seeing better pricing resulting “good operating earnings.”

11:06 Smith Barney on schedule to close in Q3.

11:08 Company will continue to operate using fair-value accounting rules usingĀ  conservative assumptions. The new FASB rules, upon adoption, will not result in any impact in the second quarter, says Kelleher.

11:12 Discussing investment banking activity. Involved in lots of debt offerings, and it was the elad underwriter for Rosetta Stone.

11:14 Interest rate products high volume and wide spread. Revenues up 150% from average of last year. Credit trading resulted in very strong results. Similar situation to Goldman, but not enough to give the bank a profit.

11:16 Discussing continued exposure to real estate assets.

11:20 Details, details. Talking asset management.

11:23 “We are uniquely positioned to gain from changes affecting our industry” Gaining marketshare, improved pricing power. MS-Smith Barney JV is a game changer.

Q&A Time:

Q: Returning TARP Capital…

A: We are more than comfortable with our capital ratios.”Having said that, we await guidance from our regulators…” Would like to consider the repayment of TARP capital following stress test results.

Q: Acquisition appetite. Buying a regional bank? Also, what about Smith Barney weakness?

A: Our retail banking strategy is very much a function of being supplementary and complementary of what we do already. (very vague, non answer). As for Smith Barney, they clearly are seeing some attrition, but if I look at the Barron’s survey of top 100 FA’s, we have 33 of those between the two ocmpanies. What we’re absolutely confident is that you’ll get the synergies we expect.

Q: Month by month performance?

A: January strong. February strong. March weak, although turned up right until the very end.

Q: Why aren’t you seeing the strong trading gains as other banks?

A: We don’t have the same risk appetite.

Q: Where are the marks for commercial real estate?

A: CMBS marked in the mid 50s.leveraged loans marked in the low 40s. All low.

Q: What’s up with issuing non-guaranteed debt? Are you running out of FDIC capacity?

A: Nope, we have capacity, but it’s a signaling. It’s important to show that the unsecured markets are open?

More questions about acquisitions, branch strategy. Mainly vague answers.

Q: PPIP question…

A: We don’t know what to do. We’re unclear of the circumstances around those programs. There’s been a certain degree of confusion about the implications either as a buyer or a seller. (pretty non-commital).

Q: Meredith Whitney asks about the wealth management. Any share gains or acquisitions?

A: Benefitting a little bit from problem at Swiss wealth managers. Net new money is coming in. It’s clear that we’re attracting high quality people, as evidenced by the Barron’s survey.

Q: Her followup question was cut off due to technical difficulties. Conspiracy!

Q: Any interest in buying back own debt?

A: Not really possible. Contrained under TLGP.

Call done.


We’ll be covering the banks call starting LIVE at 11:00 AM.

The initial earnings writeup is here.


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