Morgan Stanley (MS) — Q2 2025 Earnings Call Transcript

Thank you, and good morning. Thank you for joining us. The second quarter unfolded with two distinct halves. The first half began with uncertainty and market volatility associated with the U.S. trade policy and the second half ended with increasing engagement and a steady rebound in capital markets. For the quarter, the Firm delivered $16.8 billion in revenue, $2.13 in EPS and an 18.2% return on tangible, completing a very strong first half of 2025, $34.5 billion in revenue, $4.73 in EPS and a 20.6% return on tangible. With six sequential quarters of durable earnings, $2.02, $1.82, $1.88, $2.22, $2.60, and $2.13, Morgan Stanley's results have a cadence that reflects consistently higher levels of performance as we execute our strategy through different market and macro backdrops. The results speak to the power of our Integrated Firm and the alignment of the Firm's leadership team. With the expectation of a more constructive regulatory backdrop, we are intensely focused on generating returns on incremental capital deployment and investing for growth across the Integrated Firm globally. Total client assets across Wealth and Investment Management climbed to over $8.2 trillion, reflecting our scale and gaining ground toward our target to exceed $10 trillion. In Wealth, an excellent quarter. Profits before tax reached a record $2.2 billion on margins of over 28%. Net new assets of $59 billion were strong despite higher seasonal tax payments. And fee-based flows of $43 billion demonstrate the value of advice amidst the complex environment and support durable growth of recurring fee-based revenues. Ongoing investments in our world-class platform, including investments to support our advisers, a build-out of E-Trade capabilities, and the expansion of our central workplace channel serve as an engine for future growth. In Investment Management, our leading industry-parametric platform as well as strong Fixed Income strategies have successfully positioned this business to achieve consistent long-term inflows, generating a positive $11 billion in the second quarter. Our Institutional franchise delivered revenues of $7.6 billion supported by our leading equity markets business that reached a $3.7 billion top line. Despite a slowdown in strategic and capital markets activity for half of the quarter, our multiyear investments in our client franchise and global footprint are yielding results. A resumption of investment banking activity in June highlighted that clients turned to Morgan Stanley as market windows reopened, and serve as momentum heading into the second half of 2025. Boardrooms appear more accepting of ongoing uncertainty broadly, and we are leaning into our strategy to help clients navigate bouts of volatility. While we're still in the earlier stages of the Investment Banking recovery, the outstanding performance in equity underwriting this quarter is a positive leading indicator. Further, while there's clearly more work to do, we are beginning to see bank regulatory reform progress. The new SLR proposal and potential for CCAR reform suggests the regulatory body continues to constructively reevaluate the total capital framework. With a CET1 ratio of 15%, we are over 200 basis points above our forward capital requirement, which affords us ongoing flexibility to deploy capital. We now have a $1 per share dividend. Incremental capital deployment will range from supporting clients, growing our businesses, opportunistically buying back stock, and evaluating inorganic opportunities where there is clear strategic alignment, all through the lens of generating strong and durable returns for our shareholders. Looking ahead, we remain constructive on the market environment. Our strategy to raise, manage, and allocate capital for clients across the Wealth and Institutional universe is working. Amidst continuing economic and geopolitical uncertainty, we are intensely focused on continuing to deliver outstanding durable results for clients and returns for shareholders. Sharon will now take us through the quarter in greater detail. Over to you.

Thank you, and good morning. In the second quarter, the Firm produced revenues of $16.8 billion. Our EPS was $2.13 and our ROTCE was 18.2%. The market backdrop varied materially over the course of the quarter, impacting investor sentiment and prompting clients to seek advice and reposition portfolios in response to evolving trends and themes. Amid this backdrop, our business performed very well. We benefited from our multiyear investments to drive organic growth in Wealth and Investment Management and to support our global footprint across the integrated investment bank. Deepening partnerships across the Integrated Firm positioned us well to capture momentum in the quarter. The Firm's year-to-date efficiency ratio was 70%. Efficiency gains remain a product of continued prioritization of our controllable spend and savings from prior space exits, self-funding investments, and driving increased productivity by leveraging technology to support the Firm's strategy. Improved efficiency also comes despite higher execution-related costs on the back of elevated volumes broadly. Now to the businesses. Institutional Securities revenues were $7.6 billion, supported by our Equity and Fixed Income markets franchises, and regionally, by period-over-period strength in Asia and EMEA. Results benefited from our ongoing investments in talent, global footprint, and technology enabling us to capture activity levels and meet clients' need for advice. The underlying businesses performance varied throughout the quarter. Our markets business captured client flow opportunities early on when activity levels were elevated. Investment banking paused for April and the first half of May, but activity recovered alongside rising asset levels. A rebound in the performance of IPOs that had been priced earlier in the year supported prospective issuers to successfully come to market, further establishing investor and corporate confidence. As a result, the integrated investment bank ended the quarter with strength. Investment Banking revenues were $1.5 billion. Equity underwriting gained momentum following multiple years of subdued activity. And its rebound partially offset the year-over-year declines in debt underwriting and advisory. Regionally, strength out of Asia Pacific was supported by a healthy mix of activity across equity products. Advisory revenues were $508 million, reflecting lower completed activity. Equity underwriting revenues of $500 million improved meaningfully versus the prior year, driven by broad-based strength across products. Despite a slowdown in April and much of May, convertibles, follow-ons, and IPO issuance all accelerated towards the end of the quarter as global issuers and investors gained confidence amid a market rebound. Fixed income underwriting revenues were $532 million. Results declined versus the strong comparative period, primarily due to lower non-investment grade issuance. The M&A backlog continues to build across regions with a thematic focus on growth, supported by health care and technology. With a similar focus on growth companies, our IPO pipeline is balanced between the Americas and Asia, and issuers are poised to launch new products to open markets. We have been investing in strategic hires and corporate lending to expand and deepen our coverage footprint. And our results and recent announcements prove ongoing progress. As we continue to support clients who are increasingly accepting of uncertainty and in greater need for advice, we are well positioned to capture share as Investment Banking activity accelerates. Turning to Equity, our franchise continues to deliver robust results with revenues of $3.7 billion, reflecting growth across products and regions. Volatility around changing trends and the eventual rebound in markets required clients to reposition, which drove heightened engagement globally. Prime brokerage revenues were especially strong, achieving a record. Average client balances rose to all-time highs, driving the strength of the financing revenues. Cash results increased versus the last year on higher volumes across regions with strength in EMEA. Derivative results rose versus the previous year as the business actively supported clients, particularly around tariff-related market events, during the period. Fixed Income revenues were $2.2 billion, driven by the strength in macro products. Macro results increased versus the prior year. The business benefited from an increase in client hedging, trend in foreign exchange markets, shifting interest rate expectations, and wider bid-offer spreads, particularly early in the quarter. Micro results were solid. Strength in secured lending revenues, which continue to grow on the back of higher balances, were partially offset by heightened volatility and widening credit spreads at the beginning of the quarter. Commodity results primarily reflected lower revenues in power and gas, and fewer structured trades compared to the previous period. Other revenues were $202 million. The comparison period benefited from higher net interest income and fees on corporate loans. Turning to ISG lending and provisions. In the quarter, ISG lending provisions were $168 million, driven by portfolio growth and a moderately weaker macroeconomic outlook. Net charge-offs were $19 million, primarily related to several commercial real estate loans, which were largely provisioned for in previous quarters. Turning to Wealth Management. The business delivered on key metrics. Strong net new assets, exceptional fee-based flows, and healthy lending growth reinforced our differentiated Wealth Management franchise. Revenues were $7.8 billion, inclusive of $292 million of DCP. And the margin continued to expand, showcasing the inherent operating leverage of our scaled platform. Results reflect our investments focused on growth and our strong track record to help clients understand the value of advice. Moving to our business results in the second quarter. Pretax profit was a record at $2.2 billion, and the pretax margin was 28.3%. DCP negatively impacted the margin by approximately 70 basis points. Higher margin shows strength of our asset growth achieved by our investment-led strategy. The underlying business progressed towards our long-term goal of 30%. Asset management revenues were $4.4 billion, up 11% versus the prior year, driven by higher market levels and the cumulative impact of consistently robust fee-based flows. In the quarter, fee-based flows were very strong at $43 billion, marking a record, excluding previous asset acquisitions. Clients continue to shift assets from adviser-led brokerage accounts to fee-based accounts, and we continue to invest in overall education, technology, and product innovation to benefit clients and support ongoing asset migration. Fee-based assets now stand at $2.5 trillion. Net new assets in the quarter of $59 billion were inclusive of a $22 billion headwind from tax outflows and reflect growth across channels. Adviser-led flows were particularly strong, originating from new advisers who are attracted to the strength of the Workplace as well as assets that originated from Workplace. Transactional revenues were $1.3 billion. And excluding the impact of DCP, revenues increased 17% versus the last year. Retail engagement was especially strong in April as clients responded to elevated market volatility, and activity persisted with momentum at the end of the quarter. Bank lending balances increased sequentially to $169 billion, predominantly driven by growth in securities-based lending. Steady growth in lending shows our progress in deepening client relationships by offering portfolio solutions, addressing both sides of the clients' balance sheets. Household lending penetration grew across our adviser-led channel, with greater engagement from advisers and clients. Total deposits increased $383 billion. And net interest income of $1.9 billion was flat sequentially. These results reinforce continued stability in sweep balances. Throughout the quarter, clients steadily deployed cash into the market, indicating confidence in the forward look. As we look ahead to the third quarter, we would expect NII to remain around recent levels, subject to changes in the policy rate. Along with $6.5 trillion of client assets, our second-quarter performance demonstrates that our strategy is working, benefiting from years of sustained investment and consistent execution. Our scale positions us to continue to innovate and invest in a secularly growing market. Today we have 20 million individual relationships across our three channels, and the opportunity to deliver incremental advice and solutions across channels and our platform remains ahead of us. Turning to Investment Management. The business delivered strong results with revenues of $1.6 billion, increasing 12% year-over-year. Total AUM reached a record at $1.7 trillion. Our franchise generated positive long-term net flows of $11 billion, bringing year-to-date inflows to $16 billion. Strong organic growth is the product of leveraging our global distribution with a particular emphasis in fixed income. We are also continuing to see strong demand for Parametric's customized portfolios, especially among our wealth management client base. Asset Management and related fees were $1.4 billion, driven by higher average AUM across asset classes. Performance-based income and other revenues were $118 million, largely driven by gains in infrastructure funds. Liquidity and overlay services had outflows of $27.3 billion, reflecting institutional outflows, partially related to deployment into markets and corporate CapEx. Overall, we are seeing the benefit of our investments and continued focus on global distribution capabilities. By leveraging the Integrated Firm, we are focused on our ability to generate sustainable growth in long-term flows and fee-based revenues. Turning to the balance sheet. Total spot assets increased $54 billion from the prior quarter to $1.4 trillion. Our standardized CET1 ratio stands at 15%. Standardized RWAs increased sequentially to $523 billion as we actively supported our clients. Our stress test results reflect the durability of our business model and show consistent improvement in our results over the past five years. We announced a quarterly dividend increase of $0.075, bringing our quarterly dividend per share to $1. Our quarterly tax rate was 22.7%, reflecting our global mix and level of earnings. We expect a tax rate of approximately 24% in the second half of this year, consistent with our initial guidance. The second-quarter results were strong. As we look ahead, we are entering the third quarter with momentum. Investment Banking pipelines are healthy, dialogues are active, and markets have proven resilient. And Wealth and Investment Management continue to gather assets with total client assets now reaching $8.2 trillion.

I have a question regarding the incremental return on capital that you mentioned in your prepared comments. Considering the franchise and your targets, how should we evaluate the incremental return on capital in light of changes in the regulatory backdrop and the global integration work across your businesses? Is it possible that this bank could become even more profitable than what we have experienced so far? I would appreciate your insights on both the capabilities of this franchise and the implications of the regulatory environment for future profitability.

Well, I think that is the number one question, so it's great to have you open the call with that because it's what we're much focused on: what the franchise can afford and what the environment can afford incrementally via regulatory reform and animal spirits synchronizing around the world. Those are both clearly tailwinds. The business model, as we sit here, is generating earnings growth and incremental excess capital, which continues to grow our flexibility. We are deploying additional capital into the core businesses. So the organic development is happening and will continue to happen where we think there's operating leverage with smart risk-architected deployment around clients. Core examples of that would be in Investment Banking, we've got a world-class sales force, coverage universe that we continue to add to. We are deepening the footprint with corporates and clients through additional credit extension. There is clearly more to do there around our relationship and event. So Investment Banking is right at the top of the list, along with Wealth, as we go into the next stage of the cycle. Second is Wealth itself. There's more to do with these 20 million relationships that are growing every day, and in Workplace around broadening our lending capabilities in a prudent way. You see the tick up year-over-year. That is going to continue to happen as we supply clients with additional breadth and depth of products. The third area that we are much focused on is the markets business, specifically financing businesses that are durable where we are well known to the client and vice versa, where we can act as a leader in places like prime brokerage and secured lending. So Investment Banking writ large, Wealth Management writ large, and markets writ large cover a lot of the business where we can clearly put additional capital to work. That is a process that has begun and it continues to intensify as we generate incremental capital with each passing quarter. Inside of that, there are inorganic opportunities that come by along the transom. We are looking at them, of course, but the bar is super high. We have a record of integrations that are quite good. But we have humility around what it takes to make integrations work. So we're looking at those integrations, those potential tuck-ins in the context of what the core strategy affords. Are they acquisitions that actually are near the bull's eye or better on the bull's eye, that would actually help grow the core strategy across wealth and investment management and the investment bank such that we can continue to grow capacity that way? So you're hearing, Ebrahim, both organic and inorganic. But the specific answer to your question on the organic opportunity is that the first half affords an example of the operating leverage that the Firm is able to demonstrate where the environment has been murky. When the environment stabilizes a bit, we are one-pronged through the three-pronged administration effort; we would expect areas like the M&A business and underwriting business to pick up. That will afford us additional operating leverage. The dividend is number one and will continue to be paramount. The cadence and the increase of the dividend dating back to when it was script to now $1 a share and a 2.8% yield at current prices, will continue to be put at the top of the list for its durability and something that our core investors have come to expect as a key signpost of the core strategy itself. Finally, the buyback. We are at a $4 billion pace per annum. That is a lever that we will use tactically and accordingly. So that is some detail. But clearly, you're hearing that we're giving this quite a bit of thought because, as you rightly point out, we printed 15% CET1, we are at 13% with clear indications that you see from the most recent that the numbers are going in our direction on the back of continued regulatory reform. We should be thinking about this and taking steps, and we are as we speak.

That was very comprehensive. One quick follow-up. I think both Sharon and you implied there's a higher tolerance across boardrooms for the macro volatility. We are seeing some pickup in rhetoric around tariffs. Do you think this is different than what we saw in March and April where there's a huge hit to corporate sentiment around deal activity that is unlikely or less likely to happen on a go-forward?

My sense in recent weeks is that if the, just to use the word cadence again, if the cadence of tariff policy execution is such that it is viewed to be sort of within broadly expected parameters. Obviously, part of the negotiation is for the administration to optimize results, but if there's a sense that it is within sort of bands of outcomes and that the negotiation will take a certain amount of time as appropriate, but it's sort of quantifiable, that is clearly going to be a catalyst for further clearing of uncertainty. What is interesting in the last month has been that the strategic activity has really started to pick up. In fact, the strongest sponsors of the group, because, as you know, sponsor activity has consolidated to the winners, are actually quite aggressive on the acquisition front. The fact that an IPO market on the back end is working means that the value chain seems to be in pretty good shape. If we continue along into the fall with what we saw in the last month, it should be a quite strong second half going into '26.

Ted, I wanted to follow up on your previous comments just around inorganic. It sounds like these would be more tuck-in or complementary type of deals if they were to happen. But if you could talk to maybe financial or strategic factors that would take you over the threshold to get to completing a transaction, that would be helpful.

Yes. It has to fit squarely within the strategy to raise, manage, and allocate capital for clients. We have a record of integration. We are not looking to make acquisitions just for the sake of it. The opportunity set within Morgan Stanley proper is extraordinary. As you look across Wealth Management, the entire funnel is showing growth up and down even at this stage of uncertainty. We're seeing inflows and growth in Investment Management, and the Investment Banking franchise is a world-class franchise that is now actually able to go out and do its thing. This has been a franchise that we have nurtured as a global business. As you know, we are one of the very few that are running global businesses. The ability to execute complex, cross-border, strategic transactions is now right in front of us. The organic opportunity set is enormous. If there are tuck-ins that can actually add to operating leverage without distracting us from the opportunity set in front of us, sure, we're looking at them. But the name of the game is to continue to prosecute against the strategy that you saw. We intend to just stick to our knitting and get that right and generate real returns and incremental capital for our shareholders.

That's helpful. And then Sharon, can you expand upon your comments around M&A? You highlighted new adviser strength, but maybe talk about flows more broadly. And then also just the characterization of the recruiting backdrop today for new advisers joining the platform.

Sure. Why don't we take it step by step? So just recruiting generally, I'll take it from the bottom, is it's obviously a great platform. We have recruits that are interested in what we've been investing in. So that's been great to see. We talked about it in the last call. I think for NNA, which is really wonderful, is to see that we have strength in all three channels. It's not just one channel. From the adviser-led side, we do have recruiting, but we also have flows coming in from Workplace. I'm just providing the numbers. We used to say we had about $16 billion per year that we're originating from Workplace. This year, we're running ahead of those numbers. It just shows you the strength of all of the channels. So adviser-led is coming both from existing advisers as well as recruits and the origination of Workplace. And self-directed, we should talk a little bit about E-Trade, we're seeing really great flows from the self-directed channel year-over-year improvement there. That comes from investments in marketing and business development. We've put in new tools like E-Trade Pro. You're seeing all of that marketing pay off across the channels. Understanding all of this is happening against the backdrop of a tax season is encouraging. The fee-based flows, which you didn't ask about, are also very, very strong, just underscoring how well the funnel is working.

I have a question on stablecoins and kind of the broader theme of tokenization. Obviously, stablecoin legislation likely to pass probably in short order here. You have market structure legislation that's probably not too far behind. So I'd love to hear about how you're thinking about the opportunity for Morgan Stanley. Is this something that you think could be big or is it just kind of an evolution of market structure? And then are there any specific areas that you're focused on as we get more regulatory clarity?

Yes, sure. I'm happy to take that. As you would expect, we're actively discussing it. We're looking both at the landscape and the uses and the potential uses for our own client base. But it really is a little early to tell, especially for the businesses that we run versus businesses that you might see from competitors on how stablecoin would necessarily play in. But we're very close to the landscape, and we're understanding this, as well as the evolution across all technological advancements. AI, crypto, you name it, all of them sort of have an ecosystem that we're very focused on.

Okay. Great. And then just a follow-up on the trading environment. Obviously, in the second quarter, there's a lot going on between tariffs and geopolitical, so it's a bit hard to gauge how much activity was elevated relative to repositioning for institutions compared to maybe a more normal second quarter. So just love to hear about how the market backdrop is evolving. Sharon, I heard comments about markets have been resilient in the third quarter thus far. So I'm not sure if that was a reference to trading. But just a little bit of flavor around the market backdrop? And then if you can weave in as well, just some of the efforts you are taking to improve market share, obviously doing more on prime brokerage as well. So I'd love to just kind of weave that in as well for the question.

Sure. Why don't I take, again, I'll take the bottom question first just in terms of improvement of market share? We have been actively investing in the global franchise. That global nature is one that you can see bearing out in the results. I called out specifically even in equities record coming from EMEA. There have been previous quarters we've talked a lot about Asia. When we talk about Asia, you speak about it as one region, but there are multiple that are involved in that. The relationships that we have with MUFG, what we're doing in India, Greater China, all of that becomes relevant. When we talk about repositioning and momentum, it was not just specific to the institutional business. The retail business was extremely strong as well. I spoke about it on the April call about seeing resilience from retail engagement and a continuation of a 'buy the dip' mentality even through the tariffs. You'll probably remember that. It wasn't specific just to April. You saw inflows to market sweeps, etc., across the entire course of the quarter. I even mentioned it in the liquidity flows. The repositioning and the rebalancing is on the institutional side throughout the quarter across the equities businesses, across the retail businesses and across the IM business. We’re there to capture all of that.

Yes. What I would add to that is, in the case of equities, we've talked for many years about what it takes to run a global, fully laid out equities business, the old nine boxes where you have prime brokerage, derivatives, and, importantly, cash, as well as the three regions. The cost to run that business, just dollars in the ground to turn on the lights every year, has only gone up. Not surprisingly, the top of the competitive heap is able to incur operating leverage and above-market returns while the rest have to slug it out just to sort of make the nut. What is remarkable about this year, worthy of calling out, is this quarter in Europe, we had a record quarter in equities. In the first half, we've had a quite extraordinary half in Asia, which is obviously Hong Kong and Tokyo lead. So it's not just about the electronification of the product and the span of the product palette, but also the ability to run the business globally. I'd also just touch on Fixed Income; not so many years ago, we were talking about trying to get to $1 billion a quarter. Now Fixed Income has quietly put up $2 billion a quarter through every imaginable kind of environment for a whole bunch of quarters. Part of the strategy here is not only to generate operating leverage, but to impute durability in the results. The last piece to this, which is critical, is this idea of the Integrated Firm where, as appropriate, we are knitting clients across the plan, across the world, together, whether it’s in getting them access to capital, ideas, financing, and strategy. The capital deployed and the resources we add on should be good for the franchise as a whole.

Just a follow-up on that, Ted. I appreciate all the comments you made to the first question. I was curious a little bit about why Asset Management is not included in that potential deployment of capital being that you're already great and hopefully getting greater in Wealth Management. Same kind of comment across banking and trading. I felt that from a total dollars of capital, you could probably do the most help in terms of the Asset Management franchise. Maybe just put that in the wrapper of how you think about balancing capital deployment and making sure asset and wealth are still the big primary identities of driving the stock and returns.

Yes, it's a good pickup there. That wasn't intentional. In fact, the Investment Management numbers this quarter, as you know, were really outstanding with $11 billion of inflows and continued growth of Parametric. I think it's fair to say that the opportunities across Investment Management, which is your question, Glenn, on a stand-alone basis, given the fragmentation of the industry, have led to many acquisition opportunities in the asset management space. We are being very careful about that. The asset is valuable in and of itself, but we also think about what the platform effect to the core strategy is from being inside the Wealth funnel or being inside the Investment Management universe. Investment Management roll-ups have had mixed experiences. We will bring in a strategy that fits with Morgan Stanley culture, our client perspective and affords us incremental operating leverage. I am focused on what is in front of us in our operating and management committee and leadership meetings around the firm every day. There is a ton of demand for incremental capital and resources that are coming straight from clients through our people to us. The nurturing of our core strategy affords a lot of runway. There are Investment Management strategies and opportunities that we see as hidden gems that can help transform where the Firm is going to go with clients.

I appreciate that. Sharon, if I could ask a quick follow-up on your comment around NII, around steady and the current rate backdrop. There are about five or so rate cuts expected through now through the end of next year. I mean your business probably does well if rates are going down. But can you talk about the NII in a forward curve setting or however else we should think about the balancing of lower rates?

Sure. I won't give specific guidance as you probably expect, Glenn, as it relates to next year. But I will highlight to you that, if you use the word offsets, yes. Generally speaking, in a lower rate environment, we see inflows. There are places that you can certainly better understand where we are today, and we look ahead. We haven't really seen sweeps move, and we're in a position where there are stable rates. You'll also gain over time from increases in lending balances, which is why I've paid a lot of time talking about that in the prepared remarks, because that's a forward-looking indicator for just the strength of the business. More advisers and users are thinking about our lending products on the Wealth Management side. As it will play out specifically from an interest rate perspective and sweeps, those factors will likely be driven by the policy rate. But generally speaking, when rates do go down, we generally see sweeps balances broadly go up.

I just want to ask about a trend of more lending through the capital markets division. So, Ted, you talked about the moment of wow on your last presentation. That was memorable to me. But I think one wow to me is just to the extent that banks used to lend directly to commercial customers and now they're lending more to non-bank financial firms than directly to any of those traditional commercial customers. So my question is, how do you see that trend, where it's been, where it's going? How much lending do you do through your capital markets business as a percentage?

That's an interesting one, Mike. I think we have to see how the regulatory environment plays out, but I think we sense that the 15-year dam is breaking and that reform is in the offing. We've seen indications of that in SLR, as you know, and recent strong results from the group in this recent CCAR exam. I do think that some of the share that we ceded as an industry group at the top, the big banks writ large, that, in part, was a function of regulatory limitation broadly. That regulatory limitation may well be normalizing. That will not so much dollar for dollar take share back from the private lending group because the private credit product is institutionalized. The ability for the highly capitalized global investment banks, especially if they have something special, in our case, as you know, world-class Wealth and Investment Management businesses, will be able to get back after that core share around corporate products. That means that mid-cap space and across corporate derivatives are opportunities.

Just two follow-up questions. First, for you, Ted, on all the inorganic opportunity. When investors see your returns, they say, "Oh, how does an optimized business continue to optimize itself?" I was wondering where deposits would play into your priority. I know that you have less than 10% of trading assets in the bank sub, and some of your peers have 30% to 60%. I'm wondering sort of where that would fall on your priority list.

I'll give Sharon this one. Go ahead.

Sure. It's a really great point, and something we've been focused on. The bank is a priority for us. We put it into the strategic objectives purposely to talk about the fact that we see more potential growth as we think about eligibility. You need both sides of that balance sheet. For us in terms of deposits, we have grown and continue to diversify our deposit base, which will allow us to support ongoing growth of eligible assets that we could put on the bank. This is a strategic objective. It takes time to ensure that we do it the right way, with the right infrastructure. Over the last ten years, we have put a lot of investment into the bank products to make ourselves a real bank that can service both sides of that balance sheet.

There shouldn't be a conflation around having a strategy that is clear and well-understood and a sense that we have no more runway on that strategy. The runway on that strategy is just a byproduct of addressing enormous total addressable markets with large barriers to entry. On the one hand, you have a $6 trillion world-class wealth management business, but the current TAM is at least $60 trillion. We have a 10% share. In the Investment Bank, we are a global leader, but we only have a 15% share. Both of those businesses are secular growers. We are working to grow our assets business, our private credit businesses, and our liquidity businesses. These businesses have the kind of runway where the best use of capital is probably to continue to invest in and grow them through the power of AI and extension of credit, and work closely with clients. It may also be the case, though, that acquisitions come across that are incremental and additive. But the key focus remains on our organic strategy, as we hold incremental excess capital.