Morgan Stanley (MS) — Q1 2026 Earnings Call Transcript

Thank you, and good morning. Thank you for joining us. Morgan Stanley entered 2026 from a position of strength. Amidst increased geopolitical uncertainty, the firm generated a record quarter with revenues of $20.6 billion and EPS of $3.43. The top and bottom line results are an ongoing demonstration of the capabilities of our integrated firm in periods when clients and markets are active. The first quarter's return on tangible of 27% evidences the operating leverage of Morgan Stanley's business model, a leading wealth and asset manager alongside a leading global investment bank. The consistent execution of the last 2 years plus is the proof of Morgan Stanley's ability to deliver on a higher plane of performance against different mini and macro backdrops of uncertainty. Wealth Management demonstrated continued momentum with growing durable fee-based revenues and increasing margins. Our client acquisition funnel remains unrivaled in driving industry-leading growth with $118 billion of net new assets and $54 billion of fee-based flows. With long-standing relationships across banking and markets, the investment bank was well positioned to serve clients around the world, underscored by a record $10.7 billion in quarterly revenues, inclusive of $5 billion plus in equities. A well-diversified investment management business continues to attract strong demand for Parametric. Across wealth and investment management, total client assets exceed $9 trillion on the road to $10 trillion plus. In the first quarter, we deployed resources to support client activity and opportunistically bought back stock. Our reported CET1 ratio of 15.1% against the capital requirement of 11.8% translates into a capital buffer of over 300 basis points. We're encouraged by this period of enhanced regulatory transparency and balance as we move through rule-making comments toward the finalization of Basel. It's worth noting that over the last 9 quarters, we've accreted $15 billion of capital. During the quarter, we also closed our acquisition of Equity Zen. As discussed in our annual letter, we remain mindful of the known unknowns of 2026, the accelerating adoption of AI at the enterprise level and the ongoing military conflict in the Middle East. Against this backdrop, our approach is one of measured confidence. Our institutional wealth clients demonstrate continued resilience and as much as ever seek the depth and breadth of content and market access that Morgan Stanley provides. At the same time, we remain vigilant in the context of higher asset prices, tight credit spreads and interest rate path uncertainty. We will endeavor to navigate the upcoming period with the same level of intensity and execution that has defined our performance over the last 9 quarters. The end of the end of history is now at hand and alongside accelerating AI development, we're committed to staying in our strategic lane to execute with rigor, humility and partnership and to be prepared to tactically pivot on the ongoing military disruption or technology adaptation warrant. Morgan Stanley strategy and client-centric culture is set to raise, manage, and allocate capital with excellence, to invest in our clients and technology across the integrated firm and to grow assets and compound earnings in a capital-efficient way. Now I'll turn it over to Sharon to discuss the quarter. Thank you, Sharon.

Thank you, and good morning. The firm produced record revenues of $20.6 billion and record EPS ex DVA of $3.43. Our ROTCE was very strong at 27.1%. The results this quarter demonstrated the strength of our integrated model and the scale of our global platform. Clients increasingly turned to our trusted advisers across the firm, particularly when market volatility became more pronounced. For the quarter, our efficiency ratio was 65% reflecting strong operating leverage and disciplined execution as we continue to invest strategically across the firm. Improved efficiency includes $178 million of severance charges. Now to the businesses. Institutional Securities delivered record revenues of $10.7 billion. Strength was broad-based across asset classes in both banking and markets and in all regions. The year began with optimism supported by solid economic growth in the U.S., significant strategic and financial assets waiting to transact, and AI-driven transformational opportunities. AI themes, followed by geopolitical uncertainty and market dispersions, continued to contribute to strong client engagement throughout our quarter. Our global team across the integrated investment bank led as a trusted and long-standing partner to advise clients in an increasingly complex environment. Investment banking revenues increased year-over-year to $2.1 billion, led by growth in the Americas. Investments in our talent are yielding results. And despite ongoing geopolitical volatility, capital market activity remains resilient, and boardroom dialogue remains active. Advisory revenues of $978 million increased 74% versus the prior year, driven by higher completed activity in the Americas. Building on the momentum in the back half of last year, M&A activity broadened across sectors with notable strength in technology and industrials. Equity underwriting revenues were solid at $396 million, led by higher issuance across IPOs and convertibles compared to the prior year. Fixed income underwriting revenues were $742 million. Outperformance was driven by record issuance in the investment-grade market on the back of higher event-driven activity. Looking ahead to the remainder of the year, investment banking pipelines remain steady, supported by ongoing strategic activity from both corporates and sponsors, and increasing needs for strategic capital formation. Our integrated investment bank remains global, diversified, and well positioned to effectively support clients. Turning to equity. Revenues surpassed previous records, reaching $5.1 billion for the first time. The performance reflected year-over-year growth across businesses and regions on the back of very strong levels of client activity. Our continued investment in technology is supporting scale and access across our global franchise. Prime brokerage revenues increased versus the prior year, driven by higher average balances that outperformed market indices, particularly in Asia with investor interest across the region. Cash results increased against the prior year, driven by higher volumes across regions. Derivative results were also a standout, up versus the prior year, driven by robust client activity across products and regions. Fixed income revenues were post-crisis record at $3.4 billion. Our performance this quarter highlights our business mix and our ability to capture market opportunities. Micro results increased meaningfully year-over-year, driven by securitized products and credit corporates. Macro results were solid, reflecting declines in foreign exchange, which benefited from a more favorable trading environment last year. Results in commodities increased significantly compared to the prior year. The business navigated elevated volatility in energy markets well, benefiting from increased flow and structured client activity. Turning to Wealth Management. Record revenues and robust margins in the first quarter reflected the scale of our platform that continues to drive exceptional performance. Retail clients were engaged across channels. Net new assets of $118 billion, fee-based flows of $54 billion and growth of bank lending balances all showcased that our investments supporting both advisers and clients are working. Revenues reached a record of $8.5 billion. The business delivered a PBT margin of 30.4%. Asset Management revenues grew year-over-year to $5.1 billion, reflecting higher market levels and the cumulative impact of consistently strong fee-based flows. We are setting the industry standard in fee-based flows, generating $54 billion this quarter, a new record, excluding prior acquisitions. Transactional revenues were $1.1 billion, Daily average trades reached the second highest level on record as clients remained active in volatile markets. Results were supported by ongoing demand for our diversified alternative offering, which had record sales this quarter. This was driven by significant growth in private equity and real assets highlighting the benefits of our scaled alternatives platform. Bank lending balances increased $5 billion quarter-over-quarter to $186 billion, driven by securities-based lending and steady growth in mortgages. Household penetration of lending products is now at 18%. This is up from 14% just 5 years ago. Through ongoing investments in technology, adviser and client education and an expanded product set, sequentially, total period-end deposits grew to $419 billion and net interest income increased to $2.2 billion. NII growth in the quarter was supported by both lending balances and higher average sweeps, which more than offset the impact of the 2 rate cuts in the fourth quarter. Continued growth in lending has supported a steady build in NII over the past 6 quarters. Looking ahead, we expect NII to build over the course of the year, with a modest increase in the second quarter compared to the first. Net new assets were very strong at $118 billion; the growth showcases our diverse asset gathering capabilities, which benefited from contributions across channels. Workplace stood out as having sourced clients who continue to aggregate assets onto our platform and benefit from stock investing events. Finally, while driving exceptional quarterly results, we remain focused on long-term growth opportunities. We closed the acquisition of Equity Zen, enhancing our leadership position in the private credit markets ecosystem and further deepening market access for clients. We launched our digital asset pilot through our partnership with Zero Hash, enabling select clients to buy and sell several major digital currencies through eTrade, and we are investing in the development of our technology infrastructure. Most importantly, our investments in the funnel are servicing client needs and illustrating the value of advice. Since 2020, we have generated over $400 billion of new adviser-led assets from relationships that originated from either workplace or E-TRADE. Today, inclusive of workplace assets on our platform prior to the acquisition of E-TRADE, the total value of adviser-led assets sourced from Workplace and E-TRADE exceeds $1.2 trillion. This represents roughly 20% of our current $5.8 trillion of adviser-led assets. The scale of our client acquisition funnel is already powerful and combined with our ability to invest in the future, uniquely positions us as a category of one. Moving to Investment Management. Revenues were solid at $1.5 billion. Asset management and related fees that were up 3% year-over-year on the back of higher AUM were offset by declines in accrued carried interest in our private funds. Long-term net flows were $3.3 billion, driven by ongoing demand for our Parametric solutions and fixed income strategies, which help offset equity flows. Total AUM now stands at $1.9 trillion. Turning to the balance sheet. Total assets were $1.6 trillion; we strategically deployed leverage-based capital this quarter to help facilitate client activity in our markets franchise. Standardized RWAs increased quarter-over-quarter as we actively supported clients. We ended the period with a standardized CET1 ratio of 15.1%. During the period, we opportunistically bought back $1.75 billion of common stock. Our first quarter tax rate was 19.6%. The lower rate was driven by share-based award conversions which largely take place in the first quarter. We continue to expect our 2026 tax rate to be between 22% and 23%, which similar to prior years, will exhibit some quarterly volatility. Our integrated firm has proven critical through this period. Clients are engaged relying on our advice in an increasingly complex environment. We are well positioned to continue to support clients as they navigate fast-moving markets, and we have the capital and the resources to do so. With that, we will now open the line up to questions.

Maybe, I guess we can start with all things, private credit. So heard your prepared remarks, there were 2 things, given kind of where Morgan Stanley interacts with private credit, you had the fund that you talked about, where we had some redemptions during the quarter. But just talk to us, Ted, your perspective on what's going on with the private credit market, how does that change or inform your view on how you deal with the business? And specifically, if it's caused you to rethink how to distribute some of these products through the retail channel in wealth?

Well, I think what's important over the last number of days is that there's more balance in the conversation. As you know, private credit as a sub-asset class has come of age over the last number of years as a new set of lenders has stepped in post the financial crisis in the place of Wall Street. While it's still a growing class, it's having a learning moment. We call it an adolescent moment where both the lenders and the borrowers are being looked at carefully. But the reality is it's credit and credit is going to broadly perform when the economy is in the kind of good shape it's in right now. And the fact that it's called private credit has sort of taken on a bit of life of its own for a while. But now I think now we're all seeing that there's resiliency in the underlying product that the structures and the terms on collateral are very well thought through. And that this is a market that over the long term has extraordinary growth potential, it's just a question of time and working through economic cycles. Our own participation in this is in line with the broader market. As a distributor, bear in mind, Ebrahim, as you know, alternatives are about 5% of our total wealth management pie; so quite small. That would include real estate, private equity, private credit, and infrastructure. And then private credit is 1%. So even smaller there. And in fact, as you've seen spreads widen a bit, there has been an institutional bid, and others from the highly sophisticated institutional community on the private wealth side have come in and stepped in, and we've seen net buying across these sub-asset classes in the first quarter. And then with respect to investment management, private credit is less than 1% of our total AUM, well under $20 billion of $1.9 trillion. So our exposures are small and modest, but it is an asset class that I think there was a lot of learning around over the last couple of weeks. I think that is very healthy. But we just need to sort of remember the headline point here, which is credit should perform during periods when the economy is performing. This will be no different. Some portfolios may be overloaded in a particular sector or a particular type of name, in which case, there'll be winners and losers among asset managers, but credit generally is going to perform as the economy performs. And right now, we're not talking about the recession scenario, and that's positive for broad credit.

Could you elaborate on the liquidity management aspect, particularly regarding the reorganization approved by the Fed for the German bank into the U.S. entity? What does this mean for adding liquidity, and are there potential actions you might take moving forward? How should we assess its impact on the profit and loss statement?

Sure. It's important to note that we underwent a bank reorganization where we transferred over $100 billion of assets to the bank during the quarter. This shift will enable us to fund assets more effectively and enhance our competitiveness compared to our peers, allowing us to better distribute various products. Currently, about 30% of the transferred assets can be funded more efficiently, especially when comparing unsecured funding to wholesale deposit rates. While the potential benefits of this asset restructuring might become more apparent around 2027, it's an ongoing process. Our bank structure differs from some peers, and as we operate in this new environment, we expect to see increased assets, growth, and competitive pricing across various products offered to clients, ultimately allowing us to expand within our risk framework thanks to a more advantageous funding structure.

Sharon, was hoping you could expand around your comments on organic growth within the wealth channel. You highlighted workplace, but any additional context around that strength would be helpful.

Sure. That's a great question because there's a lot of encouraging data from this quarter. Often, we report numbers exceeding $100 billion in Net New Assets and point to a specific driver that changed the dynamics for that quarter. However, this time there wasn’t a singular driver to highlight. We still experienced very high engagement levels across the adviser-led platform. What I emphasized in my prepared remarks is that workplace is increasingly becoming a significant contributor and an effective way of engaging new clients. In this quarter, we saw the usual pattern of unvested assets vesting and, notably, a higher retention rate of those invested assets in the workplace segment. This is an important part of the funnel concept involving Workplace. We retained those assets, which resulted in greater asset retention this quarter, translating into Net New Assets. Additionally, as I mentioned towards the end of my comments on Wealth Management, we are observing channel migration, where workplace assets are now seeking advice. This migration has significantly contributed to more than $1 trillion in total assets within our adviser-led strategy.

That's helpful. Sticking with Wealth, there's been a lot of discussion around client cash optimization. I would like you to talk about your ability to earn net interest income on client cash as more tools become available to move cash around efficiently.

Yes, that's an excellent question and definitely relevant. The Wealth Management team, led by Jed and Andy, has consistently focused on finding ways to innovate and improve. Regarding the current client sweep balances, we have noted that they have mostly aligned with similar patterns where clients are seeking yield. However, there is also an aspect of transactions related to that cash, which has recently stabilized. In the near term, we’re considering how to leverage the value of advice in a new environment. For instance, how do we navigate a tokenized world and an on-chain system where assets can move as quickly as liabilities? We aim to offer various products on the asset side, especially in terms of lending and on-chain advice. Additionally, we are looking at how to manage all digital assets efficiently, whether for yield-seeking purposes or for receiving advice. There’s significant opportunity as we transition to an advice-driven model. As you know, we also currently provide options for optimizing cash that is yield-seeking.

So Sharon, I was hoping you could speak to the Fed's new Basel III capital proposal. And given you should benefit from long overdue changes, notably to the G-SIB surcharge calculation removal of double accounting in the stress test, how that might inform where you could be comfortable running on CET1 longer term versus, say, the older legacy framework?

Yes. Let's take a moment to discuss the proposed changes. There are three proposals to consider. First, regarding G-SIB and the surcharge, which is the most apparent quantitative metric. At the end of the fourth quarter, we were situated in the 3.5% G-SIB bucket buffer. Under the new framework currently proposed, this would be 2.2%, indicating the baseline for the rebates regarding G-SIB. However, there is also the potential for RWA inflation related to the Basel proposal. We hope that feedback will be incorporated from the stress testing models regarding PPNR and income-based models for fee-based assets in wealth management, along with expenses. Overall, we anticipate a modest increase, moving from capital neutral to slightly positive regarding our capital levels. The quantification of this will depend on how the three proposals interact. With respect to the CET1 metric, we are utilizing excess capital. We experienced a relaxation in SLR, allowing us to deploy SLR and leverage-based capital throughout the quarter, and we continue to raise our RWAs to support our clients.

Yes. The only thing I would add is that the firm view is that we hope to work well with the regulator, along with the rest of the group to get Basel finalized. We have a window here, and the big picture is let's put the puck on the ice once and for all. And not everyone is going to get everything they want—that's, by definition, the way these things work. But that take as much of the lot that is reasonable to balance that, which ensures ongoing stability amongst these firms, but also allows us to play the pivotal role that we do in helping to power the real economy. So with that in mind, it's absolutely critical that we keep the momentum going and we land this.

That's great. And for my follow-up, if I could just double click a little bit more into some of the organic growth opportunities. You talked about leaning more heavily into markets. We certainly saw a nice uptick in loan growth in the quarter. Just want to get a better sense as we start to look under the new proposal, what are some opportunities that might be more compelling just given the strength of your capital position that you might be more inclined to lean into here?

I think it's important to focus on our existing business model. All three segments are growing at twice the rate of GDP organically, and our market share ranges between 10% and 15%, depending on the area. Understanding this and actively pursuing it is crucial. It's interesting to note Sharon's earlier comments about the funnel's performance, which is gaining momentum in wealth management. This creates opportunities for corporate coverage officers and investment banking teams to engage with the CEO or CFO regarding the stock administration plan and employee sentiments, particularly within the Wealth Management framework. There's a lot of valuable work that can be accomplished within our integrated approach. Our capital deployment decisions should focus on client selection where we see long-term benefits that align with our risk framework. Additionally, our investment bank is evolving into a global entity. We're witnessing notable growth in Asia, not just in Greater China, but also in Japan, where we have a strong partnership with MUFG, which owns a quarter of the firm. We're also seeing growth in India and advancements in AI technologies in Korea and Taiwan. Moreover, we're enhancing management capabilities in Germany and Continental Europe, which is seeking to reindustrialize in the current climate. By maintaining our global presence and adhering to our core mission—to raise, manage, and allocate capital for institutions and individuals—we believe there are significant organic growth opportunities ahead, provided the economy continues to expand. This will enable us to increase our top line and maintain our margins.

I'd like to revisit some of your comments about cash, particularly regarding on-chain. You may have noticed that a competitor, JPMorgan, mentioned in their annual report that they intend to reduce some of the friction associated with brokerage cash. Are you suggesting that your comments about on-chain indicate a similar direction for reducing that friction? Additionally, since today is the 15th, which is typically a significant date for your wealth business due to tax season, how should we interpret cash and net new accounts, and what impact do you anticipate this year?

Thanks so much, Brennan. So going first, just to cash, we continue to offer our clients different ways to access cash, talk about cash, talk about the cash management. And as we've talked about before, there are a lot of different places for people to think through. And we have been talking to our clients around various cash management over time, just given what's gone on over the course of the last 5 years. But we're obviously, as you know, always looking at ways to continue to enhance conversations that we have with various clients. As it relates just to Tax Day and what we've seen so far this quarter, so far, right now, taxes are as we would have expected, but it's worth noting that from an SBL perspective, we've started the quarter strong. So the lending growth that we've talked about even at the beginning of this year continues. And we've put in a lot of resources towards lending products more broadly. So digital tools, digital enhancement, and using automation to be able to help with the paper backlog associated with some of the various lending products more broadly.

Yes. Adolescent I mean to say, sort of coming of age. The asset clients did not exist. And when the private lenders stepped in effectively in the place of the traditional Wall Street firms, it was new, and of course, became part of the story for private and also public asset managers. We have to remember that this class is real. It's at anywhere between $1.5 trillion, $1.7 trillion, high yield, similar size, leveraged lending, similar size. But the investment-grade market obviously is enormously bigger at $13 trillion to $15 trillion. So it's just one piece of the credit stack. And the reality is that with spreads having widened out a bit, there is an institutional bid. And we've seen this now in the last week where a number of the top asset managers have underwritten, and we've been very happy to act as an underwriter on some benchmark issuances; they have been quite reasonable rates, helping get at the refinancing phenomenon that will exist in the years ahead. Now the reality is some asset managers are going to outperform other asset managers, and that's just the nature of product selection and diversification. Part of the reason that the FAs do such a brilliant job with our clients is that they very much preach this idea of durably growing your portfolio in a risk-managed way, taking into account your liquidity needs in every imaginable scenario. And then importantly, to think about how alternatives over time, over decades, generations, and even lifetimes can be an additive part of your portfolio. And even with that, through the decades of alternative investments introduced into the system, going back to the financial crisis, through COVID, through BREIT a number of years ago, these products have sustained the test of time. And even now, the penetration is only 5%. So on the one hand, it's material. On the other hand, it is still an area of growth. And the key is to be selective in how you've put that capital across different alternative selections, whether it's private equity, private credit, infrastructure, or just straight private equity and then real estate, the 4 big ones and how you have selected managers on a diversified basis on the basis of where they have expertise by sector, what their history is of deployment, what their history is of return on capital, and that is part of the learning. And I think that has been taking place. And the data point that I would put to you, which we've heard elsewhere is that during the quarter, notwithstanding all of the press and discussion, the system was a better buyer of alternatives. And so that is an important indicator that folks want to be participating at the right price with the right manager. And then over time, the asset managers that perform will generate terrific results. And the ones that perform less well will underperform, and that becomes part of the asset manager selection dynamic.

Question on Wealth Management. Stocks obviously sold off several times during the quarter on AI feature announcements—the customer cash sweep optimization. I think to Dan's question was one of the events about other automation tools, I think, and just potential implications on revenue models. So the market seems like it's currently weighing AI as a negative for wealth towards a risk. And I suspect you don't agree with that. So it'd just be great to hear more about your view on some of the biggest implications of AI on the business. I know you guys have been investing for a number of years here.

I’d like to share my thoughts on that. AI is a valuable asset for us. It represents the latest wave of technology that will be integrated into our ecosystem. We are at a pivotal point, working with the beta version of Claude Mythos, and exploring different areas within our infrastructure for ongoing improvements. This commitment to continuous advancement aligns with our long-standing focus on cybersecurity as our top priority. While this shift isn't new, we are progressing from pure efficiency initiatives that replace functions like call centers and operational tasks to automating routine processes, such as transferring funds, which will evolve into a broader productivity surge over time. The transformation in efficiency and effectiveness is highly attractive. Beyond efficiency, the effectiveness of having historical context between financial advisers and clients enhances interactions based on past engagements and market dynamics. This collaborative approach, being led by Andy Saperstein and Jed Fin, aims to improve efficiency and effectiveness across our wealth management portfolio. We are also observing this trend in our equities business, where we can address complex, technical questions directly through client agents using our electronic trading platform. Additionally, we have many examples in our core infrastructure where we are enhancing operational flows and surveillance. While there will always be competition among AI platforms, we view this as a complement to our existing strengths, which include top-notch technology, robust cyber defenses, and the most trusted advisers working closely with clients. Ultimately, the key to our success lies in this combination, whether it's through investment banking, asset management, or wealth management and financial advising.

I appreciate that color. As a follow-up, I want to touch just on Asia; 45% of the firm's sequential revenue improvement came from Asia. It's only 16% of firm-wide revenues. I know a lot of that delta is from prime brokerage, but can you just expand a bit on the momentum in Asia? How sustainable is it further growth opportunity in the region, just given the big step-up we've been seeing here?

Well, it's a question of people. The person who runs Asia for Morgan Stanley is Gogo Leroy, who is a plus or minus 3-decade veteran of the firm. And he's one of the trusted leaders of the firm. He is also the co-head of equities with Thomas, and they've done a phenomenal job in equities. But the Asia strategy has been one where we have really integrated the effort as between the bankers and the sales and trading unit inside of Institutional Securities for the last many years. There's a firm that has been a leader in Hong Kong from the '90s right through SARS and the handover and through recent years, but the game changer for us, of course, was during the depths of the financial crisis to be effectively married to our friends at MUFG, and the senior management team of the firm travels to Tokyo 3, sometimes 4 times a year to meet with our partners day in turn; they have 2 seats on our board. So we are deeply rooted in Japan with 2 ventures that were formed 20 years ago. We expanded our capability across our research, integrating the research and equities trading platform now we help MUFG monetize through the old Bank of Tokyo, foreign exchange spot flow, which is incredibly powerful. So this is one of the classic cases where a great idea, somewhat out of necessity, was nurtured through management teams through the years of Mr. Gorman and now this management team has really gone even further to think about what Align 3.0 could look like, which is to really tap into the demography and opportunity that's inside of Japan. So the ecosystem works. We also have a world-class wealth business inside of Hong Kong that caters to the Asia Pac region. That's quietly a $1 billion business. And then the last piece I'd say is some of this is location strategy. We decided years ago to exit a number of places. We exited the Russia ecosystem. We lightened up on non-core parts of the emerging world. But we really doubled down on places like Korea and Taiwan and then importantly, in India, where we not only have 15,000 people as an infrastructure phenomenon, but we have a world-class investment banking trading business. So this is not sort of the region—it is a region where we've had a leadership position. Actually, I think we've attracted some incremental competition into the space. So in a way that actually makes the challenge harder now because I think people have seen the success, but that's the nature of our business, and we just keep on going. As these countries re-equitize, they take great companies and they want to list them and they want to deal with the issues around a lack of energy independence or where they sit in the AI ecosystem. You can expect some very interesting M&A and hybrid activity. And that's right in the sweet spot for corporate finance coverage. So we like that region very much, and we like the growth potential and it's, of course, also very closely risk-managed.

I would like to discuss the equity pipeline briefly. Typically, when the markets are performing strongly, conditions improve, but I know it is developing, and there are some significant opportunities that are expected. One interesting aspect is that many of these large IPOs appear to be favoring a substantial retail allocation. I'm curious if you believe this is accurate, how you incorporate E-TRADE into your selling strategy, and if you could provide insights on the overall pipeline. Thank you.

Yes. So it's a great question. And I think that you do continue to see the democratization of products more broadly. That's one of the reasons when you actually think about the acquisition of Equity Zen and what we're trying to do, right? So a place where there's stuff within the private domain that's actually already beginning to transact. We see that as a technology that can help us. We have already begun to offer products through that platform, and we would expect that to continue. So that is a market, as you know, it's growing. There are a lot of places within the retail channel that different companies are looking to attract, and we have that channel and those capabilities. You have it already existing on the adviser side; you have an existing to some degree when you think about the underlying E-TRADE side. But what you really need is to make sure that you also have the private market ecosystem that is necessarily before you see an IPO come through the marketplace that you're able to have different access and different corporate relationships. And those are the pieces that Jed and Andy have really begun to lay the foundation and build over time. So it's not just one thing. I'd say that it's a build across the other. And I think we have that offering to many of these companies that are looking for the ability to transact within retail.

Yes, Glenn, what I'd say on that is, as you know, the private equity firms are sitting on $1 trillion plus of dry powder. There are 1,500 plus companies that are privately held with an average duration of 5 years that are worth $1 billion plus. And the entire ecosystem of private companies—hard to know, are they worth $3 trillion or $5 trillion, but they're multiple trillions. And so the question now is, do they come and how do the markets feel? And I think the reality is I give you a balanced answer on this. I think that on the one hand, you see the earnings power of the large-cap group, the balance sheets and the earnings growth. And of course, now if the war is contained, you'll see S&P and NASDAQ working their way back to. So pretty constructive backdrop. The fact is that the sponsors, as you know, would like to crystallize some of this portfolio, especially the publicly traded ones so they can keep this process going of effectively deploying and raising. I do think that not every company is going to be able to make it as an IPO in this environment. There’s going to be some selection. And what we're seeing is that the largest asset managers, the largest private equity firms, some of whom have very high-quality companies, are likely to be the first to move. And the data point I'd give you is that there are increased numbers of bake-offs with sponsors. And again, think of it this way: corporates think about public asset managers and private asset managers. There's effectively competition and horizontal to see where capital clears is the way I'd put it. And a number of these bake-offs are two-track; can we make a sale, or can we list? And I think if we can get to a period now where we resume some of the narrative that we had going into 2026, which was a very strong one, I think what you'll see is effectively the resumption of pipeline hitting the marketplace, whether it's through outright sales to other sponsors or likely to strategics or partial sales through IPOs, which is kind of a call that we collectively made going into the year. But I do think there is some selection. There are going to be mid-cap or small and mid-cap companies that aren't going to be ready to make it as public companies because the reality is that the bar is very high for public managers and investors, as you know, against the resiliency that's been demonstrated across sectors in the C-suite through COVID and now this period. So the comps, in a sense, are tougher. But I do think that the desire for private equity sponsors to begin steadfastly to liquefy chunks of their portfolio in order to get to the next, which is to deploy capital into the next leg of the cycle, I think that has increased. And I think what you should expect to see is a reasonable drumbeat of leading sponsors and leading companies hitting either the private or public markets if the macro environment permits.

Can you elaborate more on the financing business within trading? I assume that's for both private credit and liquid markets, and that's just been growing so much the last year for this decade and a comment on the resiliency of that. Does that mean trading is less volatile than it used to be or if and when we get a bear market, does this shrink back down?

Sure. Thank you so much, Mike, for the question. There is a stabilizer, I would say, over the course of the last 10 years. I mean you've been covering us nearly 2 decades, I think. The last decade in fixed income has been marked by refocusing our business on clients and also creating durable sources of revenue. What you point out is one of those sources of revenue. It is, to some degree, the intent is to be more stable on a balanced business. But as Ted said, it is a credit risk business. So overall, all of those types of products are looking at underlying credit, looking at counter-party risk, understanding both risk limits as well as the diversification, the structural protections that you might have, the various haircuts. What I think is important, specifically about the private credit business we started the call is that you also have this ability to look down on a loan-by-loan basis, and we have the ability to both mark and margin across that. So there's a lot there within the ecosystem. But yes, that has been a stabilizing factor within our fixed income revenue results.

What I would add to that is I think the durability of the lending business is good. Of course, it kind of speaks to the proposition around valuation and repeatable P&L. But one of the things that Sharon and I have observed over the last number of quarters: the leadership groups in both, and this is, I think, part of your underlying question, Mike, as well, in equities and fixed income have both really looked to try to build a well-governed classic trading business, effectively the moving of inventory market making, taking the world-class content that Katy Huberty has and getting it to clients in all kinds of different forms, not just traditional big conferences, but finding curated ways to get institutions to effectively act on bespoke ideas in a moment where you had to take a view when we had so-called Good Vol at the beginning of the year, and we have the content available for you to express that view. Then we effectively take that content and offer market access. And that market access is to be on the cash desk where the equities guys did a fantastic job. And then importantly, in the derivatives business that has really grown into a classic market-making, risk management business around Morgan Stanley's content. So one of the things we kind of look at is having enough of the durable financing revenues throughout these businesses, and by the way, similarly in Wealth Management. There is an element of wanting to expand the lending product, but also we're looking very closely at DARTs and other indicators of just transaction activity, whether it's in cash form or derivatized form. And the answer is we want both because there are going to be periods where the markets are not going to be conducive to activity where either it will be risk off or just people sort of set in what they want to do, in which case, the financing revenues are the kind of durable P&L that allow you to sustain the balance of the firm. But at the same time, we want to have the right levels of activity around times when Morgan Stanley content matters. When we're delivering something that actually is differentiated and importantly can be acted upon. And then we wish to find a way to express that through liquid markets and market access. So it's an excellent question because I think one doesn't want to go too far to one end of the continuum or the other. But the fact that we really have built this financing business with some of our smartest people throughout the firm and that we have these credits as well structured and focused on as we have over the last number of years allows us to have an interesting activities based business alongside of it. And that, again, is not just in the Institutional Securities business, very much in the wealth business as well.

Continuing on the topic of risk and in response to the previous question, I only have seen headlines about Anthropic and its model. The article mentioned that only a few companies currently possess that model. It appears you have the beta version of the Anthropic model. Additionally, the articles mentioned you were visiting Washington D.C. and that there is significant concern among people. You mentioned that AI is beneficial and you aim to be a beneficiary rather than a victim. However, I am curious about the potential increase in cyber risk and what additional measures you are implementing now that you are exploring the model, assuming you can share what insights you have gained.

Well, we have the regular way meetings in Washington, the Financial Services Forum. So we happen to have been down there, and the press has reported; we all got together. This is not new. We've gotten together before; cyber resiliency, as you know, has been a top priority at this firm and other firms. And yes, we are permissioned for, I think the official name is Claude Mythos preview. And certainly, the reality is that cyber risk is in the ecosystem, Mike, as you know, an increasing threat broadly. And so our ability to, along with others, continue to act as a stalwart defense in our industry is important. So we will, I would imagine, collectively get better via that, and then there will be other competitive products. This is another step in kind of the long tail technology transformation that we've been talking about that is once in a generation and now it's here. And as you've heard others say, cyber resiliency is a top priority at institutions like ours across all of our businesses. And if the ecosystem risk is likely increasing because of the quality and muscularity of the model, then we do need to get our gloves up and take it to another level, and that's exactly what you'd expect, and we very much intend to do so. But I want to say on the back end that a lot of the good that AI is going to bring both as an efficiency and effectiveness matter should not get dismissed because that's an important phenomenon that's going to continue to transform this firm.

Sorry to prolong an already long call, but just wanted to ask one question?

Erica, for you, we're very happy to take that last question. You stepped in there, you stepped in there. What was that $25 ago.

Hopefully, some people are still listening. So anyway, can you hear some my question?

Yes. Thank you so much for the question, Erika, and thank you for noting all the places that we're investing. We reaffirmed our targets at 30% in the strategy deck. And we did that for good reason, mainly because we want to be in a position that we can invest. So we've never really managed the margin quarter-by-quarter. We've said that multiple quarters. We always said when we were below 30% that could cut our way very quickly to a 30% margin. But for us, what's most important is that we're constantly investing and there are so many places within this business to invest, and it's paying off. And over time, we'll continue to move up the margin on its own organically. The most important thing for us is to continue to put dollars to work to service both our clients and advisers and continue to be a category of one in this business.