Morgan Stanley (MS) Earnings Call Transcript & Summary

[indiscernible] today, James Gorman, our Chairman and CEO of Morgan Stanley.

Thanks, Betsy. Great to be here, everyone. Thanks for having us.

So I do just want to read a disclaimer and then we'll get started. The discussion may include forward-looking statements, which reflect Morgan Stanley management's current estimates and subject to risks and uncertainties that may cause actual results to differ materially. Morgan Stanley does not undertake to update the forward-looking statements. This discussion, which is copyrighted by Morgan Stanley and may not be duplicated or reproduced without their consent, is not an offer to buy any security. Okay. James, with that disclaimer out of the way, first off, I want to thank you for leading Morgan Stanley over the last decade as CEO and really appreciate your time here today.

Thanks.

Maybe you could give us a sense as to how you are managing through this COVID-19 situation. How are you working with your direct reports, your business line managers to really run the firm since 2020 has ended up being a much different year than anybody expected back in January?

Yes. No, it's been incredible, Betsy. And as you can see, I'm working from home like everybody else, although I'm expecting I'll be in the office later this week for a day, and I'll start slowly going back in through the rest of the summer. Our primary focus was on our employees and their health and safety. And very early on, we committed that everybody would keep their jobs this year, absent some major transgression or breach of our values or whatever. But the -- what we want to do is take that burden off people's shoulders of worrying about their financial security for this year. A second primary objective through this was making sure we did what we're supposed to do. We processed our clients' trades. We had unbelievable volume, which you know, all about and across The Street. And our systems held up extremely well with 90% of our employees working from home. So that of itself was frankly a test that we'd never have undertaken if we had a choice, but we didn't have a choice. And thank God the investments we've made in technology in the last 10 years have really helped position us so we could weather this. And then the third thing, as always, you want to do is risk manage through this. This was perilous stuff. There were wild swings, as everybody knows, in the equity markets, obviously always going with rates, the talk of negative interest rates, intervention of central banks, fiscal stimulation and so on. So we had to be active as our clients were repositioning. But at the same time, we had to be careful we didn't get greedy. So risk managing was critical. And then finally, you hope all of it comes together and we still make this money for shareholders. And I think first quarter ROE, I forget exactly, I think it was 8.5% or 8.6%, ROTCE around 9.5%, really solid quarter, given everything we're dealing with. So they are our priorities. So it starts with employees, then it goes to our clients and it went to our risk management. And ultimately, we want to have a viable, profitable business in times of stress. That's part of our overall strategy.

So when you think about some of the challenges and opportunities in this environment, anything else that you would want to highlight or point out? I mean global footprint obviously maybe adds another layer of complexity. But what would you suggest is some of the biggest challenges and opportunities here for the firm?

Yes. Well, interestingly, we were -- we're overweight in the U.S. strategically, geographically. And given what's gone on in the U.S. in the last couple of months, honestly, it's woken my eyes to having a larger presence, particularly in Asia, which is coming out of this crisis probably faster than any region. Just dealing with people in different timezones, doing these Zoom calls that everybody is now so familiar with, how do you manage teams when you're not having any physical connection, you can't see the body languages clearly. All of that -- and then just the stresses that even our most senior people working from home, particularly if they've got kids and family running about, a lot of pressure on people. So the mental health side of everybody's keeping balance, trying to separate the workday from the go at home. You haven't got that transition, I believe, in the office. Obviously, managing remotely, geographically, not being able to travel, not being able to see clients, see our people. There have been a lot of challenges. But in the scheme of things relative to the health crisis and the overall economic crisis, they were manageable.

So one of the things you didn't talk about is credit. And we are in a major economic downturn right now. How do you think about credit and reserve builds and that side of the equation?

Well, as you know, we have a different credit profile from most of the large, if not all the large banks, actually. We don't have unsecured credit portfolios. We don't run a credit card business. We don't really lend to small businesses. We obviously have corporate exposure. We have a lot of loans that are held for sale. We marked through 1/4 of those. And then you've got our smaller book is those held for investments. So we had a different -- in some ways, this crisis was really positive for our business model. We're a market-based business. We've got -- we saw enormous client activity. We have a huge Wealth Management business. We'll talk about some of the obvious negatives that have gone on in the crisis. But we didn't have the credit exposure. And you saw us take, I think, $1 billion in the last quarter, much smaller than the other banks. And that's for reason. Firstly, that part of our credit book is smaller. And secondly, we're just not in the space that is most damaged in this kind of unemployment economic cycle.

So would you think that there's more reserve builds coming in 2Q or you're beyond that already?

I'm sure there's some and we're taking it on a monthly basis now. So I doubt very much it will be the level we're at in Q1. And we're obviously seeing some positions as spreads are tightening that are recovering. So it's a bit of a mixed bag. But I think the worst -- the worst is clearly behind us. And I felt we came through Q1 pretty well. So -- but individual companies, there are clearly some sectors that are under enormous stress: transportation, tourism, hotels, airlines, energy, to name some of them. So I think you've got a lot of sector idiosyncratic risk. And depending on the shape of your book and your exposures, that could be a really big deal for people. We don't have a lot of exposure to the energy sector. So we're -- I think we've navigated it frankly pretty well. So will there be more provisions? Yes, there'll be some. Will they be at the level of first quarter? I very much doubt it. But we've got a few weeks to go. And one thing I've learned over the last couple of months is things can change really fast.

Okay. Before we get into the various business lines, maybe you can give us a sense as to what you're thinking about with this upcoming stress test that's going on. You've got the Fed that's stressing a pandemic baseline. And it's got people, it's got investors asking, is that going to change your view on baseline capital required for the business?

We -- it's so hard to know, Betsy, because we've got 2 things going on. We've got the transition from CCAR to the SCB, which will be effective, I believe, in October. And we've got the stress test with the sort of, if you will, supplemental stress test, which is a COVID overlay. So it's so hard to tell. I mean we lived COVID in the first quarter. And I thought our numbers frankly were remarkably good, given what the world was doing. To have an 8.5% ROE in that environment was, I thought, remarkably stable. It's exactly what our business has been designed to do. I've always said, I want us to do better in bad markets. We might do as well as some in the best markets, although that's unclear, but I want us to do better in bad markets. And that was a good example. So we lived the COVID stress. And we came out of that really well. Now we'll see where we come out. Obviously, we'll talk about Q2. But I expect Q2 is going to be positive. So I think it's interesting. What the Fed actually puts in the models and how it spits out the answer on the COVID remains to be seen. Clearly, they've got to look at all sorts of different recovery scenarios driven by unemployment numbers [ filed by ] the Fed. But you'll see V-, U- and probably W-type scenarios and they'll probabilistically weigh each of them. But the experience we are living right now would suggest that we're really well capitalized for this business environment. I don't regret us and the other banks choosing to hold our buybacks. I think it was the right thing to do at the time. But we've proven that we're well capitalized. And we'll wait until we see what the SCB buffers are. We clearly have levers to adjust our model. I mean it's driven off RWAs as it's a CET1 ratio. So we can do things much more constructively than we could when leverage ratio was that constrained. So listen, I'm anxious to see what the numbers show us. I think the recent rebound in jobs numbers and clearly the reopening of the economy, and there's no evidence there's a second wave yet of COVID, are all positives. I think the fiscal work and the monetary stimulus from the Fed have been positives. So I'm curious to see where it comes out. But I feel really good about Morgan Stanley's capital position. But until we see what the models do and how they get different parts of our business, it's hard to tell.

And then the follow-up question there is around the dividend risk and how you think about that and how the Board thinks about that.

Listen, we should be paying out our dividend. I've said that right from the get-go. The dividend payout for all the big banks, I think, is about 30% of their total distribution. We've made 3/4 of our dividend in Q1. We've got to do at least as well in Q2 and we'll talk about that. We cover -- we're going to cover our dividend very easily this year. I think on the other side of the dividend debate which gets lost is, this is a source of income for a lot of people and not just Morgan Stanley, but if you take the largest banks in this country, they are sources of 3%, 4% yield for a lot of individuals out there who need that money and frankly particularly in this time. So what is the policy reason to shut down the dividend other than you can't, right, other than, yes, more capital is -- always feels more prudent, but it's not more prudent if it's at the expense of people getting a decent income when they need a decent income. So if I felt at all that we had a capital issue and we weren't able to pay our dividend, then I'd be the first to put my hand up. But I just don't think that's what we're living right now. In fact, we proved it in the first quarter and we're going to prove it again in the second quarter.

Okay. Well, that's very clear. Maybe we could speak a little bit about the business lines before digging into the 2Q outlook here. But when we're looking at wealth, let's kick off with wealth. You announced the E*TRADE acquisition, I think it was back in February. And I think you're expecting it to close in 4Q. Can you just give us a sense as to how you're anticipating E*TRADE is going to fit into the wealth, help the business model you already have today and what you're expecting to be able to do with that post-integration?

Yes. I mean, it's really exciting. We had -- I had a conference call with the E*TRADE operating committee, a Zoom call yesterday. I've got another call with, I think, all their managing directors next Tuesday and then the following week with all their employees. I couldn't be happier about this deal. And everything I've learned about them since we did -- it's one thing during negotiations, right? There's posturing and there's stuff going on. But now that we're dealing with folks who are going to be our colleagues, then they're -- the team has been world-class. Their team, I'm really impressed with their management team, really impressed with their technology, with their digital banking capability. This is -- one thing we've learned through in COVID is people are using digital more, not less. That's why Amazon and Google and all these companies have exploded. It's the same in our business. So having world-class digital capability, if ever we needed it, we need it now, and not having to go and build it for another decade, which we've been grinding away doing, but buy it and put this on our system, I'm thrilled about it. And that's putting aside the whole workplace strategy and the huge stock plan business that we now have between the 2 companies. So listen, E*TRADE, it does several things. It makes us bigger, which gives us scale to pay for stuff like cyber. Number two, it diversifies the company even more, giving us more wealth in asset management, which should ultimately, dear investors, please listen, translate into a higher multiple on our earnings. At some point, the marketplace is going to figure this out and give us that. But this is the kind of thing that will help. Number three, gives us digital banking capability. Number four, it's a source of deposits and lower cost of funding. Number five, there is clearly a demographic that wants to deal only digitally. They have their demographic. Number six, it just gives us a technology organization that infuses our technology organization with a lot of innovation. There are so many things that are positive about this. So how does it fit? We'll keep the front end. We'll keep the brand. It will be E*TRADE powered by Morgan Stanley or something like that. But the E*TRADE brand has real value. It's important to their client base. We want to keep that. Secondly, it's an avenue we can run internationally. It might be Morgan Stanley powered by E*TRADE internationally. We'll play it out in different markets over the years. We'll fold our banks together. We have 4 banks between us, obviously subject to regulatory approval. We can share a lot of the back office and a lot of the technology. But the front end will be -- there'll be E*TRADE, which is our direct channel, and there'll be obviously our financial base channel, which is the $2.5 trillion of assets.

That's a great summary. And the 4Q closing is still your expectation at this stage?

Yes. I think the public record is their shareholder vote is July 17, I think. I don't want to presume that. But I can't imagine that's going to be an issue. And then we're waiting frankly Federal Reserve approval. We've got integration teams that are working with through any DOJ stuff. I feel -- I'm feeling very confident about the close. We'd love it as early as possible in Q4. But ultimately, it's in the hands of our regulators. And they'll do their work as they need to and get back to us. So we're -- but it will happen in Q4 and hopefully in the first half of Q4. And we're ready, like we're all geared up.

Okay. Great. Let's turn next topic to the field, the Wealth Management division today. What are you thinking some of the key drivers for growth in that business are going to be on a stand-alone basis? How important is technology? And could you give us a sense of growth via either assets held away or FA recruitment?

Yes. We've still got through -- ordinarily, in other applications, we don't have much money or good estimate of how much money our clients have away. That's really powerful. Secondly, with E*TRADE, we know a lot of clients have money at Schwab, Ameritrade and other institutions that we can now consolidate that have accounts with Morgan Stanley but have relationships with those institutions. We can consolidate all of that. Thirdly, we haven't begun to penetrate the whole banking sector. And not having a quality digital bank has been a major handicap on that. Again, we'll get that through the E*TRADE deal. We're doing some recruiting. We're always in the market for talented people. And frankly, without being arrogant about it, I think we're a place of choice right now on The Street for wealth management. I think we get 8 of the top 10 people on the Barron's 400 list. It's just -- or maybe it's the Barron's 100 list. It's just at the top of the house, we have unbelievable quality people. And they function very well inside an investment bank. And that's known across The Street. So yes, recruitment assets held away, digital banking accounts held with other online providers that we can consolidate through E*TRADE, they're just some of the areas for growth. But it's not growing at the level that the digital players are growing. And we also have the RIA channel, which is a potential, given E*TRADE has that. It's relatively small, but that's also been a fast-growing part of the marketplace. So I'm just excited that we've got all these little engines within wealth, which of itself is a monster business, chugging. Now we'll talk about rates and the impact on the business, I'm sure. But there are a lot of positives and then there are some obvious headwinds.

One question before we get to rates is just the footprint. Obviously, wealth has historically been primarily U.S.-focused. But you mentioned in your E*TRADE discussion, maybe going outside the borders here. Can you give us a sense of whether or not that is something you're thinking about just with the E*TRADE option? Or are you also thinking about that from the financial adviser, relationship manager option?

Well, we do have a financial adviser operation across Asia, based in Hong Kong and Singapore, which deals with a lot of the very wealthy -- across really the Chinese communities in particular. And we have a traditional broker-dealer in Australia that we got as part of the Smith Barney acquisition. We sold our business in Europe to Crédit Suisse. So if you look internationally, we had some. But Betsy, it's nothing near the potential of what it could be. And Morgan Stanley's presence in so many international markets, from Saudi to Japan to Korea, Brazil, Germany, you got -- we're -- our brand is very visible in these markets. So we're punching below our weight in terms of business opportunity. So we have 3 parts. One is do we replicate the U.S. model? The answer to that is no. The only countries where the broker-dealer-type model, commission-based has really worked has been Australia, Canada, Japan to some extent, U.K. to some extent. So it's really -- it doesn't function. Don't lift it and place that outside. Do we go the private banking route? Probably not. It's -- given all the compliance and money laundering and other issues that have been and managing lot of them because a lot of that is offshore money, we've tended to stay away from that. So really, our focus is through the digital direct platform. And that's why with Morgan Stanley's brand, our research, our product and E*TRADE's technology, who've been -- they've been internationally before. Remember, they're in Japan probably 15 years ago. I see that as a great opportunity for us in select markets.

What about the thought here on pretax margin in the business, given the rate environment? Is there anything you can do to offset that rate environment? And maybe you can speak to just what you're expecting with regard to pretax margin due to the rate declines we've had today.

Well, the math would tell you that the margin drops from 28% to, I don't know, 23% to 24%, probably 23%-something, just from the move in rates, right? When rates dropped so precipitously earlier this year, that was several hundred million dollars of which we don't compensate on, so it goes straight to the bottom line. So it's just math. I mean I can pretend it didn't happen, but it did happen. I don't think we're going to be in effectively 0 rate environment forever. But do -- am I happy about the way it happened? No, but it happens, so you adjust. We're still seeing great flows. We're seeing the loan book, particularly the mortgage book, has held up really well and is growing. We're seeing consolidation, which I talked about earlier. And we're seeing opportunities to grow through the stock plan business and conversion with E*TRADE. And E*TRADE's margins, its own margin is around 45%. So when you combine their, call it, nearly $3 billion of revenue to the wealth, that will help push the margin back up some. And frankly, we've been very active in the wealth business. So it's too early to say. There was obviously a Q1 like just a punch in the face. But unlike the old days, Betsy, you've been around this place. You know 10 years ago, this kind of environment would have saddled us back to a 0% to 5% pretax margin. 5 years ago, it would have put us at 15%. 3 years ago, it would have put us at 20%. If I said to you, we're going to be in a 0% interest rate environment in the kind of market shock we've all been through with everybody working at home, and we're going to generate pretax margins still above, comfortably above 20%, you'd take it all day long. Now we're not happy with that where it is. Our long-term targets were 28% to 30%. We remain committed to those in the long term. But in this environment, we've got to get past this rate cycle. And frankly, we've got to build those other legs, which we're in the process of doing, including closing E*TRADE.

Okay. Great. Just lastly on wealth. Have the wealth clients started to come back into the equity market yet? Or do you see cash on the sidelines as kind of latent energy there?

It's been -- the cash is up a little bit. Cash and cash equivalents, I think, are close to 21%. I don't have the exact number. But we're seeing asset flows. I mean what happens in times of stress is clients tend to gravitate towards the bigger, stable institutions. And there were some major outages with some of the new online robo players. That doesn't work. You can't like not access your account for several days and think that, that's okay. So institutions like ours that didn't have outages and E*TRADE was the same, that's very important. So I just think we're in an environment where you're going to see growth coming out of -- partly because of the stability of the institution.

Okay. James, I wanted to turn the conversation towards the securities business, maybe get a sense as to where you're investing in growth. What are you looking for? Just a very open-ended question to see what you're thinking.

We punch below our weight in DCM. That's been a focus and is a focus of the team. And I think we're making up some ground there. We are determined to hold on the #1 position, which I think we've had for 20 straight quarters in equities. We're continuing to invest in the technology behind that. Obviously, a lot of the electronic trading and the prime brokerage business has been critical to our success. I read in the paper another bank wanting to make a move in prime brokerage. It's a great business. But you ought to be at scale and we're a monster in that business. And then across the whole institutional fixed income and commodities platform, I think that the decisions we took at the end of 2015 to shrink by 25% both the sheet, brought down the RWAs, brought down the headcount, positioned ourselves to be a player sort of 6, 7 instead of 9, 10, I think, has worked really well. And honestly, we're gaining share in that. Now part of that has been from what's been going on with the Europeans and part of it is it's just -- we've just -- the business is just running really well. And I think we've done a much better job bringing an integrated capital markets, fixed income and equities platform to a lot of our hedge fund clients. So there's no brand-new bold strategy, right? We're not about to go and acquire another institutional business certainly of size. So in this business, it's all about finding the right balance and mix between balance sheet, risk-weighted assets, capital usage, liquidity requirements and talent. And right now, it feels like the business is functioning as it should be. It feels really good. Now on the banking side, as you all know, the M&A market is basically dead for the second half of this year. And that's not us, that's The Street because you've got to announce deals in order to ultimately get paid on them. But that -- I'm not worried about that. That's just a cyclical thing and that will flow through just fine in time once we get past the sort of COVID shock.

What about geography-wise? How are you thinking about the mix there?

Well, we've expanded, as you know. We got the license in China. So Greater China or Hong Kong remains critical to us. Japan, through our partnership with MUFG, we still think there's more to do. But the Japanese economy has been under severe pressure. Europe has stabilized. We moved our European headquarters to Frankfurt and moved several hundred people in there. We're not that interested. We went for a long period of opening and closing offices. We're not that -- our bar for opening a new location is very, very high now. So we're unlikely to be opening new locations. We're more likely just to beef up as we are in Germany and France in particular. Brazil and Mexico are doing great. And then Australia and Korea are doing very well and then the Greater China area is really the focus.

Okay. Just lastly, anything on the quarter that you wanted to mention around the outlook for securities? I know you had some thoughts on wealth; wasn't sure if you wanted to raise anything on the securities side.

Well, listen, it's been a very, very active environment. And I've seen ranges from our competitors talking about as much as 50% year-over-date in trading to 10% year-over-date and everything in between. Listen, we've got a very good business. Eric and his business is performing well. We have -- equity derivatives has been performing very well. Prime brokerage balances have come back. And frankly, fixed income, our positioning, the activity we're seeing in macro and the recovery in credit has been impressive. So listen, we're not going to be -- I don't think we're going to be an underperformer. I'd be surprised if we're an underperformer. That's all I'll say. Businesses, teams working well together. And we -- but you've got to wait. These things can move rapidly in a couple of weeks. And there are some other things going on obviously at any point in time. But I feel pretty good about what Morgan Stanley is doing right now.

Okay. Great. Wanted to just touch base as well on asset management, obviously an important part of the business where you've been delivering strong growth and significant positive flows for the past couple of years. And that continued in 1Q -- into a 1Q that was more challenging for the industry. So just wanted to get your sense as to what's driving that growth and where you see it going from here.

Yes. It's a phenomenal story and one we don't talk much about. And I give the team, led by Dan, enormous credit. The -- our asset management business was -- its strength was its breadth. Its weakness was its lack of depth. So we're in every vertical. We had -- we have liquidity management. We have a fixed income. We have an active equities business. We're deep in value. We've also got great growth businesses. We've got a fund of funds business. We have infrastructure. We've got real estate. We've got private equity. We've got MIS. But everything was kind of like small. And finally, we're starting to get some scale. For example, infrastructure, we raised our third fund, did over $5 billion. I think it's up nearly 40% from the second fund. We didn't have an infrastructure business a few years ago. Now we've had $4 billion or $4.5 billion and, I think, out of $5.5 billion. When you look at the active investment, we've had positive flows. Dennis Lynch, I'd just call him out, his business, unbelievable. They're 99th percentile. They're managing $50 billion. There's another sort of upshoot of that and Asia has done unbelievably well. Our China Asia PE fund has done well. Our real estate has come back from the crisis remarkably well. So I'm really excited about asset management. Now people keep saying, "But it's only 10% of Morgan Stanley." Yes, but Morgan Stanley is a big place. I'm happy to have plenty of 10% that are performing well, right? Which would you rather have, a 10% performing or 50% not? And right now, asset management is just -- they're on a roll. And listen, they're always -- when you're managing private equity and real estate and you have parking meters and things like that at times like this, you're going to have parts of it going to be under stress. But if you look at the positive flows and you look at the outperformance, I'd tell you this, Betsy. I've joined Morgan Stanley in -- well, I arrived in early 2006, I guess I technically joined in 2005 before garden leave, so roughly 15 years. We've never had product and performance across traditional asset management and alternatives, those 4 boxes all working. We've got products. We've gone into alternatives. We've gone into traditional. We've got performance. We've gone into alternatives. We've gone into traditional. Now are where we want to be? No. We can be bigger -- definitely bigger in scale in fixed income. We could definitely have more and different style managers across our active equities business. We can definitely be bigger in PE. There are lots of areas where we can grow. There is excitement. But we're now in a position where given the performance and given the product platform we have, we now have a credible position to grow. So this -- the business will only stay 10% of the rest of Morgan Stanley if it keeps growing at the same pace.

And is this growth from here, do you think it's more organic and small team lift-outs? Or do you feel that you would take -- increase the growth via a more aggressive kind of acquisition?

Oh, no, we'll do deals. I've been very clear about that. I mean I'm not shy about doing deals that I think hit our sweet spot and there are a lot of things that hit our sweet spot. But you can get caught doing large-scale asset management deals, you want to be very cautious about that. It doesn't mean that's a 0 chance. But certainly, my bar and the Board's bar on that is much higher, but there are -- it's a consolidating industry. Of all the sectors in financial services, from payments to corporate lending to -- you go across the whole universe that you cover, probably the most distributed, the least consolidated is the asset management space still. Now some of the ETF and the index fund business, that's different, right? That's obviously consolidated because scale drives all of that. But the whole rest of it, it's ripe for consolidation and we'll be a player in that in the years ahead.

And currently, as your business stands today, do you think you have enough size to benefit from scale today? Do you think you are a scale player?

It so much depends which vertical you're looking at. If you're talking about growth investing, unbelievably, we've got the #1 guy in the world, deep value of William Lock in London and his team, unbelievably good. The fund of funds business is clearly at scale. It's a great business. Real estate is probably #3 or #4 in the world. It's clearly at scale. Private equity, no. It's smaller than we need it to be. Infrastructure is getting there. So you've got to take -- fixed income, no. Fixed income, we can do more. So I think if you take each of the tranches, you'd get a slightly different answer. What most people say is, "Gee, your aggregate asset management business," let's say, was $500 billion, it's actually significantly more than that, "wow, there are so many players who are as big or bigger." I said, "Who cares?" What I care about is within that business, where are you at scale and where does scale matter? Where does scale drive economics? And that's the couple of layers of the onion you've got to peel back. But I think generally, I have a scale bias, as you probably know, generally in business. Scale is generally your friend, I found, unless you haven't got the management capacity to handle the size.

Okay. I think the last topic we wanted to just touch base on here is just, generally speaking, the efficiency of the organization and what you think you could do to improve from here. I know in the past in some of these presentations, you've talked about opportunities in potentially commercial real estate, et cetera. Can you give us a sense as to your most updated thinking there?

Well, I think we -- over the last 10 years, we've put out our annual targets. And by the way, I've always said those targets were for normalized environments. And this is anything but a normalized environment. So we clearly missed the targets in the first quarter. The Wealth Management targets are going to be, in this environment, impossible to be 28%. But that doesn't mean you can't have very good business growth from where we are in recovering to that period. So in the medium term, I stand by the targets. In the very short term, I didn't and I don't. But on the efficiency, that ratio, I think we had original targets of 79%. We brought it down to 77% and 75%, 73% and now it's sort of at 70% to 72% range. There's clearly things we can do -- we're doing on the expensing side to continue to drive efficiencies. But if you haven't got the revenues, the ratio obviously gets messed up by the denominator. On office space, and I was quoted -- I sort of joked to myself, I made a not quite a throwaway line but an obvious statement that we learned how to have all of our employees working from home. So surely that brought into question, did we need all the footprint? And by definition, we didn't. That then became the most quoted line I think I've had in my career, which just shows you in times of stress, people will hang on to anything and draw the conclusion that somehow Morgan Stanley is going to move out of major cities or shut its locations. No, we're not. It's ridiculous. The vast majority of our employees for the vast majority of their time will continue to work in offices. But are there ways in which we can consolidate and learn, particularly in some of the big money centers, where you want less density of people? Absolutely. Does it bring into question how we're thinking about our offshoring strategy and maybe part of that goes to smaller cities around the U.S. rather than being all concentrated in one country or geography like we have in India? Absolutely. But we've proven with Montreal, we've proven with Budapest, we've proven with Bangalore that we can operate in multiple countries around the world and many of these large locations. But yes, there will be some real estate efficiencies over time. But it's not like we're going to suddenly cut our real estate footprint in half. That was sort of ridiculous assumption based upon a passing comment. We'll continue to have major real estate in major cities. We just have opportunities to be a little smarter about the way we deploy it and where.

Got it. Okay. That makes a lot of sense. And then I suppose, lastly, just on capital, where we think about getting back into a little bit more normalized environment, what are the triggers for restarting the buyback?

I guess in order, number one, we need to see the CCAR and SCB numbers, obviously. Number two, we need to have confidence that the economy continues to improve, which I think the jobs numbers suggest that the worst is behind us. For broader economic growth and unemployment, we want to be sure that we don't have some sort of W in the next several months. But listen, I don't know the exact timing. We're not frankly talking with our Board about reinstituting our buyback at the moment. That would clearly be premature. I don't want to get ahead of what the regulator's work is doing. But as I said, I'm very comfortable with that capital position. There's no reason why we shouldn't be buying back stock as soon as we get visibility. The economy is doing fine. And as I said with the SCB, we have levers. We had less levers with leverage ratio constraints than we do under the CET1 constraint. So that will be the kinds of decisions the operating committee will make, obviously overseen by the Board is where you want to make your tradeoffs. But we're in a position where this company is very stable. We've been very stable through this crisis. I think we're going to come out of it stronger, not weaker. I see no reason why -- at the right moment when we have enough clarity around the economic outlook, we wouldn't be instituting a buyback again. I think it's sort of a no-drama answer, honestly. But we want to see what the SCB buffers come back. And who knows? I mean that's a bit of a black box right now. And I've learned one thing over 10 years doing this job is you've got to be prepared for surprises and you adjust as a result if they come.

All right. Great. Well, I want to thank you on behalf of everybody at Morgan Stanley for steering us through the last decade, and look forward to the next. Thank you again for joining us today, and appreciate your time.

Well, I appreciate everybody being on the call and the conference, Betsy, which you run, has been unbelievably strong for many years. So congratulations, and I look forward to hearing from clients how it all goes.

All right. Thank you very much.

Okay. Bye-bye.

Bye.