Morgan Stanley (MS) Earnings Call Transcript & Summary

This is Jason Goldberg, and I cover the U.S. large-cap bank stocks here at Barclays. And this is our 19th Annual Global Financial Services Conference. Next up, very pleased to have Morgan Stanley. And from the company, we've Jon Pruzan, their Chief Operating Officer. Before we jump in, 2 points of housekeeping: one, in the upper right-hand corner of your screen, there's some buttons. One of them says Ask A Question. Simply click on that and you can type in some questions. And if time permitting, we'll get to those, we can get to a lot of them. And then secondly, there's a button titled Survey. Feel free to click on that. We've been collecting data throughout the conference and we're publishing those results later this evening. And then the second point of housekeeping. I'm just going to read a disclaimer from Morgan Stanley. The discussion may include forward-looking statements, which reflect Morgan Stanley's management's current estimates and subject to -- and are subject to risks and uncertainties that may cause actual results to differ materially. Morgan Stanley does not undertake to update the forward-looking statements. 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. So with that out of the way, Jon, welcome.

Thank you.

Maybe the best place to start is back in June, you were named Chief Operating Officer after being CFO for 6-or-so years. And thank you for participating in the conference in that capacity many times and now in new capacity. But can you maybe briefly provide some additional color on what areas you're focusing on and your objectives and goals around this new role?

Sure. And I'm happy to be here in any capacity, Jason. It's been a pleasure to work with you, and I'm excited here to talk a little bit more about my new role as well as sort of the company and how we're doing. It's a really good time for a transition. The firm is doing quite well. Momentum is quite strong. The plant is quite sound. As you know, we're in the middle of 2 integrations of world-class companies. There's a lot going on that's very exciting and interesting. In terms of my new remit, clearly, tech and ops, the banks and other parts of the firm have real opportunity for us to grow. I think if you just think broadly about tech, clearly, the opportunity to accelerate investment, whether that's in innovation or automation to drive future revenue growth, better resiliency, operational effectiveness and optimization, there are real opportunities. I think tech is becoming critically important as we've all seen through the pandemic on not only how we deliver services, but how we run as an organization. So I think we did extraordinarily well through the pandemic. Unfortunately, it's not over. But if you look at our experience in terms of some of the high trading volume days, being able to support our clients and being there for them was quite good. I think the banks have continued to grow. We continue -- we now have a much broader client set, so to build out products and capabilities to align with our clients' preferences and investment needs is going to be an important element. So really just working to continue the growth and the momentum of the core businesses, and I'm really excited for the new challenge.

Got it. At the start of the year, you set a 2-year ROTCE objective of 14% to 16% and a longer-term aspiration of 17%-plus. On the most recent earnings call, James said he intended to revisit those goals come January and hinted to us, at least, there's an upward bias. What's driving kind of that improved longer-term outlook?

So no big reveal. I think you know we do our targets once a year in January, and we're going to do them again in January, and I don't want to get ahead of that, and I certainly don't want to contradict anything my boss has said. But I think you'll hear, and I'm assuming we're going to talk about the acquisitions and the underlying strength of the businesses, but we're really optimistic for a variety of reasons. One, we basically have an activity-based model across all of our segments, and activity levels are quite high. On top of that, we've increased share across all of our businesses. So I think that fundamentally bigger wallets, bigger share gives us a lot of confidence. If you just look at the new assets that we brought in, both between wealth and IM, over $250 billion of assets in the first half of the year, we now manage over $6 trillion of assets, and we continue to see good and strong flows in those businesses. And one of the most exciting parts is as we integrate these deals, finding the connectivity between the segments. I'm not talking about the integrated investment bank. I'm talking about relationships in the ISG world and leveraging those and working with either Wealth or Investment Management for solutions and other parts of the firm, connecting the dots, if you will, and sort of bringing out the full power of the franchise. So things are going quite well. We feel confident. Clearly, the pandemic, and there are risks out on the horizons, but we feel pretty good about what we can see. And then lastly, I'd like to remind everyone that we put that deck out in January of '20 and we -- excuse me, in January of '21. And we've now had a little bit of time with our transactions and the integrations are going well. The underlying businesses are performing well. So again, very confident about what we're seeing with those deals.

You talked about strength in underlying businesses, the benefit of some of these transactions. So maybe let's kind of go through the businesses. Maybe we'll start with Wealth Management and the acquisition you did there. Maybe you could provide us an update on the E*TRADE acquisition? And just where are you in terms of the integration and expense savings?

Sure. I will. And I assume we'll get to Eaton Vance at some point, but I would just make a broad statement that we are extremely pleased with the progress of both transactions and that both transactions are exceeding our expectations. And a lot of that is being driven by just the underlying fundamental growth of those businesses. When we announced the deal in February of '20 versus when we closed the deal in November of '20, the size of E*TRADE, the number of clients they had, the assets that were in the workplace, invested assets and the assets in the system, the DARTs, the number of deposits, the number of customers, all dramatically higher than when we bought the company, and we've seen a continuation of that trend. So underlying fundamental growth in the business, usually at announcement, you have uncertainty and sometimes you lose momentum and you lose focus. We didn't see any of that. And we've only gotten more excited post closing when we see the other opportunities. We didn't do these deals, as you know, for costs or for funding synergies. We did them to bring in a new service model and new capability. The self-directed channel was going to be an important part of filling out the Wealth Management service models. We also brought in Equity Edge, which is their work plan -- stock plan business. So with our historical one with the Solium transaction and Shareworks and now their business, we've got great scale in the workplace. And so those were the reasons we brought this deal, not for costs, although we will capture the cost and the deposit funding. So I think what we're focused on today is really making the investments we need so we can capture that opportunity in the future. And then again, this is -- when we laid it out, I guess, in February, it was a 3-year process post closing. We're being very deliberate about the integration. We are clearly focused on the client experience and, ultimately, elevating the client experience, but we certainly don't want to be disruptive. So we're making the investments we need in the platform and the service model. Volumes are up dramatically since we bought the transaction -- bought the company. So we want to make sure that we have the right service model in place and the right technology in place. You've heard us talk about the companion account, which in workplace is going to be critically important. Historically, Morgan Stanley didn't have the ability to capture unvested or as shares vested in the stock plan business, we didn't have the ability to capture that. Equity Edge and Shareworks helps us get there. By the end of the back half of 2022, we'll have 90% of the 6 million-odd participants we have with a companion account. So that's critically important. We've been investing in something I think you've heard us talk about, Jason, called LeadIQ, which is a matching engine. And whether someone is in workplace or the self-directed platform, if they want more formal advice, the ability to match them with an FA is critically important, making sure that, that matching system aligns what people are looking for with what we can provide, but also give us an ability to follow up with the FA and make sure they are following up on the lead and providing the services that the client wants. And then just lastly, around just data analytics in general. We have now a lot more customers. We have a lot more data. We're working on a client data genome around data analytics and trying to understand our clients' preferences and behavior so we can better supply solutions for them. And so again, a significant amount of investment in technology and people so when we get to the end of the year, we'll have processes, we'll have people, we'll have the pipes all built to take advantage and really capture the opportunity we see in this business.

I guess maybe can you help us maybe dig deeper into just the revenue opportunities of using kind of the newer self-directed and workplace channels and trying to basically feed the advisory channel. And then maybe unrelated, but just what is the opportunity kind of taking kind of the self-directed model and exporting that to outside the United States?

I'll do the last one first. Just -- I mean, we are very focused on getting the integration right. And so I would say for the near term, that is the focus in the U.S. and making sure that we integrate, but I think there is a longer-term opportunity with some of the capabilities and the brands that we have to export that. You said it. I mean the workplace, we think about it as a customer funnel. And that has been how we've been describing it. I want to take you back a couple of years when we were basically the financial advisory model in our wealth business. We had roughly 3 million relationships, and that's what we were trying to service. With E*TRADE, with the Solium transaction, with the companion account that I've talked about, with financial wellness and some of the other things that we've been doing, that 3 million number is now really 14 million-plus net relationships. So the remit and the ability for us to provide services for a much larger customer base is important. And that 14 million relationships has $8 trillion of assets held away. We manage about $4.5 trillion in our Wealth business. And so even before getting one incremental customer, if we can get any share of that $8 trillion, that would be a huge home run. So this is a funnel. We try to grow the number of corporate relationships we have, that grows in number of participants. We've got about 6 million participants in the workplace. While they're getting and their wealth is growing and their stock is vesting, we're trying to build trust and relationships with them. We have a privileged position because we're already inside the company and already have access to them. And so through content and education and financial wellness, we're trying to build relationships with this client base such that when stock vests or they need services that or advice, we're in sort of the pole position to be able to convert them to a client or add incremental services to what we do for them. So -- and just like on our FA platform, we give our clients a choice in what they can invest in. We're agnostic to the service model that our clients choose. If they are on the workplace and they want to be on the self-directed platform, that's fine or digital advice or financial adviser model or even the family office model that we're building, we're agnostic. We just want to be capturing more clients and then being able to grow with those clients and as their needs change, being able to provide a customer experience that's seamless between the service models and allows us to provide the services they want when they want them and how they want them. So this is a really critical component of future growth. And the other nice thing about this funnel is that we can add corporate relationships, and we can also add participants. So 2 interesting things we did. I think in first quarter, we did a partnership with Wilson Sonsini, a law firm that gave us private cap table capabilities. So now we can start with companies when they're even smaller on the stock plan business. And then recently, we brought in an institutional consultant that manages retirement money for smaller businesses. We not only get NNA from that or new assets from that transaction, but we also get 600,000 new participants. So again, growing the number of corporates and growing the top of the funnel is going to provide future growth for us.

Makes sense. Pretty big opportunity. In the past, you've talked about a pretax margin of 26% to 30% for Wealth Management as a 2-year objective, over 30% longer term. Any ways to kind of mention actually on where that number could go?

You want more guidance?

Yes, sure.

Now 26% -- listen, 26% to 30%. We've talked a lot about this. We think that we can continue to invest in the business and grow the margin. Incremental dollars of revenue are coming in at higher margins than the existing book. The business has been performing quite well. Indicators are very positive. We know -- you know from our Q disclosures that if we were to get a 100 basis point parallel shift in rates, it's about $1.5 billion of net interest income that drops to the bottom line. So we would clearly be over 30%. I'm not going to try to predict when rates will go up, but let's assume at some point, they will go up. So we feel very confident about, a, the 26% to 30% range. We've been running sort of 27% or 28% in the first half, whether you include or exclude the integration costs. And we feel that we can easily get over 30% with a rate hike or rate hikes. But we also think we can continue to grow that and invest in the business. So this is -- it's just been a fantastic stable source and opportunity for us. When we started this, we were 6%, 7% margins with the Smith Barney JV, and then we said 10%, 15%, 20%. It's been a very nice steady progression, and we think we can continue to grow the margin and grow the business.

Got it. And maybe you could just update us on net new asset growth, client activity, FA recruiting and retention trends. And I got to ask on net interest income.

Sure. So there were a lot of questions in there. Just generally net new assets. Underlying health of the business is quite strong. We did $175 billion of NNA in the first half. Those numbers are sort of 8%, 9% type levels. If you remember from the strategic deck, we were running 3% to 4%, did 6%-plus in 2020. We thought that, that was going to be the new level. This is obviously a higher level. We have seen some moderation in that, but we have clearly separated ourselves from our traditional wirehouse peer set and our ability to generate net new assets and between 14 million relationships that we have or touches or warm leads, whatever you want to call that funnel, between the $8 trillion of assets held away, the dynamic around net recruiting that you just mentioned, where we've become the platform of choice, we continue to see positive net recruiting and very low levels of attrition. Back in JV days with Smith Barney, we're losing 20-odd-plus FAs a week. I could count on one hand the number of FAs we lose in a week now. It's been a very stable platform. We've seen really -- some really great teams joining the platform, and we would continue -- or expect for that to continue. The health of the client base and the engagement levels in terms of loan growth, continue to see good loan growth, continue to see good deposit growth. There has been some moderation in engagement, right? First quarter was white hot, I'll use DARTs as an example. We were running 1.6 million in the first quarter, a little around 1 million in the second quarter. We're running around 950,000 a day in the third quarter, but put that against the backdrop of that was sort of what the average was in 2020. And when we bought the company, they were running less than 300,000 a day, and now we're sort of 950,000. So even the moderation that we're seeing a little bit, some of that's probably for the summer and other reasons, but still activity levels way above when we first started talking with E*TRADE. So very, very healthy NNA. We would expect to be able to continue to grow and attract new assets, both from new clients, existing clients, the workplace, assets held away. It's just all net recruiting. It's all working quite well. NII. I think on NII, I mean, the guidance that we gave in the second quarter still holds. The curve hasn't, I'm trying to think from June 30, it hasn't really done very much. Obviously, we continue to see good loan growth, which should lead to, again, in small increments, generally a positive trajectory on NII. But until we see sort of major movements either in short-term rates or the shape of the curve, we're going to be sort of in this state where we've been for the last couple of quarters.

Got it. And maybe shift gears to Investment Management. At a high level before, you alluded to that Eaton Vance also off to a strong start. Just kind of just maybe update us in terms of where you are on that integration and the synergies you expect there.

Sure. Again, exceeding expectations, not about costs. We will get the cost savings number, but that's not why we did the transaction, being very deliberate with the integrations again here. Integrations are going well. This company, as was E*TRADE, these were both companies that were very high on our list of strategic partners, and they weren't being driven around cost savings. They were being driven around capabilities or products or distribution that we thought would be better to partner with as opposed to build our own. So the value-added fixed income products that Eaton Vance brought over, the sustainability with the Calvert brand, customization with Parametric, all very important to building out the product set and the product suite that we can offer to our clients and our -- offer solutions to our clients. On top of that, the distribution was extremely complementary. So as you know, internationals or gross sales internationally very high on a percentage basis. Eaton Vance's not. So this was really complementary, bringing 2 organizations together, filling out the product suite. We've been very happy with the underlying performance since October when we closed the deal. We've had $150 billion of flows which is on $1 trillion-ish type base. So just an extraordinary clip here. Those will ebb and flow and be bumpy, but the underlying health and momentum in these businesses is quite strong, and we're quite pleased.

And maybe you could talk to just how big of an opportunity is to sell the Eaton Vance products through your international distribution channel? And then also just what are the synergies with Eaton Vance and the Wealth Management side of the house?

Again, I think we just did close this deal. The strategic logic was sound. And again, the underlying performance has been quite robust, even more so than we thought. I think the 2020 number for us was 65% of our gross sales were internationally versus 5% for Eaton Vance. So there's real opportunity to take some of those products, sustainability, customization, really an opportunity to bring those products internationally and vice versa. The ability with the wirehouses relationships that Eaton Vance had to bring some of our product into those platforms and organizations, I think there'll be real opportunity there. And then as I said, we have a whole new customer and client segment. We've got millions of participants in the stock plan business. We've got a lot -- we've got 5 million-plus self-directed clients. And so being able to customize product for the wealth channel using Eaton Vance and some of their capabilities, we think, particularly in the workplace, is also going to be a very interesting opportunity for us as we continue to integrate these models. So businesses are performing better than we expected. Cultures and integration is going quite well and the opportunity is really still in front of us.

I guess you mentioned Eaton Vance adding customized and sustainability. I guess what other product apps do you feel like you have? And the reason I ask is on the earnings call, James alluded to additional acquisition opportunities. I'm just trying to figure out if this is a segment we should expect to see more in.

Well, I think if you look at our transaction history, it's really been in both the Wealth and Investment Management space. And whether that's Mesa West or Solium before E*TRADE and Eaton Vance, I mentioned the Wilson Sonsini, I mean continuing to grow out sort of more durable revenue streams, capital light. We like these businesses within specifically Investment Management. As I said, I mean, some of the great secular growth trends around sustainability and customization. We've got scale in fixed income now, the value-added fixed income product that Eaton Vance brings, the concentrated equities products we have, alts platform -- private alts platform, we have over $110 billion in assets in that platform. So we feel very good about the product suite. If we do something, I think it will be much more, Jason, niche like the Mesa West type of deal. I don't think we need to do anything transformational. But at this point, we've got sort of the product set that we like. We've got robust distribution. And most importantly, we have investment performance. So this has really been -- you put all those together and you see the type of flows that we're having.

I guess looking back, what would you say is the biggest surprises with the E*TRADE and Eaton Vance purchases?

That's a great question. I think -- I mean, really twofold. One is just, again, I think you know my background before. I was the CFO, I was an investment banker. And post a transaction being announced, there's real risk in sort of what happens to the business between signing and closing a deal. And then once you close a deal, how those companies come together, most importantly, the cultures and the tech and whether you see any sort of dislocation or disruption in those businesses. And we had none of that in either of these deals. So that has been a really, really nice. I wouldn't call it a surprise because, again, I said these were companies that we had been focused on for a very long time, and we understood and acknowledged the strategic value that they could bring, but it's going quite well. I'm knocking on my desk, I don't know if you can hear that. It's going quite well from an integration standpoint. Culture is emerging quite nicely, and the underlying business performance is quite strong. So just positive upside surprises, I guess.

Good stop. All right. Maybe we could shift the conversation to ISG and maybe just run through the big segments there. Maybe we can start with advisory. M&A has obviously been really robust year-to-date, record volumes. So maybe just talk to how this translates into revenues, obviously, beyond the advisory fees and just your overall outlook given corporates continue to be looking at strategic opportunities, it seems, lot of dry powder from private equity, from SPACs, and just how you're thinking about the landscape.

Sure. I mean you hit most of the highlights. But M&A market is very, very active, all historical highs in terms of volumes and the pace of announcements, whether it's look at Monday mornings and even every day new announcements. Really the focus has been in the sort of $1 billion to $10 billion range. So a lot of sort of those type size deals, not a lot of the mega deals. CEO confidence is high. People clearly want to do things, and we would expect that to continue. As you've heard from others, I'm sure, pipelines are healthy. The biggest potential disruption to historical M&A cycles is volatility. They can withstand corrections because valuations get reset and then everyone sort of goes forward. But if you have volatilities and valuations are moving dramatically from day to day, it's very hard to get transactions done. So we have confident CEOs -- or CEO confidence is high. People clearly want to do things, trying to grow their businesses, a big focus on growth. Capital markets are open. Liquidity is available. So we -- again, absent a disruption, a real volatility in the valuations, we think that you can see continued M&A announcements going for the foreseeable future. It's a great product because it's generally a product that when you are advising a client you're generally doing other things for that client. So the integrated investment bank, capital markets, LBOs, private equity, you could be doing some hedging or FX work for cross-border stuff, although I would say cross-border activity is pretty light these days. But there's just a lot more that you can do with the client when they're in the middle of a transaction. The other point I would make is the one that I made earlier, which is around connecting the dots. So not only are we bringing the integrated investment bank to that corporate, but if there's a wealth event, bringing our wealth teams or if there's a solution that needs to be had from an asset and liability standpoint or asset management standpoint, bringing IM to the table. So really bringing the full capabilities of Morgan Stanley to our corporate clients behind the M&A product is something that we continue to do better and better. And I think there's more that we can do there. So it's a very healthy product and a very healthy market. There was another piece of that question. There was a lot of -- what was it?

I mentioned kind of SPACs and private equity, but I think you kind of touched on it.

Both -- I mean, I think the issuance of SPACs has slowed down a little bit, but clearly, de-SPACing is occurring. And we got $1.5 trillion dry powder private equity that gets levered. And so there's just massive firepower and usually, if you're doing an LBO, there's no sort of regulatory concerns or other things. And capital markets are open. So again, there seems to be good tailwinds for future consolidation.

And then just on equity underwriting. Revenues have exceeded $1 billion each in the past 3 quarters. Still feels like there's a lot of unicorns out there both in the U.S. and abroad? Can this pace continue?

It certainly feels that way. I don't have a crystal ball for sure, but the pipelines -- IPO pipelines are healthy. The technicals and liquidity in the market are healthy. A lot of growth focus. So it's a lot of tech and health care, but we've seen good pipelines, good geographic diversity. And the product is working well. Your comment about the unicorns, I would say a couple of years ago, there was probably a bias to stay private a little longer. I think the bias now is to maybe go a little faster given valuations and where things are and some of the potential future uncertainty around tax structures and whatnot. But so again, a very healthy market. We have a fabulous franchise in equity underwriting, continue to see healthy pipelines and technicals of the market support continued IPOs.

And then on DCM, we've seen strong absolute performance in terms of fixed income underwriting revenues, although that business is smaller size relative to the other U.S. peers, I guess, or some of the U.S. peers. Just any plans to kind of narrow that gap or you like where that business is sized?

Listen, I think that -- a couple of points. The market is very active across the entire debt stack. So IG, leveraged loans, high yield. We've had a very strong first half within our business model and within our risk appetite. We'd like to continue to grow that business. So we are making investments, but again, within our risk framework. And we feel, again, technicals are very strong. We expect to see significant levels of activity across all 3 capital structures. The high-yield market and leveraged loan markets are relative to last year, clearly, at record paces. IG is elevated even though, I mean, you can't have record after record after record. So we like this business. We'll continue to invest in it, and we think that it's got some legs to it.

Fair. And then shifting to trading. Obviously, equity is a very strong franchise, continue to be the leader there. Maybe kind of update us on some recent trends? And then any changes for you or the industry post Archegos?

I'm sure you don't need to get that. Listen, it's one of our premier franchises, the equity sales and trading business. We've been #1 in that business every year since '14, active engagement with our clients. PB balances are healthy and strong. And you see the liquidity and the flows and the valuation. So it's very, very strong. Business environment, your comments around Archegos. We did exactly what you would expect us to do. We've talked a lot about that, which is to sort of take a deep scrub and look at all of our relationships to make sure that we're not putting ourselves in a similar situation. So looking at size and concentrations and liquidity and rate of change and all the things that you would expect us to do, and we've gone through a very detailed exercise not only within the equity business, but more broadly across the plant, and have made some changes to some of the stress testing, some recalibration to make sure that we capture a broader range of outcomes. As a result, we've seen some changes in margins and sizes. But as an overall matter and an industry matter, we haven't really seen any fundamental changes coming out of that event.

And then in FID, we've obviously seen bid offer spreads normalizing across products and volatilities come in. I guess where do you think we are in that process? How sustainable do you think market share gains are? And then on the 2 quarter -- second quarter earnings call, James mentioned the $1.5 billion kind of run rate target for FID, we talked about $1 billion a few years ago. Where could you see that number potentially going?

You keep trying to get me to contradict my boss. Well, listen, the fixed income business for us is in great shape. We had -- if you go back pre-restructuring, we had a 6% market share business. We've got a 10% market share business today, and the wallet has grown this first time really across all of ISG products. We've seen the wallet expanding. So we feel very good about the 10% share. We continue to deepen our relationships with our clients in fixed income. I think today, the outcome and results are going to be driven primarily by the wallet share. We have seen your comment about bid-ask spreads, but we've also seen moderation in activity levels in that market, which would be different from, I think, the other ISG markets that we've talked about. So we feel very confident in our ability to maintain share going forward. And a lot of the results would just be a function of sort of the wallet as we continue to make selective investments to deepen our client relationships.

Got it. We've got 5 minutes left. So maybe shift to capital, the June, the announcement on the dividend and buyback, obviously, both pretty nice numbers. And that was, I think, that despite the SCB coming in higher than, I think, we would have thought. As you look out, just given what the Eaton Vance and E*TRADE acquisitions do for you in terms of your kind of revenue durability, what are your thoughts on the ability to kind of reduce that SCB and then kind of what would you do with kind of that incremental capital freed up if you could do it?

Listen, I think we were -- we spent a lot of time transforming the business model, Jason, and you said it, to more durable, less capital-intensive market risk prospective businesses. And we were pleased with the results. I know you said you were surprised, but if you look at the peak to trough decline on our SCB, we improved by 40 basis points. The only reason we -- our SCB didn't go down is because we doubled our dividend. And the results of the CCAR and the strength of the underlying business and the strength of our balance sheet allowed us to double the dividend, which was very important. I do think also going forward, as we continue to build out and capture synergies from the 2 transactions and build out Wealth and IM to more durable revenues, we should continue to see improvement in the SCB results, again, in the peak to trough decline because these businesses generally have revenues, they don't have a lot of credit and market risk and, therefore, should add to our PPNR in those models. The other thing I would remind people is we didn't close Eaton Vance until 2021. So it wasn't actually included in CCAR this year the way CCAR works. So we would hope that the business model transformation continues to be reflected in the CCAR models going forward. And hence, sort of a gradual decline in our SCB. So we'll have to see if there are any changes to that framework or that regulation. I think it's the CCAR stress test and stress testing in general has been an unbelievable success in making the business certainly safer and sounder. And a lot of credibility goes to the regulators for coming up with that construct. So I'm hopeful that they don't start tinkering with the stress testing because it's been quite successful if you look at the strength of the U.S. banks relative to the rest of the world.

That makes sense. And then maybe just turn to expenses for a moment. Just talk about maybe in an environment rates stay low, market volatility reversed to normal, I guess, how do you think about that sub-70% efficiency ratio target?

Again, we feel -- I mean, we feel good about the targets that we put out. I think to your point, I think on the one hand, clearly a rate increase would help us with that target and make us bring that -- our efficiency ratio down even further, but we feel very confident of our ability to manage this institution below a 70% efficiency ratio in virtually all market environments. We made good progress around just optimization and efficiency. We continue to invest in our technology, not only from a revenue growth and client perspective, but also operational effectiveness and efficiency. So again, we're pretty confident around that 70% ratio. We've clearly been running below that with the elevated levels that we've seen, but we feel that we're in a good spot to continue to be disciplined around the expense base.

Got it. And we have 1 to 2 minutes left. I do want to grab one audience question. [ With respect to ] ISG, can you talk to Asia recent sort of strength? What are the opportunities there? And how does the political climate impact that?

Well, Asia -- I mean, first of all, Asia is a very big region. The political climate, people are referring to are probably focused on a large country, but sort of one area. But Asia is a critically important business for us. We're a leader in equities and investment banking there. We've clearly seen growth -- dramatic growth in those businesses over the last couple of years as those economies have grown faster than most of the rest of the world. They were mostly first in on the pandemic and sort of first out in terms of the recovery in economic growth. And so our investors and our corporate clients are interested in that region, and they want to invest in that region. So we will continue to build out that business and continue to support our clients. The recent political or regulatory regime framework has clearly caused some volatility in those markets, a little bit of derisking. But again, the longer-term trend is our clients are interested in that region, and therefore, we're going to be there to support our clients.

Perfect. We are out of time, but Jon, thank you very much for joining us this year and looking forward to catch up again soon.

Great. I appreciate it, Jason, and thanks for your support.

Thank you.