Morgan Stanley (MS) Earnings Call Transcript & Summary

So good afternoon. For those of you who are joining us virtually without our sunshine, I'm Susan Katzke. I cover the large-cap banks for Credit Suisse. Our next speaker in the bank group is Morgan Stanley, and I'm nothing but privileged to have Morgan Stanley's CFO, Sharon Yeshaya, here with me today. We're going to run this as a fireside chat, work to extract a little bit more detail from Sharon along the way. Before we start, I also have the privilege of reading the compliance disclaimer.

It used to be my privilege.

It used to be yours. You made do it even when it was your privilege. The discussion may include forward-looking statements, which reflect Morgan Stanley management's current estimates and are subject to risks and uncertainties that may cause actual results to differ materially. Morgan Stanley does not undertake to update 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 let's set the stage on kind of the macro and the market environment and talk about your assessment on kind of the tone of the markets, whether it's from CEO confidence, investor risk appetite, and let's start there.

So much for pleasantries. It's very nice to see you, Susan.

Sorry, it's nice to see you, too.

Thank you for having me. It's been great. So I think what you're asking is the first question that we usually open up all conversations, which is what's the guidance for the quarter. And I think we've all lived through a lot of the last couple of weeks together, and we've obviously seen a lot of uncertainty in the marketplace. And so it's not surprising that January had uncertainty in it. What does that uncertainty mean? And what does that mean for the forward viewpoint, so to speak? Well, obviously, as you've all seen through the deal counts, et cetera, we have seen some of the pipelines that are still healthy being pushed out. So again, around the IBD side, around the underwriting side, all of that has to do with the uncertainties that's in the marketplace. But I don't think that, that shifts the real picture in terms of our business, our business mix and the strategic objectives that we outlined for you at the beginning of the year just a couple of weeks ago. I think one thing though we can probably all agree on is that it's unlikely or certainly, at this point, doesn't feel as though the first quarter of 2022 is going to be the same as the first quarter of 2021.

I think that's a pretty fair expectation at this juncture. And obviously, you talk about the backlogs being pushed out and the environment and the kind of uncertainty versus the extreme levels of confidence. How is that also playing out in terms of flows in the Wealth Management channels?

Sure. So it's still healthy. NNA remains healthy. And I think that, that -- I know we'll talk a lot about it, has to do with the setup around the 3 different channels that we have and just how we continue to integrate the businesses, specifically the E*TRADE business with the Wealth Management franchise.

Sure. We're going to get to that in much more detail in a few minutes, but I just wanted to make sure, in terms of the current environment, can you touch on that, too?

Current environment, absolutely, and I think remains healthy. I think we feel comfortable with the expectations that we sort of set at the beginning of the quarter just a couple of weeks ago.

Okay. Fair. So with that as a starting point, I think the next question we all typically have, after we kind of check the box on the current environment, is talking about normalization. And normalization across your businesses, where are we, and how do you gauge this, right? So like are we going back to 2019? Or do we gravitate over time to kind of a trend line supported by economic and market growth? How do you think about this?

So I actually think -- I received a very similar question on the earnings call, which was is it going to be back to 2019. And the way that I framed it at the time, and I think we feel comfortable with this framing is, like we said at the beginning of this conversation, 2021 is unlikely to necessarily be the way that we repeat. 2019, I don't know if that was normal. I don't think we can agree that the last 2 years is normal. And then an environment by which we have inflation at these levels, I don't know, is that normal, is that not normal. So I think the question of normal is one that I sort of put to the side. And I respect the bigger question that you're asking, which is as we think about institutional securities, are we looking at a market wallet that looks like 2019, or what does it begin to look like. And I think that from a market wallet perspective, we probably feel like we're in between there. So it's not necessarily 2019. It's not necessarily 2021. But the dynamics have changed in terms of what's going on with policy, et cetera. That at least is the frame of reference that we have sitting where we are today at this point in time. But in addition to that, I think that the second portion of the question at hand, which you didn't necessarily touch on, but I think is worth mentioning, is that we feel comfortable with our positioning in that marketplace. So it's not just about the size of the wallet, but it's also about what share you have of that wallet. And over the course of the last decade, just as we've increased sort of, I think as we've become a more integrated investment bank and we feel more confident with our positioning, that's a place where I think we continue to feel as though we should gain our sort of fair share of the market, depending on where that environment ends up over the rest of the 2022.

Okay. And so speaking of the here and now a little bit and the size of the wallet, when you think about monetary policy and you mentioned uncertainty, there's a lot of uncertainty on monetary policy. The process of also shrinking the Fed balance sheet and removing some of the excess liquidity in the market, how does that factor into your expectations?

So I think I spent -- we've all spent a lot of time talking about this even in the last hiking cycle. So there was obviously a retreat of Fed balance. The Fed took its balance sheet and shrunk its balance sheet then, and there was a question of, well, what does that mean for the banks. And I think the same answer that we had then holds today, which is the way that our bank is set up was never in the same size of a commercial bank setting, and so we never benefited in the same way that a commercial bank necessarily benefited. And so from that perspective, I don't expect to see the same outflows per se that are simply linked to the Fed balance sheet. And I know we'll discuss this as well when we speak a little bit about the bank. But it's not -- it's fair to assume that you will see outflows, right? You're going to see outflows, but that also has to do with the rising rates. I don't think that that's specific to the fact that you have what the Fed is doing to its balance sheet.

Okay. And so when we think about FIC, specifically, and how it performs in a tightening cycle, it's harder to look back at the prior tightening cycle, right? We were in the midst of secular decline in the business and flat revenue pools. You've restructured the business quite considerably from restructuring, to actually feeding the business again. So how do you think about sustainability and then FIC performance through a tightening cycle in particular?

So I think that when -- I think it's really important actually to reframe it in post-2015. Because 2015 was such a structural change for us in terms of fixed income, just the amount that we've restructured with that business. And the conversation that I think you probably had with Ted, with Jon, over the course of those years, was what are we doing in fixed income, we're going to be credibly and critically sized to meet our client base. And so we focused on 2 things when we thought about fixed income, which was servicing your clients, our clients, but thinking about the velocity of the resources, how do you make sure that you are able to use those resources appropriately as you kind of move forward. And it's that velocity of balance sheet and the focus on clients that helped us move from a 6% wallet share, to a 10% share in fixed income. And so I would say that when we look at that expectation, very similar to the way that I described Institutional Securities and where we sit with ISG, I think that we would look to participate based on that marketplace. Now I think the other question you're asking is, well, what then is the size of the wallet and how do you think about that with fixed income. And I think that you're in -- and this is part of the reason that 2019, I don't necessarily think is the right comparison for 2022, you have different monetary policies. So yes, all central banks at 0. That's going to be a different environment than when central banks are changing the monetary policy at different places in different times, dealing with their own monetary policy cycles, so their own inflation, their own unemployment, their own GDP and their own rules and sort of adherences that they have to deal with. And so we do see some dynamism in terms of what could happen to fixed income.

And if I translate that, that means a little bit more activity potentially than what was going on in 2019.

I think there -- and I think that that's -- I think that's a reasonable way to describe it in terms of understanding client engagement.

We would agree with that. So okay, so let's switch to equities. And I think the question in equities that we all know last year was just an unbelievable year, for the most part, in equities. And we've seen more consolidation of market share. And we always ask you this question, which is are there any barriers or ceilings to how much market share any one of the top firms can actually amass in this business. It's not almost it's about how much market share you can take, but how strong are the barriers to entry now into that top tier? And what are those barriers?

Sure. So I think that when you think about the first question that you asked, is there a ceiling, well, there has to be a ceiling. Because I think that if you took this audience just as your cohort and you said, are you willing to put all of your positions with one bank, the answer would be no. And so therefore, you'll never reach. There is going to be a situation in which you're going to have different counterparties for different things that you want to do. And also, just from their own governance perspective, I respect that that's a decision that would be made. However, as you think about the equity business, it's not something that when you look at it individually, you could decide today I want to be part of the equity business, and I haven't invested in technology, I have to invest in people, I have to invest in talent, infrastructure, risk systems. But in addition to that, I think what we've tried to do when we think about the Sales & Trading businesses more generally is you have to remain global. So the environment is changing in which you need a presence in all of these jurisdictions. And that becomes the sort of licenses. Those are again regulatory hurdles you may need to meet in certain places. So when you think through that, that's a really important part of, what we call, not just barriers to entry, but we've really described them as moats, so what makes it such that you can build a moat around your business and you won't necessarily see a competitor come after it immediately. And of course, that takes continuous investment as we move forward.

So really scaled and complete, it's critical.

Yes. Absolutely. I think scale is absolutely something that we've highlighted across all of the Institutional Securities businesses.

Okay. So the last of the businesses, we did FIC, we did equities. Let's do investment banking and think about what normalization means in investment banking versus growth areas. And maybe the best place to start is with M&A, where these levels of strategic dialogue and backlog have been very high. So at this point, like what inning, I hate to ask that question, but what inning are we in?

That might -- I mean, I almost -- I want...

You know I don't play baseball.

No, well, I may not play football, but I'm just kidding, I understand it's baseball. I do think that the inning question, whatever answer that you're going to get from an inning perspective, I think, is wrong. So I think that what you can look at is what are the pieces or the building blocks per se that get you to where we are today. And so I think you can think first about corporations. It's sort of block #1, as I see it. And from a corporate perspective, I think you've moved to a place from a couple of years ago, I remember actually being with James in a conference in Florida, and the answer to the question was you have strength in health care and you have strength in technology. That was it, right? That's changed. Technology now permeates all sectors, all places. And CEOs are looking for ways to grow and ways to expand their platform. And so that, to me, is one thing that's not necessarily changing as we look forward. The second piece that I would look to is financial sponsors. So obviously, there's been a shift and change in dialogue, in how do you think about deploying capital. That again is not necessarily something that we see going away today. But the final point is also around financing, which I think that some people might say, well, could that -- as you -- we've talked about as monetary policy rises, as you see rates rise, well, does that change your thoughts around financing. And I think that if you think of financing from a historical perspective, you're still in a position where financing is at low levels relative to history. So we don't see that as being an issue today as we move forward. So I think there's still -- I think as a testament to when we say pipelines are healthy, that's obviously our view currently, that nothing is necessarily, in imminent, changing, but rather it's the volatility in the marketplace that's pushing out some of the transactions.

Okay. I hope you're right on that. So let's move on to this year's strategic update and the financial targets. So 20%-plus ROTE, what type of environment is really required to sustain, if not exceed, the 20% ROE -- ROTE?

So obviously, we -- ROTCE. So obviously, we met that last year. But as we said, the environment is different from necessarily last year, which is why, when we put out our strategic objectives and we thought about long term, what is the long-term vision for the institution, what are our longer-term goals and aspirations, they were centered around the concept of an asset-based target or an asset-based goal, I should say. And the asset-based goal is to create an environment where you have durable sources of revenue, they continue to help the institution achieve greater ballast in periods of what might deem as volatility in the institutional securities market. However, you pair that very clearly with your ISG business that we've said, for a long time, is both critical to our success, but also a great portion of our DNA. So that world-class franchise, that world-class brand and all the transactions that flow through it are critically important to also sort of pairing with that ballast and that growth associated with that asset base that we continue to develop.

Okay. So let's talk about the operating efficiency component. And I want to speak to expenses and the efficiency target, really in light of the pace of inflation that we've seen and the war for talent across the businesses that been played up and then some. So let's consider that Morgan Stanley pays for production in a lot of your businesses. Are there pressures now to raise the percentage payouts and maybe even all the more so of volume in 2022 and market values don't match 2021? Where are you seeing inflation?

Well, I think that the -- first, just to level set, the first place that we are in a position where we actually pay on sort of a grid concept, which is clear, is on the FA side. So let's take that as our example because that's probably the most obvious place that you can say. The grid itself is based on alignment with our strategic objectives. So any changes that you might see to the grid are actually associated with the objectives themselves that we would have put out. And that alignment for incentives, as you see it, is important. But if we use that as our example of how you think about pay for production, regardless of the changes that we may make to the grid, very simply only on the margin, we're still seeing a talent and an attraction of talent as we think of Morgan Stanley as being a destination of choice. And so when you see a destination of choice, you think, okay, well, why is that, where is the understanding behind it being a destination of choice. That's the investment we've made, the investment in the technology, the products, et cetera. And so I think while you're asking the question around inflation for talent across all places, if you take any example, I think you don't -- you're not only offering employees "pay". It's not just about pay for production, but rather do you have the infrastructure by which you can continue to produce. So the more infrastructure you have, the more you know that you can come to Morgan Stanley and see more net new assets. You can attract clients because you have the products by which to service them. That's part of your calculus when you're thinking about what employer to choose. And so I think it's important not to just think about the pay itself, but also to think about what the institution is offering the employee.

I think that's completely fair. So let's talk about staying with Wealth and Investment Management for a minute in a rising rate environment. And you've been very clear in the guidance outlining the NII potential in a rising rate environment, and you've spoken to it largely flowing to the bottom line. Given all of the debate around expenses that's gone on post fourth quarter earnings, I just want to talk about is there any incremental investment at this point in time that claims a portion of those incremental dollars?

No. The NII is largely noncompensable. There's no change in that. And that is part of the way that we've described it, and that remains the case. If you're asking about investment separately from that point, which there's no change from that point, we are -- like I said in the previous answer, we're always investing, but that -- those investments are taken into account when we put out our operating efficiency targets, when we put out our margin targets. There's no change. And so anything additional would be largely noncompensable.

So one of the things you talked about investing in on the January earnings call was investing in investment banking.

Yes.

Can you talk about what that means?

Sure. So when you think about investing in investment banking, well, what is investment banking. As I said, well, first of all, it's talent, right? It's a talent-driven business. All of our businesses are talent-driven, but in particular, when you think about coverage of investment banking, it's being able to cover a broader set of clients and a broader set of the client base. And so as I said a couple years ago, if we were having this conversation, you would say the main leaders of M&A transactions is in tech and in health care. And that's changed. And you see that in the data. We see it in our own data. We see it in the deals we do. And we see it in the coverage. But as that coverage model continues to grow and to expand, we need more talent to be able to cover all types of those businesses and all types of clients. And I think that is where we continue to make the investment as we see the growth and we see the need for advice. And as you said, further volatility, if nothing else, actually might create an environment or a situation where there's a greater need for advice in an advice-driven and in an advice-based model.

Okay. So let's go to the next pillar of the strategic objectives that you laid out back in January. And that's the $10 trillion in assets. So it's a longer-term aspiration. My simple math, very detailed math here, from the current $6.5 trillion, if I compounded at 5% annual growth rate, right, by that little math, you'll surpass that target by 2030. And if I added in any market value appreciation, it seems pretty easily. Actually, I know it's not easy, but it's achievable.

No, no, it's achievable. And I say that that's how we think about all -- and when we think about strategic objectives, they take work, but they are achievable, and we're putting them out for the marketplace to understand sort of what is, to some degree, our North Star.

Okay. So James, in that same context, spoke to the need to do more work to gauge sustainability or a reasonable expectation, as he called it, freakishly high growth rate that you produced in 2021. So I figure now that you've had 4 weeks since the earnings call to do all that additional work, but I mean, honestly, when you think about kind of the top of the funnel of workplace, new client relationships and the channel migration, how is it that you're thinking about a reasonable growth rate or a sustainable growth rate for those flows?

It's a really -- I think it's a very reasonable question, but I would like to remind all of you that we were sitting here 2 years ago and we had 1 channel. It was the advice-based channel. And so the amount that's changed, not only in our own lives, in the world, but at Morgan Stanley, is we've moved from 1 channel to 3 channels. And so to better understand in a world that's also dynamic in terms of how those different channels change and will operate, I think, is where the hesitation to put out a number is out there. So let's take ourselves back just to those 2 years, if we put ourselves back here in February 2 years ago. And we were talking about 1 advice-based channel where we were looking to consolidate assets from existing clients and gain new assets through new clients because we were able to attract new FAs given our investment in our Modern Wealth tools. That was kind of the story and how we were looking to execute. We then acquire E*TRADE. That closes, obviously, not immediately, and begin to see flows and the environment is also changing as we think about E*TRADE and self-directed. And then we also begin to acquire workplace. Well, what does that do? And how do you begin to see technology play out across all 3 channels to be able to think about the migration across channels and also, the way that you describe it, which we have described it before, is really this funnel. And so there's 2 things to really bear in mind. The first is getting new assets from existing clients in any of those different places and then migrating them to an advice-based channel where it makes sense for that client or just consolidating existing relationships in any of the channels. Well, that is the beginning of a conversation around how do you use technology to do that, how do you think about what we call LeadIQ to match our advisers with the right clientele who's looking for advice, with the right individuals who are saying, "I would like advice and I would like to see that." And so that's the beginning of that conversation and the acquisition of new assets, which we're currently looking at. We also have other technology that we've discussed as well called Project Genome, which looks at the entirety of a client relationship, the entirety of a client's life cycle and all types of wealth and better understanding that technology and better understanding the clients and what would be interesting to that client base, how do you think about that client base and what they might want, given their place in the wealth life cycle. So these are all things that we're currently doing to better understand what is the right growth rate or what is the right net new asset acquisition that we might see. But in addition to all of that, you also need to think, as you said, about the top of the funnel, and how do you have more participants, how do you begin to speak to a different type of audience over time that can see any of these channels and then begin to also see this migration towards what might be an advice-based channel.

So if we go to that top of the funnel, right, this was your new number in January, which I give you credit for giving us this new number, and I thank you because more disclosure is always better. So that new metric, the 20% -- you went from 21% and you're aiming for -- you went from 21% to 24%, and you're aiming for 30% retention at the top of the funnel. So let's talk about where the other 75%, 76% of the people are going right now and how it is that you actually improve retention over time.

So the first thing I want to make sure is clear is the retention metric that we've described. So like I said, 3 different channels. This retention metric has to do with the [ stock plan-based ] -- the workplace-based channel, right? So then the first question you asked is, well, what happens to the rest of the money. Well, when you receive -- when any individual who might work at a corporation receives stock, they're not necessarily going to invest 100% of those assets. There will be some proportion of those assets that they use to pay their bills, to buy a house, to pay a mortgage, to pay loans, right? There's a number of ways and uses of the cash. The question at hand is how do you keep the portion that's investable at Morgan Stanley. And so the way that we think about that, the first step in doing that, is really understanding what is a companion account. And so when you think about a companion account, that means if you look back to before our acquisition of Solium, before our acquisition of E*TRADE, when we had a very small stock plan administration program, if you were an individual who was receiving stock, that stock, we would call you and we would say, "Hi. Good morning. You're going to be receiving stock. Where would you like us to direct the stock?" What account, rather than it necessarily flowing into a Morgan Stanley account. And so you could pick Morgan Stanley, but you could pick a competitor's account. So step 1 is saying, well, at this point in time, 50% of U.S.-based employees are receiving their stock through a Morgan Stanley self-directed companion account. By the end of this year, approximately our goal, our target, is that 90% of those individuals in U.S.-based stock plans will actually receive that stock in a Morgan Stanley-based self-directed account. So that's step 1. And then step 2 is the education process, which has a lot to do with the same concept around financial wellness and everything else that we've discussed in terms of the ways that we're thinking about educating our clients. So what we do now is 180 days before you receive your stock, you'll might get a video. And the video might say, "Hi. Would you like to understand what a stock -- what it means to receive your stock? Let me walk you through it. What are the tax consequences? What are different things that might happen over time that is associated with that stock? So you, as an employee, have a better understanding of what's forthcoming." Then we might ask you, "Well, are you interested in advice?" You might click, yes, I'm interested in speaking to someone. Again, going back, using our technology, LeadIQ, think about that and match that, right, with the right type of adviser for that individual. All of a sudden, rather than a cold call, with an FA just randomly cold calling you and saying, "Hi, would you like to speak to a financial adviser?" We have a lead of somebody who actually wants advice. And so I think that that's how we begin to see how do we retain assets because it's not just sort of dropping it into a Morgan Stanley account, but appropriately servicing the client, understanding the client needs using, again, Project Genome. Okay, well, what does someone do with their first stock [ plan ]? What might they do with their second stock [ plan ]? Might it make sense for them to understand a mortgage product? Using technology, again, to inform and better understand and anticipate what might make sense for our client.

Okay. So we've talked about retention now and growing the assets. Let's kind of flip that a little bit because we talked about the benefits of rising interest rates. But for your deposit base, I think it's fair to expect that we would have some outflows in a rising rate environment. So let's talk about how we think about that in wrapping up kind of the prospects for wealth.

Sure. So anybody would probably use the last rate cycle to inform their view on deposits going forward. And so as you would expect, we saw -- we did see deposit outflows in the last interest rate cycle. However, 2 different things have sort of changed in terms of what might augment that relationship with deposits as we go forward. The first point is we have more products that might keep you within the 4 walls of Morgan Stanley, savings products, products offered by Eaton Vance's, fixed income products that we've acquired through the MSIM platform, et cetera. So again, being within the 4 walls of Morgan Stanley would sort of be one, might be an outflow of deposits, but you might actually keep them if it's in a savings account, or not necessarily, or in a Morgan Stanley-specific product. The second point is, as we think more about net new assets, some portion of net new assets is always going to be -- always is a strong word, but there is a proportion that will likely be held in cash. And so as clients bring over new assets and as that becomes part of the strategy that we're looking at, it would not be surprising to begin to see as business growth would also support the deposit base.

Okay. That's fair. And just touching on the loan guidance for a moment and the amount of loan demand, if I look at the growth in your Wealth Management-related lending book, it has been relatively quick. I am a bank analyst. So fast loan growth, it is what it is. How do you know it's healthy?

Well, as a bank analyst, I know you're also very good at math. And when you look at percentages, percentages are also based on your base. And so it wouldn't be surprising for both of us to agree that we, 15 years ago, were in a different position than peers when you think about the banks. And so it's a base concept in terms of a growth concept. But I -- you also can measure that when you think about household penetration, and you think about just how many clients we have. And we're really only talking about, again, the advice-based channel. That's all we've really thought about when you think about the lending channel at this point in time. And so as you might see growth in different places, you've gone from household penetration in the low double digits, to the teens. Well, there's still a lot more penetration that might be there as you educate clients, as you better educate FAs, as FAs -- as new FAs come in and become comfortable with our product set and also, as we better understand the demographics in different portions of the different channels that we also have now acquired. So I think that, yes, we would agree that we still feel that it's healthy and appropriate.

Okay. So let's go to our final subject, which is capital management. I know there's nothing more you like to talk about than capital management and CCAR. That's a favorite of mine. But -- so let's talk about within the CET1, right, it's -- you have more than enough capital at present. We all know that. Your requirement is 13.2%, with a 3% GSIB and then a 5.7% SCB. So let's talk about the manageability. Again, not that -- I mean, you're at 16%-plus. So it's -- there's no issue, but the manageability to reduce what your required minimum even is...

Well, as you -- as we all know, not all of it is necessarily within our control if we don't have -- if we aren't the ones running the models, right? The Fed runs their own models and their own sensitivities. So that's -- the parts of that come down to the regulators. However, what we do have control over is our business mix. And as you think about our business mix and you think about balanced, sustainable, durable revenues, that's our intention, and that's the way that we've set up the structure of the business and also set up the goals. And so when you think about those goals and you think about what's intentional, that should, over time, help us, would be our expectation as you think about what capital is required when you think about different businesses.

And so any level of confidence that there is materially greater appreciation for how changed your business model is?

I think that if you look at even the CCAR, I think that we feel good about the position that we're in. I think that there are places where you look at the CCAR exam and you see that we're in a similar severity envelope, I mean, the instructions that we all received, right, and that all of you have probably looked at. And I think that concept of a similar severity envelope, which we've talked about over the last couple of years, is important to understand how the Fed is thinking about the system at large.

Okay. So you're at 16% CET1 now. Your requirement is 13.2%. Hopefully, that requirement comes down over time. But kind of putting 2 things together, where are you actually comfortable managing the CET1 down to? And in your ROTE target, if I'm not mistaken, there's no assumption about incremental capital efficiency.

Not a public assumption. That's right. So we're always thinking about how to manage capital efficiently, and that's always going to be part of the conversation. But I think what we've also been -- where we have been very public and we've been very clear is what we're expecting, how we think about capital return to our shareholders, and so the buyback authorization that we put out at the summer of last year, that we feel confident with in terms of our capital plan, the dividend increase that we gave to the shareholders over the course of time. So to us, that's a portion that we remain very committed to. And I think what we are -- what we will do is we will look at where we are, understand where we end up in June, when we receive the results of the exam, and then reevaluate how we're thinking about the continuation of that return of capital.

Okay. And just to be super clear, in terms of the capital efficiency embedded in your targets, are you thinking about the required level of 13.2%? Are you thinking about the 16% existing CET1 under the 20%-plus target?

We are going to think about both, right? You're going to think about how it moves over time, your expectations over time because there will be usages from that 16% as you continue to return capital to shareholders.

Sure. Okay. So let's take a step back and kind of digest what we've heard, where we're sitting right now. And if I think about it, I mean, look, you put up out there a 20%-plus ROTCE target, right, which, I mean, think about your GSIB, you've got 16% CET1, and you're aiming to be at a 20%-plus ROTE. So what is it that you think is most critical to staying on top, staying at that level?

Sure. Well, for us, for over a decade, what we've been unbelievably committed to is strategic objectives, strategic goals, deliberate expectations of those plans, explaining the plans to our shareholders and then meeting those objectives. And so the deliberate intentional nature of following our strategic plan is what's most critical. And I think a language that James used once on a call that we all continue to uphold and sort of believe in is there's no strategy by [ envy ]. It's our strategy. This is how we think about our own company. And to meet these objectives, we need to continue to execute on the strategy just as we've laid out to shareholders.

Okay. I think that's a perfect place to wrap this up. Thank you for making the trip down to Florida to join us in person.

Excellent. It was fun.

We'll do it again.

I can't wait.

I'm sure. Thank you.

Thanks. Thanks, everybody.