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Executives

Colm Kelleher - President, Morgan Stanley Institutional Securities

Analysts

Richard Ramsden - Goldman Sachs

Morgan Stanley (MS) 2013 Goldman Sachs Financial Services Conference December 10, 2013 8:40 AM ET

Richard Ramsden - Goldman Sachs

Okay. I think in the interest of time we're going to get started. So our next speaker is Colm Kelleher, who is President of Institutional Securities at Morgan Stanley. Over the last three years Morgan Stanley has undergone a very successful restructuring story, which in the last year has resulted in one of the best performing stocks in our coverage universe. Hopefully, Colm is here to tell us how they're going to do an encore performance well for 2014. So Colm, thank you for joining us.

Colm Kelleher

Thanks, Rich.

Question-and-Answer Session

Richard Ramsden - Goldman Sachs

I thought a good place to start would be on that theme, which is that a year ago you set out, what you intended to do around the fixed businesses in addition, which you've largely now executed upon. You've obviously had a very good year in your equities business, a very good year in your investment banking business, and your wealth management business has done very well as well. So as you think about the strategic priorities for 2014 what would your top one or two be, what would be at the top of your list?

Colm Kelleher

Well we're not certainly trying victory about what's being done in that we're only half way through the FIG itself, fixed income renovation. The first thing we said resize the capital and get rid of legacy assets. The second thing of course is to try and drive the ROE within FIG itself to an acceptable level. So we definitely reshaped the business. We got our business down to the core products that we want to do. The evidence we're seen from ClientServ base and from clients of services that we're getting increasing share and traction, but clearly we got to turn that into a better ROE. So that would be number one focus in 2014. And with the new leadership we have, I'm absolutely confident that we're going to exercise on the pathway that we showed you.

There in fact many ways, if you look at our fixed income business, we've got acceptable ROEs for most of the products. We had underperformance in one area, we're pretty sure that won't repeat itself.

The second thing that I have to do is that Morgan Stanley has two incredible sources of Alpha, which will drive cross-selling. One in cross-selling within the investment bank, where now with unified leadership in the investment bank we have much better cooperation across the silos and breakdown those silos, so I mean as a result bankers are selling much more sales and trading type products that is referenced here in the other way that is changing and we have lagged there.

And of course the second big source of Alpha is our retail platform where with Greg and myself we've actually got a much better sense of cooperation and indeed even your firm has seen some of that benefits of that recently with a very large closed end fund that we sell down through these retail pipes and this all helped strengthen that relationship with clients. So those are the two things that I'd focus on.

Richard Ramsden - Goldman Sachs

So can we spend a little bit of time on the operating environment? So I guess the backdrop is this, if you would have had two years of rally -- rallying equity markets with tightening credit spreads or reducing if you like tail risk out of Europe. And yet, when you look at volume trends they're pretty much being flat over that period of time, I think capital market revenues have basically been flat over the last three years. What are you think is behind that, and do you think 2014 could see a recoupling of market trends and volumes?

Colm Kelleher

Well ever since 2009 we've seen a very big compression in global revenue products, and the most pronounced would be in fixed income.

Richard Ramsden - Goldman Sachs

Yes.

Colm Kelleher

But we also a very big compression in equity revenue p as well. And I think it's been driven by a few things, the uncertainty from a regulatory point of view where you got multifactor regulatory strategies coming, and which are causing concerns and confusion. Specifically in Europe the LAC, which will soon be rectified of addressing the banking system that's led to significant reduced activity in Europe in confidence. So I don't believe it's a secular change. I believe that revenues have been depressed temporarily low -- cyclical low and we should start seeing recovery in those revenue pops, particularly fixed income because even though with fixed income, a reallocation of the fixed income to equities, as tapering comes off et cetera you will see fixed income itself normalizing and market will continue. So -- and also M&A activity has been very subdued as you know.

Richard Ramsden - Goldman Sachs

Yes.

Colm Kelleher

But as the market stabilizes and confidence comes back, you will see revenue pops coming out.

Richard Ramsden - Goldman Sachs

Do you think the end of tapering should coincide with the pickup in volatility and rate market and mortgage markets that should help the fixed income to --

Colm Kelleher

I think it will coincide with a healthy pickup --

Richard Ramsden - Goldman Sachs

Right --

Colm Kelleher

In volatility. Remember, investors like good volatility not gapping volatility.

Richard Ramsden - Goldman Sachs

Yes, right.

Colm Kelleher

And what we've had is areas of gapping volatility, which grows confusion and uncertainty and people not wanting to invest. But clearly, at low-volatility levels at the moment, I like to see some recovery. And I think tapering itself will be handled reasonably well.

Richard Ramsden - Goldman Sachs

Okay. And what other risks to the revenue recovery story and fixed income from things like mandatory STEPs trading in terms of volumes, margins, or you don't think it will have much of an impact?

Colm Kelleher

Well the answer of all was given to that in the past as you know is if you look at the equity outlook, back in 2000 the legacies and electronic bid also got compressed significantly 78% the volumes went up 12 times. I think we will see a similar sort of dynamic happening in fixed income. It's just inconceivable that you will not see significantly more electronic trading clearly going on and a pickup in volumes in fixed income.

Richard Ramsden - Goldman Sachs

Okay.

Colm Kelleher

So I think it's about being positioned to take hold of it.

Richard Ramsden - Goldman Sachs

Okay. So I guess the other area of debate on the operating environment is that the industry has being living with higher equity and higher liquidity requirements now for some time and the hope always has been that's going to translate into more rational pricing. From what you said, are you seeing some of your peers priced more rationally now that they're living under the Basel III and the LCR world, or is it still pretty competitive in key products?

Colm Kelleher

It's pretty competitive in key products. You haven't had the final shakeout through the players are in the industry yet and there are huge amounts of uncertainty. I think on the whole American banks kind of know this where they're operating in, in Europe it's not yet clear where Vickers is going, where Liikanen is going, and in fact by the way the actual application for Basel III itself.

So I think we're going to wait and see and as you probably saw a few weeks ago the Swiss Finance Minister made some very strong comments on leverage and that is clearly having some effect on certain lines of business such as repo, prime brokerage. And so in those businesses we are beginning to see some pricing power. But by and large it's not surprising because leverage based capital will become the binding to straighten this world. So it's all about how you size your balance sheet and who are your customers that matter. So I think it's really much more about working out who your customers are and then doing the best.

Richard Ramsden - Goldman Sachs

When you have changed pricing, say based on the revenue threshold, what's the customer response been to that?

Colm Kelleher

Well it generally tends to be in a product where you're offering value any way. So, as a rule, it's prioritizing who your customers are and how they fit strategically and they understand. So, I mean, we're not talking about excessive pricing or anything. We're talking about turning the dial a little bit to optimize returns, but customers now understand that sheet is the major constraint for the industry and they just have to react to it.

Richard Ramsden - Goldman Sachs

Okay. I mean I think you've touched on this which is that regulators in different parts of the world are all moving in in very different directions. I mean, I guess two questions, the first is to what extent do you think domicile now matters as a competitive advantage within the investment banking business? And then second, how would you rank the U.S. in terms of its attractiveness as a base from a regulatory standpoint?

Colm Kelleher

Well, those clearly are no-win questions asked somebody, but let me address in a different way. How can we get an effective resolution or recovery mechanism? You're going to have nationalists agendas which will be self interested by definition. In the UK they are very much willing to buy what happened with Lehman Brothers International. So until there is an effective resolution or recovery mechanism, they will want a robust capital liquidity and single entity defense in that regime and you're seeing that.

Now by the way, you cannot criticize them for that because Governor Tarullo came out not long ago and said exactly the same thing should happen for foreign banks based in the States. So I think the issue is not that it is a conflicting agenda so much as there is a nationalist self interest. The agendas are all the same. Everybody wants a safe and sound system. We welcome regulation. The broad thrust of regulation is good, but the problem is that it is multi-vector. So when you overlay Basel III with liquidity coverage ratio with net stable funding ratio with leverage, then you certainly saw finally that you're beginning to doing to double tap and triple tap things which are making the -- but I think a lot of that will be resolved eventually when you got a credible resolution recovery mechanism, and at that point you probably get better global harmonization. But even the FSB themselves except that there needs to be a better degree of global harmonization, so it's fits and starts. Where do the Americans fit in that? I think personally its clearer what the regulations are here and I can't answer any questions on Volcker because I don't know what's going to happen.

Richard Ramsden - Goldman Sachs

This is not out.

Colm Kelleher

This is not out. But I think it's clear that it will be workable here. The issues in Europe are still to be resolved in terms of reinventing and Liikanen and CRD-IV everything else is coming through. So I think that's a lot of the issue.

Unidentified Analyst

Okay. So if we turn to your business, let's start with FIG. Your CDS spreads have gone from 150 to 200 basis points wider than your peers quoted one and a half two years ago to pretty much being in line if not even tighter today. Has that been the source of competitive advantage for you?

Colm Kelleher

Well not really, but just so I know you're uncomfortable about this even though we are much tighter than Goldman today as we will continue to deal with. Not really because actually the debt stack itself is a weighted average cost, built up over the time. And successive treasurers and CFOs of Morgan Stanley have run a very prudent debt stack, so actually the weighted average cost itself hasn't moved up dramatically. Where it has affected us and you saw this particularly last year is in our CDA, which is when we're dealing with derivatives with customers and the implied cost of funding is high and customers said, well, Morgan Stanley is downgraded flat; we're not going to deal with them.

And so in that sense it certainly calls business to flow a lot last year, but we're beginning to see it coming back and that's been evidenced to high volumes more than anything. The problem is going back to the very first question, we're getting -- we believe we're getting increasing client share but this is against the backdrop of a very subdued fixed income volumes.

Richard Ramsden - Goldman Sachs

Okay. I mean, specifically I guess rates is an area that you have said that you're running at historically low levels of risk. What would get you to change your risk appetite within that business and how much of a delta could that be for your overall fixed income franchise?

Colm Kelleher

We're generally running low risk everywhere, I mean that's a reflection of the environment and that shouldn't be surprising, and I said this to a number of you before. Our client Alpha is one that drives our risk, right. We're not going to jack-up risk in the absence of client flows. So, in theory, if you're seeing subdued client flows, which we're seeing now, then, if you believe us you should see subdued volumes, right, and so on. And by and large, that's what it is. So when we see confidence returning to market when we see a pickup in client activity, then we'll be more comfortable in taking our risk levels up as well, but we're certainly not averse to taking that risk levels, we just wanted to be based on something sensible.

Richard Ramsden - Goldman Sachs

Okay. You obviously went through a restructuring within the rates business, change of management structure. Did that in any way impact the level of risk that you took on?

Colm Kelleher

It clearly took the level of risk down because we closed out positions that we didn't think were working. And we're very much focused on liquid flow and client activity, but it hasn't changed the mindset. I'm very comfortable with the leadership we have that we will be able to take advantage of markets and client conditions when they pick up.

Richard Ramsden - Goldman Sachs

Right. I mean, I think you previously talked about needing $6 billion of revenue within your fixed income franchise to get to a reasonable ROE. Post the restructuring is that still the case?

Colm Kelleher

The way I look at it, and you can all do the math, it's all about ROE. So without me getting into numbers because the numbers actually workout for themselves, if you look at the amount of capital we have and look at the sort of return you want, that's what drives it. And we're very much focused on getting our five core products within fixed income and commodities operating at a satisfactory ROE. Now of the core fixed income products, four of our flow rates, which unfortunately is a very big part of pie, are doing reasonably well. And of course, commodities is very significantly challenged at this point. And I think for everybody, so.

Richard Ramsden - Goldman Sachs

Yes. That's true. I mean can you talk about the commodities business? There's obviously been some press about you're looking to sell pieces of that business. What are your -- what's the longer term strategy position (inaudible)?

Colm Kelleher

Sure. I can't go in specifically but in broad terms our commodities business has been significantly PBT additive and accretive to the firm over its life cycle. And by the way that seat of the businesses pre-'99 when the changes took place and post. We're clearly aware of what the regulatory pressures are about what that business should look like going forward and we will have a commodities business going forward. But in the meantime, what we will look at is, review all options to make sure that we would be compliant with what we think a steady-stage regulatory environment would be.

Now, as you know, the fed hasn't yet opined, but we can think we can pretty much see some of the smoke signals coming out on what that means and we're dealing with that appropriately.

Richard Ramsden - Goldman Sachs

Okay. So let's turn to equities for a minute. I mean that business is looking very, very well for you over the course of 2013. Can you talk through which products and geographies have already stood out well in the equities business?

Colm Kelleher

Sure. Well, Ted Pick and his team have just done a fantastic job over the last couple of years. If you go back a few years ago, we always had a top tier equity business but it was beginning to get a little bit tired. And you guys were significantly ahead of everybody else, and then it was this big scrungy in the middle. What they have done is managed to overtake you, I have to say that gives us a little bit of pleasure, two quarters running so far and assert ourselves as the top name in the business.

How they have done that? Well, first of all, the strategy is a nine box strategy, three products and three regions and that's prime brokerage, its cash and its securities. We'd always done reasonably well in cash, our prime brokerage business has been rebuilt tremendously under Rich Portogallo's leadership and a lot of people here know that, and derivatives we lagged, so there was a focus on getting the derivatives business up. Then the three regions, well how do you scale that and what's the opportunity. Well I think everybody knows success story of Japan, particularly in what we've done there and again --

Richard Ramsden - Goldman Sachs

Just on how important was MUFJ in terms of contributing to that?

Colm Kelleher

I think critical. I mean we are the number one house on the TSE. We're the number two institutional securities house in Japan now. You see the lead tables and everything has happened, and that's a huge global sort of playoff with the rest of our franchise. The U.S. you get increased market share which you know about, and that in Europe we decided to stay very committed to Europe but I'm personally quite negative on European growth over the next three to five years and some of you know I've been very skeptical of those people call the Eurozone to blow up. But the Eurozone are going up is very different from the growth within Europe and what's happening in end markets where I think this is going to be very subdued. So what we did there was they got increased market share and focused on it appropriately and resized the business. This is all against the backdrop of using a very strong research product to support our business as well. So it's a nine box plus research product.

Richard Ramsden - Goldman Sachs

Have any of the revenue gains within equity seen the expensive margin or is the business that you've taken on a profit --

Colm Kelleher

No we've always been very aware of the high touch, low touch, few in equities; you and I spoke about before. It's very easy to contaminate your high touch with an electronic delivery system. So what we talk about is one nation two systems. We made sure that we have in the low touch the (inaudible) high trading the right sort of product offering to our clients. Now for the high touch which is where you need to move discrete blocks et cetera, the right sort of service and that has been very successful within equities. Other firms have problems with that. And that has been very much helped by the sales relationship management function where we're able to manage these processes and see what we can do.

So but the one thing I do want to say about equity, which is a lesson to all of us, particularly as we look at redeveloping the fixed income businesses, equities people really are down into detail. They're down to these 1000% in terms of managing the business and the predictability of the business. And that sort of skill set is translating itself across the products as well. So it's a tremendous job by them.

Richard Ramsden - Goldman Sachs

How would you characterize the competitive environment both I guess in equity rather in fixed income? Because I guess what you've seen is a number of firms get out of certain businesses, whether it's downsize certain business, like fixed income, but at the same time they seem to be investing in other parts of their franchise like equities or investment banking. So are you facing just fewer more focused competitors than a year ago or would you say that the environment?

Colm Kelleher

Well you never say never, but first of all the global equity revenue pot is smaller than the global fixed income pot. So the result is you have to get increased share to do it. If you look at the sums of our competitors it's clear that the top third make money, the middle third probably breakeven and the bottom third lose money crudely, right. So there is a huge desire to be in that top third. But to be in that top third it's about having the whole product suite that's right sized.

Now Morgan Stanley has got the nine boxes the three products in three areas. We have a very strong investment banking presence and huge origination pipeline and we also have this retail distribution capability which reinforces all of that. So we think two of the top three I won't mention who the other one is are pretty well ensconced there now as long as you preserve that. And then, yes, there will be a fight for talent beneath that. And that's usually where you lose people, and there are, certainly I can think of one firm that's very aggressively hiring in the equity space to try and move itself up through the tables.

Richard Ramsden - Goldman Sachs

How intense is the fight for talent today compared to what you've seen over the last three years i.e., is there a lot of competition --

Colm Kelleher

I would say in equity it's acute.

Richard Ramsden - Goldman Sachs

It's acute. Any specific areas or geographies?

Colm Kelleher

No, the U.S. for sure, and Asia, but the world's changed somewhat because people are less about have gun, will travel now in terms of their careers. They have to look at working for a firm that they think as a value proposition that makes sense. And the big change in Morgan Stanley over the last five years is that we validate to the value proposition that makes sense. So as a result we cannot lose that many people because they see that we have a top equity business, top investment banking business, around an investment bank we have this retail distribution capability and, by the way, we've a very strong shareholder who will help and it's a reason to keep people in what is -- well, we started by saying a very uncertain world from a regulatory point of view.

Richard Ramsden - Goldman Sachs

Right. So let's turn to investment banking for a second. I mean, you talked about this at the beginning. Your backdrop for M&A looks incredibly good, just given the amount of cash on corporate balance sheets and the fact that markets are doing so well, but volumes have remained pretty subdued. I mean what do you think is the trigger point?

Colm Kelleher

I think it's confidence and it's beginning to come back certainly into the U.S., unemployment's coming down, productivity costs under control, better efficiency, stock market feels pretty good, so certainly the IPO market is vibrant, the debt market has been very strong. I think M&A activity is beginning to pickup at pretty subdued levels. Although within that it's quite an interest in the proportion of cross broader activity is quite high. So I think it's all about confidence. I feel very good about M&A activity in 2014 certainly with the tailwinds we're getting through.

Richard Ramsden - Goldman Sachs

Are there any geographies or industries that you think could be standouts for next year?

Colm Kelleher

Well, I think the U.S. and Asia will be standout.

Richard Ramsden - Goldman Sachs

Okay.

Colm Kelleher

So I think Europe will be somewhat subdued for the reasons we said.

Richard Ramsden - Goldman Sachs

Okay.

Colm Kelleher

Although, on a relative basis, I think American banks can do well in Europe.

Richard Ramsden - Goldman Sachs

Yes. And for your investment bank, how important is Smith Barney's and value proposition when you go out to clients and fetch for business?

Colm Kelleher

Smith Barney is dead. Let's call Morgan Stanley Wealth Management. Thank you very much. Wealth management is absolutely fundamental to what we do, particularly in the U.S., certainly in Asia, and increasingly so in Europe. It -- you remember there was a certain modest CEO of a large competitor who two years ago said that he could lend $20 billion for AT&T, anybody remember that statement?

Richard Ramsden - Goldman Sachs

Yes, absolutely.

Colm Kelleher

What he was saying in the strobe was that's our value proposition, we're an investment banker with this massive balance sheet. Morgan Stanley's value proposition is we're an investment bank with this huge retail distribution capability and, by the way, we have the ability to use a large balance sheet not as being very effective with the Japanese in the U.S. and increasingly in Asia. So I think that really answers that question.

Richard Ramsden - Goldman Sachs

Okay. We got about 10 minutes. So do you we have any questions from the audience? Sure.

Unidentified Analyst

I just have a question about your (inaudible) dividend for 2014, does you plan to increasing ROE also include passing on some of the cost to your partners, your clients? And if so, have you already had -- started to have those discussions with them and how are your largest clients responding to the outlook for a wider bid off spreads?

Colm Kelleher

Well I don't think we're actually having active discussions about whether there are wider bid off the spreads but we're quite likely to be wider bid off the spreads because the market isn't giving a proper risk adjusted return for the risk and to mediators. But the simple answer is we're not having those discussions because we don't predict. Our ROE predictions are based on what we can control and it's not even based on market pickup and activity. So it's based upon what we think is an achievable market share within the existing revenue environment and, secondly, reducing the cost we have.

If we get the tailwinds you're talking about, which is an increase in bid offer and by the way a pickup in general market activity then that will give us huge operational leverage, but we're not factoring that in.

Richard Ramsden - Goldman Sachs

Sure. Steve? Or actually go out to Julian.

Unidentified Analyst

(inaudible). How do you see the outlook for flow rates business going forward in a rising rate environment? And secondly, given that's a relatively tougher part of fixed for you, how are you repositioning that business now?

Colm Kelleher

I mean, if you look at the fixed income pie 70% of the business even in environments where you have rising rates in the past are from the macro product, which is flow rates and foreign exchange. So you just can't not be in it. So the question is it's got to be right sized. So we've assumed that the revenue environment doesn't pick up. But we assume that we're getting an increased market share which we're beginning to get evidence of and that's really a balance of payments discussion with our clients. And certainly since the ratings announced that has been clarified clients are coming back to us and they understand the value elsewhere that we're providing.

So I do think structurally we will pick up more client business. I don't think the rising rates environment itself, I mean, in this new vocal world, that's really much more effective about questioning the carry trades that banks traditionally put on to make money and there's a lot less of that you see small trading portfolios anywhere over the last six months. So I think actually we just need to execute on not taking a carry trade type environment risk taking and just focusing on clients and we'll do pretty well given that part.

Unidentified Analyst

I'm just curious what proportion of your total FIG revenues come from derivatives and how you're thinking 2014 when a lot of the stuff has to be traded on a STEP, itself which you alluded to the fact that hit as spread may compress? But I'm not yet convinced that you're going to see a 12 times increase in velocity for off the run OTC directives. So I'm just wondering if you're going to get once gain that come out of positive?

Colm Kelleher

I can't prove that, Steve. So I can only look at that from our equity analog and say that's what's happened in the past. By the way, I wouldn't get too carried away with the amount of bid offers that have been normalized and the directives normally flow, liquid flows over the years they were pretty compressed before the crisis. And I do think there will be business away from the STEPs that will be done and priced appropriately. But by and large I'm assuming that the bid offers will get compressed and I'm assuming that unlike you, volume activity will pick up in the basis of that.

Unidentified Analyst

Do you think even with the introduction of STEPs in '14 that the fixed income revenue pools will grow versus 2013?

Colm Kelleher

Yes, I'm assuming that 2014 fixed income revenue parts will be static versus '13 and '12 and '11 has being very depressed. So if we do get a growth in those pots, we will actually get good operational leverage. So we've made no assumptions about growth in markets or anything else which I think is a prudent way of looking at it.

So as we're right sized for, that's why we have the number of people we have a fixed income, is why we decided our RWA profile will be what it should be to support those businesses on a pro forma basis, and I think we will then be relevant to our clients moving forward.

Unidentified Analyst

Thank you very much. Can you talk a little bit about non-comp expense and how important that is to getting to the ROE targets please?

Colm Kelleher

Yes, well, I'm not going to give you targets because that what the CFO does. But all I'll say it's very important to us. But you have a number of contrasting strands. You have the expenses you can control which is inefficient spend, which is old legacy systems, legacy ways of operating, which we're cleaning and reengineering, and then you have the mandatory change in one of the bank expenses that come with regulatory expenses and so on. I think we've given good guidance on expenses. The expenses we control we've actually shown a much better job and trajectory of managing and that's the way we look at it. But in terms of real detail on that I think you need to speak to Ruth who will give you better guidance.

Richard Ramsden - Goldman Sachs

Okay. I guess as a follow-up to that, how much of the headwind is some of the incremental regulatory and compliance costs from complying with things like the Volcker rule offsetting some of the stuff that you can do on the discretionary spend side?

Colm Kelleher

Well I mean some of it is expenses that have come out of regulatory change; you would have to have done any way, right. So the marginal spend I don't know what that is but clearly it's a significant headwind for everybody at the moment. And going back again to the initial issue if you're looking at ahead of resolution recovery mechanism, you have national regulators who want to see many Morgan Stanleys in their country or many Goldman Sachs in terms of controlling systems and so on. That will clearly be expensive, but we factored all of that into us, what that is doing is masking the fact that we've actually done a much better job of controlling non-comp expenses where we have been very inefficient in the past.

Richard Ramsden - Goldman Sachs

Right.

Colm Kelleher

That we can control.

Richard Ramsden - Goldman Sachs

Sure.

Unidentified Analyst

Couple of different questions. Firstly, your thoughts on upcoming fed stress tests? And secondly on the wealth of management business, you've already see quite a big rise in margin with the tailwind of rising markets, but how do you see gather from here. You're still not best-in-class despite the fact you've got fantastic scales, so how do you drive the margins high from here?

Colm Kelleher

Well, the first question the best thing that ever happened to me is my job change three years ago, so I don't comment on the fed stress test, I'll leave that to Ruth to talk about, just deal with it. On the wealth management business, yes, we've seen a pickup in margins, PBT margin, but really the real alpha will come in wealth management when we get rising rates, because it's the non-compensable revenues that come from your broker suite deposits and you know the numbers. They are huge in terms for every 100 basis points increase. What that means in terms of revenue is it drops to the bottom line and that would be a significant propellant on our ROE as well as ROT in the wealth management business. So in many ways, as long as this is an orderly transition in rising rates that will happen very good generally for all of our businesses but that's a $64 billion question.

Unidentified Analyst

Sorry, just to be clear. The targets you've laid out, some 20 to 22 that's not dependent on rising rates but dependent on the deployment of the deposits, which you're receiving from Citi, so that has the same benefit of the non-compensable revenues as well but then you have the rising rate on top of it?

Rich Ramsden - Goldman Sachs

Okay. We have time for one more question if we have one. Okay, Colm, thank you very much for coming. Thank you.

Colm Kelleher

Thank you very much. Appreciate it. Thank you.

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