Good morning. This is Kathleen McCabe, Head of Investor Relations. During today’s presentation, we will refer to our earnings release, financial supplement, and strategic update, copies of which are available at www.morganstanley.com. Today’s presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our notices regarding forward-looking statements and non-GAAP measures that appear in the earnings release and the strategic update. This presentation may not be duplicated or reproduced without our consent. I’ll now turn the call over to Chairman and Chief Executive Officer, James Gorman.

Thank you, Kathleen. Good morning, everyone. Given the amount of information we’re going to cover on this call, we’re happy to extend the Q&A a few minutes as needed to insure you get your questions in. In a minute, I’ll take you through the 2016/2017 outlook and plan, but before I do so let me touch briefly on the fourth quarter. Clearly the difficult environment that began midsummer continued through the fourth quarter. Notwithstanding that, equity sales and trading and Investment Banking were strong, and Wealth Management and Investment Management were solid. We acted on those things within our control by initiating a major restructuring affect, conducting a large reduction in force in December, reducing our compensation-to-revenue ratio, launching a large scale firm-wide expense initiative, more on that later, significantly reducing RWAs impact to $136 billion, well below our target of $180 billion, and closing the sale of our oil merchanting business. Finally, we put in place the leadership team to drive the team forward over the next several years. On that, I look forward to having Colm join me as our President. He brings highly complimentary skills and will help take this firm to the next level. The previous appointments of Ted Pick as Global Head of Sales and Trading, Dan Simkowitz as Head of Investment Management and Jon Pruzan as CFO are hard evidence of our deep and talented bench. Finally, Sam Kellie-Smith, will run fixed income and commodities working for Ted. In light of these changes, it was expected that Greg Fleming would pursue opportunities away from Morgan Stanley. We thank Greg for all he is done, and wish him well for the future. Our bench in Wealth Management is particularly strong. Andy Saperstein and Shelley O’Connor have over 40 years experience in that business. Shelley previously…

Thanks, James. Good morning. I will keep my comments brief, so we have ample time for Q&A. The fourth quarter of 2015 proved to be a continuation of the third quarter in many ways with mid-quarter volatility and macro concerns driving clients to the side lines after relatively constructive markets early in the quarter. In a volatile environment, we benefited from the strength of our equities, investment banking and wealth management businesses. Against this backdrop, revenues were $7.7 billion in the fourth quarter, or $7.9 billion excluding DVA, up 7% versus 3Q 2015. Non-interest expenses for the quarter were $6.3 billion. Our effective tax rate was 34.5% for the quarter, driven by our geographic mix of earnings throughout the year. For the full year 2015, our tax rate excluding the discrete tax benefits from the first quarter was 32.5%. Now to the businesses. In a challenging environment for some of our institutional security business, overall revenues ex-DVA were $3.5 billion, up 2% quarter-on-quarter. Non-interest expense was down 11% versus the third quarter. Compensation expenses were $1.2 billion down 7% quarter-over-quarter. Excluding DVA, the ISG compensation ratio was down for the quarter, which brought our full year ratio to 37%. Non-compensation expenses were $1.6 billion for the quarter, down 13% driven by lower litigation costs. In investment banking, continued strength in our M&A business and better performance in equity underwriting helped to offset weakness in debt underwriting. For the quarter, we generated $1.2 billion in revenues up 3% sequentially. Advisory revenues for the quarter were strong at $516 million, but down 7% from the post 2008 high we achieved last quarter. Turning to underwriting, equity underwriting revenues were $352 million up 41% versus the third quarter, primarily reflecting increases in IPOs. We continued to see pressure from volatility in fixed income…

Thank you. [Operator Instructions] Your first question comes from the line of Brennan Hawken with UBS. Please go ahead.

Good morning, thanks for taking the questions.

[Indiscernible]

Just a quick one on the reduction, it’s actually not a quick one. On [indiscernible] RWA and FIC that you laid out in the deck. So what should we think about as far as timing, obviously you laid out the year-end 2017? But is there a way to think about the curve over the next two years, as we progress. And how should we think about the revenue that would be tied to that capital and how it might be recycled throughout the organization if not returned to shareholders.

Good opener, Brennan. Let me start by saying first, we’ve laid out RWA targets, so there – for I think the last three years and going back I still remember a number like $392 billion or there about in around the third quarter of 2011 in FIC. So we are light years from that. And last year, we thought we had achieved $180 billion and as you can see, we ended materially lower than that. On the exact timing of year-end and the trajectory year-end 2017, I can’t really help you. We’re going to do it opportunistically. We’ll do with sort of minimum damage. We don’t want to get rid of assets on a distressed basis. We have some natural roll off. So we feel very comfortable with these targets. And it’s fair to say we haven’t disappointed in the last few years. That hasn’t been an issue in FIC. As it relates to the capital with just arithmetically, if you run these numbers through the models, it does actually free up that much capital. It just means the business doesn’t need that capital. Our view is that we were overcapitalized that our balance sheet was too big in the business given the revenue and business opportunity. We now – and we were over expensed frankly by taking out 25% of the head count and with that the expenses on compensation, the project streamline that would now work on some of the infrastructure pieces by now reducing the RWAs and the SLR Exposure. We will reduce the amount of capital tied up in that business. How that is redeployed is a really good question. Obviously, overtime we expect, we’ll deliver that back to shareholder. That’s the current plan. We don’t control all of the pieces of that plan. We are a regulated institution. We have been through CCAR or SCAR I think five times. And every time we’ve asked for a buyback or dividend. Our request has been met. It’s fair to say that we’ll continue to ask for buybacks and dividends. And where we can’t use that capital if it’s sort of track capital for some period of time which some of it maybe. There are clearly other businesses that can use the capital sensibly. We have very high return businesses in both Investment Management and Wealth Management. Clearly, we can use the capital to support our growth in those businesses. As indeed we have had very high returns in our equity franchise. So I don’t know, is that helpful? But it’s hard to lay out a more specific timeline for the balance sheet now that be already runoff than what we’ve given here with the instate and with the year-end 2017.

That’s fair, that’s fair. Thanks, James. I guess is there any way that we could think about revenue or you could maybe help us to frame how to think about revenue, because obviously if you are going to take that much capital out, right. You are going to have a very different business. You talked about focusing on some of the strengths a few business lines maybe you could help us think about which businesses you are going to be deemphasizing and how much revenue you think realistically could come out as a result of that. And then finally, how that translates into margin for the business overall.

Well, I don’t think I can give you the margin translation at this point. And let me address some of the other issues and then I’m sure, Jon may want to add to it and you’ll be hearing a lot more from Ted on the leadership team, probably in the first quarter, one of the investment conferences. I think the basic position we are in was we had more balance sheet and more capital in the business than we were generating revenues on. So we don’t think there’s going to be great revenue diminution from this point given where we finished 2015, which frankly as we said we are very candid that was disappointing. What we’re doing is reducing the path of fixed income, where frankly we didn’t see the revenue opportunity over the last 12 and 24 months. We’ve always said as we said on the call we’ve always had a good micro business, a good credit business that remains good. We’ve been very good in the more sophisticated structure rates. We’re reducing obviously our exposure and liquid rates. We’ve never been a major FX trader and we’ve focused on the major currencies there, not the not the non-G10 currencies. And then, regionally we sort of picked our shots through distressed and high yield in various other places around the globe where we think we need to be overemphasized relative to under. The net of it will be more of a U.S.-focused business, a slimmer business when it comes to some of the macro products. I don’t know John if you want to add at this point anymore details on that.

Yes, the one thing I would add is just to give you a better sense of some of the things we are getting out of as James mentioned, most of that is not in the U.S. Things like sovereign CDS, some of the non-core European currencies, Asia distressed trading, some of the bespoke [ph] correlation products as well as all of the work we’ve done on our commodities business in terms of the oil merchanting businesses as well as the announcement regarding our European power and gas last year. So a smaller footprint, less capital, less expenses and better margin.

Okay, great.

And on a personal note, Brennan have to apologize I’ve called you Brendan, I think, three earnings calls in a row, so my apologies.

No worries, James, that’s all right I’ve been called worse. And then finally another one here real quick. When we think about your ROE goal, right ultimately which you referenced early on in the deck many times as 10% and then, we think about 2017 showing the 9% to 11%, can you maybe square how that’s a little bit different, just is it that the transition may not be complete by 2017. How is it we should think about that?

You know, our goal remains to achieve returns above our cost of capital. Clearly whether our cost of capital is actually 10% right now, but let’s take that for granted for the moment. Our goal is to achieve returns above that. Clearly we can’t be that precise, I mean, this is a highly variable set of revenues that we have in these businesses as we are seeing in the markets today versus Friday, for example. So that’s why we’re expressing it as a range but you’ll note the mid point of that range is indeed 10%. We aren’t backing off of the goals, in fact for the first time we’ve put a timeline against it and as we laid out what the key drivers of that. Obviously, it’s with the appropriate caveat which you would expect if we have a major outsized litigation expense or penalties that are unforeseen if the markets completely collapse here if we have no revenue growth, if the Fed responded very differently to our capital plans than what we intended it gets harder. On the other side if we have stronger revenue growth, we meet our expense targets, we do our capital plan, we’re confident about, certainly about the range and our target is the mid point of that range.

That’s fair enough. Thanks a lot for taking my questions.

Sure.

[Operator Instructions] Your next question comes from the line of Glenn Schorr with Evercore ISI. Please go ahead.

Hi, thanks very much. I guess the follow-up on FICC. Just curious what you think the net of all of the moves might be in terms of how you think about your G-SIB buffer and then how it might factor in just in general to your ability to return that excess capital. I heard your comments about redeploying if you aren’t allowed but it seems like your RWA reduction and then the costs that go along with it is kind of what builds the buffer but just curious to get some detail on that.

In thinking about capital, I mean, problem number one is having enough capital. At 4.2 supplemental leverage ratio which was just I think the beginning of 2014. I’m looking John is nodding 2014, clearly we weren’t there. So problem number one has been solved we’ve clearly got enough capital on any metric that you measure. Problem number two is then if you continue to accrete capital what is the sensible buyback dividend and total payout ratio that you’ve put against that. And then opportunity number three is as you reshape the business mix and move to a less capital intensive parts of the business, you by definition are throwing off more capital than you’ve had the day before you did that, what are you able to do with that capital? As to refer to Brennan’s question this isn’t going to happen tomorrow, Glenn, it’s going to happen over as we said a couple of years so it’s not like we’re going to have a pool of capital to give back tomorrow. But we’re setting ourselves up for increasing returns over the next several years at the same time let’s make investments across the rest of the business. So I don’t know if that helps you, but where it relates to G-SIB buffer, we know what our buffer is. What we don’t know is how the Federal Reserve through the CCAR process is adjusting its models once they put the CCAR buffer in my understanding is there will be adjustments to the models which will tamper that buffer to create a net number which is lower than the buffer for all of the banks. That’s my current understanding. Obviously we have to see that play out. My understanding is the Federal Reserve had models which were by definition harder than they probably would have had in normal circumstance but that was driven by not having the G-SIB buffer put in place. Now that it’s in place the models will be refined and the net impact is what we will be looking at. So the combined net impact of the G-SIB buffer with these capital reductions from the balance sheet with the amount of capital we are a accreting, we still accrete capital last year gives us a reasonably high degree of confidence that we’re going to be seeing increasing capital returns in the years ahead.

From your lips, all right, just a follow-up on a quickie one on the corporate loan commitments, if you could give any color about the total or the funded loan book, how much of its energy reserves against that? How are you feeling about that book in general.

In general, on the corporate loan book, I think, the focus areas have really been around energy and probably event, particularly in the single-B market. We have seen, on the energy complex we have seen credit migration in that portfolio and as a result, Glenn we’ve increased our allowances. We seen an increase in some negative marks that we take through our – income statement, as well as increasing our hedges. And we would expect that pressure on that portfolio to persist for awhile. In terms of the total size of the portfolio, it’s about $16 billion of both funded and unfunded, this is energy now. That’s down from $17 billion in the third quarter. Of that $16 billion, I would say 60% is investment grade, or excuse me it’s to investment grade counter parties and only about 30% of that $16 billion is funded. Another focus area within the energy portfolio has really been around E&P. In terms of our statistics that portfolio is about $4.4 billion broken down, $1.7 of that is funded to non-investment grade borrowers and about $2.7 billion is still unfunded. That unfunded piece is about two-thirds to investment grade borrowers. In terms of the reserves and the allowances remember of the $16 billion total energy book approximately 60% of that is held for investment, while 40% is fair value or held for sale. That other portion is mark-to-market and primarily flows through our other revenue line in the ISG in terms of the income statement and has been marked to the current environment. We will continue to monitor that portfolio very closely. We regularly stress test it. We’re watching for signs of contagion and we’re hedging accordingly and adjusting our hedges accordingly. So I think that’s the color on the energy exposures. On the…

Okay. Thanks for that, a lot of detail. Good.

Your next question comes from the line of Guy Moszkowski with Autonomous Research. Please go ahead.

Good morning. Just to follow-up and stay on the topic of corporate credit. And more broadly then the sort of energy E&P type stuff that you talked about where you gave good color. In your experience what are the leading indicators of credit deterioration that you drilled down on broadly away from energy and the commodities [indiscernible], how are they looking right now and is there any reason that you can think of as to why this would be different this time?

It’s a good question in terms of relative and historical performance. I think we’ve obviously been in a very benign credit environment for awhile. We are starting to see some pressure in the energy complex as I said across the other metrics, particularly for us given the health of our customer base. In the retail side we haven’t seen much stress in those areas. We are increasing the allowance for loan losses, this quarter it’s up to about $70 million, clearly a portion which is energy. So we are seeing a churn in the credit cycle. But again from our book in the way that we look at it, it’s really been focused in, on the on the energy complex right now.

Okay, that’s helpful. And then just a follow-up question on wealth management. Looking at your Slide 16, the net interest income growth in a range of 75 basis points to 175 basis points of margin contribution, if – I think you’ll remember that you’ve baked in the forward curve to those assumptions. So where would we be in terms of that range if short-term interest rates stay where they are currently as opposed to actually incorporating the forward curve?

I think the right way to think about that, those numbers, I would say, do not require any incremental rise in rates from where we are today. If the forward curve is realized, we will get some incremental benefit, but those margin targets don’t require incremental rate movements. They do require growth in loans that we laid out on the prior page and we’ve had very good momentum in that lending book but it doesn’t require the forward curve to hit those margin targets.

Okay, that’s really helpful. Thank you so much.

Your next question comes from the line of Christian Bolu with Credit Suisse. Please go ahead

Good morning.

Good morning.

So my first question is on the $1 billion cost saves. I’m just trying to gauge what’s incremental versus just rule off one-time as in 2015. So I guess the first question is how much litigation and severance costs did you incur in 2015? And then two, of that $1 billion in cost saves how much of that is roll off of the 2015 litigation and severance cost versus incremental business rationalization?

Again of that, $1 billion as James mentioned, that assumes no individual one time significant charges. There’s obviously an element of litigation that’s part of our business. We were happy to see the litigation expense go down in the fourth quarter, but in terms of breaking out those individual numbers, we have historically not done that but again it’s – it does require no major single individual event.

Okay, just so I’m clear, because I think you put out the numbers in your Qs of just about $500 million of litigation costs through the third quarter and about $150 million in severance, so that’s close to $700 million in cost…

I’m sorry, I didn’t understand the question. I apologize so again the $550 million number you’re referencing was in the third quarter year-to-date as I said our litigation came down materially in the fourth quarter and the severance of the $150 million was across the firm in the fourth quarter, presumably we won’t have the same level of severance so part of that severance would be embedded in that billion dollars.

Okay, so what about the litigation are you assuming it’s roughly the same going forward or you assume it comes down from that at least $555 million we had as of the third quarter.

Yes, I think we believe that the most significant items related to the credit crisis are largely behind us. This quarter it was good to see litigation come down and so I think there is an embedded assumption along those lines but again it’s a lumpy and unpredictable line item.

Okay. And then my follow-up just on the lending – on balances I’m just trying to reconcile the current target versus the prior target so you had – you expected $180 billion in total U.S. Bank assets by the end of 2016. Does that still stand and then how do we think of 2017?

In terms of the – what I would say is the slide in the deck is only in the wealth management segment so it’s not a total lends on the bank. We’ll be coming back to you with more detail throughout the year but in terms of the 2016 number that loan growth that you see out of wealth management would be consistent with those targets.

Okay, great. Thank you very much.

Your next question comes from the line of Steven Chubak with Nomura. Please go ahead.

Hi, good morning.

Good morning.

So, I appreciate the detailed guidance certainly as part of the broader strategic review. It’s always quite helpful to us but some of the early feedback that I just wanted to relay suggests that there’s investors are struggling and quite candidly we’re struggling to reconcile the [indiscernible] to 9% to 11% ROE versus some of the different guidance components. And if we think about a backdrop where there’s 4% annual revenue growth, a 74% efficiency ratio, 32% tax rate, and flat preferreds and non-controlling interest, it gets to you about $6 billion of net income to common and if I even take just the low end of that 9% to 11% ROE range, the implied common equity is about $66 billion which suggests payouts in excess of 100% over the next two years. So I just wanted to get an understanding as to of what elements or components of that analysis might be flawed or needs to be tweaked and how should we – and what capital return assumptions are embedded in that 9% to 11% ROE target range that you highlighted for 2017?

Let me try to take a swing at this one. So as we laid out on the page, first of all the compensation, the billion dollars plus of compensation and non-comp savings are assuming a flat revenue environment so if we get out two years and we’re flat to today our ratio will be 74%. As James mentioned we do expect revenue growth throughout this period and therefore the efficiency ratio should be lower than the 74% because we do have operating leverage in the business. First and foremost, and so I think that is probably the biggest disconnect in your math. You can see in the revenue bucket or the modest revenue growth bucket we do have improvements in different business segments. And then in terms of the capital base, ideally, we believe we have sufficient capital, we had been accreting capital over the course of the last several years. We would expect to probably accrete a little bit more capital over the coming period. But we would like to try to slow – clearly slowdown the accretion of capital since we have – we believe we have the appropriate amount of capital for our current plan.

Okay, thanks. And Jonathan, I think you spend a lot of time talking about capital and obviously it’s going to be contingent on the feedback you get from regulators and presumably they would be inclined or incentivized to reward actions to reduce your systemic risk footprint or exposure system with more risk intensive activities, based on your discussions have you been given any indication that they would be perceptive to higher payouts for those that are willing to shrink more aggressively in those areas.

I don’t want to get ahead of predicting how regulators are going to think about this. We did what we think is right for our business. Our job is to generate returns to our business; however, arithmetically if you have met all of the capital targets by definition, if you change the structure of your business and throw off additional capital that you know by definition don’t need that all will be available for returns. Do I think that there is going to be one-time major dividend in the next 12, 18 months. No, I don’t think that’s possible but do I believe that we’re going to be in a position where we increase our returns, absolutely. And you’ve seen banks that have generated payouts above 100% for this reason, for that they are accreting more capital than they need for their business. That’s before you get to banks that have actually restructured their business in the phase of the new business reality. So again I don’t want to get ahead of them – that would not be a smart thing to do but I do think our strategy is pretty clear and it’s certainly consistent with where the regulatory push has been.

Right, that’s very helpful. I appreciate you taking my questions.

Sure.

Your next question comes from the line of Mike Mayo with CLSA. Please go ahead.

Hi, your 9% to 11% ROE target, you have a timeframe on that for the first time ever, I appreciate it. But what is that on a tangible ROE basis?

Mike, we’ve got about little over $9.5 billion of goodwill and intangibles, so on our capital base, somewhere around 125 basis points, above those numbers just math.

All right, so the target on a tangible basis is 10% to 12%?

We have an ROE target of 9% to 11%.

Okay.

For all of our common equity.

And what’s the need behind this target, I mean is it just a target that sits there or is management paid off this? What’s the follow through from this target to the organization?

Not totally sure, I understand your question. All of our employees are bonus eligible paid in stock. The stock is generally performed somewhere in line with ROE and price to book so everybody is affected by that. The most senior management team I receive as part of their compensation performance units which are directly affected too by ROE and total shareholder return so that’s very specific for the senior team. But we are not doing this to frankly drive up our personal comp. We’re doing it because we think these businesses should be run with returns at or above 10% and nobody in this world predicted the last four or five years of what’s gone in the markets and the amount of capital that would be required to support these businesses when I took this job our capital base was $40 billion, today it’s $69 billion. We’re in a tremendous E position and the challenge has been to get the R moving consistent with that rate of growth of the E. And what we’ve done here is to frame it for investors because understandably they want to know what is a realistic timeframe just to Steven’s question before what is a realistic timeframe, how do the pieces add up mathematically, to get you there. Are they believable, are they plausible and we thought it might going to be smart to layout what we think is a realistic timeframe that kind of range 9% to 11% 2017, the pieces are we are definitely taking out expenses, some of them are in the bag, if you will. And some of them are going to be driven by management processes that we put in place. We believe there is revenue growth across many parts of our business over a two year period and we believe we are sufficiently capitalized given the world that we operate in so if you add all those pieces together putting it in terms of a target to help investors have a framework rather than open ended seem to be the right transition point for Morgan Stanley. In the last several years we couldn’t have done that because we couldn’t address some of the issues on the right hand side of that slide.

As a follow-up Slide 13, you addressed compensation by each of the three main business areas, but you didn’t give any meat on the non-comp expenses. Can you just elaborate on any specifics there?

I’m sorry. Say that again. We addressed the compensation we didn’t give meat on what?

On the non-comp Slide 13, location strategy, leverage technology, consolidated processes, outsourcing. What sort of expense savings could you get from the non-comp areas?

Well, I think what we wanted to frame was the total comp ratio. I’m sorry the total efficiency ratio of 74% and embedded in that was $1 billion of expense savings, which will be function of comp and non-comp. We’re not going to break those out in detail on this call, we are very confident about that as we’re referencing with Steve and there a number of these things, which obviously just go away through reality like the severance costs. There is the elevated legal expenses we’ve carried in the last several years, which we think is unlikely to be carried forward. There is the restructuring we did which frankly just changes the run rate of your salaries benefits, medical and the bonus pool for those individuals, and we’ve already initiated a major effort under this project streamline and some of those pieces begin this week. We started with changing our so-called contingent employees or our consultants in far away markets where we’ve achieved the objective of what that would be put to work. We’ve now reduced some of those numbers. And all of those efforts are coming together. So you’ll see a mix of – and over the next several quarters we’ll give you much more details on the non-comp. So we’re not going to break it out now.

And then lastly any big restructuring or repositioning charge related to project streamline.

No. No.

All right. Thank you.

Certainly not that’s visible at this point not that’s planned.

Thanks.

Sure.

Your next question comes from the line of Michael Carrier with Bank of America. Please go ahead.

Thanks guys. James, just on the FIC side of the business, post restructuring, I know it’s tough to gauge but when you mentioned and you look at the revenue environment and kind of where your run rate now, you wouldn’t expect much of a drop-off. Just wanted to understand is that relative to like the second half of 2015, like total 2015 or is there any way to gauge it from like a return on asset like what you expect in FIC going forward?

No, I think of that in terms of the full year, obviously the second half but our revenue run rates of $500 million were incredibly low. But we look what the total market size is what our share is, and what our expected share is, and expected market size in the next couple of years and that’s why we say we believe we’re right-sized for revenue rate equivalent to 2015. We obviously – we’ll be trying to do a lot better than that but we think that’s a plausible outlook.

Okay, all right. That’s helpful. And then Jon, just on the – I guess you mentioned like with the weak markets some of the impact that you can see in investment management. So I guess just two things on that. Last quarter we saw that kind of negative accrual I think on the Asia private equity your Merchant Banking fund [ph], just what type of exposure unit in the investment management business have – those types of products so we can see those swings. And then in wealth management I feel like the transaction revenues have been pretty weak for a while and that’s more of an industry trend but just wanted to figure out are we stabilizing here, meaning are there pressures there somewhat coming to a slowdown?

Sure, a couple of questions. I think on the investment management question the way I would try to think about it is there basically two major components of how we make business in that – how we make money in that business, one is just our fee revenues from managing money. And obviously that’s going to be a rate – that’s a rate times volume equation. So if the amount of money we’re managing goes down that will be impacted by the markets that we’re seeing but that outline is pretty stable. The second line as you said is the investment line. When I refer to the investment line I’m talking about the segment reporting we do in our supplement, that number was negative $235 million last quarter we said that was predominately driven by our reversal of carry in our Asia PE fund or funds. This quarter it was $100 million that return to a positive number was driven by all of our – most of our investing businesses both private equity infrastructure and real estate that was more balanced. We said in the third quarter when we took the reversal of carry that that eliminated the vast majority – excuse me, the majority of the carry that we have accrued in our Asia PE businesses we obviously have a carry accrued in other businesses. And that’s disclosed in the queue but the exposure at certainly in Asia has been reduced and the fund that was under stress in the third quarter had no material changes, had no material changes this quarter. That was the first part of your question. I think, the second on transactional revenues. Those numbers have been subdued. Clients are cautious, whether that’s a floor or not is hard to tell given the volatility, but we think that those numbers hopefully have stabilized.

Okay, thanks a lot.

Your next question comes from the line of Matt Burnell with Wells Fargo Securities. Please go ahead.

Good morning, thanks for taking my question. First of all, maybe for you, Jon on page 3 of the supplement, you break out the regional revenues, looks like if we don’t adjust for DVA, the revenues are basically flat in the Americas up double-digit in EMEA and up high single-digit in Asia. How are you thinking about those – that revenue mix heading into 2016 given all your comments about some of the challenges emanating out of China and some of the growth challenges in Europe?

I’m sorry, I’m just turning to page 3. Before getting that page in front of me, I think the results this quarter, we did see Asia was down, but it continues to be a strong and important part of our business. We did see weakness in the fourth quarter relative to the third quarter in Europe given the concerns and uncertainty around Brexit and some of the immigration issues, we still think that Europe although showing some signs of growth in certain areas, is going to be a fragile economy and the drivers of our business will be the U.S. and Asia. In terms of the third – page 3, again, don’t have in front of me. Just this minute, but that you should also know is managed, the way we look at the business is on a managed basis, and so those revenues don’t necessarily tied back to the tax rate that I talked about earlier regarding the geographic mix of earnings.

Okay, thank you, and then a little closer to home, how are you thinking, it seems that you’re assuming that lending both in the corporate side of things, as well as Within Wealth Management is going to continue at what appears to be roughly similar growth rate as you saw this year. But I guess I’m curious how you’re thinking about what appears to be a greater level of regulatory scrutiny both in areas like leverage lending, but also in commercial real estate which seem – which where you’ve grown quite visibly over the last two years to three years as you’ve pushed on your bank growth program.

So, Matt, I’m not sure, I wouldn’t agree with that statement, I think historically over the last couple of years, we’ve seen good growth in both the ISG lending product as well as the Wealth Management lending product and those have been the key drivers along with deploying our deposits away from securities into these loans. Those have been the key drivers of the NII growth historically. I think going forward I would tell you that the primary driver of the lending growth is going to be Wealth Management. The growth assumptions in the ISG part of the business are much lower than they had been over the last couple of years as we built those portfolios up. So the key driver is going to be Wealth Management area.

Okay. And then just ripping on that theme, James, you mentioned less than 2% of your Wealth Management clients have a mortgage with Morgan Stanley. What’s your target over the next two years to get that ratio to?

I don’t have a target here. We could break out sort of mathematically how it separates and get back to, but I don’t have a target off the top of my head. Obviously, it’s very low single-digit, it’s not – it’s not in the – about 10%. You can see the numbers on the chart which just show mathematically what the total residential lending is $21 billion, up from $16 billion. So I guess that would imply we did about 2.4%.

Okay, thanks for taking my questions.

Your next question comes from the line of Devin Ryan with JMP Securities. Please go ahead.

Hey, thanks. Good morning. Thanks for squeezing me in here. When we think about the 3% to 5% revenue growth with ROE target, yes, some items like NII should increase without the backdrop changing and hopefully will be above that. So on the other hand, investment banking has been operating at a high level as you highlighted, a choppy market could impact those businesses. So just thinking about, what type of investment banking revenues or environment during that 3% to 5% revenue growth, and sounds like you guys are a little more cautious on the near-term there. So is that fair? And then and how do you think about those businesses broadly relative to their cycle?

Sure, I think first I’d highlighted that 2017 over the target I think. As you say the Wealth Management is being really driven by the lending growth and some of the other initiatives we have there. In terms of both equities and investment banking, listen, we think that we can continue to gain some share there. We have good shares in those businesses, but the backdrop is a constructive one, where the revenue pools are up modestly if we’re in a situation where revenue pools for these products decline precipitously, these are – that’s not just the backdrop that we set these assumptions. So a little bit of share gain and a little bit of revenue or pie growth.

Okay, great, helpful. And then just within the Wealth Management comp target that improvement to less than 56%, is that and entirely driven by leverage off of higher margin revenues like NII or are there other core comp expense reductions that they can occur within GWN, the GWN that we should be thinking about?

Yes, I think it’s a mix. I mean, clearly more a non-compensable revenues is helpful for that target. But as we’ve said from a – for the totality of the firm, we are very focused on expenses and comp and there are some other levers that we can use here other than just the growing non-compensable line item.

Okay. Thank you very much.

Sure.

Your next question comes from the line of Chris Kotowski with Oppenheimer. Please go ahead.

Hi, yes, good morning. You’ve mentioned how much you’ve bought the fixed income RWAs down from $390 million to like $188 million at the end of last year and down to $136 million now. And I know you can’t comment about this year’s CCAR, but I guess, it just strikes me that given the huge progress you’ve made on bringing down the fixed RWAs, it doesn’t seem like the CCAR process got – was mitigated somehow. And I wonder if you can talk in a general way again not about this year’s submission, but to what extent is – are the adverse CCAR results driven by the fixed income businesses or is it throughout the business. And in a – if the CCAR process this year were static with last year, would the reduction in RWAs that we’ve seen this year have a positive impact on CCAR?

Well, I can take out and Jon may want to add something. CCAR is a function, there are five different ratios under the normal scenario and then the severely adverse scenario, where we had an issue to the extent we did was on the total leverage ratio which we addressed with the top preferred securities. So I think was – CCAR was submitted last November, December I think.

January.

The cycle got moved down this year, an extra three months to April. So the world we’re in 15 months ago, our RWAs were significantly higher. They weren’t where we finished the year at. So it’s sort of an apples and oranges back then, we presented the firm as it was then. This April we’ll be presenting a different firm, although there are various cutoff dates when balance sheet are set and so on. So I don’t really want to get into and I know you didn’t ask for a specific prediction on CCAR, but all we can do is put ourselves in a position where it’s clear we have sufficient capital and any incremental changes we make to the business or any incremental earnings that we accrete by definition become excess capital, whether that flows on a dollar-for-dollar basis. Obviously, it’s something to be considered, when we submit our thing in here from our regulators.

Okay. Thank you.

Your final question comes from the line of Fiona Swaffield with RBC. Please go ahead.

Hi. Just had two areas. One was, you talked about funding benefits, I think it’s $0.4 at the beginning, tailwind from now funding cost. I just wondered if you could talk a bit more about how much that was for 2015 and also where we would see it because I didn’t notice the net interest income in IS was very strong in Q4. I didn’t know if that’s related, so if you could talk about that. And then the last area was really on Slide 16, on the deposit assumptions. I have thought that there was a big strategy to increase the deposits. I think I had a number in my head of $200 billion. Has that changed or is it that – just that you’re not putting that or you’re assuming there’s a length within your 2017 kind of roll forward? Thanks.

Okay. so the – Fiona, the two parts of the question, I think on the funding question, there’s obviously a lot of components that go into those lines including the size of our balance sheet, secured versus unsecured. What we said, just to give you some – to try to cuff it we did about $21 billion of new unsecured last year and those came in at rates that were significantly below where the historical debt had been issued, our average maturity or WAM on our unsecured stack now is about six years. So, we were sort of retiring five year debt and putting on slightly longer, but we saw our credit spreads were easily 100 tighter than where they were before. That process went out through – that process went on throughout the year. We obviously didn’t refinance all of the debt on day one. So, we will continue to get the benefit from those funding savings as we annualize. And so that, I think addresses question number one. And question number two on the deposits, we will continue to grow our deposit base. I think what we would like to try to do this year and 2016, is try to optimize the deposits. We have different deposits that have different liquidity values. We think we can support the lending growth that we’ve highlighted in the strategy – excuse me, in the strategy deck without growing our deposit base, but clearly that is a goal, and in 2017 that will be requirement to support our future lending growth. We’ve talked about some of the digital strategy and cash management product that are – we’re growing out, and that will support – that will hopefully drive the deposit growth in 2017 and beyond.

Thanks. Can I just go back to the first thing, and what the explanation of net internet income in IS? Is quarter-on-quarter?

I’m sorry…

Institutional Securities?

Again, I’ll come back to you on that one, Fiona.

Okay. Thanks so much.

Thank you. I’d like to turn the call back over for any closing remarks.

Now I think we have – this is probably our longest call. I’m glad we got everybody’s questions in and we look forward to talking to you again at the end of the first quarter. Thank you.