The Importance of Banking Functions in the Wealth Management Divisions of Major U.S. Financial Institutions

◆The period of rising interest rates has ended, and for major U.S. financial institutions, simply expanding their balance sheets through increased deposits and lending is no longer sufficient to improve performance or enhance corporate value. The strength of their wealth management divisions has become the main factor differentiating corporate value.

◆These major U.S. financial institutions can be categorized into two models: the "commercial bank-type AWM model," which places commercial banking at the center of its business and engages in asset and wealth management (AWM), and the "investment bank-type AWM model," which centers its business on investment banking and also engages in AWM.

◆Commercial bank-type AWM companies leverage their banking operations, targeting a broad range of customers, primarily mass-market clients, while monitoring the flow of funds (payments) in customers’ deposit accounts. They focus on capturing potential future wealth management clients (lead clients).

◆On the other hand, investment bank-type AWM companies are also strengthening their banking functions, along with workplace-oriented services, to capture prospective clients. However, unlike the commercial bank-type, they are characterized more strongly as "WM-focused banks" targeting affluent and high-net-worth clients.

◆Morgan Stanley’s (MS) banking subsidiaries exhibit strong characteristics as "WM-focused banks", operating at low cost by not deploying physical branches. This contributes to the stabilization of the group’s overall earnings and increases their presence.

◆As a result, MS can efficiently provide products and services across the full range of its WM clients' assets, including deposits, with a primary focus on high-net-worth individuals, and has established a highly competitive model with low capital usage.