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On The Call: Morgan Stanley CFO Ruth Porat

Morgan Stanley's clients are waiting on the fiscal cliff.

The bank reported third-quarter earnings Thursday that included higher revenue and net income after an accounting charge. But revenue from advising companies on whether to buy or merge with other companies fell.

On a conference call, Nomura analyst Glenn Schorr asked why.

"You look back and you say, `Wow, conditions actually should be pretty good for a heated M&A environment,'" Schorr said, using the abbreviation for mergers and acquisitions. "Yet, I think there's a lot of conversations, good pipelines, and not a lot of trigger-pulling."

"You're absolutely right," Chief Financial Officer Ruth Porat replied.

The reason? Companies don't want to act until they know what's going to happen with the fiscal cliff, which is when higher taxes and lower government spending are supposed to kick in next year unless Congress can work out a compromise before then.

MORGAN STANLEY CHIEF FINANCIAL OFFICER RUTH PORAT: "Our view is that the conditions that we are seeing today, with lower volatility in the markets and low (interest) rates, (are) an attractive financing environment. If you look historically, that should set up for or encourage a pretty robust M&A environment. And very much to your point, industrywide volumes continue to remain at very low levels. What we are hearing anecdotally is that much of that continues to be the uncertainty about the environment, the concerns not just in Europe but increasingly here in the U.S., and that is basically putting activity on the sidelines. Conversation is ongoing and the pipeline is healthy. But very much to your point, we need to have more clarity about the environment and some of the changes that are forthcoming, in particular here in the U.S., for activity to move forward in a meaningful way."