UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
CURRENT REPORT
Pursuant To Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported): April 16, 2021
 
Morgan Stanley
(Exact Name of Registrant
as Specified in Charter)
 
Delaware
1-11758
36-3145972
(State or Other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)
 
1585 Broadway, New York, New York
 
10036
(Address of Principal Executive Offices)
 
(Zip Code)
 
 
 
Registrant’s telephone number, including area code: (212) 761-4000
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
MS
New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Floating Rate
Non-Cumulative Preferred Stock, Series A, $0.01 par value
MS/PA
New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate
Non-Cumulative Preferred Stock, Series E, $0.01 par value
MS/PE

New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate
Non-Cumulative Preferred Stock, Series F, $0.01 par value
MS/PF
New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate
Non-Cumulative Preferred Stock, Series I, $0.01 par value
MS/PI
New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate
Non-Cumulative Preferred Stock, Series K, $0.01 par value
MS/PK
New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of 4.875%
Non-Cumulative Preferred Stock, Series L, $0.01 par value
 MS/PL
New York Stock Exchange
Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026
of Morgan Stanley Finance LLC (and Registrant’s guarantee with respect thereto)
MS/26C
New York Stock Exchange
Morgan Stanley Cushing® MLP High Income Index ETNs due March 21, 2031
MLPY
NYSE Arca, Inc.

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02    Results of Operations and Financial Condition.

On April 16, 2021, Morgan Stanley (the "Company") released financial information with respect to its quarter ended March 31, 2021. A copy of the press release containing this information is annexed as Exhibit 99.1 to this Report and by this reference incorporated herein and made a part hereof.  In addition, a copy of the Company's Financial Data Supplement for its quarter ended March 31, 2021 is annexed as Exhibit 99.2 to this Report and by this reference incorporated herein and made a part hereof.

The information furnished under Item 2.02 of this Report, including Exhibit 99.1 and Exhibit 99.2, shall be deemed to be "filed" for purposes of the Securities Exchange Act of 1934, as amended.

Item 9.01    Financial Statements and Exhibits.
          
           (d)     Exhibits

Exhibit
  
Number
 Description
   
   
   
101
Interactive Data Files pursuant to Rule 406 of Regulation S-T formatted in Inline eXtensible Business Reporting Language (“Inline XBRL”).
   
104
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
 
 
 
MORGAN STANLEY
(Registrant)
  
Date:
April 16, 2021
 
By:
/s/   Raja Akram
  
 
 
 
 
Name:     Raja Akram
  
 
 
 
 
Title:       Deputy Chief Financial Officer
  

Exhibit 99.1


Morgan Stanley First Quarter 2021 Earnings Results

Morgan Stanley Reports Net Revenues of $15.7 Billion, EPS of $2.19 and ROTCE of 21.1%

NEW YORK, April 16, 2021 – Morgan Stanley (NYSE: MS) today reported net revenues of $15.7 billion for the first quarter ended March 31, 2021 compared with $9.8 billion a year ago.  Net income applicable to Morgan Stanley was $4.1 billion, or $2.19 per diluted share,1 compared with net income of $1.7 billion, or $1.01 per diluted share,1 for the same period a year ago. The comparisons of current year results to prior periods were impacted by the acquisitions of Eaton Vance Corp. (“Eaton Vance”) completed on March 1, 2021, reported in the Investment Management segment and E*TRADE Financial Corporation (“E*TRADE”) completed in the fourth quarter of 2020, reported in the Wealth Management segment.
James P. Gorman, Chairman and Chief Executive Officer, said, “The Firm delivered record results. The integrated Investment Bank continues to thrive. We closed the acquisition of Eaton Vance which takes Investment Management to over $1.4 trillion of assets. Wealth Management brought in record flows of $105 billion. The Firm is very well positioned for growth in the years ahead.”

Financial Summary2,3,4
            
Firm ($ millions, except per share data)
  
1Q 2021
    
1Q 2020
  
             
Net revenues
  
$
15,719
    
$
9,779
  
Provision for credit losses
  
$
(98
)
  
$
407
  
Compensation expense
  
$
6,798
    
$
4,283
  
Non-compensation expenses
  
$
3,675
    
$
2,943
  
Pre-tax income10
  
$
5,344
    
$
2,146
  
Net income app. to MS
  
$
4,120
    
$
1,698
  
Expense efficiency ratio8
    
67
%
    
74
%
Earnings per diluted share
  
$
2.19
    
$
1.01
  
Book value per share
  
$
52.71
    
$
49.09
  
Tangible book value per share
  
$
38.97
    
$
43.28
  
Return on equity
    
16.9
%
    
8.5
%
Return on tangible equity6
    
21.1
%
    
9.7
%
Institutional Securities
                
Net revenues
  
$
8,577
    
$
5,178
  
Investment Banking
  
$
2,613
    
$
1,144
  
Equity
  
$
2,875
    
$
2,449
  
Fixed Income
  
$
2,966
    
$
2,062
  
Wealth Management
                
Net revenues
  
$
5,959
    
$
4,056
  
Fee-based client assets ($ billions)11
  
$
1,574
    
$
1,134
  
Fee-based asset flows ($ billions)12
  
$
37.2
    
$
18.4
  
Net new assets ($ billions)13
  
$
104.9
    
$
37.1
  
Loans ($ billions)
  
$
104.9
    
$
82.5
  
Investment Management
                
Net revenues
  
$
1,314
    
$
692
  
AUM ($ billions)14
  
$
1,419
    
$
584
  
Long-term net flows ($ billions)15
  
$
16.3
    
$
6.7
  


 
Highlights
 
 
•
The Firm achieved record net revenues and net income5 with strong contributions across each of our business segments.
 
 
•
The Firm delivered ROTCE of 21.1% or 21.4% excluding the impact of integration-related expenses.6,7
 
 
•
The Firm expense efficiency ratio was 67% or 66% excluding the impact of integration-related expenses.7,8
 
 
•
Common Equity Tier 1 capital standardized ratio was 16.8%.
 
 
•
The Firm repurchased $2.1 billion of its outstanding common stock.
 
 
•
Institutional Securities reported record net revenues5 up 66% reflecting strength across businesses and geographies on continued strong client engagement and higher volumes in a constructive market environment, notwithstanding losses related to a single client event in the quarter.
 
 
•
Wealth Management delivered a pre-tax margin of 26.9% or 27.9% excluding integration-related expenses.7,9 Results reflect strong levels of client engagement, record net new assets and fee-based flows of $105 billion and $37 billion, respectively, and growth in bank lending.
 
 
•
Investment Management results reflect strong asset management fees on AUM of $1.4 trillion, which include the impact of the Eaton Vance acquisition, along with strong positive net flows across all asset classes.


Media Relations: Wesley McDade   212-761-2430
Investor Relations: Sharon Yeshaya   212-761-1632
Institutional Securities

Institutional Securities reported net revenues for the current quarter of $8.6 billion compared with $5.2 billion a year ago. Pre-tax income was $3.4 billion compared with $950 million a year ago.10

Investment Banking revenues up 128% from a year ago:

•
Advisory revenues increased from a year ago on higher completed M&A volumes.

•
Equity underwriting reported record revenues driven by higher volumes in IPOs, blocks and follow-on offerings as issuers and sellers took advantage of the strong market conditions.

•
Fixed income underwriting revenues increased from a year ago on higher non-investment grade bond and loan issuances driven by a favorable market environment characterized by improved credit spreads.

Equity net revenues up 17% from a year ago:

•
Equity net revenues increased from a year ago reflecting strong performance across products and geographies, with notable strength in derivatives, driven by continued client engagement and elevated volumes. The current quarter includes a loss of $644 million related to a credit event for a single prime brokerage client, and $267 million of subsequent trading losses through the end of the quarter related to the same event.

Fixed Income net revenues up 44% from a year ago:

•
Fixed Income net revenues increased significantly from a year ago reflecting strong performance in credit products, which benefitted from robust client activity particularly in securitized products, partially offset by lower revenues in rates and foreign exchange primarily due to more stable bid-offer spreads versus a year ago.

($ millions)
  
1Q 2021
    
1Q 2020
  
                 
Net Revenues4
  
$
8,577
    
$
5,178
  
                 
Investment Banking
  
$
2,613
    
$
1,144
  
Advisory
  
$
480
    
$
362
  
Equity underwriting
  
$
1,502
    
$
336
  
Fixed income underwriting
  
$
631
    
$
446
  
                 
Equity
  
$
2,875
    
$
2,449
  
Fixed Income
  
$
2,966
    
$
2,062
  
Other
  
$
123
    
$
(477
)
                 
Provision for credit losses
  
$
(93
)
  
$
388
  
                 
Total Expenses4
  
$
5,299
    
$
3,840
  
Compensation
  
$
3,114
    
$
1,814
  
Non-compensation
  
$
2,185
    
$
2,026
  
                 


Other:

•
Other revenues increased from a year ago primarily driven by lower mark-to-market losses on corporate loans held for sale, net of related hedges, and gains on investments associated with certain employee deferred compensation plans, compared with losses on the investments in the prior year quarter.

Provision for credit losses:

•
Provision for credit losses on loans and lending commitments of $(93) million in the current quarter compared with $388 million in the prior year reflects a release in the allowance for credit losses driven by improvements in the outlook for macroeconomic conditions.

Total Expenses:

•
Compensation expense increased from a year ago on higher revenues and increases in the fair value of deferred compensation plan referenced investments.

•
Non-compensation expenses increased from a year ago primarily driven by higher volume related expenses.
2
Wealth Management

Wealth Management reported net revenues for the current quarter of $6.0 billion compared with $4.1 billion from a year ago.  Pre-tax income of $1.6 billion10 in the current quarter resulted in a reported pre-tax margin of 26.9% or 27.9% excluding the impact of integration-related expenses.7,9  The comparisons of current year results to prior periods were impacted by the acquisition of E*TRADE.

Net revenues increased 47% from a year ago:

•
Asset management revenues increased from a year ago reflecting higher asset levels and record fee-based flows.

•
Transactional revenues16 increased 40% excluding the impact of mark-to-market gains on investments associated with certain employee deferred compensation plans. Results reflect incremental revenues as a result of the E*TRADE acquisition and strong client activity.

•
Net interest income (NII) increased from a year ago driven by incremental NII as a result of the E*TRADE acquisition, improved mortgage securities prepayment impact and higher bank lending partially offset by the impact of lower rates.





($ millions)
  
1Q 2021
    
1Q 2020
  
             
Net Revenues4
  
$
5,959
    
$
4,056
  
Asset management
  
$
3,191
    
$
2,680
  
Transactional16
  
$
1,228
    
$
399
  
Net interest income
  
$
1,385
    
$
896
  
Other
  
$
155
    
$
81
  
Provision for credit losses
  
$
(5
)
  
$
19
  
Total Expenses4
  
$
4,364
    
$
2,982
  
Compensation
  
$
3,170
    
$
2,212
  
Non-compensation
  
$
1,194
    
$
770
  
                 


Total Expenses:

•
Compensation expense increased from a year ago driven by increases in the fair value of certain deferred compensation plan referenced investments, higher compensable revenues, and incremental compensation as a result of the E*TRADE acquisition.7

•
Non-compensation expenses increased from a year ago primarily driven by incremental operating and other expenses as a result of the E*TRADE acquisition.7

Investment Management

Investment Management reported net revenues of $1.3 billion compared with $692 million a year ago.  Pre-tax income was $370 million compared with $143 million a year ago.10  The comparisons of current year results to prior periods were impacted by the acquisition of Eaton Vance which closed on March 1, 2021.

Net revenues increased 90% from a year ago:

•
Asset management and related fees increased from a year ago driven by higher AUM on strong performance and positive net flows across all asset classes, as well as incremental revenues as a result of the Eaton Vance acquisition.

•
Performance-based income and other revenues increased from a year ago primarily on higher accrued carried interest in real estate funds.




($ millions)
  
1Q 2021
    
1Q 2020
  
                 
Net Revenues4
  
$
1,314
    
$
692
  
Asset management and related fees
  
$
1,103
    
$
665
  
Performance-based income and other
  
$
211
    
$
27
  
Total Expenses
  
$
944
    
$
549
  
Compensation
  
$
514
    
$
257
  
Non-compensation
  
$
430
    
$
292
  
                 


Total Expenses:

•
Compensation expense increased from a year ago on higher asset management revenues and carried interest as well as incremental compensation expenses as a result of the Eaton Vance acquisition.7

•
Non-compensation expenses increased from a year ago primarily driven by higher brokerage and clearing costs, and incremental operating and other expenses as a result of the Eaton Vance acquisition.7
3
Other Matters

•
The Firm resumed its Share Repurchase Program in the first quarter of 2021, subject to limitations on distributions from the Federal Reserve. The Firm repurchased $2.1 billion of its outstanding common stock in the quarter.

•
The Board of Directors declared a $0.35 quarterly dividend per share, payable on May 14, 2021 to common shareholders of record on April 30, 2021.

















   
1Q 2021
    
1Q 2020
  
Capital17
            
  Standardized Approach
            
     CET1 capital18
    
16.8
%
    
15.7
%
     Tier 1 capital18
    
18.5
%
    
17.8
%
  Advanced Approach
                
     CET1 capital18
    
17.3
%
    
15.2
%
     Tier 1 capital18
    
19.1
%
    
17.3
%
  Leverage-based capital
                
     Tier 1 leverage19
    
7.5
%
    
8.1
%
     SLR20
    
6.7
%
    
6.2
%
Common Stock Repurchases
                
  Repurchases ($ millions)
  
$
2,135
    
$
1,347
  
  Number of Shares (millions)
    
28
      
29
  
  Average Price
  
$
77.47
    
$
46.01
  
Period End Shares (millions)
    
1,869
      
1,576
  
Tax Rate21
    
22.0
%
    
17.1
%
                 
                 


4

Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in more than 41 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com.

A financial summary follows. Financial, statistical and business-related information, as well as information regarding business and segment trends, is included in the financial supplement. Both the earnings release and the financial supplement are available online in the Investor Relations section at www.morganstanley.com.

NOTICE:

The information provided herein and in the financial supplement, including information provided on the Firm’s earnings conference calls, may include certain non-GAAP financial measures. The definition of such measures or reconciliation of such measures to the comparable U.S. GAAP figures are included in this earnings release and the financial supplement, both of which are available on www.morganstanley.com.

This earnings release may contain forward-looking statements, including the attainment of certain financial and other targets, objectives and goals. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management’s current estimates, projections, expectations, assumptions, interpretations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of risks and uncertainties that may affect the future results of the Firm, please see “Forward-Looking Statements” immediately preceding Part I, Item 1, “Competition” and “Supervision and Regulation” in Part I, Item 1, “Risk Factors” in Part I, Item 1A, “Legal Proceedings” in Part I, Item 3, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 and “Quantitative and Qualitative Disclosures about Risk” in Part II, Item 7A in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2020 and other items throughout the Form 10-K and the Firm’s Current Reports on Form 8-K, including any amendments thereto.
5

1 Includes preferred dividends related to the calculation of earnings per share of $138 million and $108 million for the first quarter of 2021 and 2020, respectively.
 
2 The Firm prepares its Consolidated Financial Statements using accounting principles generally accepted in the United States (U.S. GAAP). From time to time, Morgan Stanley may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. The Securities and Exchange Commission defines a “non-GAAP financial measure” as a numerical measure of historical or future financial performance, financial position, or cash flows that is subject to adjustments that effectively exclude, or include amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. Non-GAAP financial measures disclosed by Morgan Stanley are provided as additional information to analysts, investors and other stakeholders in order to provide them with greater transparency about, or an alternative method for assessing our financial condition, operating results, or capital adequacy. These measures are not in accordance with, or a substitute for U.S. GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable U.S. GAAP financial measure.

3 Our earnings releases, earnings conference calls, financial presentations and other communications may also include certain metrics which we believe to be useful to us, analysts, investors, and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.
 
4 As part of the Firm’s effort to continually improve the transparency and comparability of our external financial reporting, several updates to our financial presentation were implemented in the first quarter of 2021. The presentation changes are as follows:
 

 (i)
The Provision for credit losses for loans and lending commitments is now presented as a separate line in the consolidated income statements.
 

 (ii)
Gains and losses on external economic derivative hedges associated with held-for-sale and held-for-investment corporate loans, which were previously reported in Trading revenues, are now reported within Other revenues in the consolidated income statements. 
 

 (iii)
In the Institutional Securities segment, sales and trading net revenues have been reorganized and reported into the following categories, Equity, Fixed Income and Other. In addition, Equity and Fixed Income now include certain Investments and Other revenues to the extent directly attributable to those businesses. The remaining Investments and Other revenues, along with amounts previously disclosed as “Other sales and trading” will be shown as “Other”.
 

 (iv)
In the Investment Management segment, we have renamed the previously disclosed revenue line “Asset management” to “Asset management and related fees” and combined the remaining revenue categories under a new line named “Performance-based income and other”.
 
The corresponding reclassifications have been made to prior periods to conform to the current presentation. For further information about these changes, see the Firm’s first quarter 2021 financial supplement available online in the Investor Relations section at www.morganstanley.com.
 
5 Firm and Institutional Securities net revenues and Firm net income applicable to Morgan Stanley represent records for a reported quarterly period after excluding the impact of debt valuation adjustments (DVA), which were previously reflected in net revenues in prior periods, and reflecting the current reporting structure of the Firm (i.e. exclusive of discontinued operations).  Net revenues and net income applicable to Morgan Stanley, excluding the impact of DVA, were non-GAAP financial measures in those prior periods that were reconciled to the comparable GAAP financial measures in the respective quarterly reports filed on Form 10-Q.
 
6 Return on average tangible common equity and return on average tangible common equity excluding integration-related expenses are non-GAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance and capital adequacy.  The calculation of return on average tangible common equity represents full year net income or annualized net income applicable for the quarter applicable to Morgan Stanley less preferred dividends as a percentage of average tangible common equity.  Tangible common equity, also a non-GAAP financial measure, represents common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.  The calculation of return on average tangible common equity and return on average tangible common equity excluding integration-related expenses are adjusted in both the numerator and the denominator to exclude the integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance.

7 The Firm’s first quarter results include $75 million of integration-related expenses on a pre-tax basis ($58 million after-tax) as a result of the E*TRADE and Eaton Vance acquisitions.  The integration-related expenses include $33 million in compensation expense and $42 million in non-compensation expense.  Wealth Management and Investment Management integration-related expenses include $30 million and $3 million in compensation expense, respectively, and $34 million and $8 million in non-compensation expense, respectively.
6
 
8 The Firm expense efficiency ratio of 67% represents total non-interest expenses as a percentage of net revenues.  The Firm expense efficiency ratio excluding integration-related expenses of 66% represents total non-interest expenses adjusted for integration-related expenses as a percentage of net revenues. The Firm expense efficiency ratio excluding integration-related expenses is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance.
 
9 Pre-tax margin represents income before taxes divided by net revenues.  Wealth Management pre-tax margin excluding the integration-related expenses represents income before taxes less those expenses divided by net revenues.  Wealth Management pre-tax margin excluding integration-related expenses is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance.
 
10 Pre-tax income represents income before taxes.
 
11 Wealth Management fee-based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
 
12 Wealth Management fee-based asset flows include net new fee-based assets, net account transfers, dividends, interest, and client fees and exclude institutional cash management related activity.
 
13 Wealth Management net new assets represents client inflows (including dividend and interest) less client outflows (excluding activity from business combinations/divestitures and impact of fees and commissions).
 
14 AUM is defined as assets under management.
 
15 Long-term net flows include the Equity, Fixed Income and Alternative and Solutions asset classes and exclude the Liquidity and Overlay Services asset class.
 
16 Transactional revenues include investment banking, trading, and commissions and fee revenues.  Transactional revenues excluding the impact of mark-to-market gains on investments associated with certain employee deferred compensation plans is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow better comparability of period-to-period operating performance and capital adequacy.
 
17 Capital ratios are estimates as of the press release date, April 16, 2021.
 
18 CET1 capital is defined as Common Equity Tier 1 capital.  The Firm’s risk-based capital ratios are computed under each of the (i) standardized approaches for calculating credit risk and market risk risk‐weighted assets (RWAs) (the “Standardized Approach”) and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”).  For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K).
 
19 The Tier 1 leverage ratio is a leverage-based capital requirement that measures the Firm’s leverage.  Tier 1 leverage ratio utilizes Tier 1 capital as the numerator and average adjusted assets as the denominator.
 
20 The Firm’s supplementary leverage ratio (SLR) utilizes a Tier 1 capital numerator of approximately $84.1 billion and $73.9 billion, and supplementary leverage exposure denominator of approximately $1.26 trillion and $1.19 trillion, for the first quarter of 2021 and 2020, respectively.  Based on a Federal Reserve interim final rule in effect until March 31, 2021, our SLR and supplementary leverage exposure as of March 31, 2021 reflect the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks.  The exclusion of these assets had the effect of increasing our SLR by 0.7% as of March 31, 2021.
 
21 The income tax consequences related to employee share-based payments are recognized in Provision for income taxes in the consolidated income statement, and may be either a benefit or a provision. The impacts of recognizing excess tax benefits upon conversion of awards are $82 million and $99 million for the first quarter of 2021 and 2020, respectively.

7
Consolidated Income Statement Information
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
Revenues:
                              
Investment banking
  
$
2,840
    
$
2,435
    
$
1,271
      
17
%
    
123
%
Trading
    
4,225
      
3,229
      
2,801
      
31
%
    
51
%
Investments
    
318
      
327
      
38
      
(3
%)
    
*
  
Commissions and fees
    
1,626
      
1,352
      
1,360
      
20
%
    
20
%
Asset management
    
4,398
      
3,926
      
3,417
      
12
%
    
29
%
Other
    
284
      
457
      
(464
)
    
(38
%)
    
*
  
Total non-interest revenues
    
13,691
      
11,726
      
8,423
      
17
%
    
63
%
                                         
Interest income
    
2,437
      
2,245
      
3,503
      
9
%
    
(30
%)
Interest expense
    
409
      
374
      
2,147
      
9
%
    
(81
%)
Net interest
    
2,028
      
1,871
      
1,356
      
8
%
    
50
%
Net revenues
    
15,719
      
13,597
      
9,779
      
16
%
    
61
%
                                         
Provision for credit losses
    
(98
)
    
4
      
407
      
*
      
*
  
                                         
Non-interest expenses:
                                        
Compensation and benefits
    
6,798
      
5,450
      
4,283
      
25
%
    
59
%
                                         
Non-compensation expenses:
                                        
Brokerage, clearing and exchange fees
    
910
      
776
      
740
      
17
%
    
23
%
Information processing and communications
    
733
      
697
      
563
      
5
%
    
30
%
Professional services
    
624
      
679
      
449
      
(8
%)
    
39
%
Occupancy and equipment
    
405
      
456
      
365
      
(11
%)
    
11
%
Marketing and business development
    
146
      
161
      
132
      
(9
%)
    
11
%
Other
    
857
      
944
      
694
      
(9
%)
    
23
%
Total non-compensation expenses
    
3,675
      
3,713
      
2,943
      
(1
%)
    
25
%
                                         
Total non-interest expenses
    
10,473
      
9,163
      
7,226
      
14
%
    
45
%
                                         
Income before provision for income taxes
    
5,344
      
4,430
      
2,146
      
21
%
    
149
%
Provision for income taxes
    
1,176
      
1,018
      
366
      
16
%
    
*
  
Net income
  
$
4,168
    
$
3,412
    
$
1,780
      
22
%
    
134
%
Net income applicable to nonredeemable noncontrolling interests
    
48
      
27
      
82
      
78
%
    
(41
%)
Net income applicable to Morgan Stanley
    
4,120
      
3,385
      
1,698
      
22
%
    
143
%
Preferred stock dividend
    
138
      
119
      
108
      
16
%
    
28
%
Earnings applicable to Morgan Stanley common shareholders
  
$
3,982
    
$
3,266
    
$
1,590
      
22
%
    
150
%
                                         
                                         
The End Notes are an integral part of this presentation. Refer to the Financial Supplement on pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance
  
Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice for additional information.
  
8
Consolidated Financial Metrics, Ratios and Statistical Data
(unaudited)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
Financial Metrics:
                              
                               
Earnings per basic share
  
$
2.22
    
$
1.84
    
$
1.02
      
21
%
    
118
%
Earnings per diluted share
  
$
2.19
    
$
1.81
    
$
1.01
      
21
%
    
117
%
                                         
Return on average common equity
    
16.9
%
    
14.7
%
    
8.5
%
                
Return on average tangible common equity
    
21.1
%
    
17.7
%
    
9.7
%
                
                                         
Book value per common share
  
$
52.71
    
$
51.13
    
$
49.09
                  
Tangible book value per common share
  
$
38.97
    
$
41.95
    
$
43.28
                  
                                         
Excluding integration-related expenses
                                        
Adjusted earnings per diluted share
  
$
2.22
    
$
1.92
    
$
1.01
      
16
%
    
120
%
Adjusted return on average common equity
    
17.1
%
    
15.6
%
    
8.5
%
                
Adjusted return on average tangible common equity
    
21.4
%
    
18.7
%
    
9.7
%
                
                                         
                                         
Financial Ratios:
                                        
                                         
Pre-tax profit margin
    
34
%
    
33
%
    
22
%
                
Compensation and benefits as a % of net revenues
    
43
%
    
40
%
    
44
%
                
Non-compensation expenses as a % of net revenues
    
23
%
    
27
%
    
30
%
                
Firm expense efficiency ratio
    
67
%
    
67
%
    
74
%
                
Firm expense efficiency ratio excluding integration-related expenses
    
66
%
    
66
%
    
74
%
                
Effective tax rate
    
22.0
%
    
23.0
%
    
17.1
%
                
                                         
                                         
Statistical Data:
                                        
                                         
Period end common shares outstanding (millions)
    
1,869
      
1,810
      
1,576
      
3
%
    
19
%
Average common shares outstanding (millions)
                                        
Basic
    
1,795
      
1,774
      
1,555
      
1
%
    
15
%
Diluted
    
1,818
      
1,802
      
1,573
      
1
%
    
16
%
                                         
Worldwide employees
    
70,975
      
68,097
      
60,670
      
4
%
    
17
%
                                         
                                         
Notes:
                                       
‐ The Firm’s first quarter 2021 results include pre-tax integration-related expenses of $75 million ($58 million after‐tax) reported in the Wealth Management and Investment Management business segments. The Firm's fourth quarter 2020 results include pre-tax integration-related expenses of $231 million ($189 million after‐tax) reported in the Wealth Management business segment.
  
- The End Notes are an integral part of this presentation. Refer to the Financial Supplement on pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice for additional information.
  

9
Exhibit 99.2


First Quarter 2021 Earnings Results

Quarterly Financial Supplement
Page
   
Consolidated Financial Summary
1
Consolidated Financial Metrics, Ratios and Statistical Data
2
Consolidated and U.S. Bank Supplemental Financial Information
3
Consolidated Average Common Equity and Regulatory Capital Information
4
Institutional Securities Income Statement Information, Financial Metrics and Ratios
5
Wealth Management Income Statement Information, Financial Metrics and Ratios
6
Wealth Management Financial Information and Statistical Data
7
Investment Management Income Statement Information, Financial Metrics and Ratios
8
Investment Management Financial Information and Statistical Data
9
Consolidated Loans and Lending Commitments
10
Consolidated Loans and Lending Commitments Allowance for Credit Losses
11
Firm and Segment Historical Income Statement Information - Addendum I
12 - 13
Definition of U.S. GAAP to Non-GAAP Measures
14
Definitions of Performance Metrics and Terms
15 - 16
Supplemental Quantitative Details and Calculations
17 - 18
Legal Notice
19

As part of the Firm’s effort to continually improve the transparency and comparability of our external financial reporting, several updates to our financial presentation are being implemented in the first quarter of 2021 and as a result certain prior period amounts have been reclassified to conform to the current period presentation. In addition, comparisons of current and prior periods are impacted by the financial results of Eaton Vance Corp. (Eaton Vance) and E*TRADE Financial Corporation (E*TRADE) reported in the Investment Management segment and Wealth Management segment, respectively. The Firm's first quarter 2021 earnings results reflect the completed acquisition of Eaton Vance, which closed on March 1, 2021. The Firm's first quarter 2021 and fourth quarter 2020 earnings results reflect the completed acquisition of E*TRADE.

Consolidated Financial Summary
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
Net revenues
                              
Institutional Securities
  
$
8,577
    
$
6,970
    
$
5,178
      
23
%
    
66
%
Wealth Management
    
5,959
      
5,672
      
4,056
      
5
%
    
47
%
Investment Management
    
1,314
      
1,100
      
692
      
19
%
    
90
%
Intersegment Eliminations
    
(131
)
    
(145
)
    
(147
)
    
10
%
    
11
%
Net revenues
  
$
15,719
    
$
13,597
    
$
9,779
      
16
%
    
61
%
                                         
Provision for credit losses
  
$
(98
)
  
$
4
    
$
407
      
*
      
*
  
                                         
Non-interest expenses
                                        
Institutional Securities
  
$
5,299
    
$
3,797
    
$
3,840
      
40
%
    
38
%
Wealth Management
    
4,364
      
4,611
      
2,982
      
(5
%)
    
46
%
Investment Management
    
944
      
904
      
549
      
4
%
    
72
%
Intersegment Eliminations
    
(134
)
    
(149
)
    
(145
)
    
10
%
    
8
%
Non-interest expenses (1)
  
$
10,473
    
$
9,163
    
$
7,226
      
14
%
    
45
%
                                         
Income before taxes
                                        
Institutional Securities
  
$
3,371
    
$
3,160
    
$
950
      
7
%
    
*
  
Wealth Management
    
1,600
      
1,070
      
1,055
      
50
%
    
52
%
Investment Management
    
370
      
196
      
143
      
89
%
    
159
%
Intersegment Eliminations
    
3
      
4
      
(2
)
    
(25
%)
    
*
  
Income before taxes
  
$
5,344
    
$
4,430
    
$
2,146
      
21
%
    
149
%
                                         
Net Income applicable to Morgan Stanley
                                       
Institutional Securities
  
$
2,601
    
$
2,422
    
$
757
      
7
%
    
*
  
Wealth Management
    
1,242
      
802
      
864
      
55
%
    
44
%
Investment Management
    
275
      
158
      
78
      
74
%
    
*
  
Intersegment Eliminations
    
2
      
3
      
(1
)
    
(33
%)
    
*
  
Net Income applicable to Morgan Stanley
  
$
4,120
    
$
3,385
    
$
1,698
      
22
%
    
143
%
Earnings applicable to Morgan Stanley common shareholders
  
$
3,982
    
$
3,266
    
$
1,590
      
22
%
    
150
%
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

1

Consolidated Financial Metrics, Ratios and Statistical Data
(unaudited)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
Financial Metrics:
                              
                               
Earnings per basic share
  
$
2.22
    
$
1.84
    
$
1.02
      
21
%
    
118
%
Earnings per diluted share
  
$
2.19
    
$
1.81
    
$
1.01
      
21
%
    
117
%
 
                                        
Return on average common equity
    
16.9
%
    
14.7
%
    
8.5
%
                
Return on average tangible common equity
    
21.1
%
    
17.7
%
    
9.7
%
                
 
                                        
Book value per common share
  
$
52.71
    
$
51.13
    
$
49.09
                  
Tangible book value per common share
  
$
38.97
    
$
41.95
    
$
43.28
                  
 
                                        
Excluding integration-related expenses (1)
                                        
Adjusted earnings per diluted share
  
$
2.22
    
$
1.92
    
$
1.01
      
16
%
    
120
%
Adjusted return on average common equity
    
17.1
%
    
15.6
%
    
8.5
%
                
Adjusted return on average tangible common equity
    
21.4
%
    
18.7
%
    
9.7
%
                
                                         
                                         
Financial Ratios:
                                        
                                         
Pre-tax profit margin
    
34
%
    
33
%
    
22
%
                
Compensation and benefits as a % of net revenues
    
43
%
    
40
%
    
44
%
                
Non-compensation expenses as a % of net revenues
    
23
%
    
27
%
    
30
%
                
Firm expense efficiency ratio
    
67
%
    
67
%
    
74
%
                
Firm expense efficiency ratio excluding integration-related expenses (1)
    
66
%
    
66
%
    
74
%
                
Effective tax rate (2)
    
22.0
%
    
23.0
%
    
17.1
%
                
                                         
                                         
Statistical Data:
                                        
                                         
Period end common shares outstanding (millions)
    
1,869
      
1,810
      
1,576
      
3
%
    
19
%
Average common shares outstanding (millions)
                                        
Basic
    
1,795
      
1,774
      
1,555
      
1
%
    
15
%
Diluted
    
1,818
      
1,802
      
1,573
      
1
%
    
16
%
                                         
Worldwide employees
    
70,975
      
68,097
      
60,670
      
4
%
    
17
%
                                         
                                         
Notes:
                                        
‐ The Firm’s first quarter 2021 results include pre-tax integration-related expenses of $75 million ($58 million after‐tax) reported in the Wealth Management and Investment Management business segments. The Firm's fourth quarter 2020 results include pre-tax integration-related expenses of $231 million ($189 million after‐tax) reported in the Wealth Management business segment.
  
- The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

2
Consolidated and U.S. Bank Supplemental Financial Information
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
Consolidated Balance sheet
                              
                               
Total assets
  
$
1,158,772
    
$
1,115,862
    
$
947,795
      
4
%
    
22
%
Loans (1)
  
$
171,812
    
$
161,745
    
$
158,759
      
6
%
    
8
%
Deposits
  
$
323,138
    
$
310,782
    
$
235,239
      
4
%
    
37
%
Liquidity resources
  
$
353,304
    
$
338,623
    
$
255,134
      
4
%
    
38
%
Long-term debt outstanding
  
$
208,267
    
$
213,388
    
$
192,645
      
(2
%)
    
8
%
Maturities of long-term debt outstanding (next 12 months)
  
$
18,976
    
$
24,241
    
$
17,153
      
(22
%)
    
11
%
 
                                        
Common equity
  
$
98,509
    
$
92,531
    
$
77,340
      
6
%
    
27
%
Less: Goodwill and intangible assets
    
(25,681
)
    
(16,615
)
    
(9,146
)
    
55
%
    
181
%
Tangible common equity
  
$
72,828
    
$
75,916
    
$
68,194
      
(4
%)
    
7
%
 
                                        
Preferred equity
  
$
7,750
    
$
9,250
    
$
8,520
      
(16
%)
    
(9
%)
                                         
U.S. Bank Supplemental Financial Information
                                        
Total assets
  
$
357,217
    
$
346,515
    
$
265,383
      
3
%
    
35
%
Loans
  
$
157,354
    
$
148,885
    
$
141,712
      
6
%
    
11
%
Investment securities portfolio (2)
  
$
149,423
    
$
142,929
    
$
77,747
      
5
%
    
92
%
Deposits
  
$
321,630
    
$
309,712
    
$
234,055
      
4
%
    
37
%
                                         
Regional revenues
                                        
Americas
  
$
11,191
    
$
10,166
    
$
6,888
      
10
%
    
62
%
EMEA (Europe, Middle East, Africa)
    
2,159
      
1,771
      
1,197
      
22
%
    
80
%
Asia
    
2,369
      
1,660
      
1,694
      
43
%
    
40
%
Consolidated net revenues
  
$
15,719
    
$
13,597
    
$
9,779
      
16
%
    
61
%

                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

3
Consolidated Average Common Equity and Regulatory Capital Information
(unaudited, dollars in billions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
Average Common Equity
                              
Institutional Securities
  
$
43.5
    
$
42.8
    
$
42.8
      
2
%
    
2
%
Wealth Management
    
28.5
      
26.5
      
18.2
      
8
%
    
57
%
Investment Management
    
4.4
      
2.6
      
2.6
      
69
%
    
69
%
Parent
    
17.9
      
16.7
      
11.1
      
7
%
    
61
%
Firm
  
$
94.3
    
$
88.6
    
$
74.7
      
6
%
    
26
%
                                         
                                         
                                         
Regulatory Capital
                                        
                                         
Common Equity Tier 1 capital
  
$
76.2
    
$
78.7
    
$
65.2
      
(3
%)
    
17
%
Tier 1 capital
  
$
84.1
    
$
88.1
    
$
73.9
      
(5
%)
    
14
%
 
                                        
Standardized Approach
                                        
Risk-weighted assets
  
$
453.7
    
$
453.1
    
$
415.0
      
--
      
9
%
Common Equity Tier 1 capital ratio
    
16.8
%
    
17.4
%
    
15.7
%
                
Tier 1 capital ratio
    
18.5
%
    
19.4
%
    
17.8
%
                
 
                                        
Advanced Approach
                                        
Risk-weighted assets
  
$
441.3
    
$
445.2
    
$
427.8
      
(1
%)
    
3
%
Common Equity Tier 1 capital ratio
    
17.3
%
    
17.7
%
    
15.2
%
                
Tier 1 capital ratio
    
19.1
%
    
19.8
%
    
17.3
%
                
 
                                        
Leverage-based capital
                                        
Tier 1 leverage ratio
    
7.5
%
    
8.4
%
    
8.1
%
                
Supplementary Leverage Ratio (1)
    
6.7
%
    
7.4
%
    
6.2
%
                
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

4
Institutional Securities
Income Statement Information, Financial Metrics and Ratios
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
Revenues:
                              
                               
Advisory
  
$
480
    
$
827
    
$
362
      
(42
%)
    
33
%
Equity
    
1,502
      
1,000
      
336
      
50
%
    
*
  
Fixed income
    
631
      
475
      
446
      
33
%
    
41
%
Underwriting
    
2,133
      
1,475
      
782
      
45
%
    
173
%
Investment banking
    
2,613
      
2,302
      
1,144
      
14
%
    
128
%
                                         
Equity
    
2,875
      
2,534
      
2,449
      
13
%
    
17
%
Fixed income
    
2,966
      
1,790
      
2,062
      
66
%
    
44
%
Other
    
123
      
344
      
(477
)
    
(64
%)
    
*
  
                                         
Net revenues
    
8,577
      
6,970
      
5,178
      
23
%
    
66
%
                                         
Provision for credit losses
    
(93
)
    
13
      
388
      
*
      
*
  
                                         
Compensation and benefits
    
3,114
      
1,575
      
1,814
      
98
%
    
72
%
Non-compensation expenses
    
2,185
      
2,222
      
2,026
      
(2
%)
    
8
%
Total non-interest expenses
    
5,299
      
3,797
      
3,840
      
40
%
    
38
%
                                         
                                         
Income before taxes
    
3,371
      
3,160
      
950
      
7
%
    
*
  
Net income applicable to Morgan Stanley
  
$
2,601
    
$
2,422
    
$
757
      
7
%
    
*
  
                                         
                                         
Pre-tax profit margin
    
39
%
    
45
%
    
18
%
                
Compensation and benefits as a % of net revenues
    
36
%
    
23
%
    
35
%
                
Non-compensation expenses as a % of net revenues
    
25
%
    
32
%
    
39
%
                
                                         
Return on Average Common Equity
    
23
%
    
22
%
    
6
%
                
Return on Average Tangible Common Equity (1)
    
23
%
    
22
%
    
6
%
                
                                         
Trading VaR (Average Daily 95% / One-Day VaR)
  
$
69
    
$
55
    
$
40
                  
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

5
Wealth Management
Income Statement Information, Financial Metrics and Ratios
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
Revenues:
                              
Asset management
  
$
3,191
    
$
2,975
    
$
2,680
      
7
%
    
19
%
Transactional
    
1,228
      
1,340
      
399
      
(8
%)
    
*
  
Net interest income
    
1,385
      
1,207
      
896
      
15
%
    
55
%
Other
    
155
      
150
      
81
      
3
%
    
91
%
Net revenues
    
5,959
      
5,672
      
4,056
      
5
%
    
47
%
                                         
Provision for credit losses
    
(5
)
    
(9
)
    
19
      
*
      
*
  
                                         
Compensation and benefits
    
3,170
      
3,345
      
2,212
      
(5
%)
    
43
%
Non-compensation expenses
    
1,194
      
1,266
      
770
      
(6
%)
    
55
%
Total non-interest expenses (1)
    
4,364
      
4,611
      
2,982
      
(5
%)
    
46
%
                                         
Income before taxes
    
1,600
      
1,070
      
1,055
      
50
%
    
52
%
Net income applicable to Morgan Stanley
  
$
1,242
    
$
802
    
$
864
      
55
%
    
44
%
                                         
Pre-tax profit margin
    
27
%
    
19
%
    
26
%
                
Pre-tax profit margin excluding integration-related expenses
    
28
%
    
23
%
    
26
%
                
Compensation and benefits as a % of net revenues
    
53
%
    
59
%
    
55
%
                
Non-compensation expenses as a % of net revenues
    
20
%
    
22
%
    
19
%
                
                                         
Return on Average Common Equity
    
17
%
    
12
%
    
18
%
                
Return on Average Tangible Common Equity (2)
    
36
%
    
23
%
    
32
%
                
                                         
                                         
Notes:
                                        
- For the quarters ended March 31, 2021 and December 31, 2020, Wealth Management's results include pre-tax integration-related expenses of $64 million and $231 million ($49 million and $189 million after-tax), respectively.
  
- The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice. 
 

6
Wealth Management
Financial Information and Statistical Data
(unaudited, dollars in billions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
                               
Wealth Management Metrics
                              
                               
Total client assets
  
$
4,231
    
$
3,999
    
$
2,397
      
6
%
    
77
%
Net new assets
  
$
104.9
    
$
73.4
    
$
37.1
      
43
%
    
183
%
U.S. Bank loans
  
$
104.9
    
$
98.1
    
$
82.5
      
7
%
    
27
%
Margin and other lending (1)
  
$
26.6
    
$
23.1
    
$
9.5
      
15
%
    
180
%
Deposits (2)
  
$
322
    
$
306
    
$
234
      
5
%
    
38
%
Weighted average cost of deposits
    
0.18
%
    
0.24
%
    
0.57
%
                
                                         
Advisor-led channel
                                        
                                         
Advisor-led client assets
  
$
3,349
    
$
3,167
    
$
2,331
      
6
%
    
44
%
                                         
Fee-based client assets
  
$
1,574
    
$
1,472
    
$
1,134
      
7
%
    
39
%
Fee-based asset flows
  
$
37.2
    
$
24.1
    
$
18.4
      
54
%
    
102
%
Fee-based assets as a % of advisor-led client assets
    
47
%
    
46
%
    
49
%
                
                                         
Self-directed channel
                                        
                                         
Self-directed assets
  
$
882
    
$
832
    
$
66
      
6
%
    
*
  
Daily average revenue trades (000's)
    
1,619
      
1,106
      
5
      
46
%
    
*
  
Self-directed households (millions)
    
7.2
      
6.7
      
1.3
      
7
%
    
*
  
                                         
Workplace channel
                                        
                                         
Workplace unvested assets
  
$
461
    
$
435
    
$
155
      
6
%
    
197
 %
Number of participants (millions)
    
5.1
      
4.9
      
2.7
      
4
%
    
89
%
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

7
Investment Management
Income Statement Information, Financial Metrics and Ratios
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
Revenues:
                              
Asset management and related fees
  
$
1,103
    
$
869
    
$
665
      
27
%
    
66
%
Performance-based income and other
    
211
      
231
      
27
      
(9
%)
    
*
  
Net revenues
    
1,314
      
1,100
      
692
      
19
%
    
90
%
                                         
Compensation and benefits
    
514
      
530
      
257
      
(3
%)
    
100
%
Non-compensation expenses
    
430
      
374
      
292
      
15
%
    
47
%
Total non-interest expenses (1)
    
944
      
904
      
549
      
4
%
    
72
%
                                         
Income before taxes
    
370
      
196
      
143
      
89
%
    
159
%
Net income applicable to Morgan Stanley
  
$
275
    
$
158
    
$
78
      
74
%
    
*
  
                                         
Pre-tax profit margin
    
28
%
    
18
%
    
21
%
                
Pre-tax profit margin excluding integration-related expenses
    
29
%
    
18
%
    
21
%
                
Compensation and benefits as a % of net revenues
    
39
%
    
48
%
    
37
%
                
Non-compensation expenses as a % of net revenues
    
33
%
    
34
%
    
42
%
                
                                         
Return on Average Common Equity
    
25
%
    
24
%
    
12
%
                
Return on Average Tangible Common Equity (2)
    
88
%
    
37
%
    
18
%
                
                                         
                                         
Notes:
                                        
- For the quarter ended March 31, 2021, Investment Management's results include pre-tax integration-related expenses of $11 million ($9 million after-tax).
  
- The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

8
Investment Management
Financial Information and Statistical Data
(unaudited, dollars in billions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
Assets under management or supervision (AUM)
                          
                               
Net flows by asset class (1)
                              
Equity
  
$
7.8
    
$
12.2
    
$
1.6
      
(36
%)
    
*
  
Fixed Income
    
3.9
      
(1.3
)
    
1.3
      
*
      
200
%
Alternatives and Solutions
    
4.6
      
(2.4
)
    
3.8
      
*
      
21
%
Long-Term Net Flows
    
16.3
      
8.5
      
6.7
      
92
%
    
143
%
                                         
Liquidity and Overlay Services
    
25.9
      
16.5
      
50.6
      
57
%
    
(49
%)
                                         
Total net flows
  
$
42.2
    
$
25.0
    
$
57.3
      
69
%
    
(26
%)
                                         
                                         
Assets under management or supervision by asset class (2)
                                  
Equity
  
$
371
    
$
242
    
$
121
      
53
%
    
*
  
Fixed Income
    
201
      
98
      
75
      
105
%
    
168
%
Alternatives and Solutions
    
418
      
153
      
141
      
173
%
    
196
%
Long‐Term Assets Under Management or Supervision
    
990
      
493
      
337
      
101
%
    
194
%
                                         
Liquidity and Overlay Services
    
429
      
288
      
247
      
49
%
    
74
%
                                         
Total Assets Under Management or Supervision
  
$
1,419
    
$
781
    
$
584
      
82
%
    
143
%
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

9
Consolidated Loans and Lending Commitments
(unaudited, dollars in billions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
Institutional Securities
                              
                               
Loans:
                              
Corporate
  
$
16.8
    
$
14.3
    
$
26.8
      
17
%
    
(37
%)
Secured lending facilities
    
29.6
      
29.5
      
30.4
      
--
      
(3
%)
Commercial and residential real estate
    
10.5
      
11.1
      
11.4
      
(5
%)
    
(8
%)
Securities-based lending and other
    
8.8
      
8.3
      
7.1
      
6
%
    
24
%
                                         
Total Loans
    
65.7
      
63.2
      
75.7
      
4
%
    
(13
%)
                                         
Lending Commitments
    
118.8
      
113.5
      
92.9
      
5
%
    
28
%
                                         
Institutional Securities Loans and Lending Commitments
  
$
184.5
    
$
176.7
    
$
168.6
      
4
%
    
9
%
                                         
                                         
Wealth Management
                                        
                                         
Loans:
                                        
Securities-based lending and other
  
$
68.1
    
$
62.9
    
$
51.4
      
8
%
    
32
%
Residential real estate
    
36.8
      
35.2
      
31.1
      
5
%
    
18
%
                                         
Total Loans
    
104.9
      
98.1
      
82.5
      
7
%
    
27
%
                                         
Lending Commitments
    
14.0
      
14.4
      
13.4
      
(3
%)
    
4
%
                                         
Wealth Management Loans and Lending Commitments
  
$
118.9
    
$
112.5
    
$
95.9
      
6
%
    
24
%
                                         
Consolidated Loans and Lending Commitments (1)
  
$
303.4
    
$
289.2
    
$
264.5
      
5
%
    
15
%
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

10
Consolidated Loans and Lending Commitments
Allowance for Credit Losses (ACL) as of March 31, 2021
(unaudited, dollars in millions)

                         
   
Loans and Lending Commitments
    
ACL (1)
    
ACL %
    
Q1 Provision
  
   
(Gross)
                    
Loans:
                        
Held For Investment (HFI)
                        
                         
Corporate
  
$
5,185
    
$
250
      
4.8
%
  
$
(56
)
Secured lending facilities
    
25,886
      
193
      
0.7
%
    
(3
)
Commercial and residential real estate
    
7,277
      
206
      
2.8
%
    
5
  
Other
    
1,034
      
22
      
2.1
%
    
1
  
Institutional Securities - HFI
  
$
39,382
    
$
671
      
1.7
%
  
$
(53
)
 
                                
Wealth Management - HFI
    
105,010
      
91
      
0.1
%
    
(5
)
                                 
Held For Investment
  
$
144,392
    
$
762
      
0.5
%
  
$
(58
)
                                 
Held For Sale
    
15,466
                          
                                 
Fair Value
    
11,584
                          
                                 
Total Loans
    
171,442
      
762
              
(58
)
                                 
Lending Commitments
    
132,717
      
354
      
0.3
%
    
(40
)
                                 
Consolidated Loans and Lending Commitments
  
$
304,159
    
$
1,116
            
$
(98
)
                                 
                                 
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

11
This page represents an addendum to the 1Q 2021 Financial Supplement, Addendum I

Firm and segment historical income statement information which reflect reclassifications to certain prior period amounts to conform to the presentation changes made in the first quarter of 2021.

(unaudited, dollars in millions)

Consolidated Firm
                                                                        
     
4Q20
      
3Q20
      
2Q20
      
1Q20
      
4Q19
      
3Q19
      
2Q19
      
1Q19
      
4Q18
      
3Q18
      
2Q18
      
1Q18
  
Investment banking
  
$
2,435
    
$
1,826
    
$
2,142
    
$
1,271
    
$
1,696
    
$
1,635
    
$
1,590
    
$
1,242
    
$
1,488
    
$
1,567
    
$
1,793
    
$
1,634
  
Trading
    
3,229
      
3,150
      
4,803
      
2,801
      
2,363
      
2,615
      
2,765
      
3,531
      
1,661
      
2,818
      
3,308
      
3,787
  
Investments
    
327
      
346
      
275
      
38
      
739
      
87
      
441
      
273
      
28
      
136
      
147
      
126
  
Commissions and fees
    
1,352
      
1,037
      
1,102
      
1,360
      
984
      
990
      
979
      
966
      
1,046
      
932
      
1,039
      
1,173
  
Asset management
    
3,926
      
3,664
      
3,265
      
3,417
      
3,451
      
3,363
      
3,220
      
3,049
      
3,266
      
3,251
      
3,189
      
3,192
  
Other
    
457
      
212
      
473
      
(464
)
    
241
      
159
      
227
      
238
      
79
      
234
      
175
      
209
  
Total non-interest revenues
    
11,726
      
10,235
      
12,060
      
8,423
      
9,474
      
8,849
      
9,222
      
9,299
      
7,568
      
8,938
      
9,651
      
10,121
  
                                                                                                 
Interest income
    
2,245
      
2,056
      
2,358
      
3,503
      
3,952
      
4,350
      
4,506
      
4,290
      
4,111
      
3,627
      
3,294
      
2,860
  
Interest expense
    
374
      
570
      
758
      
2,147
      
2,519
      
3,132
      
3,477
      
3,276
      
3,122
      
2,691
      
2,388
      
1,885
  
Net interest
    
1,871
      
1,486
      
1,600
      
1,356
      
1,433
      
1,218
      
1,029
      
1,014
      
989
      
936
      
906
      
975
  
                                                                                                 
Net revenues
  
$
13,597
    
$
11,721
    
$
13,660
    
$
9,779
    
$
10,907
    
$
10,067
    
$
10,251
    
$
10,313
    
$
8,557
    
$
9,874
    
$
10,557
    
$
11,096
  
 
                                                                                                
Provision for credit losses
    
4
      
111
      
239
      
407
      
57
      
51
      
17
      
36
      
11
      
3
      
(55
)
    
26
  
                                                                                                 
Compensation and benefits
    
5,450
      
5,086
      
6,035
      
4,283
      
5,228
      
4,427
      
4,531
      
4,651
      
3,787
      
4,310
      
4,621
      
4,914
  
Non-compensation expenses
    
3,713
      
3,037
      
3,031
      
2,943
      
2,889
      
2,879
      
2,800
      
2,671
      
2,902
      
2,710
      
2,882
      
2,736
  
Total non-interest expenses
    
9,163
      
8,123
      
9,066
      
7,226
      
8,117
      
7,306
      
7,331
      
7,322
      
6,689
      
7,020
      
7,503
      
7,650
  
Income before taxes
  
$
4,430
    
$
3,487
    
$
4,355
    
$
2,146
    
$
2,733
    
$
2,710
    
$
2,903
    
$
2,955
    
$
1,857
    
$
2,851
    
$
3,109
    
$
3,420
  

Institutional Securities
                                                                                                
     
4Q20
      
3Q20
      
2Q20
      
1Q20
      
4Q19
      
3Q19
      
2Q19
      
1Q19
      
4Q18
      
3Q18
      
2Q18
      
1Q18
  
Advisory
  
$
827
    
$
357
    
$
462
    
$
362
    
$
654
    
$
550
    
$
506
    
$
406
    
$
734
    
$
510
    
$
618
    
$
574
  
Equity
    
1,000
      
874
      
882
      
336
      
422
      
401
      
546
      
339
      
323
      
441
      
541
      
421
  
Fixed income
    
475
      
476
      
707
      
446
      
500
      
584
      
420
      
406
      
360
      
508
      
540
      
518
  
Underwriting
    
1,475
      
1,350
      
1,589
      
782
      
922
      
985
      
966
      
745
      
683
      
949
      
1,081
      
939
  
Investment banking
    
2,302
      
1,707
      
2,051
      
1,144
      
1,576
      
1,535
      
1,472
      
1,151
      
1,417
      
1,459
      
1,699
      
1,513
  
                                                                                                 
Equity
    
2,534
      
2,311
      
2,627
      
2,449
      
1,937
      
2,001
      
2,131
      
2,064
      
1,946
      
2,021
      
2,472
      
2,598
  
Fixed income
    
1,790
      
1,954
      
3,041
      
2,062
      
1,405
      
1,429
      
1,350
      
1,801
      
528
      
1,366
      
1,502
      
1,919
  
Other
    
344
      
157
      
480
      
(477
)
    
182
      
90
      
164
      
208
      
(46
)
    
82
      
(10
)
    
89
  
                                                                                                 
Net revenues
  
$
6,970
    
$
6,129
    
$
8,199
    
$
5,178
    
$
5,100
    
$
5,055
    
$
5,117
    
$
5,224
    
$
3,845
    
$
4,928
    
$
5,663
    
$
6,119
  
                                                                                                 
Provision for credit losses
    
13
      
113
      
217
      
388
      
52
      
49
      
13
      
37
      
10
      
(1
)
    
(54
)
    
26
  
                                                                                                 
Compensation and benefits
    
1,575
      
2,001
      
2,952
      
1,814
      
2,057
      
1,768
      
1,789
      
1,819
      
1,179
      
1,626
      
1,993
      
2,160
  
Non-compensation expenses
    
2,222
      
1,967
      
2,037
      
2,026
      
1,866
      
1,931
      
1,852
      
1,773
      
1,876
      
1,747
      
1,912
      
1,821
  
Total non-interest expenses
    
3,797
      
3,968
      
4,989
      
3,840
      
3,923
      
3,699
      
3,641
      
3,592
      
3,055
      
3,373
      
3,905
      
3,981
  
Income before taxes
  
$
3,160
    
$
2,048
    
$
2,993
    
$
950
    
$
1,125
    
$
1,307
    
$
1,463
    
$
1,595
    
$
780
    
$
1,556
    
$
1,812
    
$
2,112
  
                                                                                                 
Notes:
                                                                                                
As part of the Firm’s effort to continually improve the transparency and comparability of our external financial reporting, several updates to our financial presentation were implemented in the first quarter of 2021. The corresponding reclassifications have been made to prior periods to conform to the current presentation. The presentation changes are as follows:
  
(i) The Provision for credit losses for loans and lending commitments is now presented as a separate line in the consolidated income statements.
  
(ii) Gains and losses on external economic derivative hedges associated with held-for-sale and held-for-investment corporate loans, which were previously reported in Trading revenues, are now reported within Other revenues in the consolidated income statements.
  
(iii) In the Institutional Securities segment, sales and trading net revenues have been reorganized and reported into the following categories, Equity, Fixed Income and Other. In addition, Equity and Fixed Income now include certain Investments and Other revenues to the extent directly attributable to those businesses. The remaining Investments and Other revenues, along with amounts previously disclosed as “Other sales and trading” will be shown as “Other”.
  

12
This page represents an addendum to the 1Q 2021 Financial Supplement, Addendum I

Firm and segment historical income statement information which reflect reclassifications to certain prior period amounts to conform to the presentation changes made in the first quarter of 2021.

(unaudited, dollars in millions)

Wealth Management
                                                                        
     
4Q20
      
3Q20
      
2Q20
      
1Q20
      
4Q19
      
3Q19
      
2Q19
      
1Q19
      
4Q18
      
3Q18
      
2Q18
      
1Q18
  
Asset management
  
$
2,975
    
$
2,793
    
$
2,507
    
$
2,680
    
$
2,655
    
$
2,639
    
$
2,544
    
$
2,361
    
$
2,576
    
$
2,573
    
$
2,514
    
$
2,495
  
Transactional
    
1,340
      
880
      
1,075
      
399
      
829
      
595
      
728
      
817
      
422
      
698
      
691
      
747
  
Net interest income
    
1,207
      
889
      
1,030
      
896
      
1,033
      
1,043
      
1,016
      
1,130
      
1,095
      
1,070
      
1,043
      
1,069
  
Other
    
150
      
92
      
92
      
81
      
69
      
84
      
123
      
80
      
54
      
61
      
75
      
63
  
Net revenues
  
$
5,672
    
$
4,654
    
$
4,704
    
$
4,056
    
$
4,586
    
$
4,361
    
$
4,411
    
$
4,388
    
$
4,147
    
$
4,402
    
$
4,323
    
$
4,374
  
                                                                                                 
Provision for credit losses
    
(9
)
    
(2
)
    
22
      
19
      
5
      
2
      
4
      
(1
)
    
1
      
4
      
(1
)
    
0
  
                                                                                                 
Compensation and benefits
    
3,345
      
2,684
      
2,729
      
2,212
      
2,590
      
2,340
      
2,382
      
2,462
      
2,286
      
2,415
      
2,356
      
2,450
  
Non-compensation expenses
    
1,266
      
852
      
811
      
770
      
828
      
781
      
782
      
739
      
850
      
789
      
811
      
764
  
Total non-interest expenses
    
4,611
      
3,536
      
3,540
      
2,982
      
3,418
      
3,121
      
3,164
      
3,201
      
3,136
      
3,204
      
3,167
      
3,214
  
Income before taxes
  
$
1,070
    
$
1,120
    
$
1,142
    
$
1,055
    
$
1,163
    
$
1,238
    
$
1,243
    
$
1,188
    
$
1,010
    
$
1,194
    
$
1,157
    
$
1,160
  

Investment Management
                                                                                                
     
4Q20
      
3Q20
      
2Q20
      
1Q20
      
4Q19
      
3Q19
      
2Q19
      
1Q19
      
4Q18
      
3Q18
      
2Q18
      
1Q18
  
Asset management and related fees
  
$
869
    
$
795
    
$
684
    
$
665
    
$
736
    
$
664
    
$
612
    
$
617
    
$
628
    
$
604
    
$
610
    
$
626
  
Performance-based income and other
    
231
      
261
      
202
      
27
      
620
      
100
      
227
      
187
      
56
      
49
      
81
      
92
  
Net revenues
  
$
1,100
    
$
1,056
    
$
886
    
$
692
    
$
1,356
    
$
764
    
$
839
    
$
804
    
$
684
    
$
653
    
$
691
    
$
718
  
                                                                                                 
Compensation and benefits
    
530
      
401
      
354
      
257
      
581
      
319
      
360
      
370
      
322
      
269
      
272
      
304
  
Non-compensation expenses
    
374
      
340
      
316
      
292
      
328
      
280
      
280
      
260
      
288
      
282
      
279
      
266
  
Total non-interest expenses
    
904
      
741
      
670
      
549
      
909
      
599
      
640
      
630
      
610
      
551
      
551
      
570
  
Income before taxes
  
$
196
    
$
315
    
$
216
    
$
143
    
$
447
    
$
165
    
$
199
    
$
174
    
$
74
    
$
102
    
$
140
    
$
148
  
                                                                                                 
Notes:
                                                                                                
As part of the Firm’s effort to continually improve the transparency and comparability of our external financial reporting, several updates to our financial presentation were implemented in the first quarter of 2021. The corresponding reclassifications have been made to prior periods to conform to the current presentation. The presentation changes are as follows:
  
(i) The Provision for credit losses for loans and lending commitments is now presented as a separate line in the consolidated income statements.
  
(ii) In the Investment Management segment, we have renamed the previously disclosed revenue line “Asset management” to “Asset management and related fees” and combined the remaining revenue categories under a new line named “Performance-based income and other”.
  

13
Definition of U.S. GAAP to Non-GAAP Measures

(a)
The Firm prepares its Consolidated Financial Statements using accounting principles generally accepted in the United States (U.S. GAAP).  From time to time, Morgan Stanley may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings conference calls, financial presentations and otherwise.  The Securities and Exchange Commission defines a “non-GAAP financial measure” as a numerical measure of historical or future financial performance, financial positions, or cash flows that is subject to adjustments that effectively exclude, or include amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP.  Non-GAAP financial measures disclosed by Morgan Stanley are provided as additional information to analysts, investors and other stakeholders in order to provide them with greater transparency about, or an alternative method for assessing, our financial condition, operating results, or prospective regulatory capital requirements.  These measures are not in accordance with, or a substitute for U.S. GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies.  Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable U.S. GAAP financial measure.  In addition to the following notes, please also refer to the Firm's Annual Report on Form 10-K for the year ended December 31, 2020.
   
(b)
The following are considered non-GAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of operating performance and capital adequacy.  These measures are calculated as follows:
  -
Earnings per diluted share excluding integration-related expenses represents net income applicable to Morgan Stanley, adjusted for the impact of the integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance, less preferred dividends divided by the average number of diluted shares outstanding.
  -
The return on average tangible common equity represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average tangible common equity.
  -
The return on average common equity and the return on average tangible common equity excluding integration-related expenses are adjusted in both the numerator and the denominator to exclude the integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance.
  -
Segment return on average common equity and return on average tangible common equity represent full year net income or annualized net income for the quarter applicable to Morgan Stanley for each segment, less preferred dividend segment allocation, divided by average common equity and average tangible common equity for each respective segment.  The segment adjustments to common equity to derive segment average tangible common equity are generally set at the beginning of the year, and will remain fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition).
  -
 Tangible common equity represents common equity less goodwill and intangible assets net of certain mortgage servicing rights deduction.
  -
 Tangible book value per common share represents tangible common equity divided by period end common shares outstanding.
  -
Pre-tax profit margin excluding integration-related expenses represents income before income taxes less integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance as percentages of net revenues.
  -
The Firm expense efficiency ratio excluding integration-related expenses represents total non‐interest expenses less integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance as a percentage of net revenues.

14
Definitions of Performance Metrics and Terms

Our earnings releases, earnings conference calls, financial presentations and other communications may also include certain metrics which we believe to be useful to us, analysts, investors and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.

Page 1:
(a)
Provision for credit losses represents the provision for credit losses on loans held for investment and unfunded lending commitments.
(b)
Net income applicable to Morgan Stanley represents net income, less net income applicable to nonredeemable noncontrolling interests.
(c)
Earnings applicable to Morgan Stanley common shareholders represents net income applicable to Morgan Stanley, less preferred dividends.
   
Page 2:
(a)
The return on average common equity represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity.
(b)
Book value per common share represents common equity divided by period end common shares outstanding.
(c)
Tangible book value per common share represents tangible common equity divided by period end common shares outstanding.
(d)
Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
(e)
The Firm expense efficiency ratio represents total non‐interest expenses as a percentage of net revenues.
   
Page 3:
(a)
Liquidity Resources, which are held within the bank and non-bank operating subsidiaries, are comprised of high quality liquid assets (HQLA) and cash deposits with banks ("Liquidity Resources"). The total amount of Liquidity Resources is actively managed by us considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements.
(b)
The Firm's goodwill and intangible balances utilized in the calculation of tangible common equity are net of certain mortgage servicing rights deduction.
(c)
U.S. Bank refers to the Firm's U.S. Bank operating subsidiaries Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association, E*TRADE Bank, and E*TRADE Savings Bank, and excludes balances between Bank subsidiaries, as well as deposits from the Parent and affiliates.
(d)
Firmwide regional revenues reflect the Firm's consolidated net revenues on a managed basis.  Further discussion regarding the geographic methodology for net revenues is disclosed in Note 23 to the consolidated financial statements included in the Firm's Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K).
   
Page 4:
(a)
The Firm's attribution of average common equity to the business segments is based on the Required Capital framework, an internal capital adequacy measure. This framework is a risk-based and leverage-based capital measure, which is compared with the Firm's regulatory capital to ensure that the Firm maintains an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time.  The Required Capital Framework is based on the Firm's regulatory capital requirements. The Firm defines the difference between its total average common equity and the sum of the average common equity amounts allocated to its business segments as Parent common equity.  The amount of capital allocated to the business segments is generally set at the beginning of the year, and will remain fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition).  The Firm has made updates to its required capital framework for 2021 and continues to evaluate with respect to the impact of evolving regulatory requirements, as appropriate.  For further discussion of the framework, refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm's 2020 Form 10-K.
(b)
The Firm's risk‐based capital ratios are computed under each of the (i) standardized approaches for calculating credit risk and market risk risk‐weighted assets (RWAs) (the “Standardized Approach”) and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”). For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s 2020 Form 10‐K.
(c)
Supplementary leverage ratio represents Tier 1 capital divided by the total supplementary leverage exposure.
   
Page 5:
(a)
Institutional Securities Equity and Fixed income net revenues include trading, net interest income (interest income less interest expense), asset management, commissions and fees, investments and other revenues which are directly attributable to those businesses.
(b)
Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
(c)
VaR represents the unrealized loss in portfolio value that one would not expect to exceed, on average, more than five times every one hundred trading days in the Firm's trading positions if the portfolio were held constant for a one-day period. Further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology, is disclosed in "Quantitative and Qualitative Disclosures about Risk" included in the Firm's 2020 Form 10-K.

15
Definitions of Performance Metrics and Terms

Our earnings releases, earnings conference calls, financial presentations and other communications may also include certain metrics which we believe to be useful to us, analysts, investors and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.

Page 6:
(a)
Transactional revenues for the Wealth Management segment includes investment banking, trading, and commissions and fee revenues.
(b)
Net interest income represents interest income less interest expense.
(c)
Other revenues for the Wealth Management segment includes investments and other revenues.
(d)
Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
   
Page 7:
(a)
Net new assets represents client inflows (including dividend and interest) less client outflows (excluding activity from business combinations/divestitures and impact of fees and commissions).
(b)
Margin and other lending represents Wealth Management margin lending arrangements, which allow customers to borrow against the value of qualifying securities and Wealth Management other lending which includes non-purpose securities based lending on non-bank entities.
(c)
Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits.
(d)
Weighted average cost of deposits represents the annualized weighted average cost of deposits as of periods ended March 31, 2021, December 31, 2020 and March 31, 2020.
(e)
Advisor-led client assets represents client assets in accounts that have a Wealth Management representative assigned.
(f)
Fee-based client assets represents the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
(g)
Fee-based asset flows includes net new fee-based assets, net account transfers, dividends, interest, and client fees and exclude institutional cash management related activity.
(h)
Self-directed assets represents active accounts which are not advisor led. Active accounts are defined as having $25 or more in assets.
(i)
Daily average revenue trades (DARTs) represents the total client-directed trades in a period divided by the number of trading days during that period.
(j)
Self-directed households represents the total number of households that include at least one account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels (Advisor-Led, Self-Directed, Workplace) will be included in each of the respective channel counts.
(k)
The workplace channel assets includes equity compensation solutions for companies, their executives and employees. Workplace unvested assets represents the market value of public company securities at the end of the period.
(l)
Workplace participants represents total accounts with vested or unvested assets >0 in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.
   
Page 8:
(a)
Asset management and related fees represents management and administrative fees, distribution fees, and performance-based fees, not in the form of carried interest. Asset management and related fees represents Asset management as reported on the Firm's consolidated income statement.
(b)
Performance-based income and other includes performance-based fees in the form of carried interest, gains and losses form investments, gains and losses from hedges on seed capital and certain employee deferred compensation plans, net interest, and other revenues. Performance-based income and other represents investments, investment banking, trading, net interest and other revenues as reported on the Firm's consolidated income statement.
(c)
Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
   
Page 9:
(a)
Investment Management Alternatives and Solutions asset class includes products in Fund of Funds, Real Estate, Private Equity and Credit strategies, Multi-Asset portfolios, as well as Custom Separate Account portfolios.
(b)
Investment Management net flows include new commitments, investments or reinvestments, net of client redemptions, returns of capital post-fund investment period and dividends not reinvested and excludes the impact of the transition of funds from their commitment period to the invested capital period.
(c) Overlay Services represents investment strategies that use passive exposure instruments to obtain, offset, or substitute specific portfolio exposures beyond those provided by the underlying holdings of the fund.
(d)
Total assets under management or supervision excludes shares of minority stake assets which represent the Investment Management business segment’s proportional share of assets managed by third-party asset managers in which we hold investments accounted for under the equity method.
   
Page 10 and 11:
(a)
Corporate loans include relationship and event-driven loans and typically consist of revolving lines of credit, term loans and bridge loans.
(b)
Secured lending facilities include loans provided to clients, which are primarily secured by loans, which are, in turn, collateralized by various assets including residential real estate, commercial real estate, corporate and financial assets.
(c)
Securities-based lending and other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market.
(d)
Institutional Securities Lending Commitments principally include Corporate lending activity.

16
Supplemental Quantitative Details and Calculations

Page 1:
(1)
The Firm non-interest expenses by category are as follows:

     
1Q21
      
4Q20
      
1Q20
  
Compensation and benefits
  
$
6,798
    
$
5,450
    
$
4,283
  
                         
Non-compensation expenses:
                        
Brokerage, clearing and exchange fees
    
910
      
776
      
740
  
Information processing and communications
    
733
      
697
      
563
  
Professional services
    
624
      
679
      
449
  
Occupancy and equipment
    
405
      
456
      
365
  
Marketing and business development
    
146
      
161
      
132
  
Other
    
857
      
944
      
694
  
Total non-compensation expenses
    
3,675
      
3,713
      
2,943
  
                         
Total non-interest expenses
  
$
10,473
    
$
9,163
    
$
7,226
  

Page 2:
(1)
The quarter ended March 31, 2021 included pre-tax integration-related expenses of $75 million ($58 million after-tax), associated with the acquisitions of E*TRADE and Eaton Vance. The quarter ended December 31, 2020 also included pre-tax integration-related expenses of $231 million ($189 million after-tax) associated with the acquisition of E*TRADE. The following sets forth the impact of the integration-related expenses to earnings per diluted share, return on average common equity and return on average tangible common equity (which are excluded):

     
1Q21
      
4Q20
  
Earnings per diluted share - GAAP
  
$
2.19
    
$
1.81
  
Impact of adjustments
    
0.03
      
0.11
  
Earnings per diluted share excluding integration-related expenses - Non-GAAP
  
$
2.22
    
$
1.92
  
                 
Return on average common equity - GAAP
    
16.9
%
    
14.7
%
Impact of adjustments
    
0.2
%
    
0.9
%
Return on average common equity excluding integration-related expenses - Non-GAAP
    
17.1
%
    
15.6
%
                 
Return on average tangible common equity - GAAP
    
21.1
%
    
17.7
%
Impact of adjustments
    
0.3
%
    
1.0
%
Return on average tangible common equity excluding integration-related expenses - Non-GAAP
    
21.4
%
    
18.7
%
                 
Firm expense efficiency ratio - GAAP
    
66.6
%
    
67.5
%
Impact of adjustments
    
(0.5
)%
    
(1.7
)%
Firm expense efficiency ratio excluding integration-related expenses - Non-GAAP
    
66.1
%
    
65.8
%

(2)
The impacts of recognizing excess tax benefits upon conversion of awards are $82 million and $99 million in the quarters ended March 31, 2021 and March 31, 2020, respectively.
   
Page 3:
(1)
Includes loans held for investment (net of allowance), loans held for sale and also includes loans at fair value which are included in Trading assets on the balance sheet.
(2)
As of March 31, 2021, December 31, 2020 and March 31, 2020, the U.S. Bank investment securities portfolio included held to maturity investment securities of $64.6 billion, $52.6 billion and $28.8 billion, respectively.
   
Page 4:
(1)
Based on a Federal Reserve interim final rule in effect until March 31, 2021, our supplementary leverage ratio (SLR) and supplementary leverage exposure, effective June 30, 2020, reflect the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. The exclusion of these assets had the effect of increasing our SLR by 0.7% as of March 31, 2021.
   
Page 5:
(1)
Institutional Securities average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 1Q21: $603mm; 4Q20: $484mm; 1Q20: $484mm

Page 6:
(1)
For the quarters ended March 31, 2021 and December 31, 2020, integration-related compensation and non-compensation expenses associated with the acquisition of E*TRADE are as follows:

   
     
1Q21
      
4Q20
  
Compensation expenses
  
$
30
    
$
151
  
Non-compensation expenses
    
34
      
80
  
Total non-interest expenses
  
$
64
    
$
231
  
Income tax provision
    
15
      
42
  
Total non-interest expenses (after-tax)
  
$
49
    
$
189
  

(2)
Wealth Management average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 1Q21: $15,101mm; 4Q20: $13,440mm; 1Q20: $7,802mm
   
Page 7:
(1)
Wealth Management other lending includes $3 billion of non-purpose securities based lending on non-bank entities in each period ended March 31, 2021, December 31, 2020 and March 31, 2020.
(2)
For the quarters ended March 31, 2021 and December 31, 2020, Wealth Management deposits of $322 billion and $306 billion, respectively, exclude off-balance sheet deposits of $8 billion and $25 billion, respectively, held by third parties outside of Morgan Stanley. Total deposits details are as follows:

     
1Q21
      
4Q20
  
Brokerage sweep deposits
  
$
253
    
$
232
  
Other deposits
    
69
      
74
  
Total balance sheet deposits
    
322
      
306
  
Off-balance sheet deposits
    
8
      
25
  
Total deposits
  
$
330
    
$
331
  

17
Supplemental Quantitative Details and Calculations

Page 8:
(1)
For the quarter ended March 31, 2021, integration-related compensation and non-compensation expenses associated with the acquisition of Eaton Vance are as follows:

     
1Q21
  
Compensation expenses
  
$
3
  
Non-compensation expenses
    
8
  
Total non-interest expenses
  
$
11
  
Income tax provision
    
2
  
Total non-interest expenses (after-tax)
  
$
9
  

(2)
Investment Management average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 1Q21: $3,174mm; 4Q20: $932mm; 1Q20: $932mm
   
Page 9:
(1)
Net Flows by region for the quarters ended March 31, 2021, December 31, 2020 and March 31, 2020 were:
 
North America: $35.0 billion, $21.4 billion and $57.9 billion
 
International: $7.2 billion, $3.6 billion and $(0.6) billion
(2)
Assets under management or supervision by region for the quarters ended March 31, 2021, December 31, 2020 and March 31, 2020 were:
 
North America: $1,058 billion, $449 billion and $359 billion
 
International: $361 billion, $332 billion and $225 billion

Page 10:
(1)
For the quarters ended March 31, 2021, December 31, 2020 and March 31, 2020, Investment Management reflected loan balances of $1,130 million, $443 million and $499 million, respectively.
   
Page 11:
(1)
For the quarter ended March 31, 2021, the Allowance Rollforward for Loans and Lending Commitments is as follows:

                   
   
Institutional Securities
    
Wealth Management
    
Total
  
Loans
                  
                   
Allowance for Credit Losses (ACL)
                  
Beginning Balance - December 31, 2020
  
$
739
    
$
96
    
$
835
  
Net Charge Offs
    
(10
)
    
-
      
(10
)
Provision
    
(53
)
    
(5
)
    
(58
)
Other
    
(5
)
    
-
      
(5
)
Ending Balance - March 31, 2021
  
$
671
    
$
91
    
$
762
  
                         
                         
Lending Commitments
                        
                         
Allowance for Credit Losses (ACL)
                        
Beginning Balance - December 31, 2020
  
$
391
    
$
5
    
$
396
  
Net Charge Offs
    
-
      
-
      
-
  
Provision
    
(40
)
    
-
      
(40
)
Other
    
(1
)
    
(1
)
    
(2
)
Ending Balance - March 31, 2021
  
$
350
    
$
4
    
$
354
  
                         
                         
Loans and Lending Commitments
                        
                         
Allowance for Credit Losses (ACL)
                        
Beginning Balance - December 31, 2020
  
$
1,130
    
$
101
    
$
1,231
  
Net Charge Offs
    
(10
)
    
-
      
(10
)
Provision
    
(93
)
    
(5
)
    
(98
)
Other
    
(6
)
    
(1
)
    
(7
)
Ending Balance - March 31, 2021
  
$
1,021
    
$
95
    
$
1,116
  

18
Legal Notice


This Financial Supplement contains financial, statistical and business-related information, as well as business and segment trends.
The information should be read in conjunction with the Firm's first quarter earnings press release issued April 16, 2021.


19