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): July 16, 2020
 
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 July 16, 2020, Morgan Stanley (the "Company") released financial information with respect to its quarter ended June 30, 2020. 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 June 30, 2020 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:
July 16, 2020
 
By:
/s/   Raja Akram
 
 
 
 
Name:
Raja Akram
 
 
 
 
Title:
Deputy Chief Financial Officer

Exhibit 99.1


Morgan Stanley Second Quarter 2020 Earnings Results
Morgan Stanley Reports Net Revenues of $13.4 Billion and EPS of $1.96
NEW YORK, July 16, 2020 – Morgan Stanley (NYSE: MS) today reported net revenues of $13.4 billion for the second quarter ended June 30, 2020 compared with $10.2 billion a year ago.  Net income applicable to Morgan Stanley was $3.2 billion, or $1.96 per diluted share1, compared with net income of $2.2 billion, or $1.23 per diluted share1, for the same period a year ago. The current quarter included intermittent net discrete tax expenses of $134 million which had an impact of $0.08 per diluted share.


James P. Gorman, Chairman and Chief Executive Officer, said, “Our decade long business transformation was intended to provide stability during times of serious stress. The second quarter tested the model and we performed exceedingly well, delivering record results. This builds on the momentum of a very strong first quarter, while more than 90% of our employees continue to work from home, demonstrating the ongoing operational resilience of our platform. We remain focused on supporting our employees, communities, and clients, while managing our risk and continuing to invest in our businesses.”
 

 
Financial Summary2,3
($ millions, except per share data)
    
Firm
2Q 2020
2Q 2019
     
Net revenues
$13,414
$10,244
Compensation expense
$6,035
$4,531
Non-compensation expenses
$3,024
$2,810
Pre-tax income6
$4,355
$2,903
Net income app. to MS
$3,196
$2,201
Expense efficiency ratio7
68%
72%
Earnings per diluted share
$1.96
$1.23
Book value per share8
$49.57
$44.13
Tangible book value per share9
$43.68
$38.44
Return on equity10
15.7%
11.2%
Return on tangible equity10
17.8%
12.8%
Institutional Securities
    
     
Net revenues
$7,977
$5,113
Investment Banking
$2,051
$1,472
Sales & Trading
$5,553
$3,304
Wealth Management
    
     
Net revenues
$4,680
$4,408
Fee-based client assets ($ billions)11
$1,236
$1,159
Fee-based asset flows ($ billions)12
$11.1
$9.8
Loans ($ billions)
$85.2
$74.1
Investment Management
    
     
Net revenues
$886
$839
AUM ($ billions)13
$665
$497
Long-term net flows ($ billions)14
$15.4
$4.9

 
 
Highlights
   
   
• The Firm’s results reflect both record net revenues up ~30% and net income up ~45%4 with contributions from all businesses and geographies.
   
• The Firm delivered ROE of 15.7% and ROTCE of 17.8%.
   
• The Firm’s allowance for credit losses on loans held for investment increased by 40% to $866 million as of June 30, 2020 with a provision for credit losses of $246 million in the current quarter.
   
• Our balance sheet, capital and liquidity remain strong and the Firm is well positioned to continue to facilitate client activity.
   
• Institutional Securities net revenues increased 56% reflecting outperformance across the businesses.  Sales and Trading up 68% on strong client engagement as markets stabilized; Underwriting up 64% as clients accessed the open capital markets to strengthen their balance sheets.
   
• Wealth Management delivered a pre-tax income of $1.1 billion with a pre-tax margin of 24.4%5 despite a challenging market and rate environment.  Bank lending increased 15% and brokerage sweep deposits were up $40 billion from a year ago.
   
• Investment Management reported both record long-term net flows of $15.4 billion and AUM of $665 billion driving revenue growth of 6%.
   

Media Relations: Wesley McDade   212-761-2430

Investor Relations: Sharon Yeshaya   212-761-1632

1

Institutional Securities

Institutional Securities reported net revenues for the current quarter of $8.0 billion compared with $5.1 billion a year ago. Pre-tax income was $3.0 billion compared with $1.5 billion a year ago.6


Investment Banking revenues up 39% from a year ago:

•
Advisory revenues decreased from a year ago driven by lower completed M&A activity and fewer large transactions.

•
Equity underwriting revenues increased from a year ago on increased volumes and higher revenues from blocks, convertibles and follow-on offerings.

•
Fixed income underwriting revenues increased from a year ago on higher investment grade and non-investment grade bond issuances as clients continue to access the market to benefit from the lower rate environment and to raise liquidity.

Sales and Trading net revenues up 68% from a year ago:

•
Equity sales and trading net revenues increased from a year ago reflecting strong performance in cash equities and derivatives across all regions driven by elevated client activity.

•
Fixed Income sales and trading net revenues increased significantly from a year ago reflecting strong performance across products and geographies on higher client activity.  The increase in credit products reflected robust global capital markets activity and credit spread movements.  The foreign exchange and rates businesses benefited from elevated volatility and wider bid-offer spreads while commodities revenues benefited from higher client activity in volatile markets.

•
Other sales and trading net revenues decreased from a year ago driven by losses on economic hedges associated with corporate lending activity.

Investments and Other:

•


•
Investments revenues decreased from a year ago. The prior year quarter included gains associated with an investment’s initial public offering and subsequent mark-to-market gains on remaining holdings.

Other revenues increased from a year ago primarily related to mark-to-market gains associated with corporate lending activity as credit spreads tightened in the quarter, partially offset by an increase in the allowance for credit losses for loans held for investment.

Total Expenses:

•

•
Compensation expenses increased from a year ago on higher revenues.

Non-compensation expenses increased from a year ago primarily on higher volume driven expenses and information processing costs partially offset by lower spending on business travel, entertainment and conferences.
 
       
($ millions)
2Q 2020
2Q 2019
  
       
Net Revenues
$7,977
$5,113
  
       
Investment Banking
$2,051
$1,472
  
       
Advisory
$462
$506
  
       
Equity underwriting
$882
$546
  
       
Fixed income underwriting
$707
$420
  
       
Sales and Trading
$5,553
$3,304
  
       
Equity
$2,619
$2,130
  
       
Fixed Income
$3,033
$1,133
  
       
Other
$(99)
$41
  
       
Investments and Other
$373
$337
  
       
Investments
$36
$194
  
       
Other
$337
$143
  
       
Total Expenses
$4,984
$3,650
  
       
Compensation
$2,952
$1,789
  
       
Non-compensation
$2,032
$1,861
  

2

Wealth Management

Wealth Management reported net revenues for the current quarter of $4.7 billion compared with $4.4 billion from a year ago.  Pre-tax income of $1.1 billion6 in the current quarter resulted in a pre-tax margin of 24.4%.5


Net revenues increased 6% from a year ago:

•
Asset management revenues were essentially unchanged from a year ago reflecting lower markets and lower average fee rates primarily on changes in asset mix, offset by positive flows.

•
Transactional revenues15 decreased slightly excluding the impact of mark-to-market gains on investments associated with employee deferred cash-based compensation plans.

•
Net interest income remained essentially unchanged from a year ago reflecting growth in bank lending, increases in bank deposits and lower mortgage securities prepayment amortization expense, partially offset by the impact of lower average interest rates.  Wealth Management client liabilities16 were $94 billion at quarter end compared with $84 billion a year ago.

Total Expenses:

•
Compensation expense increased from a year ago primarily driven by the increase in the fair value of deferred cash-based compensation plan referenced investments.

•
Non-compensation expenses were essentially unchanged from a year ago.

 
($ millions)
2Q 2020
2Q 2019
    
         
Net Revenues
$4,680
$4,408
  
       
Asset management
$2,507
$2,544
  
       
Transactional15
  $1,075
$728
  
       
Net interest
$1,030
$1,016
  
       
Other
$68
$120
  
       
Total Expenses
$3,538
$3,165
  
       
Compensation
$2,729
$2,382
  
       
Non-compensation
$809
$783
  


















Investment Management

Investment Management reported net revenues of $886 million compared with $839 million a year ago.  Pre-tax income was $216 million
compared with $199 million a year ago.6

 
Net revenues increased 6% from a year ago:

•
Asset management revenues increased 12% from a year ago driven by record AUM on continued strong performance and positive net flows.
•
Investments revenues decreased slightly on lower accrued carried interest from Real Estate and Infrastructure funds.
Total Expenses:

•
Compensation expense decreased slightly from a year ago principally due to a decrease in carried interest.

•
Non-compensation expenses increased from a year ago driven by higher brokerage and clearing costs.
 
($ millions)
2Q 2020
2Q 2019
  
       
Net Revenues
$886
$839
  
       
Asset management
$684
$612
  
       
Investments
$231
$247
  
       
Other
$(29)
$(20)
  
       
Total Expenses
$670
$640
  
       
Compensation
$354
$360
  
       
Non-compensation
$316
$280
  

3

Other Matters

 
•
The Comprehensive Capital Analysis and Review (CCAR) results affirm the Firm’s strong capital position and reflect the stability of the business model.

•
At June 30, 2020 the Firm’s Common Equity Tier 118 and Tier 118 risk-based capital ratios under the Advanced Approach were 16.1% and 18.1%, respectively and under the Standardized Approach the ratios were 16.5% and 18.6%, respectively.

•
Supplementary leverage ratio (SLR)20 and exposures in the current quarter include the Federal Reserve interim final rule relief in effect until March 31, 2021.  The impact of the interim rule on the SLR ratio was an improvement of 0.9%.20

•
The Board of Directors declared a $0.35 quarterly dividend per share, payable on August 14, 2020 to common shareholders of record on July 31, 2020.

•
The effective tax rate for the quarter was 25.7%.  The current quarter includes intermittent net discrete tax expenses of $134 million principally associated with the remeasurement of reserves related to a foreign tax matter.

•
The Firm’s provision for credit losses on loans and lending commitments was $239 million for the second quarter of 2020, compared with $18 million for the second quarter of 2019 and $407 million for the first quarter of 2020.  The allowance for credit losses on loans and lending commitments was $1.2 billion as of June 30, 2020, an increase of approximately 26% over the previous quarter.
 
       
 
2Q 2020
2Q 2019
  
       
Capital17
      
       
Common Equity Tier 1 capital18
16.1%
16.3%
  
       
Tier 1 capital18
18.1%
18.6%
  
       
Tier 1 leverage19
8.1%
8.4%
  
       
Supplementary leverage ratio20
7.3%
6.5%
  
       
Common Stock Repurchases
      
       
Repurchases ($ millions)
NA
$1,180
  
       
Number of Shares (millions)
NA
26
  
       
Average Price
NA
$44.53
  
       
Period End Shares (millions)
1,576
1,659
  
       
Tax Rate
25.7%
22.6%
  

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 may include certain non-GAAP financial measures.  The definition of such measures or reconciliation of such metrics 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 contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or negatives of these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, including the attainment of certain financial and other targets, objectives and goals of the Firm, as well as statements about the consummation of the proposed transaction with E*TRADE Financial Corporation (“E*TRADE”) and the anticipated benefits thereof.  All such forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in such forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to, (i) the completion of the proposed transaction on anticipated terms and timing, including obtaining required stockholder and regulatory approvals, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined company’s operations and other conditions to the completion of the acquisition, including the possibility that any of the anticipated benefits of the proposed transaction will not be realized or will not be realized within the expected time period, (ii) the ability of the Firm and E*TRADE to integrate the business successfully and to achieve anticipated synergies, risks and costs, (iii) potential litigation relating to the proposed transaction that could be instituted against the Firm, E*TRADE or their respective directors, (iv) the risk that disruptions from the proposed transaction will harm the Firm’s and E*TRADE’s business, including current plans and operations, (v) the ability of the Firm or E*TRADE to retain and hire key personnel, (vi) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the acquisition, (vii) continued availability of capital and financing and rating agency actions, (viii) legislative, regulatory and economic developments, (ix) potential business uncertainty, including changes to existing business relationships, during the pendency of the acquisition that could affect Morgan Stanley’s and/or E*TRADE’s financial performance, (x) certain restrictions during the pendency of the acquisition that may impact the Firm’s or E*TRADE’s ability to pursue certain business opportunities or strategic transactions, (xi) unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management’s response to any of the aforementioned factors, (xii) dilution caused by the Firm’s issuance of additional shares of its common stock in connection with the proposed transaction, (xiii) the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, (xiv) those risks described in Item 1A of the Firm’s most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K, including the risk factor under Item 8.01 “Other Matters” in the Current Report on Form 8-K dated April 16, 2020, and the additional risk factors under “Risk Factors” in the Registration Statement on Form S-4 filed on April 17, 2020, as amended (“Form S-4”), (xv) those risks described in Item 1A of E*TRADE’s most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K and (xvi) those risks described in the proxy statement/prospectus on Form S-4 available from the sources indicated above. These risks, as well as other risks associated with the proposed acquisition, are more fully discussed in the proxy statement/prospectus included in the registration statement on Form S-4 filed with the SEC in connection with the proposed acquisition. While the list of factors presented here and the list of factors presented in the registration statement on Form S-4 are considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on the Firm’s or E*TRADE’s consolidated financial condition, results of operations, credit rating or liquidity. Neither the Firm nor E*TRADE assumes any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.

5

1 Includes preferred dividends related to the calculation of earnings per share of $149 million and $170 million for the second quarter of 2020 and 2019, 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 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.

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, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.

4 Net revenues of $13.4 billion and net income applicable to Morgan Stanley of $3.2 billion 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.

5 Pre-tax margin represents income (loss) before taxes divided by net revenues.

6 Pre-tax income represents income (loss) before taxes.

7 The Firm expense efficiency ratio represents total non-interest expenses as a percentage of net revenues.

8 Book value per common share represents common equity divided by period end common shares outstanding.

9 Tangible book value per common share 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. The calculation of tangible book value per common share represents tangible common equity divided by period end common shares outstanding.  Tangible common equity, also a non-GAAP financial measure, represents common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.

10 The return on average tangible common equity and tangible common equity are non-GAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders to allow better comparability of period-to-period operating performance and capital adequacy.  The calculation of return on average common equity and return on average tangible common equity represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively.  Tangible common equity represents common equity less goodwill and intangible assets net of certain allowable servicing rights deduction.

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.
6

13 AUM is defined as assets under management.

14 Long-term net flows include the Equity, Fixed Income and Alternative/Other asset classes and exclude the Liquidity asset class.

15 Transactional revenues include investment banking, trading, and commissions and fee revenues.
16 Wealth Management client liabilities reflect U.S. Bank Subsidiaries’ lending and broker-dealer margin activity.  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.
17 Capital ratios are estimates as of the press release date, July 16, 2020.

18 The Firm’s risk-based capital ratios for purposes of determining regulatory compliance are the lower of the capital ratios computed under 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”).  At June 30, 2020 the Firm’s ratios are based on the Advanced Approach, while at June 30, 2019, they were based on the Standardized Approach.  For information on the calculation of regulatory capital and ratios for prior periods, please refer to “Liquidity and Capital Resources – Regulatory Requirements” in the Firm’s 2019 Form 10-K.

19 The Tier 1 leverage ratio is a non-risk 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 must maintain a Tier 1 supplementary leverage ratio of 5% inclusive of a capital buffer of at least 2% in order to avoid limitations on capital distributions, including dividends and stock repurchases, and discretionary bonus payments to executive officers.  The Firm’s Supplementary Leverage Ratio utilizes a Tier 1 capital numerator of approximately $77.4 billion and $72.7 billion, and supplementary leverage exposure denominator of approximately $1.06 trillion and $1.12 trillion, for the second quarter of 2020 and 2019, respectively.  Based on a Federal Reserve interim final rule in effect until March 31, 2021, our SLR and Supplementary leverage exposure as of 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 improving our SLR ratio by 0.9% as of June 30, 2020.
7

Consolidated Income Statement Information
                                                
(unaudited, dollars in millions)
                                                
                                                 
   
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
    
Jun 30, 2020
    
Jun 30, 2019
    
Change
  
Revenues:
                                                
Investment banking
  
$
2,142
    
$
1,271
    
$
1,590
      
69
%
    
35
%
  
$
3,413
    
$
2,832
      
21
%
Trading
    
4,683
      
3,056
      
2,732
      
53
%
    
71
%
    
7,739
      
6,173
      
25
%
Investments
    
275
      
38
      
441
      
*
      
(38
%)
    
313
      
714
      
(56
%)
Commissions and fees
    
1,102
      
1,360
      
979
      
(19
%)
    
13
%
    
2,462
      
1,945
      
27
%
Asset management
    
3,265
      
3,417
      
3,220
      
(4
%)
    
1
%
    
6,682
      
6,269
      
7
%
Other
    
347
      
(1,011
)
    
253
      
*
      
37
%
    
(664
)
    
554
      
*
  
Total non-interest revenues
    
11,814
      
8,131
      
9,215
      
45
%
    
28
%
    
19,945
      
18,487
      
8
%
                                                                 
Interest income
    
2,358
      
3,503
      
4,506
      
(33
%)
    
(48
%)
    
5,861
      
8,796
      
(33
%)
Interest expense
    
758
      
2,147
      
3,477
      
(65
%)
    
(78
%)
    
2,905
      
6,753
      
(57
%)
Net interest
    
1,600
      
1,356
      
1,029
      
18
%
    
55
%
    
2,956
      
2,043
      
45
%
Net revenues
    
13,414
      
9,487
      
10,244
      
41
%
    
31
%
    
22,901
      
20,530
      
12
%
                                                                 
Non-interest expenses:
                                                                
Compensation and benefits
    
6,035
      
4,283
      
4,531
      
41
%
    
33
%
    
10,318
      
9,182
      
12
%
                                                                 
Non-compensation expenses:
                                                                
Brokerage, clearing and exchange fees
    
716
      
740
      
630
      
(3
%)
    
14
%
    
1,456
      
1,223
      
19
%
Information processing and communications
    
589
      
563
      
538
      
5
%
    
9
%
    
1,152
      
1,070
      
8
%
Professional services
    
535
      
449
      
537
      
19
%
    
--
      
984
      
1,051
      
(6
%)
Occupancy and equipment
    
365
      
365
      
353
      
--
      
3
%
    
730
      
700
      
4
%
Marketing and business development
    
63
      
132
      
162
      
(52
%)
    
(61
%)
    
195
      
303
      
(36
%)
Other
    
756
      
809
      
590
      
(7
%)
    
28
%
    
1,565
      
1,143
      
37
%
Total non-compensation expenses
    
3,024
      
3,058
      
2,810
      
(1
%)
    
8
%
    
6,082
      
5,490
      
11
%
                                                                 
Total non-interest expenses
    
9,059
      
7,341
      
7,341
      
23
%
    
23
%
    
16,400
      
14,672
      
12
%
                                                                 
Income before provision for income taxes
    
4,355
      
2,146
      
2,903
      
103
%
    
50
%
    
6,501
      
5,858
      
11
%
Provision for income taxes
    
1,119
      
366
      
657
      
*
      
70
%
    
1,485
      
1,144
      
30
%
Net income (loss)
  
$
3,236
    
$
1,780
    
$
2,246
      
82
%
    
44
%
  
$
5,016
    
$
4,714
      
6
%
Net income applicable to nonredeemable noncontrolling interests
    
40
      
82
      
45
      
(51
%)
    
(11
%)
    
122
      
84
      
45
%
Net income (loss) applicable to Morgan Stanley
    
3,196
      
1,698
      
2,201
      
88
%
    
45
%
    
4,894
      
4,630
      
6
%
Preferred stock dividend
    
149
      
108
      
170
      
38
%
    
(12
%)
    
257
      
263
      
(2
%)
Earnings (loss) applicable to Morgan Stanley common shareholders
  
$
3,047
    
$
1,590
    
$
2,031
      
92
%
    
50
%
  
$
4,637
    
$
4,367
      
6
%


The End Notes are an integral part of this presentation.  Refer to the Financial Supplement on pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
    
Six Months Ended
    
Percentage
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
    
Jun 30, 2020
    
Jun 30, 2019
    
Change
  
                                                 
Financial Metrics:
                                                
                                                 
Earnings per basic share
  
$
1.98
    
$
1.02
    
$
1.24
      
94
%
    
60
%
  
$
3.00
    
$
2.65
      
13
%
Earnings per diluted share
  
$
1.96
    
$
1.01
    
$
1.23
      
94
%
    
59
%
  
$
2.96
    
$
2.62
      
13
%
                                                                 
Return on average common equity
    
15.7
%
    
8.5
%
    
11.2
%
                    
12.2
%
    
12.1
%
        
Return on average tangible common equity
    
17.8
%
    
9.7
%
    
12.8
%
                    
13.9
%
    
13.8
%
        
                                                                 
Book value per common share
  
$
49.57
    
$
49.09
    
$
44.13
                    
$
49.57
    
$
44.13
          
Tangible book value per common share
  
$
43.68
    
$
43.28
    
$
38.44
                    
$
43.68
    
$
38.44
          
                                                                 
Excluding intermittent net discrete tax provision / benefit
                                                                
Adjusted earnings per diluted share
  
$
2.04
    
$
0.99
    
$
1.23
      
106
%
    
66
%
  
$
3.03
    
$
2.56
      
18
%
Adjusted return on average common equity
    
16.4
%
    
8.3
%
    
11.2
%
                    
12.5
%
    
11.8
%
        
Adjusted return on average tangible common equity
    
18.6
%
    
9.5
%
    
12.8
%
                    
14.2
%
    
13.5
%
        
                                                                 
                                                                 
Financial Ratios:
                                                                
                                                                 
Pre-tax profit margin
    
32
%
    
23
%
    
28
%
                    
28
%
    
29
%
        
Compensation and benefits as a % of net revenues
    
45
%
    
45
%
    
44
%
                    
45
%
    
45
%
        
Non-compensation expenses as a % of net revenues
    
23
%
    
32
%
    
27
%
                    
27
%
    
27
%
        
Firm expense efficiency ratio
    
68
%
    
77
%
    
72
%
                    
72
%
    
71
%
        
Effective tax rate
    
25.7
%
    
17.1
%
    
22.6
%
                    
22.8
%
    
19.5
%
        
                                                                 
                                                                 
Statistical Data:
                                                                
                                                                 
Period end common shares outstanding (millions)
    
1,576
      
1,576
      
1,659
      
--
      
(5
%)
                        
Average common shares outstanding (millions)
                                                                
Basic
    
1,541
      
1,555
      
1,634
      
(1
%)
    
(6
%)
    
1,548
      
1,646
      
(6
%)
Diluted
    
1,557
      
1,573
      
1,655
      
(1
%)
    
(6
%)
    
1,565
      
1,666
      
(6
%)
                                                                 
Worldwide employees
    
61,596
      
60,670
      
59,513
      
2
%
    
4
%
                        


The End Notes are an integral part of this presentation.  Refer to the Financial Supplement on pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations and Legal Notice for additional information.

9
Exhibit 99.2
Second Quarter 2020 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
Definition of U.S. GAAP to Non-GAAP Measures
12
Definition of Performance Metrics and Terms
13 - 14
Supplemental Quantitative Details and Calculations
15 - 16
Legal Notice
17


Consolidated Financial Summary
                                        
(unaudited, dollars in millions)
                                                
                                                 
   
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
    
Jun 30, 2020
    
Jun 30, 2019
    
Change
  
Net revenues
                                                
Institutional Securities
  
$
7,977
    
$
4,905
    
$
5,113
      
63
%
    
56
%
  
$
12,882
    
$
10,309
      
25
%
Wealth Management
    
4,680
      
4,037
      
4,408
      
16
%
    
6
%
    
8,717
      
8,797
      
(1
%)
Investment Management
    
886
      
692
      
839
      
28
%
    
6
%
    
1,578
      
1,643
      
(4
%)
Intersegment Eliminations
    
(129
)
    
(147
)
    
(116
)
    
12
%
    
(11
%)
    
(276
)
    
(219
)
    
(26
%)
Net revenues
  
$
13,414
    
$
9,487
    
$
10,244
      
41
%
    
31
%
  
$
22,901
    
$
20,530
      
12
%
                                                                 
Non-interest expenses
                                                                
Institutional Securities
  
$
4,984
    
$
3,955
    
$
3,650
      
26
%
    
37
%
  
$
8,939
    
$
7,251
      
23
%
Wealth Management
    
3,538
      
2,982
      
3,165
      
19
%
    
12
%
    
6,520
      
6,366
      
2
%
Investment Management
    
670
      
549
      
640
      
22
%
    
5
%
    
1,219
      
1,270
      
(4
%)
Intersegment Eliminations
    
(133
)
    
(145
)
    
(114
)
    
8
%
    
(17
%)
    
(278
)
    
(215
)
    
(29
%)
Non-interest expenses (1)
  
$
9,059
    
$
7,341
    
$
7,341
      
23
%
    
23
%
  
$
16,400
    
$
14,672
      
12
%
                                                                 
Income (loss) before taxes
                                                                
Institutional Securities
  
$
2,993
    
$
950
    
$
1,463
      
*
      
105
%
  
$
3,943
    
$
3,058
      
29
%
Wealth Management
    
1,142
      
1,055
      
1,243
      
8
%
    
(8
%)
    
2,197
      
2,431
      
(10
%)
Investment Management
    
216
      
143
      
199
      
51
%
    
9
%
    
359
      
373
      
(4
%)
Intersegment Eliminations
    
4
      
(2
)
    
(2
)
    
*
      
*
      
2
      
(4
)
    
*
  
Income (loss) before taxes
  
$
4,355
    
$
2,146
    
$
2,903
      
103
%
    
50
%
  
$
6,501
    
$
5,858
      
11
%
                                                                 
Net Income (loss) applicable to Morgan Stanley
                                                               
Institutional Securities
  
$
2,186
    
$
757
    
$
1,121
      
189
%
    
95
%
  
$
2,943
    
$
2,492
      
18
%
Wealth Management
    
853
      
864
      
953
      
(1
%)
    
(10
%)
    
1,717
      
1,877
      
(9
%)
Investment Management
    
154
      
78
      
128
      
97
%
    
20
%
    
232
      
264
      
(12
%)
Intersegment Eliminations
    
3
      
(1
)
    
(1
)
    
*
      
*
      
2
      
(3
)
    
*
  
Net Income (loss) applicable to Morgan Stanley
  
$
3,196
    
$
1,698
    
$
2,201
      
88
%
    
45
%
  
$
4,894
    
$
4,630
      
6
%
Earnings (loss) applicable to Morgan Stanley common shareholders
  
$
3,047
    
$
1,590
    
$
2,031
      
92
%
    
50
%
  
$
4,637
    
$
4,367
      
6
%


The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
    
Six Months Ended
    
Percentage
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
    
Jun 30, 2020
    
Jun 30, 2019
    
Change
  
                                                 
Financial Metrics:
                                                
                                                 
Earnings per basic share
  
$
1.98
    
$
1.02
    
$
1.24
      
94
%
    
60
%
  
$
3.00
    
$
2.65
      
13
%
Earnings per diluted share
  
$
1.96
    
$
1.01
    
$
1.23
      
94
%
    
59
%
  
$
2.96
    
$
2.62
      
13
%
                                                                 
Return on average common equity
    
15.7
%
    
8.5
%
    
11.2
%
                    
12.2
%
    
12.1
%
        
Return on average tangible common equity
    
17.8
%
    
9.7
%
    
12.8
%
                    
13.9
%
    
13.8
%
        
                                                                 
Book value per common share
  
$
49.57
    
$
49.09
    
$
44.13
                    
$
49.57
    
$
44.13
          
Tangible book value per common share
  
$
43.68
    
$
43.28
    
$
38.44
                    
$
43.68
    
$
38.44
          
                                                                 
Excluding intermittent net discrete tax provision / benefit (1)(2)
                                                                
Adjusted earnings per diluted share
  
$
2.04
    
$
0.99
    
$
1.23
      
106
%
    
66
%
  
$
3.03
    
$
2.56
      
18
%
Adjusted return on average common equity
    
16.4
%
    
8.3
%
    
11.2
%
                    
12.5
%
    
11.8
%
        
Adjusted return on average tangible common equity
    
18.6
%
    
9.5
%
    
12.8
%
                    
14.2
%
    
13.5
%
        
                                                                 
                                                                 
Financial Ratios:
                                                                
                                                                 
Pre-tax profit margin
    
32
%
    
23
%
    
28
%
                    
28
%
    
29
%
        
Compensation and benefits as a % of net revenues
    
45
%
    
45
%
    
44
%
                    
45
%
    
45
%
        
Non-compensation expenses as a % of net revenues
    
23
%
    
32
%
    
27
%
                    
27
%
    
27
%
        
Firm expense efficiency ratio
    
68
%
    
77
%
    
72
%
                    
72
%
    
71
%
        
Effective tax rate(1)(2)
    
25.7
%
    
17.1
%
    
22.6
%
                    
22.8
%
    
19.5
%
        
                                                                 
                                                                 
Statistical Data:
                                                                
                                                                 
Period end common shares outstanding (millions)
    
1,576
      
1,576
      
1,659
      
--
      
(5
%)
                        
Average common shares outstanding (millions)
                                                                
Basic
    
1,541
      
1,555
      
1,634
      
(1
%)
    
(6
%)
    
1,548
      
1,646
      
(6
%)
Diluted
    
1,557
      
1,573
      
1,655
      
(1
%)
    
(6
%)
    
1,565
      
1,666
      
(6
%)
                                                                 
Worldwide employees
    
61,596
      
60,670
      
59,513
      
2
%
    
4
%
                        


The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
    
Six Months Ended
    
Percentage
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
    
Jun 30, 2020
    
Jun 30, 2019
    
Change
  
                                                 
Consolidated Balance sheet
                                                
                                                 
Total assets
  
$
975,363
    
$
947,795
    
$
891,959
      
3
%
    
9
%
                  
Loans (1)  
$
150,723
    
$
158,759
    
$
131,957
      
(5
%)
    
14
%
                  
Deposits
  
$
236,849
    
$
235,239
    
$
176,593
      
1
%
    
34
%
                  
Liquidity Resources (2)
  
$
301,407
    
$
255,134
    
$
219,337
      
18
%
    
37
%
                  
Long-term debt outstanding
  
$
202,238
    
$
192,645
    
$
196,072
      
5
%
    
3
%
                  
Maturities of long-term debt outstanding (next 12 months)
  
$
20,076
    
$
17,153
    
$
26,621
      
17
%
    
(25
%)
                  
                                                           
Common equity
  
$
78,125
    
$
77,340
    
$
73,204
      
1
%
    
7
%
                  
Less: Goodwill and intangible assets
    
(9,286
)
    
(9,146
)
    
(9,433
)
    
2
%
    
(2
%)
                  
Tangible common equity
  
$
68,839
    
$
68,194
    
$
63,771
      
1
%
    
8
%
                  
                                                           
Preferred equity
  
$
8,520
    
$
8,520
    
$
8,520
      
--
      
--
                    
                                                           
U.S. Bank Supplemental Financial Information
                                                          
Total Assets
  
$
263,934
    
$
265,383
    
$
205,897
      
(1
%)
    
28
%
                  
Loans
 
$
136,613
    
$
141,712
    
$
119,754
      
(4
%)
    
14
%
                  
Investment securities portfolio (3)
  
$
92,270
    
$
77,747
    
$
70,712
      
19
%
    
30
%
                  
Deposits
  
$
235,959
    
$
234,055
    
$
175,765
      
1
%
    
34
%
                  
                                                           
Regional revenues
                                                          
Americas
  
$
9,765
    
$
6,646
    
$
7,526
      
47
%
    
30
%
  
$
16,411
    
$
14,847
      
11
%
EMEA (Europe, Middle East, Africa)
    
2,049
      
1,148
      
1,576
      
78
%
    
30
%
    
3,197
      
3,278
      
(2
%)
Asia
   
1,600
      
1,693
      
1,142
      
(5
%)
    
40
%
    
3,293
      
2,405
      
37
%
Consolidated net revenues
  
$
13,414
    
$
9,487
    
$
10,244
      
41
%
    
31
%
  
$
22,901
    
$
20,530
      
12
%


The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
    
Six Months Ended
    
Percentage
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
    
Jun 30, 2020
    
Jun 30, 2019
    
Change
  
                                                 
Average Common Equity
                                                
Institutional Securities
  
$
42.8
    
$
42.8
    
$
40.4
      
--
      
6
%
  
$
42.8
    
$
40.4
      
6
%
Wealth Management
    
18.2
      
18.2
      
18.2
      
--
      
--
      
18.2
      
18.2
      
--
  
Investment Management
    
2.6
      
2.6
      
2.5
      
--
      
4
%
    
2.6
      
2.5
      
4
%
Parent
    
14.0
      
11.1
      
11.5
      
26
%
    
22
%
    
12.4
      
11.0
      
13
%
Firm
  
$
77.6
    
$
74.7
    
$
72.6
      
4
%
    
7
%
  
$
76.0
    
$
72.1
      
5
%
                                                                 
                                                                 
Regulatory Capital
                                                                
                                                                 
Common Equity Tier 1 capital
  
$
68.7
    
$
65.2
    
$
64.0
      
5
%
    
7
%
                        
Tier 1 capital
  
$
77.4
    
$
73.9
    
$
72.7
      
5
%
    
6
%
                        
                                                                 
Standardized Approach
                                                                
Risk-weighted assets
  
$
416.0
    
$
415.0
    
$
391.5
      
--
      
6
%
                        
Common Equity Tier 1 capital ratio
    
16.5
%
    
15.7
%
    
16.3
%
                                        
Tier 1 capital ratio
    
18.6
%
    
17.8
%
    
18.6
%
                                        
                                                                 
Advanced Approach
                                                                
Risk-weighted assets
  
$
426.7
    
$
427.8
    
$
384.0
      
--
      
11
%
                        
Common Equity Tier 1 capital ratio
    
16.1
%
    
15.2
%
    
16.7
%
                                        
Tier 1 capital ratio
    
18.1
%
    
17.3
%
    
18.9
%
                                        
                                                                 
Leverage-based capital
                                                                
Tier 1 leverage ratio
    
8.1
%
    
8.1
%
    
8.4
%
                                        
Supplementary Leverage Ratio (1)
    
7.3
%
    
6.2
%
    
6.5
%
                                        


The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
    
Six Months Ended
    
Percentage
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
    
Jun 30, 2020
    
Jun 30, 2019
    
Change
  
Revenues:
                                                
                                                 
Advisory
  
$
462
    
$
362
    
$
506
      
28
%
    
(9
%)
  
$
824
    
$
912
      
(10
%)
Equity
    882       336       546       163 %     62 %     1,218       885
    38
%
Fixed income
    
707
      
446
      
420
      
59
%
    
68
%
    
1,153
      
826
      
40
%
Underwriting
    
1,589
      
782
      
966
      
103
%
    
64
%
    
2,371
      
1,711
      
39
%
Investment Banking
    
2,051
      
1,144
      
1,472
      
79
%
    
39
%
    
3,195
      
2,623
      
22
%
                                                                 
Equity
    
2,619
      
2,422
      
2,130
      
8
%
    
23
%
    
5,041
      
4,145
      
22
%
Fixed Income
    
3,033
      
2,203
      
1,133
      
38
%
    
168
%
    
5,236
      
2,843
      
84
%
Other
    
(99
)
    
240
      
41
      
*
      
*
      
141
      
58
      
143
%
Sales and Trading
    
5,553
      
4,865
      
3,304
      
14
%
    
68
%
    
10,418
      
7,046
      
48
%
                                                                 
Investments
    
36
      
(25
)
    
194
      
*
      
(81
%)
    
11
      
275
      
(96
%)
Other
    
337
      
(1,079
)
    
143
      
*
      
136
%
    
(742
)
    
365
      
*
  
                                                                 
Net revenues
    
7,977
      
4,905
      
5,113
      
63
%
    
56
%
    
12,882
      
10,309
      
25
%
                                                                 
Compensation and benefits
    
2,952
      
1,814
      
1,789
      
63
%
    
65
%
    
4,766
      
3,608
      
32
%
Non-compensation expenses
    
2,032
      
2,141
      
1,861
      
(5
%)
    
9
%
    
4,173
      
3,643
      
15
%
Total non-interest expenses
    
4,984
      
3,955
      
3,650
      
26
%
    
37
%
    
8,939
      
7,251
      
23
%
                                                                 
                                                                 
Income (loss) before taxes
    
2,993
      
950
      
1,463
      
*
      
105
%
    
3,943
      
3,058
      
29
%
Net income (loss) applicable to Morgan Stanley (1)
  
$
2,186
    
$
757
    
$
1,121
      
189
%
    
95
%
  
$
2,943
    
$
2,492
      
18
%
                                                                 
                                                                 
Pre-tax profit margin
    
38
%
    
19
%
    
29
%
                    
31
%
    
30
%
        
Compensation and benefits as a % of net revenues
    
37
%
    
37
%
    
35
%
                    
37
%
    
35
%
        
Non-compensation expenses as a % of net revenues
    
25
%
    
44
%
    
36
%
                    
32
%
    
35
%
        
                                                                 
Return on Average Common Equity
    
19
%
    
6
%
    
10
%
                    
13
%
    
11
%
        
Return on Average Tangible Common Equity (2)
    
20
%
    
6
%
    
10
%
                    
13
%
    
11
%
        
                                                                 
Trading VaR (Average Daily 95% / One-Day VaR)
  
$
60
    
$
40
    
$
46
                                          


The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
    
Six Months Ended
    
Percentage
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
    
Jun 30, 2020
    
Jun 30, 2019
    
Change
  
Revenues:
                                                
Asset management
    
2,507
      
2,680
      
2,544
      
(6
%)
    
(1
%)
    
5,187
      
4,905
      
6
%
Transactional
    
1,075
      
399
      
728
      
169
%
    
48
%
    
1,474
      
1,545
      
(5
%)
Net interest income
    
1,030
      
896
      
1,016
      
15
%
    
1
%
    
1,926
      
2,146
      
(10
%)
Other
    
68
      
62
      
120
      
10
%
    
(43
%)
    
130
      
201
      
(35
%)
Net revenues
    
4,680
      
4,037
      
4,408
      
16
%
    
6
%
    
8,717
      
8,797
      
(1
%)
                                                                 
Compensation and benefits
    
2,729
      
2,212
      
2,382
      
23
%
    
15
%
    
4,941
      
4,844
      
2
%
Non-compensation expenses 
    
809
      
770
      
783
      
5
%
    
3
%
    
1,579
      
1,522
      
4
%
Total non-interest expenses
    
3,538
      
2,982
      
3,165
      
19
%
    
12
%
    
6,520
      
6,366
      
2
%
                                                                 
Income (loss) before taxes
    
1,142
      
1,055
      
1,243
      
8
%
    
(8
%)
    
2,197
      
2,431
      
(10
%)
Net income (loss) applicable to Morgan Stanley
  
$
853
    
$
864
    
$
953
      
(1
%)
    
(10
%)
  
$
1,717
    
$
1,877
      
(9
%)
                                                                 
Pre-tax profit margin
    
24
%
    
26
%
    
28
%
                    
25
%
    
28
%
        
Compensation and benefits as a % of net revenues
    
58
%
    
55
%
    
54
%
                    
57
%
    
55
%
        
Non-compensation expenses as a % of net revenues
    
17
%
    
19
%
    
18
%
                    
18
%
    
17
%
        
                                                                 
Return on Average Common Equity
    
18
%
    
18
%
    
20
%
                    
18
%
    
20
%
        
Return on Average Tangible Common Equity (1)
    
32
%
    
32
%
    
36
%
                    
32
%
    
36
%
        


The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.

6

Wealth Management
                             
Financial Information and Statistical Data
                          
(unaudited)
                             
                               
   
Quarter Ended
    
Percentage Change From:
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
  
                               
                               
Wealth Management Metrics
                              
                               
Wealth Management representatives
    
15,399
      
15,432
      
15,633
      
--
      
(1
%)
                                         
Annualized revenue per representative (000's)
  
$
1,214
    
$
1,045
    
$
1,125
      
16
%
    
8
%
                                         
Client assets (billions)
  
$
2,661
    
$
2,397
    
$
2,570
      
11
%
    
4
%
Client assets per representative (millions)
  
$
173
    
$
155
    
$
164
      
12
%
    
5
%
Client liabilities (billions)
  
$
94
    
$
92
    
$
84
      
2
%
    
12
%
                                         
Fee-based client assets (billions)
  
$
1,236
    
$
1,134
    
$
1,159
      
9
%
    
7
%
Fee-based asset flows (billions)
  
$
11.1
    
$
18.4
    
$
9.8
      
(40
%)
    
13
%
Fee-based assets as a % of client assets
    
46
%
    
47
%
    
45
%
                
                                         
Retail locations
    
584
      
591
      
589
      
(1
%)
    
(1
%)


The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
    
Six Months Ended
    
Percentage
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
    
Jun 30, 2020
    
Jun 30, 2019
    
Change
  
Revenues:
                                                
Asset management
  
$
684
    
$
665
    
$
612
      
3
%
    
12
%
  
$
1,349
    
$
1,229
      
10
%
Investments (1)
    
231
      
63
      
247
      
*
      
(6
%)
    
294
      
438
      
(33
%)
Other
    
(29
)
    
(36
)
    
(20
)
    
19
%
    
(45
%)
    
(65
)
    
(24
)
    
(171
%)
Net revenues
    
886
      
692
      
839
      
28
%
    
6
%
    
1,578
      
1,643
      
(4
%)
                                                                 
Compensation and benefits
    
354
      
257
      
360
      
38
%
    
(2
%)
    
611
      
730
      
(16
%)
Non-compensation expenses
    
316
      
292
      
280
      
8
%
    
13
%
    
608
      
540
      
13
%
Total non-interest expenses
    
670
      
549
      
640
      
22
%
    
5
%
    
1,219
      
1,270
      
(4
%)
                                                                 
Income (loss) before taxes
    
216
      
143
      
199
      
51
%
    
9
%
    
359
      
373
      
(4
%)
Net income (loss) applicable to Morgan Stanley
  
$
154
    
$
78
    
$
128
      
97
%
    
20
%
  
$
232
    
$
264
      
(12
%)
                                                                 
Pre-tax profit margin
    
24
%
    
21
%
    
24
%
                    
23
%
    
23
%
        
Compensation and benefits as a % of net revenues
    
40
%
    
37
%
    
43
%
                    
39
%
    
44
%
        
Non-compensation expenses as a % of net revenues
    
36
%
    
42
%
    
33
%
                    
39
%
    
33
%
        
                                                                 
Return on Average Common Equity
    
23
%
    
12
%
    
20
%
                    
18
%
    
21
%
        
Return on Average Tangible Common Equity (2)
    
36
%
    
18
%
    
33
%
                    
27
%
    
34
%
        


The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
    
Six Months Ended
    
Percentage
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
    
Jun 30, 2020
    
Jun 30, 2019
    
Change
  
                                                 
Assets under management or supervision (AUM)
                                                
                                                 
Net flows by asset class (1)
                                                
Equity
  
$
9.0
    
$
1.6
    
$
1.4
      
*
      
*
    
$
10.6
    
$
2.8
      
*
  
Fixed Income
    
4.4
      
1.3
      
1.3
      
*
      
*
      
5.7
      
0.1
      
*
  
Alternative / Other
    
2.0
      
3.8
      
2.2
      
(47
%)
    
(9
%)
    
5.8
      
1.6
      
*
  
Long-Term Net Flows
    
15.4
      
6.7
      
4.9
      
130
%
    
*
      
22.1
      
4.5
      
*
  
                                                                 
Liquidity
   
20.7
      
50.6
      
3.0
      
(59
%)
    
*
      
71.3
      
(2.8
)
    
*
  
                                                                 
Total net flows
  
$
36.1
    
$
57.3
    
$
7.9
      
(37
%)
    
*
    
$
93.4
    
$
1.7
      
*
  
                                                                 
                                                                 
Assets under management or supervision by asset class (2)(3)
                                                                
Equity
  
$
168
    
$
121
    
$
128
      
39
%
    
31
%
                        
Fixed Income
    
84
      
75
      
71
      
12
%
    
18
%
                        
Alternative / Other
    
145
      
141
      
135
      
3
%
    
7
%
                        
Long‐Term Assets Under Management or Supervision
    
397
      
337
      
334
      
18
%
    
19
%
                        
                                                                 
Liquidity
   
268
      
247
      
163
      
9
%
    
64
%
                        
                                                                 
Total Assets Under Management or Supervision
  
$
665
    
$
584
    
$
497
      
14
%
    
34
%
                        


The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
  
   
Jun 30, 2020
    
Mar 31, 2020
    
Jun 30, 2019
    
Mar 31, 2020
    
Jun 30, 2019
  
                               
Institutional Securities
                              
                               
Loans:
                              
Corporate
  
$
19.0
    
$
26.8
    
$
13.3
      
(29
%)
    
43
%
Secured lending facilities
    
28.9
      
30.4
      
24.9
      
(5
%)
    
16
%
Commercial and residential real estate
    
10.2
      
11.4
      
11.7
      
(11
%)
    
(13
%)
Securities-based lending and other
    
6.9
      
7.1
      
8.0
      
(3
%)
    
(14
%)
                                         
Total Loans
    
65.0
      
75.7
      
57.9
      
(14
%)
    
12
%
                                         
Lending Commitments
    
98.5
      
92.9
      
114.0
      
6
%
    
(14
%)
                                         
Institutional Securities Loans and Lending Commitments
  
$
163.5
    
$
168.6
    
$
171.9
      
(3
%)
    
(5
%)
                                         
                                         
Wealth Management
                                        
                                         
Loans:
                                        
Securities-based lending and other
  
$
53.1
    
$
51.4
    
$
45.5
      
3
%
    
17
%
Residential real estate
    
32.1
      
31.1
      
28.6
      
3
%
    
12
%
                                         
Total Loans
    
85.2
      
82.5
      
74.1
      
3
%
    
15
%
                                         
Lending Commitments
    
14.4
      
13.4
      
12.3
      
7
%
    
17
%
                                         
Wealth Management Loans and Lending Commitments
  
$
99.6
    
$
95.9
    
$
86.4
      
4
%
    
15
%
                                         
Consolidated Loans and Lending Commitments (1)
  
$
263.1
    
$
264.5
    
$
258.3
      
(1
%)
    
2
%


The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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 June 30, 2020
                        
(unaudited, dollars in millions)
                        
                         
   
Loans and Lending Commitments
    
ACL (1)
    
ACL %
    
Q2 Provision (2)
  
   
(Gross)
                    
Loans:
                       
Held For Investment (HFI)
                        
                         
Corporate
  
$
9,974
    
$
379
      
3.8
%
  
$
121
  
Secured lending facilities
    
24,733
      
122
      
0.5
%
    
34
  
Commercial and residential real estate
    
7,207
      
226
      
3.1
%
    
89
  
Other
   
1,012
      
29
      
2.9
%
    
(21
)
Institutional Securities - HFI
  
$
42,926
    
$
756
      
1.8
%
    
223
  
                                 
Wealth Management - HFI
    
85,358
      
110
      
0.1
%
    
23
  
                                 
Held For Investment
  
$
128,284
    
$
866
      
0.7
%
    
246
  
                                 
Held For Sale
    
14,543
                          
                                 
Fair Value
    
8,240
                          
                                 
Total Loans
    
151,067
      
866
              
246
  
                                 
Lending Commitments
    
112,841
      
297
      
0.3
%
    
(7
)
                                 
Consolidated Loans and Lending Commitments (3)
  
$
263,908
    
$
1,163
            
$
239
  


The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.

11

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, 2019.
(b)
The following are considered non-GAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders to allow better comparability of operating performance and capital adequacy.  These measures are calculated as follows:
  -
Earnings per diluted share, excluding intermittent net discrete tax provision / benefit represents net income (loss) applicable to Morgan Stanley, adjusted for the impact of the intermittent net discrete tax provision / benefit, 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 intermittent net discrete tax provision / benefit are adjusted in both the numerator and the denominator to exclude the intermittent net discrete tax provision / benefit.
  -
Segment return on average common equity and return on average tangible common equity represents 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.

12

Definition 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, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.
   
Page 1:
(a)
Net income (loss) applicable to Morgan Stanley represents net income, less net income applicable to nonredeemable noncontrolling interests.
(b)
Earnings (loss) applicable to Morgan Stanley common shareholders represents net income (loss) 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 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 21 to the consolidated financial statements included in the Firm's Annual Report on Form 10-K for the year ended December 31, 2019 (2019 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 use-of-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 Required Capital framework is expected to evolve over time in response to changes in the business and regulatory environment, for example, to incorporate changes in stress testing or enhancements to modeling techniques.  For further discussion of the framework, refer to "Quantitative and Qualitative Disclosures about Risk" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2019.
(b)
The Firm's risk-based capital ratios for purposes of determining regulatory compliance are the lower of the capital ratios computed under 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”). At June 30, 2020 and March 31, 2020, the Firm's ratios are based on the Advanced Approach, while at June 30, 2019 were based on the Standardized Approach.  For information on the calculation of regulatory capital and ratios for prior periods, please refer to "Quantitative and Qualitative Disclosures about Risk" in the Firm's 2019 Form 10-K.
(c)
Supplementary leverage ratio represents Tier 1 capital divided by the total supplementary leverage exposure.
   
Page 5:
(a)
Institutional Securities Sales & Trading net revenues includes trading, net interest income (interest income less interest expense), asset management and commissions and fees revenues.
(b)
Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
(c)
VaR represents the loss amount 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 2019 Form 10-K.

13

Definition 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, investors, analysts 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)
The average annualized revenue per representative metric represents annualized net revenues divided by average representative headcount.
(b)
Client assets per representative represents total client assets divided by period end representative headcount.
(c)
Client liabilities reflect U.S. Bank lending and broker dealer margin activity.
(d)
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.
(e)
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.
   
Page 8:
(a)
Other revenues for the Investment Management segment includes investment banking, trading, net interest and other revenues.
(b)
Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
   
Page 9:
(a)
Investment Management Alternative/Other asset class includes products in Fund of Funds, Real Estate, Private Equity and Credit strategies, as well as Multi-Asset 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)
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.

14

Supplemental Quantitative Details and Calculations
   
Page 1:
(1)
The Firm non-interest expenses by category are as follows:

     
2Q20
      
1Q20
      
2Q19
    
2Q20 YTD
    
2Q19 YTD
  
Compensation and benefits
  
$
6,035
    
$
4,283
    
$
4,531
    
$
10,318
    
$
9,182
  
                                         
Non-compensation expenses:
                                        
Brokerage, clearing and exchange fees
    
716
      
740
      
630
      
1,456
      
1,223
  
Information processing and communications
    
589
      
563
      
538
      
1,152
      
1,070
  
Professional services
    
535
      
449
      
537
      
984
      
1,051
  
Occupancy and equipment
    
365
      
365
      
353
      
730
      
700
  
Marketing and business development
    
63
      
132
      
162
      
195
      
303
  
Other
    
756
      
809
      
590
      
1,565
      
1,143
  
Total non-compensation expenses
    
3,024
      
3,058
      
2,810
      
6,082
      
5,490
  
                                         
Total non-interest expenses
  
$
9,059
    
$
7,341
    
$
7,341
    
$
16,400
    
$
14,672
  

Page 2:
(1)
The second quarter ended June 30, 2020 included intermittent net discrete tax expenses of $134 million principally associated with the remeasurement of reserves related to a foreign tax matter. The first quarter ended March 31, 2020 included intermittent net discrete tax benefits of $31 million associated with the remeasurement of prior years' tax liability.
   
  The following sets forth the impact of the intermittent net discrete tax items to earnings per diluted share, return on average common equity and return on average tangible common equity (which are excluded):

     
2Q20
      
1Q20
    
2Q20 YTD
    
2Q19 YTD
  
Earnings per diluted share impact
  
$
(0.08
)
  
$
0.02
    
$
(0.07
)
  
$
0.06
  
Return on average common equity impact
    
(0.7
)%
    
0.2
%
    
(0.3
)%
    
0.3
%
Return on average tangible common equity impact
    
(0.8
)%
    
0.2
%
    
(0.3
)%
    
0.3
%

(2)
The income tax consequences related to employee share-based payments, which are recurring-type tax items, are recognized in Provision for income taxes in the consolidated income statement, and may be either a benefit or a provision.  Conversion of employee share-based awards to Firm shares will primarily occur in the first quarter of each year.  The impacts of recognizing excess tax benefits / (cost) upon conversion of awards, are as follows: 2Q20 $(5) million; 1Q20: $99 million, 2Q19: $20 million, 2Q20 YTD: $94 million and 2Q19 YTD $127 million.  The impact of intermittent net discrete tax provisions and benefits reflected above do not include the recurring-type discrete tax benefits related to employee share‐based payments as we anticipate conversion activity each year.

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)
Beginning in the quarter ended March 31, 2020, the internal measure of liquidity was changed from Global Liquidity Reserve to Liquidity Resources to be more aligned with the current regulatory definition HQLA. June 30, 2019 has been recast. Refer to page 13 for additional information on the change in methodology.
(3)
For the quarters ended June 30, 2020, March 31, 2020 and June 30, 2019, the U.S. Bank investment securities portfolio included held to maturity investment securities of $28.5 billion, $28.8 billion and $27.2 billion, respectively.
   
Page 4:
(1)
Based on a Federal Reserve interim final rule in effect until March 31, 2021, our Supplementary leverage ratio and Supplementary leverage exposure as of 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 improving our SLR ratio by 0.9% as of June 30, 2020.

Page 5:
(1)
For the second quarter ended June 30, 2020, the Institutional Securities segment net income applicable to Morgan Stanley included intermittent net discrete tax expenses of $125 million principally associated with the remeasurement of reserves related to a foreign tax matter. The first quarter ended March 31, 2020 included intermittent net discrete tax benefits of $27 million associated with the remeasurement of prior years' tax liability.
(2)
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: 2Q20: $484mm; 1Q20: $484mm; 2Q19: $536mm; 2Q20 YTD: $484mm, 2Q19 YTD: $536mm
   
Page 6:
(1)
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: 2Q20: $7,802mm; 1Q20: $7,802mm; 2Q19: $8,088mm, 2Q20 YTD: $7,802mm; 2Q19 YTD: $8,088mm

15
Supplemental Quantitative Details and Calculations
   
Page 8:
(1)
Includes investment gains or losses for certain funds included in the Firm's consolidated financial statements for which the limited partnership interests in these gains or losses were reported in net income (loss) applicable to nonredeemable noncontrolling interests.
(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:  2Q20: $932mm;  1Q20: $932mm;  2Q19: $940mm; 2Q20 YTD: $932mm; 2Q19 YTD: $940mm

Page 9:
(1)
Net Flows by region for the quarters ended June 30, 2020, March 31, 2020 and June 30, 2019 were:
  North America: $17.7 billion, $57.9 billion and $4.3 billion
  International: $18.4 billion, $(0.6) billion and $3.6 billion
(2)
Assets under management or supervision by region for the quarters ended  June 30, 2020, March 31, 2020 and June 30, 2019 were:
  North America: $268 billion, $359 billion and $277 billion
  International: $397 billion, $225 billion and $220 billion
(3)
For the quarters ended June 30, 2020, March 31, 2020 and June 30, 2019, the shares of minority stake assets were $5 billion, $6 billion and $6 billion, respectively.
   
Page 10:
(1)
For the quarters ended June 30, 2020, March 31, 2020 and June 30, 2019, Investment Management reflected loan balances of $521 million, $499 million and $27 million, respectively. No material lending commitments were recorded by Investment Management for the quarters ended June 30, 2020, March 31, 2020 and June 30, 2019.

Page 11:
(1)
For the quarter ended June 30, 2020 the Allowance Rollforward for Loans and Lending Commitments is as follows:

   
Institutional
Securities
    
Wealth
Management
    
Total
  
Loans
                  
                   
Allowance for Credit Losses (ACL)
                  
Beginning Balance - March 31, 2020
  
$
530
    
$
87
    
$
617
  
Net Charge Offs
    
2
      
0
      
2
  
Provision
    
223
      
23
      
246
  
Other
    
1
      
(0
)
    
1
  
Ending Balance - June 30, 2020
  
$
756
    
$
110
    
$
866
  
                         
                         
Lending Commitments
                        
                         
Allowance for Credit Losses (ACL)
                        
Beginning Balance - March 31, 2020
  
$
298
    
$
6
    
$
304
  
Net Charge Offs
    
0
      
0
      
0
  
Provision
    
(5
)
    
(2
)
    
(7
)
Other
    
(0
)
    
0
      
0
  
Ending Balance - June 30, 2020
  
$
293
    
$
4
    
$
297
  
                         
                         
Loans and Lending Commitments
                        
                         
Allowance for Credit Losses (ACL)
                        
Beginning Balance - March 31, 2020
  
$
828
    
$
93
    
$
921
  
Net Charge Offs
    
2
      
0
      
2
  
Provision
    
218
      
21
      
239
  
Other
    
1
      
(0
)
    
1
  
Ending Balance - June 30, 2020
  
$
1,049
    
$
114
    
$
1,163
  

(2)
The provision for credit losses associated with loans held for investment are reported in other revenues while the provision for credit losses related to lending commitments  are reported in other expenses.
(3)
For the quarters ended June 30, 2020, March 31, 2020 and June 30, 2019, Investment Management reflected loan balances of $521 million, $499 million and $27 million, respectively. No material lending commitments were recorded by Investment Management for the quarters ended June 30, 2020, March 31, 2020 and June 30, 2019.
16

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 second quarter earnings press release issued July 16, 2020.


17