8-K
MORGAN STANLEY (MS)
8-K
2023-04-19
For: 2023-04-19
View Original
Added on
April 05, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or
15\(d\) of
the Securities Exchange Act of 1934
| Date of report (Date of earliest event reported): April 19, 2023 | ||
|---|---|---|
| Morgan Stanley | ||
| (Exact Name of Registrant<br><br> 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)<br> 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<br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br><br> Shares, each representing 1/1,000th interest in a share of Floating Rate<br><br> <br>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<br><br> <br>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<br><br> <br>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<br><br> <br>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<br><br> <br>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%<br><br> <br>Non-Cumulative Preferred Stock, Series L, $0.01 par value | MS/PL | New York Stock Exchange |
| Depositary Shares, each representing 1/1,000th interest in a share of 4.250%<br><br> <br>Non-Cumulative Preferred Stock, Series O, $0.01 par value | MS/PO | New York Stock Exchange |
| Depositary Shares, each representing 1/1,000th interest in a share of 6.500%<br><br> <br>Non-Cumulative Preferred Stock, Series P, $0.01 par value | MS/PP | New York Stock Exchange |
| Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026<br><br> <br>of Morgan Stanley Finance LLC (and Registrant’s guarantee with respect thereto) | MS/26C | New York Stock Exchange |
| Global Medium-Term Notes, Series A, Floating Rate Notes Due 2029<br><br> <br>of Morgan Stanley Finance LLC (and Registrant’s guarantee with respect thereto) | MS/29 | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On April 19, 2023, Morgan Stanley (the "Company") released financial information with respect to its quarter ended March 31, 2023. A copy of the press release containing this information is annexed as Exhibit 99.1 to this Report and by this reference incorporated herein and made a part hereof. In addition, a copy of the Company's Financial Data Supplement for its quarter ended March 31, 2023 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 |
| 99.1 | Press release of the Company, dated April<br> 19, 2023, containing financial information for the quarter ended March 31, 2023. |
| 99.2 | Financial Data Supplement of the Company<br> for the quarter ended March 31, 2023. |
| 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<br><br> (Registrant) | ||||
|---|---|---|---|---|
| Date: | April 19, 2023 | By: | /s/ Raja Akram | |
| Name: | Raja Akram | |||
| Title: | Deputy Chief Financial Officer |
Exhibit 99.1
Morgan Stanley First Quarter 2023 Earnings Results
Morgan Stanley Reports Net Revenues of $14.5 Billion, EPS of $1.70 and ROTCE of 16.9%
NEW YORK, April 19, 2023 – Morgan Stanley (NYSE: MS) today reported net revenues of $14.5 billion for the first quarter ended March 31, 2023 compared with $14.8 billion a year ago. Net income applicable to Morgan Stanley was $3.0 billion, or $1.70 per diluted share,^1^^^compared with net income of $3.7 billion, or $2.02 per diluted share,^1^ for the same period a year ago.
James P. Gorman, Chairman and Chief Executive Officer, said, “The Firm delivered strong results with a ROTCE of 17% in a very unusual environment, demonstrating the strength of our business model. The investments we have made in our Wealth Management business continue to bear fruit as we added a robust $110 billion in net new assets this quarter. Equity and Fixed Income revenues were strong, although Investment Banking activity continued to be constrained. We maintained our strong capital levels and remain well positioned to provide long-term value to our shareholders.”
| Financial Summary^2^^,3^ | ||||||
|---|---|---|---|---|---|---|
| Firm ($ millions, except per share data) | 1Q 2023 | 1Q 2022 | ||||
| Net revenues | $ | 14,517 | $ | 14,801 | ||
| Provision for credit losses | $ | 234 | $ | 57 | ||
| Compensation expense | $ | 6,410 | $ | 6,274 | ||
| Non-compensation expenses | $ | 4,113 | $ | 3,882 | ||
| Pre-tax income^8^ | $ | 3,760 | $ | 4,588 | ||
| Net income app. to MS | $ | 2,980 | $ | 3,666 | ||
| Expense efficiency ratio^5^ | 72 | % | 69 | % | ||
| Earnings per diluted share^1^ | $ | 1.70 | $ | 2.02 | ||
| Book value per share | $ | 55.13 | $ | 54.18 | ||
| Tangible book value per share | $ | 40.68 | $ | 39.91 | ||
| Return on equity | 12.4 | % | 14.7 | % | ||
| Return on tangible equity^4^ | 16.9 | % | 19.8 | % | ||
| Institutional Securities | ||||||
| Net revenues | $ | 6,797 | $ | 7,657 | ||
| Investment Banking | $ | 1,247 | $ | 1,634 | ||
| Equity | $ | 2,729 | $ | 3,174 | ||
| Fixed Income | $ | 2,576 | $ | 2,923 | ||
| Wealth Management | ||||||
| Net revenues | $ | 6,559 | $ | 5,935 | ||
| Fee-based client assets ($ billions)^9^ | $ | 1,769 | $ | 1,873 | ||
| Fee-based asset flows ($ billions)^10^ | $ | 22.4 | $ | 97.2 | ||
| Net new assets ($ billions)^6^ | $ | 109.6 | $ | 142.0 | ||
| Loans ($ billions) | $ | 143.7 | $ | 136.7 | ||
| Investment Management | ||||||
| Net revenues | $ | 1,289 | $ | 1,335 | ||
| AUM ($ billions)^11^ | $ | 1,362 | $ | 1,447 | ||
| Long-term net flows ($ billions)^12^ | $ | (2.4 | ) | $ | (14.4 | ) |
| Highlights | ||||||
| --- | --- | |||||
| • | The Firm reported net revenues of $14.5 billion and net income of $3.0 billion as our businesses navigated a volatile market environment. | |||||
| • | The Firm delivered ROTCE of 16.9%.^4^ | |||||
| • | The Firm expense efficiency ratio was 72%.^5^ Expenses for the quarter include integration-related expenses of $77<br> million. | |||||
| • | Standardized Common Equity Tier 1 capital ratio was 15.1%.^15^ | |||||
| • | Institutional Securities net revenues of $6.8 billion reflect strong performance in Equity and Fixed Income despite a less<br> favorable market environment compared to a year ago and lower results in Investment Banking. | |||||
| • | Wealth Management attracted significant net new assets of $110 billion during the quarter.^6^ Net revenues were $6.6<br> billion, positively impacted by mark-to-market gains on investments associated with certain employee deferred compensation plans compared to losses a year ago. The business delivered a pre-tax margin of 26.1%.^7^ Results reflect<br> higher net interest income versus prior year primarily driven by higher interest rates, even as clients continue to redeploy sweep deposits. These results were partially offset by an increase in expenses as well as higher provisions for<br> credit losses. | |||||
| • | Investment Management results reflect net revenues of $1.3 billion on AUM of $1.4 trillion amid declines in asset values from a<br> year ago. | |||||
| Media Relations: Wesley McDade 212-761-2430 | Investor Relations: Leslie Bazos 212-761-5352 | |||||
| --- | --- |
Institutional Securities
Institutional Securities reported net revenues for the current quarter of $6.8 billion compared with $7.7 billion a year ago. Pre-tax income was $1.9 billion compared with $2.8 billion a year ago.^8^
Investment Banking revenues down 24% from a year ago:
| • | Advisory revenues decreased from a year ago driven by fewer completed M&A transactions. | ||||
|---|---|---|---|---|---|
| • | Equity underwriting revenues decreased from a year ago primarily driven by lower IPO volumes. | ||||
| • | Fixed income underwriting revenues decreased from a year ago primarily driven by lower non-investment grade loan issuances. | ||||
| Equity net revenues down 14% from a year ago: | |||||
| • | Equity net revenues declined compared to a strong prior year quarter. The decrease was primarily due to lower volumes and declines in global equity markets compared to a year ago. | ||||
| Fixed Income net revenues down 12% from a year ago: | |||||
| • | Fixed Income net revenues decreased from a year ago due to declines in commodities and foreign exchange as a result of lower volatility and client activity. The declines were partially offset by (1) higher<br> revenues in rates supported by interest rate volatility across geographies and (2) increased credit products revenues supported by client engagement. | ||||
| Other: | |||||
| • | Other revenues increased primarily driven by higher revenues on corporate lending activity, net of losses on loan hedges, and mark-to-market gains on investments associated with certain employee deferred<br> compensation plans compared to losses in the prior year quarter. | ||||
| ($ millions) | 1Q 2023 | 1Q 2022 | |||
| --- | --- | --- | --- | --- | --- |
| Net Revenues | $ | 6,797 | $ | 7,657 | |
| Investment Banking | $ | 1,247 | $ | 1,634 | |
| Advisory | $ | 638 | $ | 944 | |
| Equity underwriting | $ | 202 | $ | 258 | |
| Fixed income underwriting | $ | 407 | $ | 432 | |
| Equity | $ | 2,729 | $ | 3,174 | |
| Fixed Income | $ | 2,576 | $ | 2,923 | |
| Other | $ | 245 | $ | (74 | ) |
| Provision for credit losses | $ | 189 | $ | 44 | |
| Total Expenses | $ | 4,716 | $ | 4,826 | |
| Compensation | $ | 2,365 | $ | 2,604 | |
| Non-compensation | $ | 2,351 | $ | 2,222 |
Provision for credit losses:
| • | Increases in provisions for credit losses were primarily related to commercial real estate and deterioration in the macroeconomic outlook from a year<br> ago. |
|---|
Total Expenses:
| • | Compensation expenses decreased on lower revenues, partially offset by higher expenses related to stock-based compensation plans and certain deferred<br> compensation plans linked to investment performance. |
|---|---|
| • | Non-compensation expenses increased from a year ago primarily driven by higher litigation and marketing and business development costs. |
| --- | --- |
2
Wealth Management
Wealth Management reported net revenues for the current quarter of $6.6 billion compared with $5.9 billion from a year ago. Pre-tax income of $1.7 billion^8^ in the current quarter resulted in a reported pre-tax margin of 26.1%.^7^
Net revenues increased 11% from a year ago:
| • | Asset management revenues decreased from a year ago reflecting lower asset levels due to declines in the markets, partially offset by positive fee-based flows. | |||
|---|---|---|---|---|
| • | Transactional revenues^13^ decreased 12% excluding the impact of mark-to-market gains on investments associated with certain employee deferred compensation plans. The decrease was driven by fewer new issuance<br> opportunities and reduced activity levels compared to the beginning of 2022. | |||
| • | Net interest income increased from a year ago on higher interest rates and bank lending growth, partially offset by lower brokerage sweep deposits as clients continue to redeploy balances. | |||
| Provision for credit losses: | ||||
| • | Increases in provisions for credit losses were related to deterioration in the macroeconomic outlook from a year ago. | |||
| ($ millions) | 1Q 2023 | 1Q 2022 | ||
| --- | --- | --- | --- | --- |
| Net Revenues | $ | 6,559 | $ | 5,935 |
| Asset management | $ | 3,382 | $ | 3,626 |
| Transactional^13^ | $ | 921 | $ | 635 |
| Net interest income | $ | 2,158 | $ | 1,540 |
| Other | $ | 98 | $ | 134 |
| Provision for credit losses | $ | 45 | $ | 13 |
| Total Expenses | $ | 4,802 | $ | 4,349 |
| Compensation | $ | 3,477 | $ | 3,125 |
| Non-compensation | $ | 1,325 | $ | 1,224 |
Total Expenses:
| • | Compensation expense increased from a year ago driven by higher expenses related to certain deferred compensation plans linked to investment<br> performance. |
|---|---|
| • | Non-compensation expenses increased from a year ago primarily driven by investments in technology, as well as higher marketing and business<br> development costs. |
| --- | --- |
Investment Management
Investment Management reported net revenues of $1.3 billion, down 3% from a year ago. Pre-tax income was $166 million compared with $228 million a year ago.^8^
| Net revenues decreased 3% from a year ago: | |||||
|---|---|---|---|---|---|
| • | Asset management and related fees decreased from a year ago driven primarily by lower AUM due to the decline in asset values and the cumulative effect of outflows. | ||||
| • | Performance-based income and other revenues increased from a year ago due to mark-to-market gains on investments associated with certain employee deferred compensation plans and higher marks on public investments<br> compared to losses in the prior year quarter, partially offset by lower accrued carried interest. | ||||
| ($ millions) | 1Q 2023 | 1Q 2022 | |||
| --- | --- | --- | --- | --- | --- |
| Net Revenues | $ | 1,289 | $ | 1,335 | |
| Asset management and related fees | $ | 1,248 | $ | 1,388 | |
| Performance-based income and other | $ | 41 | $ | (53 | ) |
| Total Expenses | $ | 1,123 | $ | 1,107 | |
| Compensation | $ | 568 | $ | 545 | |
| Non-compensation | $ | 555 | $ | 562 |
Total Expenses:
| • | Compensation expense increased from a year ago primarily driven by higher expenses related to certain deferred compensation plans linked to investment<br> performance partially offset by lower compensation associated with carried interest. |
|---|
3
Other Matters
| • | Standardized Common Equity Tier 1 capital ratio was 15.1%, 180 basis points above the aggregate standardized approach CET1 requirement inclusive of buffers. | |||||
|---|---|---|---|---|---|---|
| • | The Firm repurchased $1.5 billion of its outstanding common stock during the quarter as part of its Share Repurchase Program. | |||||
| • | The Board of Directors declared a $0.775 quarterly dividend per share, payable on May 15, 2023 to common shareholders of record on May 1, 2023. | |||||
| • | The effective tax rate for the quarter was 19.3%, which reflects a benefit associated with employee share-based payments.^18^ | |||||
| 1Q 2023 | 1Q 2022 | |||||
| --- | --- | --- | --- | --- | --- | --- |
| Capital^14^ | ||||||
| Standardized Approach | ||||||
| CET1 capital^15^ | 15.1 | % | 14.5 | % | ||
| Tier 1 capital^15^ | 17.0 | % | 16.0 | % | ||
| Advanced Approach | ||||||
| CET1 capital^15^ | 15.6 | % | 15.9 | % | ||
| Tier 1 capital^15^ | 17.5 | % | 17.6 | % | ||
| Leverage-based capital | ||||||
| Tier 1 leverage^16^ | 6.7 | % | 6.8 | % | ||
| SLR^17^ | 5.5 | % | 5.5 | % | ||
| Common Stock Repurchases | ||||||
| Repurchases ($ millions) | $ | 1,500 | $ | 2,872 | ||
| Number of Shares (millions) | 16 | 30 | ||||
| Average Price | $ | 95.16 | $ | 95.20 | ||
| Period End Shares (millions) | 1,670 | 1,756 | ||||
| Effective Tax Rate^18^ | 19.3 | % | 19.0 | % |
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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 42 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com.
A financial summary follows. Financial, statistical and business-related information, as well as information regarding business and segment trends, is included in the financial supplement. Both the earnings release and the financial supplement are available online in the Investor Relations section at www.morganstanley.com.
NOTICE:
The information provided herein and in the financial supplement, including information provided on the Firm’s earnings conference calls, may include certain non-GAAP financial measures. The definition of such measures or reconciliation of such measures to the comparable U.S. GAAP figures are included in this earnings release and the financial supplement, both of which are available on www.morganstanley.com.
This earnings release may contain forward-looking statements, including the attainment of certain financial and other targets, objectives and goals. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management’s current estimates, projections, expectations, assumptions, interpretations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of risks and uncertainties that may affect the future results of the Firm, please see “Forward-Looking Statements” preceding Part I, Item 1, “Competition” and “Supervision and Regulation” in Part I, Item 1, “Risk Factors” in Part I, Item 1A, “Legal Proceedings” in Part I, Item 3, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 and “Quantitative and Qualitative Disclosures about Risk” in Part II, Item 7A in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2022 and other items throughout the Form 10-K, the Firm’s Quarterly Reports on Form 10-Q and the Firm’s Current Reports on Form 8-K, including any amendments thereto.
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^1^ Includes preferred dividends related to the calculation of earnings per share of $144 million and $124 million for the first quarter of 2023 and 2022, respectively.
^2^ The Firm prepares its Consolidated Financial Statements using accounting principles generally accepted in the United States (U.S. GAAP). From time to time, Morgan Stanley may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. The Securities and Exchange Commission defines a “non-GAAP financial measure” as a numerical measure of historical or future financial performance, financial position, or cash flows that is subject to adjustments that effectively exclude, or include amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. Non-GAAP financial measures disclosed by Morgan Stanley are provided as additional information to analysts, investors and other stakeholders in order to provide them with greater transparency about, or an alternative method for assessing our financial condition, operating results, or capital adequacy. These measures are not in accordance with, or a substitute for U.S. GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable U.S. GAAP financial measure.
^3^ Our earnings releases, earnings conference calls, financial presentations and other communications may also include certain metrics which we believe to be useful to us, analysts, investors, and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.
^4^ Return on average tangible common equity is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance and capital adequacy. The calculation of return on average tangible common equity represents full year or annualized net income applicable to Morgan Stanley less preferred dividends as a percentage of average tangible common equity. Tangible common equity, also a non-GAAP financial measure, represents common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.
^5^ The Firm expense efficiency ratio represents total non-interest expenses as a percentage of net revenues. For the quarter ended March 31, 2023, Firm results include pre-tax integration-related expenses of $77 million, of which $53 million is reported in the Wealth Management business segment and $24 million is reported in the Investment Management business segment.
^6^ Wealth Management net new assets represent client inflows, including dividends and interest, and asset acquisitions, less client outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions.
^7^ Pre-tax margin represents income before provision for income taxes divided by net revenues.
^8^ Pre-tax income represents income before provision for income taxes.
^9^ 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.
^10^ Wealth Management fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest, and client fees, and exclude institutional cash management-related activity.
^11^ AUM is defined as assets under management.
^12^ Long-term net flows include the Equity, Fixed Income and Alternative and Solutions asset classes and excludes the Liquidity and Overlay Services asset class.
^13^ Transactional revenues include investment banking, trading, and commissions and fee revenues.
^14^ Capital ratios are estimates as of the press release date, April 19, 2023.
^15^ CET1 capital is defined as Common Equity Tier 1 capital. The Firm’s risk-based capital ratios are computed under each of the (i) standardized approaches for calculating credit risk and market risk risk‐weighted assets (RWAs) (the “Standardized Approach”) and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”). For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Form 10-K).
6
^^
^^
^16^ The Tier 1 leverage ratio is a leverage-based capital requirement that measures the Firm’s leverage. Tier 1 leverage ratio utilizes Tier 1 capital as the numerator and average adjusted assets as the denominator.
^17^ The Firm’s supplementary leverage ratio (SLR) utilizes a Tier 1 capital numerator of approximately $77.9 billion and $80.1 billion, and supplementary leverage exposure denominator of approximately $1.42 trillion and $1.47 trillion, for the first quarter of 2023 and 2022, respectively.
^18^ The income tax consequences related to employee share-based payments are recognized in Provision for income taxes in the consolidated income statement, and may be either a benefit or a provision. The impacts of recognizing excess tax benefits upon conversion of awards are $149 million and $205 million for the first quarter of 2023 and 2022, respectively.
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| Consolidated Income Statement Information | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in millions) | ||||||||||||
| Percentage Change From: | ||||||||||||
| Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | |||||||||
| Revenues: | ||||||||||||
| Investment banking | 1,330 | $ | 1,318 | $ | 1,758 | 1 | % | (24 | %) | |||
| Trading | 4,477 | 3,017 | 3,983 | 48 | % | 12 | % | |||||
| Investments | 145 | 85 | 75 | 71 | % | 93 | % | |||||
| Commissions and fees | 1,239 | 1,169 | 1,416 | 6 | % | (13 | %) | |||||
| Asset management | 4,728 | 4,803 | 5,119 | (2 | %) | (8 | %) | |||||
| Other | 252 | 38 | 234 | * | 8 | % | ||||||
| Total non-interest revenues | 12,171 | 10,430 | 12,585 | 17 | % | (3 | %) | |||||
| Interest income | 10,379 | 9,232 | 2,650 | 12 | % | * | ||||||
| Interest expense | 8,033 | 6,913 | 434 | 16 | % | * | ||||||
| Net interest | 2,346 | 2,319 | 2,216 | 1 | % | 6 | % | |||||
| Net revenues | 14,517 | 12,749 | 14,801 | 14 | % | (2 | %) | |||||
| Provision for credit losses | 234 | 87 | 57 | 169 | % | * | ||||||
| Non-interest expenses: | ||||||||||||
| Compensation and benefits | 6,410 | 5,615 | 6,274 | 14 | % | 2 | % | |||||
| Non-compensation expenses: | ||||||||||||
| Brokerage, clearing and exchange fees | 881 | 851 | 882 | 4 | % | -- | ||||||
| Information processing and communications | 915 | 933 | 829 | (2 | %) | 10 | % | |||||
| Professional services | 710 | 853 | 705 | (17 | %) | 1 | % | |||||
| Occupancy and equipment | 440 | 443 | 427 | (1 | %) | 3 | % | |||||
| Marketing and business development | 247 | 295 | 175 | (16 | %) | 41 | % | |||||
| Other | 920 | 878 | 864 | 5 | % | 6 | % | |||||
| Total non-compensation expenses | 4,113 | 4,253 | 3,882 | (3 | %) | 6 | % | |||||
| Total non-interest expenses | 10,523 | 9,868 | 10,156 | 7 | % | 4 | % | |||||
| Income before provision for income taxes | 3,760 | 2,794 | 4,588 | 35 | % | (18 | %) | |||||
| Provision for income taxes | 727 | 528 | 873 | 38 | % | (17 | %) | |||||
| Net income | 3,033 | $ | 2,266 | $ | 3,715 | 34 | % | (18 | %) | |||
| Net income applicable to nonredeemable noncontrolling interests | 53 | 30 | 49 | 77 | % | 8 | % | |||||
| Net income applicable to Morgan Stanley | 2,980 | 2,236 | 3,666 | 33 | % | (19 | %) | |||||
| Preferred stock dividend | 144 | 123 | 124 | 17 | % | 16 | % | |||||
| Earnings applicable to Morgan Stanley common shareholders | 2,836 | $ | 2,113 | $ | 3,542 | 34 | % | (20 | %) | |||
| Notes: | ||||||||||||
| - | Firm net revenues excluding mark-to-market gains and losses on deferred cash-based compensation plans (DCP) were: 1Q23: 14,364 million, 4Q22: 12,555 million, 1Q22:<br> 15,242 million. | |||||||||||
| - | Firm compensation expenses excluding DCP were: 1Q23: 6,217 million, 4Q22: 5,426 million, 1Q22: 6,562 million. | |||||||||||
| - | The End Notes are an integral part of this presentation. Refer to pages 12 - 17 of the Financial Supplement for Definition of<br> U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice. |
All values are in US Dollars.
8
| Consolidated Financial Metrics, Ratios and Statistical Data | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | |||||||||||||||
| Quarter Ended | Percentage Change From: | ||||||||||||||
| Mar 31, 2023 | Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | |||||||||||
| Financial Metrics: | |||||||||||||||
| Earnings per basic share | $ | 1.72 | $ | 1.28 | $ | 2.04 | 34 | % | (16 | %) | |||||
| Earnings per diluted share | $ | 1.70 | $ | 1.26 | $ | 2.02 | 35 | % | (16 | %) | |||||
| Return on average common equity | 12.4 | % | 9.2 | % | 14.7 | % | |||||||||
| Return on average tangible common equity | 16.9 | % | 12.6 | % | 19.8 | % | |||||||||
| Book value per common share | $ | 55.13 | $ | 54.55 | $ | 54.18 | |||||||||
| Tangible book value per common share | $ | 40.68 | $ | 40.06 | $ | 39.91 | |||||||||
| Financial Ratios: | |||||||||||||||
| Pre-tax profit margin | 26 | % | 22 | % | 31 | % | |||||||||
| Compensation and benefits as a % of net revenues | 44 | % | 44 | % | 42 | % | |||||||||
| Non-compensation expenses as a % of net revenues | 28 | % | 33 | % | 26 | % | |||||||||
| Firm expense efficiency ratio | 72 | % | 77 | % | 69 | % | |||||||||
| Effective tax rate | 19.3 | % | 18.9 | % | 19.0 | % | |||||||||
| Statistical Data: | |||||||||||||||
| Period end common shares outstanding (millions) | 1,670 | 1,675 | 1,756 | -- | (5 | %) | |||||||||
| Average common shares outstanding (millions) | |||||||||||||||
| Basic | 1,645 | 1,652 | 1,733 | -- | (5 | %) | |||||||||
| Diluted | 1,663 | 1,679 | 1,755 | (1 | %) | (5 | %) | ||||||||
| Worldwide employees | 82,266 | 82,427 | 76,541 | -- | 7 | % | |||||||||
| The End Notes are an integral part of this presentation. Refer to pages 12 - 17 of<br> the Financial Supplement 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
Exhibit 99.2
| First Quarter 2023 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 |
| Definitions of Performance Metrics and Terms | 13 - 14 |
| Supplemental Quantitative Details and Calculations | 15 - 16 |
| Legal Notice | 17 |
| Consolidated Financial Summary | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited, dollars in millions) | |||||||||||||||
| Percentage Change From: | |||||||||||||||
| Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | ||||||||||||
| Net revenues | |||||||||||||||
| Institutional Securities | 6,797 | $ | 4,800 | $ | 7,657 | 42 | % | (11 | %) | ||||||
| Wealth Management | 6,559 | 6,626 | 5,935 | (1 | %) | 11 | % | ||||||||
| Investment Management | 1,289 | 1,461 | 1,335 | (12 | %) | (3 | %) | ||||||||
| Intersegment Eliminations | (128 | ) | (138 | ) | (126 | ) | 7 | % | (2 | %) | |||||
| Net revenues ^(1)^ | 14,517 | $ | 12,749 | $ | 14,801 | 14 | % | (2 | %) | ||||||
| Provision for credit losses | 234 | $ | 87 | $ | 57 | 169 | % | * | |||||||
| Non-interest expenses | |||||||||||||||
| Institutional Securities | 4,716 | $ | 3,991 | $ | 4,826 | 18 | % | (2 | %) | ||||||
| Wealth Management | 4,802 | 4,760 | 4,349 | 1 | % | 10 | % | ||||||||
| Investment Management | 1,123 | 1,247 | 1,107 | (10 | %) | 1 | % | ||||||||
| Intersegment Eliminations | (118 | ) | (130 | ) | (126 | ) | 9 | % | 6 | % | |||||
| Non-interest expenses ^(1)(2)^ | 10,523 | $ | 9,868 | $ | 10,156 | 7 | % | 4 | % | ||||||
| Income before provision for income taxes | |||||||||||||||
| Institutional Securities | 1,892 | $ | 748 | $ | 2,787 | 153 | % | (32 | %) | ||||||
| Wealth Management | 1,712 | 1,840 | 1,573 | (7 | %) | 9 | % | ||||||||
| Investment Management | 166 | 214 | 228 | (22 | %) | (27 | %) | ||||||||
| Intersegment Eliminations | (10 | ) | (8 | ) | - | (25 | %) | * | |||||||
| Income before provision for income taxes | 3,760 | $ | 2,794 | $ | 4,588 | 35 | % | (18 | %) | ||||||
| Net Income applicable to Morgan Stanley | |||||||||||||||
| Institutional Securities | 1,478 | $ | 656 | $ | 2,191 | 125 | % | (33 | %) | ||||||
| Wealth Management | 1,376 | 1,424 | 1,272 | (3 | %) | 8 | % | ||||||||
| Investment Management | 134 | 162 | 203 | (17 | %) | (34 | %) | ||||||||
| Intersegment Eliminations | (8 | ) | (6 | ) | - | (33 | %) | * | |||||||
| Net Income applicable to Morgan Stanley | 2,980 | $ | 2,236 | $ | 3,666 | 33 | % | (19 | %) | ||||||
| Earnings applicable to Morgan Stanley common shareholders | 2,836 | $ | 2,113 | $ | 3,542 | 34 | % | (20 | %) | ||||||
| Notes: | |||||||||||||||
| - | Firm net revenues excluding mark-to-market gains and losses on deferred cash-based compensation plans (DCP) were: 1Q23: 14,364 million, 4Q22: 12,555<br> million, 1Q22: 15,242 million. | ||||||||||||||
| - | Firm compensation expenses excluding DCP were: 1Q23: 6,217 million, 4Q22: 5,426 million, 1Q22: 6,562 million. | ||||||||||||||
| - | The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to<br> Non-GAAP Measures, Definition of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice. |
All values are in US Dollars.
1
| Consolidated Financial Metrics, Ratios and Statistical Data | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | |||||||||||||||
| Quarter Ended | Percentage Change From: | ||||||||||||||
| Mar 31, 2023 | Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | |||||||||||
| Financial Metrics: | |||||||||||||||
| Earnings per basic share | $ | 1.72 | $ | 1.28 | $ | 2.04 | 34 | % | (16 | %) | |||||
| Earnings per diluted share | $ | 1.70 | $ | 1.26 | $ | 2.02 | 35 | % | (16 | %) | |||||
| Return on average common equity | 12.4 | % | 9.2 | % | 14.7 | % | |||||||||
| Return on average tangible common equity | 16.9 | % | 12.6 | % | 19.8 | % | |||||||||
| Book value per common share | $ | 55.13 | $ | 54.55 | $ | 54.18 | |||||||||
| Tangible book value per common share | $ | 40.68 | $ | 40.06 | $ | 39.91 | |||||||||
| Financial Ratios: | |||||||||||||||
| Pre-tax profit margin | 26 | % | 22 | % | 31 | % | |||||||||
| Compensation and benefits as a % of net revenues | 44 | % | 44 | % | 42 | % | |||||||||
| Non-compensation expenses as a % of net revenues | 28 | % | 33 | % | 26 | % | |||||||||
| Firm expense efficiency ratio^(1)^ | 72 | % | 77 | % | 69 | % | |||||||||
| Effective tax rate ^(2)^ | 19.3 | % | 18.9 | % | 19.0 | % | |||||||||
| Statistical Data: | |||||||||||||||
| Period end common shares outstanding (millions) | 1,670 | 1,675 | 1,756 | -- | (5 | %) | |||||||||
| Average common shares outstanding (millions) | |||||||||||||||
| Basic | 1,645 | 1,652 | 1,733 | -- | (5 | %) | |||||||||
| Diluted | 1,663 | 1,679 | 1,755 | (1 | %) | (5 | %) | ||||||||
| Worldwide employees | 82,266 | 82,427 | 76,541 | -- | 7 | % | |||||||||
| The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP<br> 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: | ||||||||||||||
| Mar 31, 2023 | Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | |||||||||||
| Consolidated Balance sheet | |||||||||||||||
| Total assets | $ | 1,199,904 | $ | 1,180,231 | $ | 1,222,233 | 2 | % | (2 | %) | |||||
| Loans ^(1)^ | $ | 222,727 | $ | 222,182 | $ | 208,750 | -- | 7 | % | ||||||
| Deposits | $ | 347,523 | $ | 356,646 | $ | 360,840 | (3 | %) | (4 | %) | |||||
| Long-term debt outstanding | $ | 245,595 | $ | 233,867 | $ | 225,671 | 5 | % | 9 | % | |||||
| Maturities of long-term debt outstanding (next 12 months) | $ | 20,382 | $ | 18,910 | $ | 21,205 | 8 | % | (4 | %) | |||||
| Average liquidity resources | $ | 321,195 | $ | 312,250 | $ | 338,281 | 3 | % | (5 | %) | |||||
| Common equity | $ | 92,076 | $ | 91,391 | $ | 95,151 | 1 | % | (3 | %) | |||||
| Less: Goodwill and intangible assets | (24,125 | ) | (24,268 | ) | (25,068 | ) | (1 | %) | (4 | %) | |||||
| Tangible common equity | $ | 67,951 | $ | 67,123 | $ | 70,083 | 1 | % | (3 | %) | |||||
| Preferred equity | $ | 8,750 | $ | 8,750 | $ | 7,750 | -- | 13 | % | ||||||
| U.S. Bank Supplemental Financial Information | |||||||||||||||
| Total assets | $ | 384,794 | $ | 390,963 | $ | 389,978 | (2 | %) | (1 | %) | |||||
| Loans | $ | 206,785 | $ | 206,344 | $ | 194,791 | -- | 6 | % | ||||||
| Investment securities portfolio ^(2)^ | $ | 123,250 | $ | 123,254 | $ | 129,886 | -- | (5 | %) | ||||||
| Deposits | $ | 340,926 | $ | 350,553 | $ | 352,078 | (3 | %) | (3 | %) | |||||
| Regional revenues | |||||||||||||||
| Americas | $ | 10,791 | $ | 9,897 | $ | 10,464 | 9 | % | 3 | % | |||||
| EMEA (Europe, Middle East, Africa) | 1,737 | 1,430 | 2,311 | 21 | % | (25 | %) | ||||||||
| Asia | 1,989 | 1,422 | 2,026 | 40 | % | (2 | %) | ||||||||
| Consolidated net revenues | $ | 14,517 | $ | 12,749 | $ | 14,801 | 14 | % | (2 | %) | |||||
| The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to<br> 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: | ||||||||||||||
| Mar 31, 2023 | Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | |||||||||||
| Average Common Equity | |||||||||||||||
| Institutional Securities | $ | 45.6 | $ | 48.8 | $ | 48.8 | (7 | %) | (7 | %) | |||||
| Wealth Management | 28.8 | 31.0 | 31.0 | (7 | %) | (7 | %) | ||||||||
| Investment Management | 10.4 | 10.6 | 10.6 | (2 | %) | (2 | %) | ||||||||
| Parent | 6.6 | 1.1 | 6.3 | * | 5 | % | |||||||||
| Firm | $ | 91.4 | $ | 91.5 | $ | 96.7 | -- | (5 | %) | ||||||
| Regulatory Capital | |||||||||||||||
| Common Equity Tier 1 capital | $ | 69.4 | $ | 68.7 | $ | 72.5 | 1 | % | (4 | %) | |||||
| Tier 1 capital | $ | 77.9 | $ | 77.2 | $ | 80.1 | 1 | % | (3 | %) | |||||
| Standardized Approach | |||||||||||||||
| Risk-weighted assets | $ | 459.1 | $ | 447.8 | $ | 501.4 | 3 | % | (8 | %) | |||||
| Common Equity Tier 1 capital ratio | 15.1 | % | 15.3 | % | 14.5 | % | |||||||||
| Tier 1 capital ratio | 17.0 | % | 17.2 | % | 16.0 | % | |||||||||
| Advanced Approach | |||||||||||||||
| Risk-weighted assets | $ | 445.3 | $ | 438.8 | $ | 456.5 | 1 | % | (2 | %) | |||||
| Common Equity Tier 1 capital ratio | 15.6 | % | 15.6 | % | 15.9 | % | |||||||||
| Tier 1 capital ratio | 17.5 | % | 17.6 | % | 17.6 | % | |||||||||
| Leverage-based capital | |||||||||||||||
| Tier 1 leverage ratio | 6.7 | % | 6.7 | % | 6.8 | % | |||||||||
| Supplementary Leverage Ratio | 5.5 | % | 5.5 | % | 5.5 | % | |||||||||
| The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to<br> 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: | ||||||||||||||
| Mar 31, 2023 | Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | |||||||||||
| Revenues: | |||||||||||||||
| Advisory | $ | 638 | $ | 711 | $ | 944 | (10 | %) | (32 | %) | |||||
| Equity | 202 | 227 | 258 | (11 | %) | (22 | %) | ||||||||
| Fixed income | 407 | 314 | 432 | 30 | % | (6 | %) | ||||||||
| Underwriting | 609 | 541 | 690 | 13 | % | (12 | %) | ||||||||
| Investment banking | 1,247 | 1,252 | 1,634 | -- | (24 | %) | |||||||||
| Equity | 2,729 | 2,176 | 3,174 | 25 | % | (14 | %) | ||||||||
| Fixed income | 2,576 | 1,418 | 2,923 | 82 | % | (12 | %) | ||||||||
| Other | 245 | (46 | ) | (74 | ) | * | * | ||||||||
| Net revenues | 6,797 | 4,800 | 7,657 | 42 | % | (11 | %) | ||||||||
| Provision for credit losses | 189 | 61 | 44 | * | * | ||||||||||
| Compensation and benefits | 2,365 | 1,644 | 2,604 | 44 | % | (9 | %) | ||||||||
| Non-compensation expenses | 2,351 | 2,347 | 2,222 | -- | 6 | % | |||||||||
| Total non-interest expenses | 4,716 | 3,991 | 4,826 | 18 | % | (2 | %) | ||||||||
| Income before provision for income taxes | 1,892 | 748 | 2,787 | 153 | % | (32 | %) | ||||||||
| Net income applicable to Morgan Stanley | $ | 1,478 | $ | 656 | $ | 2,191 | 125 | % | (33 | %) | |||||
| Pre-tax profit margin | 28 | % | 16 | % | 36 | % | |||||||||
| Compensation and benefits as a % of net revenues | 35 | % | 34 | % | 34 | % | |||||||||
| Non-compensation expenses as a % of net revenues | 35 | % | 49 | % | 29 | % | |||||||||
| Return on Average Common Equity | 12 | % | 5 | % | 17 | % | |||||||||
| Return on Average Tangible Common Equity ^(1)^ | 12 | % | 5 | % | 17 | % | |||||||||
| Trading VaR (Average Daily 95% / One-Day VaR) | $ | 55 | $ | 64 | $ | 39 | |||||||||
| The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of<br> 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: | ||||||||||||||
| Mar 31, 2023 | Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | |||||||||||
| Revenues: | |||||||||||||||
| Asset management | $ | 3,382 | $ | 3,347 | $ | 3,626 | 1 | % | (7 | %) | |||||
| Transactional | 921 | 931 | 635 | (1 | %) | 45 | % | ||||||||
| Net interest income | 2,158 | 2,138 | 1,540 | 1 | % | 40 | % | ||||||||
| Other | 98 | 210 | 134 | (53 | %) | (27 | %) | ||||||||
| Net revenues ^(1)^ | 6,559 | 6,626 | 5,935 | (1 | %) | 11 | % | ||||||||
| Provision for credit losses | 45 | 26 | 13 | 73 | % | * | |||||||||
| Compensation and benefits ^(1)^ | 3,477 | 3,343 | 3,125 | 4 | % | 11 | % | ||||||||
| Non-compensation expenses | 1,325 | 1,417 | 1,224 | (6 | %) | 8 | % | ||||||||
| Total non-interest expenses | 4,802 | 4,760 | 4,349 | 1 | % | 10 | % | ||||||||
| Income before provision for income taxes | 1,712 | 1,840 | 1,573 | (7 | %) | 9 | % | ||||||||
| Net income applicable to Morgan Stanley | $ | 1,376 | $ | 1,424 | $ | 1,272 | (3 | %) | 8 | % | |||||
| Pre-tax profit margin | 26 | % | 28 | % | 27 | % | |||||||||
| Compensation and benefits as a % of net revenues | 53 | % | 50 | % | 53 | % | |||||||||
| Non-compensation expenses as a % of net revenues | 20 | % | 21 | % | 21 | % | |||||||||
| Return on Average Common Equity | 19 | % | 18 | % | 16 | % | |||||||||
| Return on Average Tangible Common Equity ^(2)^ | 36 | % | 34 | % | 30 | % | |||||||||
| Notes: | |||||||||||||||
| --- | --- | ||||||||||||||
| - | Wealth Management net revenues excluding DCP were: 1Q23: $6,458 million, 4Q22: $6,520 million, 1Q22:<br> $6,231 million. | ||||||||||||||
| - | Wealth Management compensation expenses excluding DCP were: 1Q23: $3,358 million, 4Q22: $3,228<br> million, 1Q22: $3,325 million. | ||||||||||||||
| - | The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of<br> 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, dollars in billions) | |||||||||||||||
| Quarter Ended | Percentage Change From: | ||||||||||||||
| Mar 31, 2023 | Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | |||||||||||
| Wealth Management Metrics | |||||||||||||||
| Total client assets | $ | 4,558 | $ | 4,187 | $ | 4,869 | 9 | % | (6 | %) | |||||
| Net new assets | $ | 109.6 | $ | 51.6 | $ | 142.0 | 112 | % | (23 | %) | |||||
| U.S. Bank loans | $ | 143.7 | $ | 146.1 | $ | 136.7 | (2 | %) | 5 | % | |||||
| Margin and other lending^(1)^ | $ | 21.1 | $ | 22.0 | $ | 29.2 | (4 | %) | (28 | %) | |||||
| Deposits ^(2)^ | $ | 341 | $ | 351 | $ | 352 | (3 | %) | (3 | %) | |||||
| Annualized weighted average cost of deposits | |||||||||||||||
| Period end | 2.05 | % | 1.59 | % | 0.09 | % | |||||||||
| Period average | 1.86 | % | 1.32 | % | 0.10 | % | |||||||||
| Advisor-led channel | |||||||||||||||
| Advisor-led client assets | $ | 3,582 | $ | 3,392 | $ | 3,835 | 6 | % | (7 | %) | |||||
| Fee-based client assets | $ | 1,769 | $ | 1,678 | $ | 1,873 | 5 | % | (6 | %) | |||||
| Fee-based asset flows | $ | 22.4 | $ | 20.4 | $ | 97.2 | 10 | % | (77 | %) | |||||
| Fee-based assets as a % of advisor-led client assets | 49 | % | 49 | % | 49 | % | |||||||||
| Self-directed channel | |||||||||||||||
| Self-directed assets | $ | 976 | $ | 795 | $ | 1,034 | 23 | % | (6 | %) | |||||
| Daily average revenue trades (000's) | 831 | 755 | 1,016 | 10 | % | (18 | %) | ||||||||
| Self-directed households (millions) | 8.1 | 8.0 | 7.6 | 1 | % | 7 | % | ||||||||
| Workplace channel | |||||||||||||||
| Stock plan unvested assets | $ | 358 | $ | 302 | $ | 454 | 19 | % | (21 | %) | |||||
| Number of stock plan participants (millions) | 6.5 | 6.3 | 5.8 | 3 | % | 12 | % | ||||||||
| The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of<br> 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: | ||||||||||||||
| Mar 31, 2023 | Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | |||||||||||
| Revenues: | |||||||||||||||
| Asset management and related fees | $ | 1,248 | $ | 1,371 | $ | 1,388 | (9 | %) | (10 | %) | |||||
| Performance-based income and other | 41 | 90 | (53 | ) | (54 | %) | * | ||||||||
| Net revenues | 1,289 | 1,461 | 1,335 | (12 | %) | (3 | %) | ||||||||
| Compensation and benefits | 568 | 628 | 545 | (10 | %) | 4 | % | ||||||||
| Non-compensation expenses | 555 | 619 | 562 | (10 | %) | (1 | %) | ||||||||
| Total non-interest expenses | 1,123 | 1,247 | 1,107 | (10 | %) | 1 | % | ||||||||
| Income before provision for income taxes | 166 | 214 | 228 | (22 | %) | (27 | %) | ||||||||
| Net income applicable to Morgan Stanley | $ | 134 | $ | 162 | $ | 203 | (17 | %) | (34 | %) | |||||
| Pre-tax profit margin | 13 | % | 15 | % | 17 | % | |||||||||
| Compensation and benefits as a % of net revenues | 44 | % | 43 | % | 41 | % | |||||||||
| Non-compensation expenses as a % of net revenues | 43 | % | 42 | % | 42 | % | |||||||||
| Return on Average Common Equity | 5 | % | 6 | % | 8 | % | |||||||||
| Return on Average Tangible Common Equity ^(1)^ | 73 | % | 85 | % | 106 | % | |||||||||
| The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of<br> 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: | ||||||||||||||
| Mar 31, 2023 | Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | |||||||||||
| Assets under management or supervision (AUM) | |||||||||||||||
| Net flows by asset class | |||||||||||||||
| Equity | $ | (2.1 | ) | $ | (6.1 | ) | $ | (7.5 | ) | 66 | % | 72 | % | ||
| Fixed Income | (2.0 | ) | (3.8 | ) | (3.9 | ) | 47 | % | 49 | % | |||||
| Alternatives and Solutions | 1.7 | 3.9 | (3.0 | ) | (56 | %) | * | ||||||||
| Long-Term Net Flows | (2.4 | ) | (6.0 | ) | (14.4 | ) | 60 | % | 83 | % | |||||
| Liquidity and Overlay Services | 13.9 | (18.5 | ) | (28.1 | ) | * | * | ||||||||
| Total Net Flows | $ | 11.5 | $ | (24.5 | ) | $ | (42.5 | ) | * | * | |||||
| Assets under management or supervision by asset class | |||||||||||||||
| Equity | $ | 277 | $ | 259 | $ | 337 | 7 | % | (18 | %) | |||||
| Fixed Income | 175 | 173 | 195 | 1 | % | (10 | %) | ||||||||
| Alternatives and Solutions | 448 | 431 | 449 | 4 | % | -- | |||||||||
| Long-Term Assets Under Management or Supervision | $ | 900 | $ | 863 | $ | 981 | 4 | % | (8 | %) | |||||
| Liquidity and Overlay Services | 462 | 442 | 466 | 5 | % | (1 | %) | ||||||||
| Total Assets Under Management or Supervision | $ | 1,362 | $ | 1,305 | $ | 1,447 | 4 | % | (6 | %) | |||||
| The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition<br> 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: | |||||||||||
| Mar 31, 2023 | Dec 31, 2022 | Mar 31, 2022 | Dec 31, 2022 | Mar 31, 2022 | ||||||||
| Institutional Securities | ||||||||||||
| Loans: | ||||||||||||
| Corporate | $ | 18.3 | $ | 17.0 | $ | 13.0 | 8 | % | 41 | % | ||
| Secured lending facilities | 40.0 | 38.6 | 34.4 | 4 | % | 16 | % | |||||
| Commercial and residential real estate | 11.8 | 11.7 | 14.6 | 1 | % | (19 | %) | |||||
| Securities-based lending and other | 8.7 | 8.5 | 9.7 | 2 | % | (10 | %) | |||||
| Total Loans | 78.8 | 75.8 | 71.7 | 4 | % | 10 | % | |||||
| Lending Commitments | 122.3 | 119.7 | 128.0 | 2 | % | (4 | %) | |||||
| Institutional Securities Loans and Lending Commitments | $ | 201.1 | $ | 195.5 | $ | 199.7 | 3 | % | 1 | % | ||
| Wealth Management | ||||||||||||
| Loans: | ||||||||||||
| Securities-based lending and other | $ | 88.4 | $ | 91.7 | $ | 89.5 | (4 | %) | (1 | %) | ||
| Residential real estate | 55.3 | 54.4 | 47.2 | 2 | % | 17 | % | |||||
| Total Loans | 143.7 | 146.1 | 136.7 | (2 | %) | 5 | % | |||||
| Lending Commitments | 17.8 | 17.3 | 14.5 | 3 | % | 23 | % | |||||
| Wealth Management Loans and Lending Commitments | $ | 161.5 | $ | 163.4 | $ | 151.2 | (1 | %) | 7 | % | ||
| Consolidated Loans and Lending Commitments ^(1)^ | $ | 362.6 | $ | 358.9 | $ | 350.9 | 1 | % | 3 | % | ||
| The End Notes are an integral part of this presentation. See pages 12 - 17 for<br> 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 March 31, 2023 | |||||||||
| (unaudited, dollars in millions) | |||||||||
| Loans and Lending Commitments | ACL^(1)^ | ACL % | Q1 Provision | ||||||
| (Gross) | |||||||||
| Loans: | |||||||||
| Held For Investment (HFI) | |||||||||
| Corporate | $ | 7,435 | $ | 265 | 3.6 | % | $ | 31 | |
| Secured lending facilities | 37,187 | 152 | 0.4 | % | - | ||||
| Commercial and residential real estate | 8,601 | 335 | 3.9 | % | 129 | ||||
| Other | 3,430 | 13 | 0.4 | % | - | ||||
| Institutional Securities - HFI | $ | 56,653 | $ | 765 | 1.4 | % | $ | 160 | |
| Wealth Management - HFI | 143,863 | 205 | 0.1 | % | 41 | ||||
| Held For Investment | $ | 200,516 | $ | 970 | 0.5 | % | $ | 201 | |
| Held For Sale | 15,146 | ||||||||
| Fair Value | 7,817 | ||||||||
| Total Loans | 223,479 | 970 | 201 | ||||||
| Lending Commitments | 140,096 | 539 | 0.4 | % | 33 | ||||
| Consolidated Loans and Lending Commitments | $ | 363,575 | $ | 1,509 | $ | 234 | |||
| The End Notes are an integral part of this presentation. See pages 12 - 17 for<br> 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<br> 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<br> 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<br> 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<br> 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,<br> 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<br> 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<br> 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<br> addition to the following notes, please also refer to the Firm's Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Form 10-K). | |
| (b) | The following are considered non-GAAP financial measures that the Firm considers useful for<br> analysts, investors and other stakeholders to allow comparability of operating performance and capital adequacy. These measures are calculated as follows: | |
| - | The return on average tangible common equity represents annualized earnings applicable to Morgan<br> Stanley common shareholders as a percentage of average tangible common equity. | |
| - | Segment return on average common equity and return on average tangible common equity represent<br> 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<br> 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<br> 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<br> certain mortgage servicing rights deduction. | |
| - | Tangible book value per common share represents tangible common equity divided by period end<br> common shares outstanding. | |
| - | Net revenues excluding DCP represents net revenues adjusted for the impact of mark-to-market gains/losses on economic hedges associated with certain employee<br> deferred cash-based compensation plans. | |
| - | Compensation expense excluding DCP represents compensation adjusted for the impact related to certain deferred cash-based compensation plans linked to<br> investment performance. |
12
| Definitions of Performance<br> Metrics and Terms | |
|---|---|
| Our earnings releases, earnings conference calls, financial presentations and<br> other communications may also include certain metrics which we believe to be useful to us, analysts, investors and other stakeholders by providing further transparency about, or an additional means of assessing,<br> our financial condition and operating results. | |
| Page 1: | |
| (a) | Provision for credit losses represents the provision for credit losses on loans held for investment and unfunded<br> lending commitments. |
| (b) | Net income applicable to Morgan Stanley represents net income, less net income applicable to nonredeemable<br> noncontrolling interests. |
| (c) | Earnings applicable to Morgan Stanley common shareholders represents net income applicable to Morgan Stanley, less<br> preferred dividends. |
| Page 2: | |
| (a) | The return on average common equity represents annualized earnings applicable to Morgan Stanley common shareholders as<br> 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 provision for 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 primarily held within the Parent and its major operating subsidiaries, are comprised of high quality liquid assets (HQLA) and cash deposits with<br> 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<br> needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements. Average Liquidity Resources<br> represents the average daily balance for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022. |
| (b) | The Firm's goodwill and intangible balances utilized in the calculation of tangible common equity are net of certain<br> 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<br> 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<br> regarding the geographic methodology for net revenues is disclosed in Note 23 to the consolidated financial statements included in the Firm's 2022 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<br> internal capital adequacy measure. This framework is a risk-based and leverage-based capital measure, which is compared with the Firm's regulatory capital to ensure that the Firm maintains an amount of going<br> 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<br> 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<br> 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<br> Firm continues to evaluate its required capital framework with respect to the impact of evolving regulatory requirements, as appropriate. For further discussion of the framework, refer to "Management’s Discussion<br> and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s 2022 Form 10‐K. |
| (b) | The Firm's risk‐based capital ratios are computed under each of the (i) standardized approaches for calculating credit<br> 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”).<br> For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations<br> – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s 2022 Form 10‐K. |
| (c) | Supplementary leverage ratio represents Tier 1 capital divided by the total supplementary leverage exposure. |
| Page 5: | |
| (a) | Institutional Securities Equity and Fixed income net revenues include trading, net interest income<br> (interest income less interest expense), asset management, commissions and fees, investments and other revenues which are directly attributable to those businesses. |
| (b) | Pre-tax profit margin percentages represent income before provision for income taxes as percentages<br> of net revenues. |
| (c) | VaR represents the unrealized loss in portfolio value that one would not expect to exceed, on<br> 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<br> limitations of the Firm's VaR methodology, is disclosed in "Quantitative and Qualitative Disclosures about Risk" included in the Firm's 2022 Form 10-K. |
| Page 6: | |
| (a) | Transactional revenues for the Wealth Management segment includes investment banking, trading, and<br> 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 provision for income taxes as percentages<br> of net revenues. |
13
Definitions of Performance Metrics and Terms
Our earnings releases, earnings conference calls, financial presentations and other communications may also include certain metrics which we believe to be useful to us, analysts, investors and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.
| Page 7: | |
|---|---|
| (a) | Client assets represent those for which Wealth Management is providing services including financial advisor-led<br> brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration, and<br> retirement plan services. |
| (b) | Net new assets represent client inflows, including dividends and interest, and asset acquisitions, less client<br> outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions. |
| (c) | Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of<br> qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities. |
| (d) | Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and<br> other, and time deposits. |
| (e) | Annualized weighted average cost of deposits represents the total annualized weighted average cost of the various<br> deposit products, excluding the effect of related hedging derivatives. The period end cost of deposits is based upon balances and rates as of March 31, 2023, December 31, 2022 and March 31, 2022. The period<br> average is based on both daily average deposit balances and rates for the period. |
| (f) | Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned. |
| (g) | 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. |
| (h) | Fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers,<br> dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets in the<br> 2022 Form 10-K. |
| (i) | Self-directed assets represent active accounts which are not advisor led. Active accounts are defined as having at<br> least $25 in assets. |
| (j) | Daily average revenue trades (DARTs) represent the total self-directed trades in a period divided by the number of<br> trading days during that period. |
| (k) | Self-directed households represent the total number of households that include at least one account with self-directed assets. Individual households or participants that are<br> engaged in one or more of our Wealth Management channels are included in each of the respective channel counts. |
| (l) | The workplace channel assets includes equity compensation solutions for companies, their executives and employees. Stock plan unvested assets represent the market value of public<br> company securities at the end of the period. |
| (m) | Stock plan participants represent total accounts with vested and/or unvested stock plan assets in the workplace<br> channel. Individuals with accounts in multiple plans are counted as participants in each plan. |
| Page 8: | |
| (a) | Asset management and related fees represents management and administrative fees, distribution fees, and<br> performance-based fees, not in the form of carried interest. Asset management and related fees represents Asset management as reported on the Firm’s consolidated income statement. |
| (b) | Performance-based income and other includes performance-based fees in the form of carried interest, gains and losses<br> from investments, gains and losses from hedges on seed capital and certain employee deferred compensation plans, net interest, and other revenues. Performance-based income and other represents investments,<br> investment banking, trading, net interest and other revenues as reported on the Firm’s consolidated income statement. |
| (c) | Pre-tax profit margin percentages represent income before provision for income taxes as percentages of net revenues. |
| Page 9: | |
| (a) | Investment Management Alternatives and Solutions asset class includes products in Fund of Funds, Real Estate, Private<br> Equity and Credit strategies, Multi‐Asset portfolios, as well as Custom Separate Account portfolios. |
| (b) | Investment Management net flows include new commitments, investments or reinvestments, net of client redemptions,<br> returns of capital post-fund investment period and dividends not reinvested and excludes the impact of the transition of funds from their commitment period to the invested capital period. |
| (c) | Overlay Services represents investment strategies that use passive exposure instruments to obtain, offset, or<br> substitute specific portfolio exposures beyond those provided by the underlying holdings of the fund. |
| (d) | Total assets under management or supervision excludes shares of minority stake assets which represent the Investment<br> 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<br> loans and bridge loans. |
| (b) | Secured lending facilities include loans provided to clients, which are primarily secured by loans, which are, in turn,<br> 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<br> 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 following sets forth the net revenue impact of mark-to-market gains and losses on investments<br> associated with DCP and compensation expense impact related to DCP: | |||||||
| 1Q23 | 4Q22 | 1Q22 | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net revenues | $ | 14,517 | $ | 12,749 | $ | 14,801 | ||
| Adjustment for mark-to-market on DCP | (153 | ) | (194 | ) | 441 | |||
| Adjusted Net revenues - non-GAAP | $ | 14,364 | $ | 12,555 | $ | 15,242 | ||
| Compensation expense | $ | 6,410 | $ | 5,615 | $ | 6,274 | ||
| Adjustment for mark-to-market on DCP | (193 | ) | (189 | ) | 288 | |||
| Adjusted Compensation expense - non-GAAP | $ | 6,217 | $ | 5,426 | $ | 6,562 | ||
| - | Compensation expense for deferred cash-based compensation awards is calculated based<br> on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period<br> relevant to each separately vesting portion of deferred awards. | |||||||
| --- | --- | |||||||
| - | The Firm invests directly, as a principal, in financial instruments and other<br> investments to economically hedge certain of its obligations under these deferred cash-based compensation plans. Changes in the fair value of such investments, net of financing costs, are recorded<br> in Net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced<br> investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and<br> losses on the Firm’s investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference may not be material to Income before<br> provision for income taxes for the Firm in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially<br> significant impacts to net revenues and compensation expenses. | |||||||
| (2) | The Firm non-interest expenses by category are as follows: | |||||||
| 1Q23 | 4Q22 | 1Q22 | ||||||
| --- | --- | --- | --- | --- | --- | --- | ||
| Compensation and benefits ^(a)^ | $ | 6,410 | $ | 5,615 | $ | 6,274 | ||
| Non-compensation expenses: | ||||||||
| Brokerage, clearing and exchange fees | 881 | 851 | 882 | |||||
| Information processing and communications | 915 | 933 | 829 | |||||
| Professional services | 710 | 853 | 705 | |||||
| Occupancy and equipment | 440 | 443 | 427 | |||||
| Marketing and business development | 247 | 295 | 175 | |||||
| Other | 920 | 878 | 864 | |||||
| Total non-compensation expenses | 4,113 | 4,253 | 3,882 | |||||
| Total non-interest expenses | $ | 10,523 | $ | 9,868 | $ | 10,156 | ||
| (a) | The Firm recorded severance costs of $133 million in the fourth quarter of 2022, associated<br> with a December employee action, which were reported in the business segments’ results as follows: Institutional Securities $88 million, Wealth Management $30 million and Investment<br> Management $15 million. | |||||||
| --- | --- | |||||||
| Page 2: | ||||||||
| --- | --- | |||||||
| (1) | For the quarter ended March 31, 2023, Firm results<br> include pre-tax integration-related expenses of $77 million, of which $53 million is reported in the Wealth Management business segment and $24 million is reported in the Investment<br> Management business segment. | |||||||
| (2) | The income tax consequences related to employee<br> share‐based payments are recognized in Provision for income taxes in the consolidated income statement, and may be either a benefit or a provision. The impacts of recognizing excess tax<br> benefits upon conversion of awards are $149 million and $205 million for the first quarter of 2023 and 2022, respectively. | |||||||
| Page 3: | ||||||||
| (1) | Includes loans held for investment (net of allowance),<br> loans held for sale and also includes loans at fair value which are included in Trading assets on the balance sheet. | |||||||
| (2) | As of March 31, 2023, December 31, 2022 and March 31,<br> 2022, the U.S. Bank investment securities portfolio included held to maturity investment securities of $55.7 billion, $56.4 billion and $60.6 billion, respectively. | |||||||
| Page 5: | ||||||||
| --- | --- | |||||||
| (1) | Institutional<br> Securities average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage<br> servicing rights deduction. The adjustments are as follows: 1Q23: $471mm; 4Q22: $576mm; 1Q22: $576mm | |||||||
| Page 6: | ||||||||
| (1) | The following sets<br> forth the net revenue impact of mark-to-market gains and losses on investments associated with DCP and compensation expense impact related to DCP: | |||||||
| 1Q23 | 4Q22 | 1Q22 | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net revenues | $ | 6,559 | $ | 6,626 | $ | 5,935 | ||
| Adjustment for mark-to-market on DCP | (101 | ) | (106 | ) | 296 | |||
| Adjusted Net revenues - non-GAAP | $ | 6,458 | $ | 6,520 | $ | 6,231 | ||
| Compensation expense | $ | 3,477 | $ | 3,343 | $ | 3,125 | ||
| Adjustment for mark-to-market on DCP | (119 | ) | (115 | ) | 200 | |||
| Adjusted Compensation expense - non-GAAP | $ | 3,358 | $ | 3,228 | $ | 3,325 | ||
| (2) | Wealth Management average tangible common equity<br> represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 1Q23: $14,075mm;<br> 4Q22: $14,746mm; 1Q22: $14,746mm | |||||||
| --- | --- |
15
Supplemental Quantitative Details and Calculations
| Page 7: | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (1) | Wealth Management other lending includes $2 billion, $2 billion and $3 billion,<br> respectively, of non-purpose securities based lending on non-bank entities in the periods ended March 31, 2023, December 31, 2022 and March 31, 2022. | ||||||||
| (2) | For the quarters ended March 31, 2023, December 31, 2022 and March 31, 2022, Wealth<br> Management deposits of $341 billion, $351 billion and $352 billion, respectively, exclude off-balance sheet deposits of $2 billion, $6 billion and $8 billion, respectively, held by third parties outside of Morgan Stanley.<br> Total deposits details are as follows: | ||||||||
| 1Q23 | 4Q22 | 1Q22 | |||||||
| --- | --- | --- | --- | --- | --- | --- | |||
| Brokerage sweep deposits | $ | 172 | $ | 198 | $ | 309 | |||
| Other deposits | 169 | 153 | 43 | ||||||
| Total balance sheet deposits | 341 | 351 | 352 | ||||||
| Off-balance sheet deposits | 2 | 6 | 8 | ||||||
| Total deposits | $ | 343 | $ | 357 | $ | 360 | |||
| Page 8: | |||||||||
| --- | --- | ||||||||
| (1) | Investment Management average tangible common equity represents average common<br> equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 1Q23: $9,687mm; 4Q22: $9,815mm; 1Q22: $9,815mm | ||||||||
| Page 10: | |||||||||
| (1) | For the quarters ended March 31, 2023, December 31, 2022 and March 31, 2022,<br> Investment Management reflected loan balances of $219 million, $222 million and $362 million, respectively. | ||||||||
| Page 11: | |||||||||
| (1) | For the quarter ended March 31, 2023, the Allowance Rollforward for Loans and<br> Lending Commitments is as follows: | ||||||||
| Institutional<br><br> <br>Securities | Wealth<br><br> <br>Management | Total | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Loans | |||||||||
| Allowance for Credit Losses (ACL) | |||||||||
| Beginning Balance - December 31, 2022 | $ | 674 | $ | 165 | $ | 839 | |||
| Net Charge Offs | (70 | ) | (1 | ) | (71 | ) | |||
| Provision | 160 | 41 | 201 | ||||||
| Other | 1 | - | 1 | ||||||
| Ending Balance - March 31, 2023 | $ | 765 | $ | 205 | $ | 970 | |||
| Lending Commitments | |||||||||
| Allowance for Credit Losses (ACL) | |||||||||
| Beginning Balance - December 31, 2022 | $ | 484 | $ | 20 | $ | 504 | |||
| Net Charge Offs | - | - | - | ||||||
| Provision | 29 | 4 | 33 | ||||||
| Other | 2 | - | 2 | ||||||
| Ending Balance - March 31, 2023 | $ | 515 | $ | 24 | $ | 539 | |||
| Loans and Lending Commitments | |||||||||
| Allowance for Credit Losses (ACL) | |||||||||
| Beginning Balance - December 31, 2022 | $ | 1,158 | $ | 185 | $ | 1,343 | |||
| Net Charge Offs | (70 | ) | (1 | ) | (71 | ) | |||
| Provision | 189 | 45 | 234 | ||||||
| Other | 3 | - | 3 | ||||||
| Ending Balance - March 31, 2023 | $ | 1,280 | $ | 229 | $ | 1,509 |
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 first quarter earnings press release issued April 19, 2023.
17