Form 8-K MORGAN STANLEY For: Oct 16

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October 16, 2018 6:56 AM EDT

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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): October 16, 2018

Morgan Stanley

________________________________________________

(Exact name of Registrant as specified

in its charter)

Delaware	1−11758	36−3145972
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1585 Broadway, New York, New York 10036

(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (212) 761−4000

(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 (see General Instruction A.2. below):

[ ] 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))

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 October 16, 2018, Morgan Stanley (the "Company") released financial information with respect to its quarter ended September 30, 2018. 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 September 30, 2018 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

	99.1	Press release of the Company, dated October 16, 2018, containing financial information for the quarter ended September 30, 2018.

	99.2	Financial Data Supplement of the Company for the quarter ended September 30, 2018.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

	MORGAN STANLEY
	(Registrant)
	By: /s/ Paul C. Wirth


	Paul C. Wirth
	Deputy Chief Financial Officer

Dated: October 16, 2018

Exhibit 99.1

Morgan Stanley Reports Third Quarter 2018

• Strong Third Quarter Net Revenues of $9.9 Billion¹

• Firm Expense Efficiency Ratio of 71%² Reflects Ongoing Operating Leverage

• Earnings per Diluted Share of $1.17, Up 26% versus a year ago

• ROE of 11.5% and ROTCE of 13.2%^3,4

James P. Gorman, Chairman and Chief Executive Officer, said, “In the first half of the year, we produced strong results across the franchise. Despite the seasonal summer slowdown in the third quarter, we reported solid revenue and earnings growth demonstrating the stability of the franchise. Year to date, we have produced an ROE of 13% and ROTCE of 15%. We remain well positioned and optimistic for the remainder of the year.”

Financial Overview⁴

NEW YORK, October 16, 2018 – Morgan Stanley (NYSE: MS) today reported net revenues of $9.9 billion¹ for the third quarter ended September 30, 2018 compared with $9.2 billion a year ago. For the current quarter, net income applicable to Morgan Stanley was $2.1 billion, or $1.17 per diluted share,⁵compared with net income of $1.8 billion, or $0.93 per diluted share,⁵ for the same period a year ago.

Compensation expense of $4.3 billion increased from $4.2 billion a year ago on higher revenues. Non-compensation expenses of $2.7 billion increased from $2.5 billion a year ago primarily on higher volume driven expenses and investments in technology, partly offset by lower litigation costs.¹ The Firm’s expense efficiency ratio for the current quarter was 71% compared with 73% a year ago.²

The annualized return on average common equity was 11.5% and the annualized return on average tangible common equity was 13.2% in the current quarter.³

Summary of Segment Results
(dollars in millions)

	Net Revenues¹				Pre-Tax Income⁶
	3Q 2018		3Q 2017		3Q 2018		3Q 2017
Institutional Securities	$	4,929	$	4,376	$	1,556	$	1,236
Wealth Management	$	4,399	$	4,220	$	1,194	$	1,119
Investment Management	$	653	$	675	$	102	$	131
Firm	$	9,872	$	9,197	$	2,851	$	2,482

Business Highlights

•	Institutional Securities net revenues increased 13% reflecting strong results in underwriting and solid performance in M&A advisory and sales and trading.

•	Wealth Management achieved a pre-tax margin of 27.1%,⁷ reflecting continuing operating leverage. Results reflect growth in bank lending and positive fee-based flows.

•	Investment Management AUM⁸ of $471 billion reflect seven consecutive quarters of positive long-term net flows,⁹ with asset management fees up 6%.

Media Relations: Michele Davis 212-761-9621

Investor Relations: Sharon Yeshaya 212-761-1632

Institutional Securities

Institutional Securities reported pre-tax income from continuing operations of $1.6 billion compared with $1.2 billion a year ago. Net revenues for the current quarter were $4.9 billion compared with $4.4 billion a year ago.¹

•	Investment Banking revenues of $1.5 billion increased from $1.3 billion a year ago:

-	Advisory revenues of $510 million decreased from $555 million a year ago on lower levels of completed M&A activity.

-	Equity underwriting revenues of $441 million increased from $273 million a year ago primarily driven by higher revenues on IPOs and convertible offerings.

-	Fixed income underwriting revenues of $508 million increased from $442 million a year ago on higher loan and bond fees which benefited from event-related financings.

•	Sales and Trading net revenues of $3.1 billion increased from $2.9 billion a year ago:

-	Equity sales and trading net revenues of $2.0 billion increased from $1.9 billion a year ago reflecting solid performance across products with notable strength in our financing business.

-	Fixed Income sales and trading net revenues of $1.2 billion were relatively unchanged from a year ago reflecting higher revenues in foreign exchange and commodities offset by declines in rates.

-	Other sales and trading net losses of $68 million compared with net losses of $147 million a year ago reflecting lower net funding costs.

•	Investment revenues of $96 million increased from $52 million a year ago. Results for the current quarter included a gain from the disposition of a business related investment.

•	Other revenues of $244 million increased from $143 million a year ago primarily reflecting higher revenues associated with corporate lending activity.

•	Compensation expense of $1.6 billion increased from $1.5 billion a year ago on higher revenues. Non-compensation expenses of $1.7 billion increased from $1.6 billion a year ago on higher volume driven expenses, partly offset by lower litigation costs.¹

Morgan Stanley’s average trading Value-at-Risk (VaR) measured at the 95% confidence level was $42 million compared with $44 million from the second quarter of 2018 and $43 million in the third quarter of the prior year.¹⁰

Wealth Management

Wealth Management reported pre-tax income from continuing operations of $1.2 billion compared with $1.1 billion in the third quarter of last year. The quarter’s pre-tax margin was 27.1%.⁷ Net revenues for the current quarter were $4.4 billion compared with $4.2 billion a year ago.

•	Asset management revenues of $2.6 billion increased from $2.4 billion a year ago reflecting higher asset levels and positive flows.

•	Transactional revenues¹¹ of $698 million decreased from $739 million a year ago driven by lower fixed income revenues.

•	Net interest income of $1.1 billion increased 4 percent compared with a year ago primarily driven by growth in bank lending. Wealth Management client liabilities¹² were $83 billion at quarter end compared with $78 billion a year ago.

•	Compensation expense for the current quarter of $2.4 billion increased from $2.3 billion a year ago on higher revenues. Non-compensation expenses of $790 million increased from $775 million a year ago reflecting continued investment in technology.

Total client assets were $2.5 trillion and client assets in fee-based accounts were $1.1 trillion at the end of the quarter. Fee-based asset flows for the quarter were a positive $16.2 billion.

Wealth Management representatives of 15,655 produced average annualized revenue per representative of $1.1 million in the current quarter.¹³

Investment Management

Investment Management reported pre-tax income from continuing operations of $102 million compared with $131 million in the third quarter of last year. Net revenues of $653 million decreased from $675 million a year ago.¹

•	Asset management revenues of $604 million increased from $568 million a year ago on higher levels of assets under management.

•	Investment revenues of $40 million decreased from $114 million a year ago. Results for the prior year reflected higher carried interest related to Infrastructure investments.

•

Compensation expense for the current quarter of $269 million decreased from $311 million a year ago principally due to a decrease in deferred compensation associated with carried interest. Non-compensation expenses of $282 million increased from $233 million a year ago primarily driven by brokerage and clearing expenses.¹

•	Total assets under management or supervision at September 30, 2018 were $471 billion compared with $447 billion a year ago.

Capital

As of September 30, 2018, the Firm’s Common Equity Tier 1 and Tier 1 risk-based capital ratios under the fully phased-in Standardized Approach were approximately 16.7% and 19.0%, respectively; the fully phased-in Supplementary Leverage Ratio was approximately 6.4%.¹⁴^,¹⁵

At September 30, 2018, book value and tangible book value per common share were $40.67¹⁶ and $35.50,¹⁷ respectively, based on approximately 1.7 billion shares outstanding.

Other Matters

The effective tax rate from continuing operations for the quarter was 24.4%.

During the quarter ended September 30, 2018, the Firm repurchased approximately $1.2 billion of its common stock or approximately 24 million shares.

The Board of Directors declared a $0.30 quarterly dividend per share, payable on November 15, 2018 to common shareholders of record on October 31, 2018.

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.

# # #

(See Attached Schedules)

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 may contain forward-looking statements including the attainment of certain financial and other targets, objectives and goals. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management’s current estimates, projections, expectations, assumptions, interpretations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of risks and uncertainties that may affect the future results of the Firm, please see “Forward-Looking Statements” immediately preceding Part I, Item 1, “Competition” and “Supervision and Regulation” in Part I, Item 1, “Risk Factors” in Part I, Item 1A, “Legal Proceedings” in Part I, Item 3, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 and “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2017 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.

¹ Effective January 1, 2018, the Firm adopted new accounting guidance related to Revenue from Contracts with Customers, which among other things, requires a gross presentation of certain costs that were previously netted against net revenues. For the quarter ended September 30, 2018, this change in presentation resulted in an increase to net revenues and non-compensation expenses of $93 million, of which $85 million was reported in the Institutional Securities segment and $17 million in the Investment Management segment. In addition, the Firm included an intersegment elimination of $(9) million related to intercompany activity. This change in presentation did not have an impact on net income. Prior periods have not been restated pursuant to this guidance.

² The Firm Expense Efficiency Ratio represents total non-interest expenses as a percentage of net revenues.

³ Annualized return on average common equity, annualized return on average tangible common equity and tangible common equity are non-GAAP financial measures that the Firm considers useful for investors and analysts 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 uses annualized net income applicable to Morgan Stanley less preferred dividends 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 allowable mortgage servicing rights deduction.

⁴ 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 investors and analysts 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.

⁵ Includes preferred dividends related to the calculation of earnings per share of $93 million for the third quarter of 2018 and 2017.

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

⁷ Pre-tax margin is a non-GAAP financial measure that the Firm considers useful for investors and analysts to assess operating performance. Pre-tax margin represents income (loss) from continuing operations before taxes divided by net revenues.

⁸ AUM is defined as assets under management.

⁹ Long-term net flows include the equity, fixed income and alternative/other asset classes and exclude the liquidity asset class.

¹⁰ 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 Part II, Item 7A “Quantitative and Qualitative Disclosures about Market Risk” included in the Annual Report on Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”). Refer to page 7 of Morgan Stanley’s Financial Supplement accompanying this release for the VaR disclosure.

¹¹ Transactional revenues include investment banking, trading, and commissions and fee revenues.

¹² Wealth Management client liabilities reflect U.S. Bank Subsidiaries’ lending and broker dealer margin activity.

¹³ The average annualized revenue per Wealth Management representative metric represents annualized net revenues divided by average representative headcount.

¹⁴ 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 September 30, 2018, the Firm’s ratios are based on the Standardized Approach fully phased-in rules. Regulatory compliance was determined based on capital ratios calculated under transitional rules until December 31, 2017. For information on the calculation of regulatory capital and ratios for prior periods, please refer to Part II, Item 7 “Liquidity and Capital Resources – Regulatory Requirements” in the Firm’s 2017 Form 10-K.

¹⁵ The Supplementary Leverage Ratio became effective as a capital standard on January 1, 2018. As such, the Firm must maintain a Tier 1 supplementary leverage capital buffer of at least 2% in addition to the 3% minimum supplementary leverage ratio (for a total of at least 5%), 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 fully phased-in Tier 1 capital numerator of approximately $70.3 billion and a fully phased-in supplementary leverage exposure denominator of approximately $1.10 trillion.

¹⁶ Book value per common share represents common equity divided by period end common shares outstanding.

¹⁷ Tangible book value per common share is a non-GAAP financial measure that the Firm considers to be a useful measure of capital adequacy for investors and analysts. Tangible book value per common share represents tangible common equity divided by period end common shares outstanding.

Consolidated Financial Summary
(unaudited, dollars in millions, except for per share data)


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017			Jun 30, 2018			Sep 30, 2017			Sep 30, 2018			Sep 30, 2017			Change
Net revenues
Institutional Securities	$	4,929		$	5,714		$	4,376			(14	%)		13	%	$	16,743		$	14,290			17	%
Wealth Management		4,399			4,325			4,220			2	%		4	%		13,098			12,429			5	%
Investment Management		653			691			675			(5	%)		(3	%)		2,062			1,949			6	%
Intersegment Eliminations		(109	)		(120	)		(74	)		9	%		(47	%)		(344	)		(223	)		(54	%)
Net revenues	$	9,872		$	10,610		$	9,197			(7	%)		7	%	$	31,559		$	28,445			11	%

Income (loss) from continuing operations before tax
Institutional Securities	$	1,556		$	1,812		$	1,236			(14	%)		26	%	$	5,480		$	4,409			24	%
Wealth Management		1,194			1,157			1,119			3	%		7	%		3,511			3,149			11	%
Investment Management		102			140			131			(27	%)		(22	%)		390			376			4	%
Intersegment Eliminations		(1	)		0			(4	)		*			75	%		(1	)		(2	)		50	%
Income (loss) from continuing operations before tax	$	2,851		$	3,109		$	2,482			(8	%)		15	%	$	9,380		$	7,932			18	%

Net Income (loss) applicable to Morgan Stanley
Institutional Securities	$	1,120		$	1,457		$	973			(23	%)		15	%	$	4,204		$	3,179			32	%
Wealth Management		913			876			698			4	%		31	%		2,703			2,010			34	%
Investment Management		80			104			114			(23	%)		(30	%)		311			281			11	%
Intersegment Eliminations		(1	)		0			(4	)		*			75	%		(1	)		(2	)		50	%
Net Income (loss) applicable to Morgan Stanley	$	2,112		$	2,437		$	1,781			(13	%)		19	%	$	7,217		$	5,468			32	%
Earnings (loss) applicable to Morgan Stanley common shareholders	$	2,019		$	2,267		$	1,688			(11	%)		20	%	$	6,861		$	5,115			34	%

Financial Metrics:

Earnings per basic share	$	1.19		$	1.32		$	0.95			(10	%)		25	%	$	3.99		$	2.86			40	%
Earnings per diluted share	$	1.17		$	1.30		$	0.93			(10	%)		26	%	$	3.92		$	2.79			41	%

Return on average common equity		11.5	%		13.0	%		9.6	%								13.1	%		9.8	%
Return on average tangible common equity		13.2	%		14.9	%		11.0	%								15.1	%		11.3	%

Book value per common share	$	40.67		$	40.34		$	38.87								$	40.67		$	38.87
Tangible book value per common share	$	35.50		$	35.19		$	33.86								$	35.50		$	33.86

Excluding intermittent net discrete tax provision / benefit
Adjusted earnings per diluted share	$	1.17		$	1.25		$	0.88			(6	%)		33	%	$	3.87		$	2.76			40	%
Adjusted return on average common equity		11.5	%		12.5	%		9.1	%								13.0	%		9.6	%
Adjusted return on average tangible common equity		13.2	%		14.3	%		10.5	%								14.9	%		11.1	%

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures and Definition of Performance Metrics on pages 13 - 16 from the Financial Supplement for additional information related to the calculation of the financial metrics.

Consolidated Income Statement Information
(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017			Jun 30, 2018			Sep 30, 2017			Sep 30, 2018			Sep 30, 2017			Change
Revenues:
Investment banking	$	1,567		$	1,793		$	1,380			(13	%)		14	%	$	4,994		$	4,455			12	%
Trading		2,752			3,293			2,704			(16	%)		2	%		9,815			8,870			11	%
Investments		136			147			167			(7	%)		(19	%)		409			495			(17	%)
Commissions and fees		932			1,039			937			(10	%)		(1	%)		3,144			2,997			5	%
Asset management		3,251			3,189			3,026			2	%		7	%		9,632			8,695			11	%
Other		298			243			200			23	%		49	%		748			628			19	%
Total non-interest revenues		8,936			9,704			8,414			(8	%)		6	%		28,742			26,140			10	%

Interest income		3,627			3,294			2,340			10	%		55	%		9,781			6,411			53	%
Interest expense		2,691			2,388			1,557			13	%		73	%		6,964			4,106			70	%
Net interest		936			906			783			3	%		20	%		2,817			2,305			22	%
Net revenues		9,872			10,610			9,197			(7	%)		7	%		31,559			28,445			11	%
Non-interest expenses:
Compensation and benefits		4,310			4,621			4,169			(7	%)		3	%		13,845			12,887			7	%

Non-compensation expenses:
Occupancy and equipment		351			346			330			1	%		6	%		1,033			990			4	%
Brokerage, clearing and exchange fees		559			609			522			(8	%)		7	%		1,795			1,556			15	%
Information processing and communications		513			496			459			3	%		12	%		1,487			1,320			13	%
Marketing and business development		152			179			128			(15	%)		19	%		471			419			12	%
Professional services		570			580			534			(2	%)		7	%		1,660			1,622			2	%
Other		566			670			573			(16	%)		(1	%)		1,888			1,719			10	%
Total non-compensation expenses		2,711			2,880			2,546			(6	%)		6	%		8,334			7,626			9	%

Total non-interest expenses		7,021			7,501			6,715			(6	%)		5	%		22,179			20,513			8	%

Income (loss) from continuing operations before taxes		2,851			3,109			2,482			(8	%)		15	%		9,380			7,932			18	%
Income tax provision / (benefit) from continuing operations		696			640			697			9	%		--			2,050			2,358			(13	%)
Income (loss) from continuing operations		2,155			2,469			1,785			(13	%)		21	%		7,330			5,574			32	%
Gain (loss) from discontinued operations after tax		(1	)		(2	)		6			50	%		*			(5	)		(21	)		76	%
Net income (loss)	$	2,154		$	2,467		$	1,791			(13	%)		20	%	$	7,325		$	5,553			32	%
Net income applicable to nonredeemable noncontrolling interests		42			30			10			40	%		*			108			85			27	%
Net income (loss) applicable to Morgan Stanley		2,112			2,437			1,781			(13	%)		19	%		7,217			5,468			32	%
Preferred stock dividend / Other		93			170			93			(45	%)		--			356			353			1	%
Earnings (loss) applicable to Morgan Stanley common shareholders	$	2,019		$	2,267		$	1,688			(11	%)		20	%	$	6,861		$	5,115			34	%

Pre-tax profit margin		29	%		29	%		27	%								30	%		28	%
Compensation and benefits as a % of net revenues		44	%		44	%		45	%								44	%		45	%
Non-compensation expenses as a % of net revenues		27	%		27	%		28	%								26	%		27	%
Firm expense efficiency ratio		71	%		71	%		73	%								70	%		72	%
Effective tax rate from continuing operations		24.4	%		20.6	%		28.1	%								21.9	%		29.7	%

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures and Definition of Performance Metrics on pages 13 - 16 from the Financial Supplement for additional information.

Exhibit 99.2

Quarterly Financial Supplement - 3Q 2018


	Page #

Consolidated Financial Summary	1
Consolidated Income Statement Information	2
Consolidated Financial Information and Statistical Data	3
Consolidated Return on Average Common Equity and Regulatory Capital Information	4
Consolidated Loans and Lending Commitments	5
Institutional Securities Income Statement Information	6
Institutional Securities Financial Information and Statistical Data	7
Wealth Management Income Statement Information	8
Wealth Management Financial Information and Statistical Data	9
Investment Management Income Statement Information	10
Investment Management Financial Information and Statistical Data	11
U.S. Bank Supplemental Financial Information	12
End Notes	13 - 14
Definition of U.S. GAAP to Non-GAAP Measures and Performance Metrics	15 - 16
Legal Notice	17

Consolidated Financial Summary
(unaudited, dollars in millions, except for per share data)


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017			Jun 30, 2018			Sep 30, 2017			Sep 30, 2018			Sep 30, 2017			Change
Net revenues ⁽¹⁾
Institutional Securities	$	4,929		$	5,714		$	4,376			(14	%)		13	%	$	16,743		$	14,290			17	%
Wealth Management		4,399			4,325			4,220			2	%		4	%		13,098			12,429			5	%
Investment Management		653			691			675			(5	%)		(3	%)		2,062			1,949			6	%
Intersegment Eliminations		(109	)		(120	)		(74	)		9	%		(47	%)		(344	)		(223	)		(54	%)
Net revenues	$	9,872		$	10,610		$	9,197			(7	%)		7	%	$	31,559		$	28,445			11	%

Income (loss) from continuing operations before tax
Institutional Securities	$	1,556		$	1,812		$	1,236			(14	%)		26	%	$	5,480		$	4,409			24	%
Wealth Management		1,194			1,157			1,119			3	%		7	%		3,511			3,149			11	%
Investment Management		102			140			131			(27	%)		(22	%)		390			376			4	%
Intersegment Eliminations		(1	)		0			(4	)		*			75	%		(1	)		(2	)		50	%
Income (loss) from continuing operations before tax	$	2,851		$	3,109		$	2,482			(8	%)		15	%	$	9,380		$	7,932			18	%

Net Income (loss) applicable to Morgan Stanley
Institutional Securities	$	1,120		$	1,457		$	973			(23	%)		15	%	$	4,204		$	3,179			32	%
Wealth Management		913			876			698			4	%		31	%		2,703			2,010			34	%
Investment Management		80			104			114			(23	%)		(30	%)		311			281			11	%
Intersegment Eliminations		(1	)		0			(4	)		*			75	%		(1	)		(2	)		50	%
Net Income (loss) applicable to Morgan Stanley	$	2,112		$	2,437		$	1,781			(13	%)		19	%	$	7,217		$	5,468			32	%
Earnings (loss) applicable to Morgan Stanley common shareholders	$	2,019		$	2,267		$	1,688			(11	%)		20	%	$	6,861		$	5,115			34	%

Financial Metrics:

Earnings per basic share	$	1.19		$	1.32		$	0.95			(10	%)		25	%	$	3.99		$	2.86			40	%
Earnings per diluted share	$	1.17		$	1.30		$	0.93			(10	%)		26	%	$	3.92		$	2.79			41	%

Return on average common equity		11.5	%		13.0	%		9.6	%								13.1	%		9.8	%
Return on average tangible common equity		13.2	%		14.9	%		11.0	%								15.1	%		11.3	%

Book value per common share	$	40.67		$	40.34		$	38.87								$	40.67		$	38.87
Tangible book value per common share	$	35.50		$	35.19		$	33.86								$	35.50		$	33.86

Excluding intermittent net discrete tax provision / benefit ⁽²⁾⁽³⁾
Adjusted earnings per diluted share	$	1.17		$	1.25		$	0.88			(6	%)		33	%	$	3.87		$	2.76			40	%
Adjusted return on average common equity		11.5	%		12.5	%		9.1	%								13.0	%		9.6	%
Adjusted return on average tangible common equity		13.2	%		14.3	%		10.5	%								14.9	%		11.1	%

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

Consolidated Income Statement Information
(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017			Jun 30, 2018			Sep 30, 2017			Sep 30, 2018			Sep 30, 2017			Change
Revenues:
Investment banking	$	1,567		$	1,793		$	1,380			(13	%)		14	%	$	4,994		$	4,455			12	%
Trading		2,752			3,293			2,704			(16	%)		2	%		9,815			8,870			11	%
Investments		136			147			167			(7	%)		(19	%)		409			495			(17	%)
Commissions and fees		932			1,039			937			(10	%)		(1	%)		3,144			2,997			5	%
Asset management		3,251			3,189			3,026			2	%		7	%		9,632			8,695			11	%
Other		298			243			200			23	%		49	%		748			628			19	%
Total non-interest revenues		8,936			9,704			8,414			(8	%)		6	%		28,742			26,140			10	%

Interest income		3,627			3,294			2,340			10	%		55	%		9,781			6,411			53	%
Interest expense		2,691			2,388			1,557			13	%		73	%		6,964			4,106			70	%
Net interest		936			906			783			3	%		20	%		2,817			2,305			22	%
Net revenues⁽¹⁾		9,872			10,610			9,197			(7	%)		7	%		31,559			28,445			11	%
Non-interest expenses:
Compensation and benefits		4,310			4,621			4,169			(7	%)		3	%		13,845			12,887			7	%

Non-compensation expenses:
Occupancy and equipment		351			346			330			1	%		6	%		1,033			990			4	%
Brokerage, clearing and exchange fees		559			609			522			(8	%)		7	%		1,795			1,556			15	%
Information processing and communications		513			496			459			3	%		12	%		1,487			1,320			13	%
Marketing and business development		152			179			128			(15	%)		19	%		471			419			12	%
Professional services		570			580			534			(2	%)		7	%		1,660			1,622			2	%
Other		566			670			573			(16	%)		(1	%)		1,888			1,719			10	%
Total non-compensation expenses ⁽¹⁾		2,711			2,880			2,546			(6	%)		6	%		8,334			7,626			9	%

Total non-interest expenses		7,021			7,501			6,715			(6	%)		5	%		22,179			20,513			8	%

Income (loss) from continuing operations before taxes		2,851			3,109			2,482			(8	%)		15	%		9,380			7,932			18	%
Income tax provision / (benefit) from continuing operations ⁽²⁾⁽³⁾		696			640			697			9	%		--			2,050			2,358			(13	%)
Income (loss) from continuing operations		2,155			2,469			1,785			(13	%)		21	%		7,330			5,574			32	%
Gain (loss) from discontinued operations after tax		(1	)		(2	)		6			50	%		*			(5	)		(21	)		76	%
Net income (loss)	$	2,154		$	2,467		$	1,791			(13	%)		20	%	$	7,325		$	5,553			32	%
Net income applicable to nonredeemable noncontrolling interests		42			30			10			40	%		*			108			85			27	%
Net income (loss) applicable to Morgan Stanley		2,112			2,437			1,781			(13	%)		19	%		7,217			5,468			32	%
Preferred stock dividend / Other		93			170			93			(45	%)		--			356			353			1	%
Earnings (loss) applicable to Morgan Stanley common shareholders	$	2,019		$	2,267		$	1,688			(11	%)		20	%	$	6,861		$	5,115			34	%

Pre-tax profit margin		29	%		29	%		27	%								30	%		28	%
Compensation and benefits as a % of net revenues		44	%		44	%		45	%								44	%		45	%
Non-compensation expenses as a % of net revenues		27	%		27	%		28	%								26	%		27	%
Firm expense efficiency ratio		71	%		71	%		73	%								70	%		72	%
Effective tax rate from continuing operations ⁽²⁾⁽³⁾		24.4	%		20.6	%		28.1	%								21.9	%		29.7	%

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

Consolidated Financial Information and Statistical Data
(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Nine Months Ended				Percentage
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017			Jun 30, 2018			Sep 30, 2017			Sep 30, 2018		Sep 30, 2017		Change

Regional revenues
Americas	$	7,357		$	7,614		$	6,833			(3	%)		8	%	$	22,989	$	20,667		11	%
EMEA (Europe, Middle East, Africa)		1,355			1,829			1,325			(26	%)		2	%		4,892		4,420		11	%
Asia		1,160			1,167			1,039			(1	%)		12	%		3,678		3,358		10	%
Consolidated net revenues	$	9,872		$	10,610		$	9,197			(7	%)		7	%	$	31,559	$	28,445		11	%

Balance sheet
Deposits	$	175,185		$	172,802		$	154,639			1	%		13	%
Total Assets	$	865,517		$	875,875		$	853,693			(1	%)		1	%
Global liquidity reserve	$	214,848		$	226,322		$	189,966			(5	%)		13	%
Long-term debt outstanding	$	189,949		$	189,915		$	191,677			--			(1	%)
Maturities of long-term debt outstanding (next 12 months)	$	24,122		$	17,330		$	25,792			39	%		(6	%)

Common equity	$	70,183		$	70,589		$	70,458			(1	%)		--
Less: Goodwill and intangible assets		(8,918	)		(9,022	)		(9,079	)		(1	%)		(2	%)
Tangible common equity	$	61,265		$	61,567		$	61,379			--			--

Preferred equity	$	8,520		$	8,520		$	8,520			--			--


Period end common shares outstanding (millions)		1,726			1,750			1,812			(1	%)		(5	%)
Average common shares outstanding (millions)
Basic		1,697			1,720			1,776			(1	%)		(4	%)		1,719		1,789		(4	%)
Diluted		1,727			1,748			1,818			(1	%)		(5	%)		1,749		1,830		(4	%)

Worldwide employees		59,835			58,010			57,702			3	%		4	%

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

Consolidated Return on Average Common Equity and Regulatory Capital Information
(unaudited)

	Quarter Ended									Nine Months Ended
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017			Sep 30, 2018			Sep 30, 2017
Average Common Equity (billions)
Institutional Securities	$	40.8		$	40.8		$	40.2		$	40.8		$	40.2
Wealth Management		16.8			16.8			17.2			16.8			17.2
Investment Management		2.6			2.6			2.4			2.6			2.4
Parent		10.0			9.7			10.7			9.4			10.0
Firm	$	70.2		$	69.9		$	70.5		$	69.6		$	69.8

Return on Average Common Equity
Institutional Securities		10	%		13	%		9	%		13	%		10	%
Wealth Management		21	%		20	%		16	%		21	%		15	%
Investment Management		12	%		16	%		19	%		16	%		15	%
Firm		11	%		13	%		10	%		13	%		10	%

Return on Average Tangible Common Equity ⁽¹⁾
Institutional Securities		10	%		13	%		9	%		13	%		10	%
Wealth Management		39	%		37	%		29	%		38	%		28	%
Investment Management		19	%		25	%		28	%		25	%		23	%
Firm		13	%		15	%		11	%		15	%		11	%


Regulatory Capital (millions) ⁽²⁾

Common Equity Tier 1 capital (Fully Phased-in)	$	61,772		$	61,352		$	61,603
Tier 1 capital (Fully Phased-in)	$	70,308		$	70,017		$	70,276

Standardized Approach (Fully Phased-in)
Risk-weighted assets	$	370,318		$	387,414		$	378,334
Common Equity Tier 1 capital ratio		16.7	%		15.8	%		16.3	%
Tier 1 capital ratio		19.0	%		18.1	%		18.6	%
Tier 1 leverage ratio		8.2	%		8.2	%		8.4	%

Advanced Approach (Fully Phased-in)
Risk-weighted assets	$	357,418		$	369,383		$	368,507
Common Equity Tier 1 capital ratio		17.3	%		16.6	%		16.7	%
Tier 1 capital ratio		19.7	%		19.0	%		19.1	%
Supplementary Leverage Ratio		6.4	%		6.4	%		6.5	%

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

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


	Quarter Ended						Percentage Change From:
	Sep 30, 2018		Jun 30, 2018		Sep 30, 2017		Jun 30, 2018			Sep 30, 2017

Institutional Securities

Corporate loans⁽¹⁾	$	12.0	$	12.9	$	16.1		(7	%)		(25	%)

Corporate lending commitments ⁽²⁾		86.2		101.9		83.2		(15	%)		4	%

Corporate Loans and Lending Commitments ⁽³⁾		98.2		114.8		99.3		(14	%)		(1	%)

Other loans		38.5		42.0		30.3		(8	%)		27	%

Other lending commitments		11.7		10.9		6.2		7	%		89	%

Other Loans and Lending Commitments ⁽⁴⁾		50.2		52.9		36.5		(5	%)		38	%

Institutional Securities Loans and Lending Commitments⁽⁵⁾	$	148.4	$	167.7	$	135.8		(12	%)		9	%


Wealth Management

Loans		71.1		70.0		66.3		2	%		7	%

Lending commitments		10.7		10.7		9.9		--			8	%

Wealth Management Loans and Lending Commitments ⁽⁶⁾	$	81.8	$	80.7	$	76.2		1	%		7	%

Consolidated Loans and Lending Commitments ⁽⁷⁾	$	230.2	$	248.4	$	212.0		(7	%)		9	%

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

Institutional Securities
Income Statement Information
(unaudited, dollars in millions)
	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017			Jun 30, 2018			Sep 30, 2017			Sep 30, 2018			Sep 30, 2017			Change
Revenues:
Investment banking	$	1,459		$	1,699		$	1,270			(14	%)		15	%	$	4,671		$	4,100			14	%
Trading		2,573			3,128			2,504			(18	%)		3	%		9,344			8,241			13	%
Investments		96			89			52			8	%		85	%		234			155			51	%
Commissions and fees		589			674			561			(13	%)		5	%		2,007			1,811			11	%
Asset management		112			102			88			10	%		27	%		324			268			21	%
Other		244			168			143			45	%		71	%		548			442			24	%
Total non-interest revenues		5,073			5,860			4,618			(13	%)		10	%		17,128			15,017			14	%

Interest income		2,425			2,195			1,421			10	%		71	%		6,424			3,788			70	%
Interest expense		2,569			2,341			1,663			10	%		54	%		6,809			4,515			51	%
Net interest		(144	)		(146	)		(242	)		1	%		40	%		(385	)		(727	)		47	%
Net revenues ⁽¹⁾		4,929			5,714			4,376			(14	%)		13	%		16,743			14,290			17	%

Compensation and benefits		1,626			1,993			1,532			(18	%)		6	%		5,779			5,069			14	%
Non-compensation expenses ⁽¹⁾		1,747			1,909			1,608			(8	%)		9	%		5,484			4,812			14	%
Total non-interest expenses		3,373			3,902			3,140			(14	%)		7	%		11,263			9,881			14	%


Income (loss) from continuing operations before taxes		1,556			1,812			1,236			(14	%)		26	%		5,480			4,409			24	%
Income tax provision / (benefit) from continuing operations ⁽²⁾		397			323			260			23	%		53	%		1,169			1,132			3	%
Income (loss) from continuing operations		1,159			1,489			976			(22	%)		19	%		4,311			3,277			32	%
Gain (loss) from discontinued operations after tax		(3	)		(2	)		6			(50	%)		*			(7	)		(21	)		67	%
Net income (loss)		1,156			1,487			982			(22	%)		18	%		4,304			3,256			32	%
Net income applicable to nonredeemable noncontrolling interests		36			30			9			20	%		*			100			77			30	%
Net income (loss) applicable to Morgan Stanley	$	1,120		$	1,457		$	973			(23	%)		15	%	$	4,204		$	3,179			32	%


Pre-tax profit margin		32	%		32	%		28	%								33	%		31	%
Compensation and benefits as a % of net revenues		33	%		35	%		35	%								35	%		35	%

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

Institutional Securities
Financial Information and Statistical Data
(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017			Jun 30, 2018			Sep 30, 2017			Sep 30, 2018			Sep 30, 2017			Change
Investment Banking
Advisory revenues	$	510		$	618		$	555			(17	%)		(8	%)	$	1,702		$	1,555			9	%
Underwriting revenues
Equity		441			541			273			(18	%)		62	%		1,403			1,068			31	%
Fixed income		508			540			442			(6	%)		15	%		1,566			1,477			6	%
Total underwriting revenues		949			1,081			715			(12	%)		33	%		2,969			2,545			17	%

Total investment banking revenues	$	1,459		$	1,699		$	1,270			(14	%)		15	%	$	4,671		$	4,100			14	%

Sales & Trading
Equity	$	2,019		$	2,470		$	1,891			(18	%)		7	%	$	7,047		$	6,062			16	%
Fixed Income		1,179			1,389			1,167			(15	%)		1	%		4,441			4,120			8	%
Other		(68	)		(101	)		(147	)		33	%		54	%		(198	)		(589	)		66	%

Total sales & trading net revenues	$	3,130		$	3,758		$	2,911			(17	%)		8	%	$	11,290		$	9,593			18	%

Investments & Other
Investments	$	96		$	89		$	52			8	%		85	%	$	234		$	155			51	%
Other		244			168			143			45	%		71	%		548			442			24	%
Total investments & other revenues	$	340		$	257		$	195			32	%		74	%	$	782		$	597			31	%

Institutional Securities net revenues ⁽¹⁾	$	4,929		$	5,714		$	4,376			(14	%)		13	%	$	16,743		$	14,290			17	%


Average Daily 95% / One-Day Value-at-Risk ("VaR")
Primary Market Risk Category ($ millions, pre-tax)
Interest rate and credit spread	$	29		$	35		$	31
Equity price	$	15		$	14		$	14
Foreign exchange rate	$	12		$	9		$	9
Commodity price	$	8		$	9		$	9

Aggregation of Primary Risk Categories	$	37		$	41		$	38

Credit Portfolio VaR	$	12		$	11		$	11

Trading VaR	$	42		$	44		$	43

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

Wealth Management
Income Statement Information
(unaudited, dollars in millions)


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017			Jun 30, 2018			Sep 30, 2017			Sep 30, 2018			Sep 30,2017			Change
Revenues:
Investment banking	$	129		$	114		$	125			13	%		3	%	$	383		$	405			(5	%)
Trading		160			135			212			19	%		(25	%)		404			657			(39	%)
Investments		0			3			1			*			*			3			3			--
Commissions and fees		409			442			402			(7	%)		2	%		1,349			1,266			7	%
Asset management		2,573			2,514			2,393			2	%		8	%		7,582			6,879			10	%
Other		58			74			62			(22	%)		(6	%)		195			191			2	%
Total non-interest revenues		3,329			3,282			3,195			1	%		4	%		9,916			9,401			5	%

Interest income		1,412			1,320			1,155			7	%		22	%		4,012			3,348			20	%
Interest expense		342			277			130			23	%		163	%		830			320			159	%
Net interest		1,070			1,043			1,025			3	%		4	%		3,182			3,028			5	%
Net revenues		4,399			4,325			4,220			2	%		4	%		13,098			12,429			5	%

Compensation and benefits		2,415			2,356			2,326			3	%		4	%		7,221			6,940			4	%
Non-compensation expenses		790			812			775			(3	%)		2	%		2,366			2,340			1	%
Total non-interest expenses		3,205			3,168			3,101			1	%		3	%		9,587			9,280			3	%

Income (loss) from continuing operations before taxes		1,194			1,157			1,119			3	%		7	%		3,511			3,149			11	%
Income tax provision / (benefit) from continuing operations		281			281			421			--			(33	%)		808			1,139			(29	%)
Income (loss) from continuing operations		913			876			698			4	%		31	%		2,703			2,010			34	%
Gain (loss) from discontinued operations after tax		-			-			-			--			--			0			0			--
Net income (loss)		913			876			698			4	%		31	%		2,703			2,010			34	%
Net income applicable to nonredeemable noncontrolling interests		-			-			-			--			--			-			-			--
Net income (loss) applicable to Morgan Stanley	$	913		$	876		$	698			4	%		31	%	$	2,703		$	2,010			34	%

Pre-tax profit margin		27	%		27	%		27	%								27	%		25	%
Compensation and benefits as a % of net revenues		55	%		54	%		55	%								55	%		56	%

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

Wealth Management
Financial Information and Statistical Data
(unaudited)



	Quarter Ended									Percentage Change From:
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017			Jun 30, 2018			Sep 30, 2017


Wealth Management Metrics

Wealth Management representatives		15,655			15,632			15,759			--			(1	%)

Annualized revenue per representative (000's)	$	1,125		$	1,105		$	1,071			2	%		5	%

Client assets (billions)	$	2,496		$	2,411		$	2,307			4	%		8	%
Client assets per representative (millions)	$	159		$	154		$	146			3	%		9	%
Client liabilities (billions)	$	83		$	82		$	78			1	%		6	%

Fee-based asset flows (billions)	$	16.2		$	15.3		$	15.8			6	%		3	%
Fee-based client account assets (billions)	$	1,120		$	1,084		$	1,003			3	%		12	%
Fee-based assets as a % of client assets		45	%		45	%		43	%

Retail locations		595			595			598			--			(1	%)

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

Investment Management
Income Statement Information
(unaudited, dollars in millions)


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017			Jun 30, 2018			Sep 30, 2017			Sep 30, 2018			Sep 30, 2017			Change
Revenues:
Investment banking	$	-		$	-		$	-			--			--		$	-		$	-			--
Trading		2			16			(7	)		(88	%)		*			23			(21	)		*
Investments ⁽¹⁾		40			55			114			(27	%)		(65	%)		172			337			(49	%)
Commissions and fees		0			0			0			--			--			0			0			--
Asset management		604			610			568			(1	%)		6	%		1,840			1,624			13	%
Other		(3	)		3			1			*			*			10			9			11	%
Total non-interest revenues		643			684			676			(6	%)		(5	%)		2,045			1,949			5	%

Interest income		19			17			1			12	%		*			37			3			*
Interest expense		9			10			2			(10	%)		*			20			3			*
Net interest		10			7			(1	)		43	%		*			17			0			*
Net revenues ⁽²⁾		653			691			675			(5	%)		(3	%)		2,062			1,949			6	%

Compensation and benefits		269			272			311			(1	%)		(14	%)		845			878			(4	%)
Non-compensation expenses ⁽²⁾		282			279			233			1	%		21	%		827			695			19	%
Total non-interest expenses		551			551			544			--			1	%		1,672			1,573			6	%

Income (loss) from continuing operations before taxes		102			140			131			(27	%)		(22	%)		390			376			4	%
Income tax provision / (benefit) from continuing operations		18			36			16			(50	%)		13	%		73			87			(16	%)
Income (loss) from continuing operations		84			104			115			(19	%)		(27	%)		317			289			10	%
Gain (loss) from discontinued operations after tax		2			0			0			*			*			2			0			*
Net income (loss)		86			104			115			(17	%)		(25	%)		319			289			10	%
Net income applicable to nonredeemable noncontrolling interests		6			0			1			*			*			8			8			--
Net income (loss) applicable to Morgan Stanley	$	80		$	104		$	114			(23	%)		(30	%)	$	311		$	281			11	%

Pre-tax profit margin		16	%		20	%		19	%								19	%		19	%
Compensation and benefits as a % of net revenues		41	%		39	%		46	%								41	%		45	%

Notes:

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

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


	Quarter Ended								Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2018			Jun 30, 2018			Sep 30, 2017		Jun 30, 2018			Sep 30, 2017			Sep 30, 2018			Sep 30, 2017			Change

Assets under management or supervision (AUM)

Net flows by asset class ⁽¹⁾
Equity	$	1.6		$	3.0		$	0.1		(47	%)		*		$	6.9		$	0.5			*
Fixed Income		1.6			(0.8	)		1.8		*			(11	%)		0.1			3.8			(97	%)
Alternative / Other		(0.2	)		1.3			0.9		*			*			1.0			3.0			(67	%)
Long-Term Net Flows		3.0			3.5			2.8		(14	%)		7	%		8.0			7.3			10	%

Liquidity		(9.8	)		1.5			1.8		*			*			(27.7	)		(8.4	)		*

Total net flows	$	(6.8	)	$	5.0		$	4.6		*			*		$	(19.7	)	$	(1.1	)		*

Assets under management or supervision by asset class⁽²⁾
Equity	$	117		$	114		$	97		3	%		21	%
Fixed Income		71			69			69		3	%		3	%
Alternative / Other		133			132			125		1	%		6	%
Long‐Term Assets Under Management or Supervision		321			315			291		2	%		10	%

Liquidity		150			159			156		(6	%)		(4	%)

Total Assets Under Management or Supervision	$	471		$	474		$	447		(1	%)		5	%
Share of minority stake assets	$	7		$	7		$	7		--			--

Notes:	- In the second quarter of 2018, the Firm initiated a redesign of our Brokerage sweep deposit program in an effort to simplify our client cash sweep options. This resulted in approximately $18 billion of AUM liquidity outflows (3Q18: $8Bn, 2Q18: $10Bn), with a corresponding inflow in U.S. Bank deposits.
	- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

U.S. Bank Supplemental Financial Information
(unaudited, dollars in billions)

	Quarter Ended						Percentage Change From:
	Sep 30, 2018		Jun 30, 2018		Sep 30, 2017		Jun 30, 2018			Sep 30, 2017


U.S. Bank assets⁽¹⁾	$	203.2	$	200.5	$	182.2		1	%		12	%

U.S. Bank deposits⁽¹⁾	$	174.4	$	172.6	$	154.2		1	%		13	%

U.S. Bank investment securities portfolio ⁽²⁾	$	60.5	$	60.1	$	60.8		1	%		--


Wealth Management U.S. Bank Data
Securities-based lending and other loans	$	44.4	$	43.6	$	40.1		2	%		11	%
Residential real estate loans		26.7		26.4		26.2		1	%		2	%
Total Securities-based and residential loans	$	71.1	$	70.0	$	66.3		2	%		7	%


Institutional Securities U.S. Bank Data
Corporate Lending	$	7.0	$	6.1	$	6.7		15	%		4	%
Other Lending:
Corporate loans		23.0		20.6		15.6		12	%		47	%
Wholesale real estate and other loans		10.9		14.5		10.1		(25	%)		8	%
Total other loans	$	33.9	$	35.1	$	25.7		(3	%)		32	%
Total corporate and other loans	$	40.9	$	41.2	$	32.4		(1	%)		26	%

Notes:

- In the second quarter of 2018, the Firm initiated a redesign of our Brokerage sweep deposit program in an effort to simplify our client cash sweep options. This resulted in approximately $18 billion of U.S. Bank deposits inflows (3Q18: $8Bn, 2Q18: $10Bn), with a corresponding amount of AUM liquidity outflows in the Investment Management Segment.

- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

End Notes

Pages 1 & 2:
(1)	Effective January 1, 2018, the Firm adopted new accounting guidance related to Revenue from Contracts with Customers, which among other things, requires a gross presentation of certain costs that were previously netted against net revenues. For the quarters and nine months ended, this change in presentation resulted in an increase to net revenues and non-compensation expenses as follows:
	3Q18: Firm: $93 million, Institutional Securities: $85 million, Investment Management: $17 million, Intersegment elimination: $(9) million
	2Q18: Firm: $108 million, Institutional Securities: $101 million, Investment Management: $21 million, Intersegment elimination: $(14) million
	3Q18 YTD: Firm: $280 million, Institutional Securities: $258 million, Investment Management: $61 million, Intersegment elimination $(39) million
	The change in presentation did not have an impact on net income. Prior periods have not been restated pursuant to this guidance.
(2)	The income tax consequences related to 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. For the quarters and nine months ended, the impact of recognizing excess tax benefits upon conversion of awards are as follows: 3Q18: None, 2Q18: $17 million, 3Q17: $11 million, 3Q18 YTD: $164 million and 3Q17 YTD: $139 million.
(3)	The quarter ended June 30, 2018 and the nine months ended September 30, 2018 included intermittent net discrete tax benefits of $88 million and $92 million, respectively, primarily associated with the new information pertaining to resolution of multi-jurisdiction tax examinations and other matters. The quarter and nine months ended September 30, 2017 included intermittent net discrete tax benefits of $83 million and $65 million, respectively, primarily resulting from the remeasurement of certain deferred tax assets.
	The following sets forth the impact of excluding the intermittent net discrete tax items from earnings per diluted share, return on average common equity and return on average tangible common equity:

		2Q18			3Q17		3Q18 YTD			3Q17 YTD
Earnings per diluted share impact	$	0.05		$	0.05		$	0.05		$	0.03
Return on average common equity impact		0.5	%		0.5	%		0.1	%		0.2	%
Return on average tangible common equity impact		0.6	%		0.5	%		0.2	%		0.2	%

The exclusions for intermittent net discrete tax provisions and benefits reflected above do not include the recurring-type discrete tax benefits associated with the accounting guidance related to employee share‐based payments as we anticipate conversion activity each year.

Page 4:
(1)	Segment average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The segment adjustments are as follows:

	3Q18: ISG: $641mm; WM: $7,604mm; IM: $950mm		3Q18 YTD: ISG: $641mm; WM: $7,604mm; IM: $950mm
	2Q18: ISG: $641mm; WM: $7,604mm; IM: $950mm		3Q17 YTD: ISG: $622mm; WM: $7,872mm; IM: $779mm
	3Q17: ISG: $622mm; WM: $7,872mm; IM: $779mm

(2)

Commencing January 1, 2018, regulatory compliance is based on risk-based capital ratios calculated under a fully phased-in approach. Prior to that date, such capital ratios were determined based on transitional rules. The fully phased-in risk-based capital ratios provided for periods prior to 2018 were pro-forma estimates. For information on the calculation of regulatory capital and ratios for prior periods, please refer to Part II, Item 7 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2017.

Page 5:
(1)	For the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017, the percentage of Institutional Securities corporate loans by credit rating was as follows:
	- % investment grade: 43%, 36% and 27%
	- % non-investment grade: 57%, 64% and 73%
(2)	For the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017, the percentage of Institutional Securities corporate lending commitments by credit rating was as follows:
	- % investment grade: 70%, 70% and 69%
	- % non-investment grade: 30%, 30% and 31%
(3)	At September 30, 2018, June 30, 2018 and September 30, 2017, the event-driven portfolio of loans and lending commitments to non-investment grade borrowers were $10.2 billion, $16.1 billion and $14.9 billion, respectively.

Page 5 (continued):
(4)	The Institutional Securities business segment engages in other lending activity. These activities include commercial and residential mortgage lending, asset-backed lending, corporate loans purchased in the secondary market and financing extended to equities and commodities customers and municipalities.
(5)	For the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017, Institutional Securities recorded a provision (release) for credit losses of $(2) million, $(51) million and $11 million, respectively, related to loans. The amount for the quarter ended June 30, 2018 reflects a recovery of a previously charged-off loan. For the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017, a provision (release) for credit losses of $1 million, $(3) million and $(6) million was recorded, respectively, related to lending commitments.
(6)	For the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017, Wealth Management recorded a provision (release) for credit losses of $4 million, $(2) million and $2 million, respectively, related to loans. For the quarters ended September 30, 2018 and June 30, 2018, Wealth Management recorded a provision for credit losses of $1 million and $1 million, respectively, related to lending commitments. For the quarter ended September 30, 2017, there was no material provision related to lending commitments recorded by Wealth Management.
(7)	For the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017, Investment Management reflected loan balances of $1.2 billion, $1.2 billion and $26 million, respectively, and lending commitments of $164 million, $173 million and $0 million, respectively, which are not included in the Consolidated Loans and Lending Commitments balance.

Page 6:
(1)	Effective January 1, 2018, the Firm adopted new accounting guidance related to Revenue from Contracts with Customers, which among other things, requires a gross presentation of certain costs that were previously netted against net revenues. As a result, Institutional Securities segment recorded an increase to net revenues and non-compensation expenses as follows: 3Q18: $85 million; 2Q18: $101 million and 3Q18 YTD: $258 million. This change in presentation did not have an impact on net income. Prior periods have not been restated pursuant to this guidance.
(2)	The quarter ended June 30, 2018 and the nine months ended September 30, 2018 included intermittent net discrete tax benefits of $97 million and $88 million, respectively, primarily associated with the new information pertaining to resolution of multi‐jurisdiction tax examinations and other matters.

Page 7:
(1)	Effective January 1, 2018, the Firm adopted new accounting guidance related to Revenue from Contracts with Customers, which among other things, requires a gross presentation of certain costs that were previously netted against net revenues. As a result, Institutional Securities segment recorded an increase to net revenues and non-compensation expenses as follows: 3Q18: $85 million; 2Q18: $101 million and 3Q18 YTD: $258 million. This change in presentation did not have an impact on net income. Prior periods have not been restated pursuant to this guidance.

Page 10:
(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 noncontrolling interests.
(2)	Effective January 1, 2018, the Firm adopted new accounting guidance related to Revenue from Contracts with Customers, which among other things, requires a gross presentation of certain costs that were previously netted against net revenues. As a result, Investment Management segment recorded an increase to net revenues and non-compensation expenses as follows: 3Q18: $17 million; 2Q18: $21 million and 3Q18 YTD: $61 million. This change in presentation did not have an impact on net income. Prior periods have not been restated pursuant to this guidance.

Page 11:
(1)	Net Flows by region for the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017 were:
	North America: $(10.2) billion, $1.4 billion and $2.9 billion
	International: $3.4 billion, $3.6 billion and $1.7 billion
(2)	Assets under management or supervision by region for the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017 were:
	North America: $265 billion, $273 billion and $266 billion
	International: $206 billion, $201 billion and $181 billion

Page 12:
(1)	U.S. Bank assets and deposits exclude balances between Bank subsidiaries as well as deposits from the Parent and affiliates.
(2)	For the quarters ended September 30, 2018, June 30, 2018 and September 30, 2017, the U.S. Bank investment securities portfolio included held to maturity investment securities of $19.0 billion, $18.8 billion and $18.1 billion, respectively.

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 investors and analysts 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.
(b)	The following are considered non-GAAP financial measures that the Firm considers useful for investors to allow better comparability of operating performance. These measures are calculated as follows:
	- The 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 annualized return on average common equity and annualized return on average tangible common equity represents annualized net income applicable to Morgan Stanley for the quarter less preferred dividends as a percentage of average common equity and average tangible common equity, respectively.
	- The annualized return on average common equity and the annualized return on average tangible common equity excluding intermittent net discrete tax provision / benefit is adjusted in both the numerator and the denominator to exclude the intermittent net discrete tax provision / benefit.
	- Segment annualized return on average common equity and annualized return on average tangible common equity represents annualized net income applicable to Morgan Stanley for each segment, less preferred dividend allocation, divided by average common equity and average tangible common equity for each respective segment.
	- Tangible common equity represents common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.
	- Tangible book value per common share represents tangible common equity divided by period end common shares outstanding.
	- Pre-tax profit margin percentages represent income from continuing operations before income taxes as percentages of net revenues.
(c)	Regulatory compliance was determined based on the risk-based capital ratios calculated under the transitional rules until December 31, 2017. The fully phased-in Common Equity Tier 1 risk-based capital ratios and fully phased-in Supplementary Leverage Ratio provided prior to 2018 were pro-forma estimates which represent non-GAAP financial measures that the Firm considers to be useful measures for evaluating compliance with new regulatory capital requirements that had not yet become effective. For information on the calculation of regulatory capital and ratios for prior periods, please refer to Part II, Item 7 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2017 and Part I, Item 2 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.

Definition of Performance Metrics

(a)	The Firm calculates earnings per share using the two-class method as described under the accounting guidance for earnings per share. For further discussion of the Firm's earnings per share calculations, see Note 2 to the consolidated financial statements in the Firm's Annual Report on Form 10-K for the year ended December 31, 2017 (2017 Form 10-K).
(b)	Book value per common share represents common equity divided by period end common shares outstanding.
(c)	Preferred stock dividend / Other includes allocation of earnings to Participating Restricted Stock Units (RSUs) for periods prior to 2Q18.
(d)	The Firm expense efficiency ratio represents total non‐interest expenses as a percentage of net revenues.
(e)	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 2017 Form 10-K.
(f)	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.
(g)	The global liquidity reserve, which is held within the bank and non-bank operating subsidiaries, is comprised of highly liquid and diversified cash and cash equivalents and unencumbered securities. Eligible unencumbered securities include U.S. government securities, U.S. agency securities, U.S. agency mortgage-backed securities, non-U.S. government securities and other highly liquid investment grade securities.
(h)	The Firm's goodwill and intangible balances utilized in the calculation of tangible common equity are net of allowable mortgage servicing rights deduction.
(i)	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 fully phased‐in 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 and to incorporate enhancements in modeling techniques. For further discussion of the framework, refer to Part II, Item 7 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2017 and Part I, Item 2 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's Quarterly Report on Form 10‐Q for the quarter ended June 30, 2018.
(j)	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).
(k)	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 September 30, 2018, the Firm's ratios are based on the Standardized Approach fully phased-in rules. Regulatory compliance was determined based on capital ratios calculated under transitional rules until December 31, 2017. For information on the calculation of regulatory capital and ratios for prior periods, please refer to Part II, Item 7 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's 2017 Form 10-K and Part I, Item 2 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's 10‐Q for the quarter ended June 30, 2018.
(l)	Supplementary leverage ratio represents fully phased‐in Tier 1 capital divided by the fully phased‐in total supplementary leverage exposure.
(m)	Institutional Securities net income applicable to noncontrolling interests primarily represents the allocation to Mitsubishi UFJ Financial Group, Inc. of Morgan Stanley MUFG Securities Co., Ltd., which the Firm consolidates.
(n)	Institutional Securities discontinued operations primarily includes after-tax gains/(losses) related to Saxon.
(o)	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 Part II, Item 7A "Quantitative and Qualitative Disclosures about Market Risk" included in the Firm's 2017 Form 10-K.
(p)	The average annualized revenue per Wealth Management representative metric represents annualized net revenues divided by average representative headcount.
(q)	Client assets per Wealth Management representative represents total client assets divided by period end representative headcount.
(r)	Wealth Management client liabilities reflect U.S. Bank lending and broker dealer margin activity.
(s)	Wealth Management fee-based client account assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
(t)	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.
(u)	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.
(v)	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.
(w)	The share of minority stake assets represents Investment Management's proportional share of assets managed by entities in which it owns a minority stake.
(x)	The Institutional Securities U.S. Bank other lending data includes activities related to commercial and residential mortgage lending, asset-backed lending, corporate loans purchased in the secondary market, financing extended to equities and commodities customers, and loans to municipalities.

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 third quarter earnings press release issued October 16, 2018.

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Form 8-K MORGAN STANLEY For: Oct 16

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