Form 8-K MORGAN STANLEY For: Jan 20
Exhibit 99.1
Morgan Stanley Fourth Quarter and Full Year 2020 Earnings Results
Morgan Stanley Reports Fourth Quarter Net Revenues of $13.6 Billion, EPS of $1.81 and ROTCE of 17.7%; Record Full Year
Net Revenues of $48.2 Billion, EPS of $6.46 and ROTCE of 15.2%
NEW YORK, January 20, 2021 – Morgan Stanley (NYSE: MS) today reported net revenues of $13.6 billion for the fourth quarter ended December 31, 2020 compared with $10.9 billion a year ago. Net income applicable to Morgan Stanley was $3.4 billion, or
$1.81 per diluted share,1 compared with $2.2 billion, or $1.30 per diluted share,1 for the same period a year ago. The comparisons of current year results to prior periods
were impacted by the acquisition of E*TRADE Financial Corporation (“E*TRADE”), completed on October 2, 2020, reported in the Wealth Management segment.
Full year net revenues were a record $48.2 billion compared with $41.4 billion a year ago. Net income applicable to Morgan Stanley for the current year was $11.0
billion, or $6.46 per diluted share,1 compared with $9.0 billion, or $5.19 per diluted share,1 a year ago.
James P. Gorman, Chairman and
Chief Executive Officer, said, “The Firm produced a very strong quarter and record full-year results, with excellent performance across all three
businesses and geographies. I am extremely proud of how our employees came together to support each other and our communities and deliver for our clients in an incredibly challenging year. Our unique business model continues to serve us well as we
further execute on our long-term strategy with the acquisitions of E*TRADE and Eaton Vance. We enter 2021 with significant momentum, and I am very confident in our competitive position and our opportunities for continued growth.”
Financial Summary2,3
|
||||||||||||||||
Firm ($MM, except per share data)
|
4Q 2020
|
4Q 2019
|
FY 2020
|
FY 2019
|
||||||||||||
Net revenues
|
$
|
13,640
|
$
|
10,857
|
$
|
48,198
|
$
|
41,419
|
||||||||
Compensation expense
|
$
|
5,450
|
$
|
5,228
|
$
|
20,854
|
$
|
18,837
|
||||||||
Non-compensation expenses
|
$
|
3,760
|
$
|
2,896
|
$
|
12,926
|
$
|
11,281
|
||||||||
Pre-tax income8
|
$
|
4,430
|
$
|
2,733
|
$
|
14,418
|
$
|
11,301
|
||||||||
Net income app. to MS
|
$
|
3,385
|
$
|
2,239
|
$
|
10,996
|
$
|
9,042
|
||||||||
Expense efficiency ratio6
|
68
|
%
|
75
|
%
|
70
|
%
|
73
|
%
|
||||||||
Earnings per diluted share
|
$
|
1.81
|
$
|
1.30
|
$
|
6.46
|
$
|
5.19
|
||||||||
Book value per share
|
$
|
51.13
|
$
|
45.82
|
$
|
51.13
|
$
|
45.82
|
||||||||
Tangible book value per share
|
$
|
41.95
|
$
|
40.01
|
$
|
41.95
|
$
|
40.01
|
||||||||
Return on equity
|
14.7
|
%
|
11.3
|
%
|
13.1
|
%
|
11.7
|
%
|
||||||||
Return on tangible equity4
|
17.7
|
%
|
13.0
|
%
|
15.2
|
%
|
13.4
|
%
|
||||||||
Institutional Securities
|
||||||||||||||||
Net revenues
|
$
|
7,004
|
$
|
5,054
|
$
|
25,948
|
$
|
20,386
|
||||||||
Investment Banking
|
$
|
2,302
|
$
|
1,576
|
$
|
7,204
|
$
|
5,734
|
||||||||
Sales & Trading
|
$
|
4,220
|
$
|
3,194
|
$
|
18,792
|
$
|
13,695
|
||||||||
Wealth Management
|
||||||||||||||||
Net revenues
|
$
|
5,681
|
$
|
4,582
|
$
|
19,055
|
$
|
17,737
|
||||||||
Fee-based client assets ($Bn)9
|
$
|
1,472
|
$
|
1,267
|
$
|
1,472
|
$
|
1,267
|
||||||||
Fee-based asset flows ($Bn)10
|
$
|
24.1
|
$
|
24.9
|
$
|
77.4
|
$
|
64.9
|
||||||||
Net new assets ($Bn)11
|
$
|
66.1
|
$
|
27.1
|
$
|
175.4
|
$
|
97.8
|
||||||||
Loans ($Bn)
|
$
|
98.1
|
$
|
80.1
|
$
|
98.1
|
$
|
80.1
|
||||||||
Investment Management
|
||||||||||||||||
Net revenues
|
$
|
1,100
|
$
|
1,356
|
$
|
3,734
|
$
|
3,763
|
||||||||
AUM ($Bn)12
|
$
|
781
|
$
|
552
|
$
|
781
|
$
|
552
|
||||||||
Long-term net flows ($Bn)13
|
$
|
8.5
|
$
|
6.7
|
$
|
41.0
|
$
|
15.4
|
|
|
Highlights
|
|
• | The Firm’s full year results reflect both record net revenues of $48 billion up 16% year over year and net income of $11 billion up 22%. |
|
|
• |
The Firm delivered full year ROTCE of 15.2% or 15.4% excluding the impact of integration-related expenses.4,5
|
|
|
• |
The full year Firm expense efficiency ratio was 70% excluding the impact of integration-related expenses.5,6
|
|
|
• |
Common Equity Tier 1 capital standardized ratio of 17.4%.
|
|
|
• |
Institutional Securities delivered record full year net revenues of $25.9 billion. Fourth quarter net revenues were up 39% driven by continued strong client engagement in a constructive market environment.
|
|
|
• |
Wealth Management delivered a full year pre-tax margin of 23.0% (24.2% excluding $231 million of integration-related expenses).7 Fourth quarter results reflect growth in client assets, increases in bank deposits and
lending as well as strong transactional activity.
|
• |
Strong Investment Management results reflect record asset management fees in both the quarter and full year driven by record AUM of $781 billion and record long-term net flows of $41 billion.
|
Media Relations: Wesley McDade 212-761-2430
|
Investor Relations: Sharon Yeshaya 212-761-1632
|
Fourth Quarter Results
Institutional Securities
Institutional Securities reported net revenues for the current quarter of $7.0 billion compared
with $5.1 billion a year ago. Pre-tax income was $3.2 billion compared with $1.1 billion a year ago.8
|
|
Investment Banking revenues up 46% from a year ago:
|
|
|
|
• | Advisory revenues increased from a year ago driven by higher M&A completed transactions. |
|
|
• |
Equity underwriting revenues increased from a year ago driven by higher revenues on IPOs, blocks and follow-on offerings.
|
|
|
• |
Fixed income underwriting revenues decreased from a year ago as lower volumes contributed to a decline in bond revenues, partially offset by higher event driven activity.
|
|
|
Sales and Trading net revenues up 32% from a year ago:
|
|
|
|
• |
Equity sales and trading net revenues increased from a year ago reflecting strong performance across products and geographies driven by increased client activity, with particular
strength in derivatives.
|
• |
Fixed Income sales and trading net revenues increased from a year ago reflecting strong performance across businesses, benefitting from strong client engagement and market
volatility, with notable strength in foreign exchange and credit products.
|
• |
Other sales and trading net revenues increased from a year ago reflecting gains on investments associated with certain employee deferred compensation plans.
|
Investments and Other:
|
|
• |
Other revenues increased from a year ago primarily driven by a reduction in the provision for credit losses on loans held for investment, mark-to-market gains on loans held for
sale related to corporate lending activity and gains on the sale of a commodities related intangible asset.
|
Total Expenses:
|
|
• |
Compensation expense decreased from a year ago driven by lower discretionary compensation, partially offset by increases in the fair value of deferred compensation plan referenced
investments.
|
• |
Non-compensation expenses increased from a year ago driven by higher volume related expenses, higher litigation expense, and an increase in the provision for credit losses on
unfunded lending commitments.
|
($ millions)
|
4Q 2020
|
4Q 2019
|
||||||
Net Revenues
|
$
|
7,004
|
$
|
5,054
|
||||
Investment Banking
|
$
|
2,302
|
$
|
1,576
|
||||
Advisory
|
$
|
827
|
$
|
654
|
||||
Equity underwriting
|
$
|
1,000
|
$
|
422
|
||||
Fixed income underwriting
|
$
|
475
|
$
|
500
|
||||
Sales and Trading
|
$
|
4,220
|
$
|
3,194
|
||||
Equity
|
$
|
2,498
|
$
|
1,920
|
||||
Fixed Income
|
$
|
1,664
|
$
|
1,273
|
||||
Other
|
$
|
58
|
$
|
1
|
||||
Investments and Other
|
$
|
482
|
$
|
284
|
||||
Investments
|
$
|
68
|
$
|
68
|
||||
Other
|
$
|
414
|
$
|
216
|
||||
Total Expenses
|
$
|
3,844
|
$
|
3,929
|
||||
Compensation
|
$
|
1,575
|
$
|
2,057
|
||||
Non-compensation
|
$
|
2,269
|
$
|
1,872
|
2
Wealth Management
Wealth Management reported net revenues for the current quarter of $5.7 billion compared with $4.6 billion a year ago. Pre-tax income of $1.1
billion8 in the current quarter resulted in a
pre-tax margin of 18.8%7 or 22.9% excluding
the impact of integration-related expenses.5
The comparisons of current year results to prior periods were impacted by the acquisition of E*TRADE.
($ millions)
|
4Q 2020
|
4Q 2019
|
||||||
Net Revenues
|
$
|
5,681
|
$
|
4,582
|
Net revenues up 24% from a year ago:
|
|
|
|
• |
Asset management revenues increased from a year ago reflecting higher asset levels driven by market appreciation and strong fee-based flows.
|
|
|
• |
Transactional revenues14 increased 37% excluding the impact of mark-to-market gains on investments associated with
certain employee deferred compensation plans. Results reflect strong client activity in both the advisor-led and self-directed channels.
|
|
|
• |
Net interest income (NII) increased from a year ago driven by incremental NII as a result of the E*TRADE acquisition as well as higher deposits and bank lending,
partially offset by the impact of lower average rates.
|
|
|
Total Expenses:
|
|
|
|
• |
Compensation expense increased from a year ago driven by incremental compensation as a result of the E*TRADE acquisition and integration-related expenses,5 increases in
the fair value of deferred compensation plan referenced investments, and higher compensable revenues.
|
|
|
• |
Non-compensation expense increased from a year ago primarily driven by incremental operating and other expenses as a result of the E*TRADE acquisition and
integration-related expenses.5
|
Asset management
|
$
|
2,975
|
$
|
2,655
|
||||
Transactional14
|
$
|
1,340
|
$
|
829
|
||||
Net interest
|
$
|
1,207
|
$
|
1,033
|
||||
Other
|
$
|
159
|
$
|
65
|
||||
Total Expenses
|
$
|
4,611
|
$
|
3,419
|
||||
Compensation
|
$
|
3,345
|
$
|
2,590
|
||||
Non-compensation
|
$
|
1,266
|
$
|
829
|
Investment Management
Investment Management reported net revenues of $1.1 billion compared with $1.4 billion a year ago. Pre-tax income was $196 million compared
with $447 million a year ago.8
Net revenues down 19% from a year ago:
|
|
•
|
Asset management revenues increased from a year ago driven by record AUM, reflecting strong investment performance and positive net flows.
|
|
|
• |
Investments revenues decreased from a year ago due to significant gains reflected in the prior year quarter related to an investment’s initial public offering within
an Asia private equity fund.
|
|
|
Total Expenses:
|
|
|
|
• |
Compensation expense decreased from a year ago principally due to lower carried interest in the quarter.
|
|
|
• |
Non-compensation expenses increased from a year ago driven by higher brokerage and clearing expense.
|
($ millions)
|
4Q 2020
|
4Q 2019
|
||||||
Net Revenues
|
$
|
1,100
|
$
|
1,356
|
||||
Asset management
|
$
|
869
|
$
|
736
|
||||
Investments
|
$
|
256
|
$
|
670
|
||||
Other
|
$
|
(25
|
)
|
$
|
(50
|
)
|
||
Total Expenses
|
$
|
904
|
$
|
909
|
||||
Compensation
|
$
|
530
|
$
|
581
|
||||
Non-compensation
|
$
|
374
|
$
|
328
|
3
Full Year Results
Institutional Securities
Institutional Securities reported net revenues of $25.9 billion compared with
$20.4 billion a year ago. Pre-tax income was $9.2 billion compared with $5.5 billion in the prior year.8
Investment Banking revenues up 26% from a year ago:
|
|
|
|
• |
Advisory revenues decreased from a year ago due to fewer large completed M&A transactions.
|
|
|
• |
Equity underwriting revenues increased 81% from a year ago driven by growth in blocks, IPOs and follow-on offerings as clients continued to access capital
markets.
|
|
|
• |
Fixed income underwriting revenues increased from a year ago on higher investment and non-investment grade bond issuances driven by elevated volumes as clients
accessed capital markets, partially offset by lower investment grade loan issuances.
|
|
|
Sales and Trading net revenues up 37% from a year ago:
|
|
|
|
• |
Equity sales and trading net revenues increased 22% from a year ago reflecting strong performance across products and geographies driven by increased client
activity.
|
|
|
• |
Fixed Income sales and trading net revenues increased 59% from a year ago reflecting strong performance across businesses benefitting from strong client engagement
and market volatility, with notable strength in foreign exchange and credit products.
|
• |
Other sales and trading net revenues increased from a year ago primarily driven by gains on economic hedges associated with corporate lending activity, partially
offset by lower rates on liquidity investments.
|
Investments and Other:
|
|
• |
Revenues decreased from a year ago reflecting lower mark-to-market gains on investments.
|
• |
Other revenues decreased from a year ago due to mark-to-market losses on corporate loans held for sale and an increase in the provision for credit losses on loans
held for investment.
|
Total Expenses:
|
|
• |
Compensation expense increased from a year ago driven by higher discretionary compensation expense as a result of higher revenues.
|
• |
Non-compensation expenses increased from a year ago driven by higher volume related expenses and an increase in the provision for credit losses on unfunded
lending commitments.
|
($ millions)
|
FY 2020
|
FY 2019
|
||||||
Net Revenues
|
$
|
25,948
|
$
|
20,386
|
||||
Investment Banking
|
$
|
7,204
|
$
|
5,734
|
||||
Advisory
|
$
|
2,008
|
$
|
2,116
|
||||
Equity underwriting
|
$
|
3,092
|
$
|
1,708
|
||||
Fixed income underwriting
|
$
|
2,104
|
$
|
1,910
|
||||
Sales and Trading
|
$
|
18,792
|
$
|
13,695
|
||||
Equity
|
$
|
9,801
|
$
|
8,056
|
||||
Fixed Income
|
$
|
8,824
|
$
|
5,546
|
||||
Other
|
$
|
167
|
$
|
93
|
||||
Investments and Other
|
$
|
(48
|
)
|
$
|
957
|
|||
Investments
|
$
|
166
|
$
|
325
|
||||
Other
|
$
|
(214
|
)
|
$
|
632
|
|||
Total Expenses
|
$
|
16,797
|
$
|
14,896
|
||||
Compensation
|
$
|
8,342
|
$
|
7,433
|
||||
Non-compensation
|
$
|
8,455
|
$
|
7,463
|
4
Wealth Management
Wealth Management reported net revenues of $19.1 billion compared with $17.7 billion a year ago. Pre-tax income of $4.4 billion resulted in a pre-tax margin of 23.0%7,8 or 24.2% excluding the impact of integration-related expenses.5
Net revenues up 7% from a year ago:
•
|
Asset management revenues increased from a year ago on higher asset levels driven by market appreciation and record fee-based flows.
|
•
|
Transactional revenues14 increased from a year ago primarily driven by an increase in
commissions on higher client activity, gains on investments associated with certain employee deferred compensation plans, and incremental revenues in the fourth quarter as a result of the E*TRADE acquisition.
|
•
|
Net interest income decreased from a year ago primarily driven by the impact of lower interest rates, partially offset by increases due to higher deposits and bank lending as well as incremental NII as a
result of the E*TRADE acquisition.
|
Total Expenses:
•
|
Compensation expense increased from a year ago primarily driven by higher compensable revenues, incremental compensation as a result of the E*TRADE acquisition and integration-related expenses,5 as well as increases in the fair value of deferred compensation plan referenced
investments.
|
($ millions)
|
FY 2020
|
FY 2019
|
||||||
Net Revenues
|
$
|
19,055
|
$
|
17,737
|
||||
Asset management
|
$
|
10,955
|
$
|
10,199
|
||||
Transactional14
|
$
|
3,694
|
$
|
2,969
|
||||
Net interest
|
$
|
4,022
|
$
|
4,222
|
||||
Other
|
$
|
384
|
$
|
347
|
||||
Total Expenses
|
$
|
14,668
|
$
|
12,905
|
||||
Compensation
|
$
|
10,970
|
$
|
9,774
|
||||
Non-compensation
|
$
|
3,698
|
$
|
3,131
|
||||
|
•
|
Non-compensation expenses increased from a year ago primarily driven by incremental operating and other expenses as a result of the E*TRADE acquisition, integration-related expenses,5 and a regulatory charge, partially offset by lower marketing and business development expenses.
|
Investment Management
Investment Management net revenues were essentially unchanged from a year ago. Pre-tax income was $870 million compared with $985 million in the prior year.8
Net revenues:
•
|
Asset management revenues increased from a year ago driven by record AUM, reflecting strong investment performance and positive net flows.
|
•
|
Investments revenues decreased from a year ago driven by lower accrued carried interest.
|
Total Expenses:
•
|
Compensation expense decreased from a year ago principally due to a decrease in carried interest.
|
•
|
Non-compensation expenses increased from a year ago driven by higher brokerage and clearing costs.
|
($ millions)
|
FY 2020
|
FY 2019
|
||||||
Net Revenues
|
$
|
3,734
|
$
|
3,763
|
||||
Asset management
|
$
|
3,013
|
$
|
2,629
|
||||
Investments
|
$
|
808
|
$
|
1,213
|
||||
Other
|
$
|
(87
|
)
|
$
|
(79
|
)
|
||
Total Expenses
|
$
|
2,864
|
$
|
2,778
|
||||
Compensation
|
$
|
1,542
|
$
|
1,630
|
||||
Non-compensation
|
$
|
1,322
|
$
|
1,148
|
||||
5
Other Matters
•
|
The Firm’s Board of Directors authorized the repurchase of outstanding common stock of up to $10 billion in 2021.
|
•
|
The Board of Directors declared a $0.35 quarterly dividend per share, payable on February 12, 2021 to common shareholders of record on January 29, 2021.
|
•
|
The Firm’s provision for credit losses on loans and lending commitments was $5 million for the fourth quarter of 2020, compared with $57 million for the fourth quarter of 2019 and $111 million for the
third quarter of 2020. The allowance for credit losses on loans and lending commitments was $1.2 billion as of December 31, 2020, a decrease of approximately $29 million from September 30, 2020 and an
increase of approximately $641 million from December 31, 2019.
|
4Q 2020 |
4Q 2019
|
FY 2020
|
FY 2019
|
|||||||||||||
Common Stock Repurchases
|
||||||||||||||||
Repurchases ($MM)
|
NA
|
$
|
1,500
|
$
|
1,347
|
$
|
5,360
|
|||||||||
Number of Shares (MM)
|
NA
|
31
|
29
|
121
|
||||||||||||
Average Price
|
NA
|
$
|
48.49
|
$
|
46.01
|
$
|
44.23
|
|||||||||
Period End Shares (MM)
|
1,810
|
1,594
|
1,810
|
1,594
|
||||||||||||
Tax Rate
|
23.0
|
%
|
15.7
|
%
|
22.5
|
%
|
18.3
|
%
|
||||||||
Capital15
|
||||||||||||||||
Standardized Approach
|
||||||||||||||||
CET1 capital16
|
17.4
|
%
|
16.4
|
%
|
||||||||||||
Tier 1 capital16
|
19.4
|
%
|
18.6
|
%
|
||||||||||||
Advanced Approach
|
||||||||||||||||
CET1 capital16
|
17.7
|
%
|
16.9
|
%
|
||||||||||||
Tier 1 capital16
|
19.8
|
%
|
19.2
|
%
|
||||||||||||
Leverage-based capital
|
||||||||||||||||
Tier 1 leverage17
|
8.4
|
%
|
8.3
|
%
|
||||||||||||
SLR18
|
7.4
|
%
|
6.4
|
%
|
||||||||||||
6
Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in
more than 41 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com.
A financial summary follows. Financial, statistical and business-related information, as well as information regarding business and segment trends, is included in the Financial Supplement. Both the earnings release
and the Financial Supplement are available online in the Investor Relations section at www.morganstanley.com.
NOTICE:
The information provided herein and in the financial supplement may include certain non-GAAP financial measures. The definition of such measures or reconciliation of such metrics to the comparable U.S. GAAP figures
are included in this earnings release and the Financial Supplement, both of which are available on www.morganstanley.com.
This earnings release contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or negatives of these words. Forward-looking statements by their nature address matters that are,
to different degrees, uncertain, such as statements about the consummation of the proposed transaction and the anticipated benefits thereof. All such forward-looking statements are subject to risks, uncertainties and
assumptions that could cause actual results to differ materially from those expressed in such forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to, (i) the
completion of the proposed transaction on anticipated terms and timing, including obtaining required regulatory approvals, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues,
expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined company’s
operations and other conditions to the completion of the acquisition, including the possibility that any of the anticipated benefits of the proposed transaction will not be realized or will not be realized within the
expected time period, (ii) the ability of Morgan Stanley and Eaton Vance to integrate the business successfully and to achieve anticipated synergies, risks and costs, (iii) potential litigation relating to the proposed
transaction that could be instituted against Morgan Stanley, Eaton Vance or their respective directors, (iv) the risk that disruptions from the proposed transaction will harm Morgan Stanley’s and Eaton Vance’s business,
including current plans and operations, (v) the ability of Morgan Stanley or Eaton Vance to retain and hire key personnel, (vi) potential adverse reactions or changes to business relationships resulting from the
announcement or completion of the acquisition, (vii) continued availability of capital and financing and rating agency actions, (viii) legislative, regulatory and economic developments, (ix) potential business
uncertainty, including changes to existing business relationships, during the pendency of the acquisition that could affect Morgan Stanley’s and/or Eaton Vance’s financial performance, (x) certain restrictions during the
pendency of the acquisition that may impact Morgan Stanley’s or Eaton Vance’s ability to pursue certain business opportunities or strategic transactions, (xi) unpredictability and severity of catastrophic events,
including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as Morgan Stanley’s or Eaton Vance’s management’s response to any of the aforementioned factors, (xii) dilution caused by Morgan
Stanley’s issuance of additional shares of its common stock in connection with the proposed transaction, (xiii) the possibility that the transaction may be more expensive to complete than anticipated, including as a
result of unexpected factors or events, (xiv) those risks described in Item 1A of Morgan Stanley’s most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K, (xv) those risks described
in Item 1A of Eaton Vance’s most recently filed Annual Report on Form 10-K and any subsequent reports on Forms 10-Q and 8-K and (xvi) those risks that are described in the registration statement on Form S-4 available
from the sources indicated above. These risks, as well as other risks associated with the proposed acquisition, are more fully discussed in the registration statement on Form S-4, as amended, filed with the SEC in
connection with the proposed acquisition. While the list of factors presented here is, and the list of factors presented in the registration statement on Form S-4 will be, considered representative, no such list should
be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material
differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties
and similar risks, any of which could have a material adverse effect on Morgan Stanley’s or Eaton Vance’s consolidated financial condition, results of operations, credit rating or liquidity. Neither Morgan Stanley nor
Eaton Vance assumes any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except
as otherwise required by securities and other applicable laws.
7
1 Includes preferred dividends related to the calculation of earnings per share for the fourth quarter of 2020 and 2019 of approximately
$119 million and $154 million, respectively. Includes preferred dividends related to the calculation of earnings per share for the years ended 2020 and 2019 of approximately $496 million and $530 million, 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, investors, analysts 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 and return on average tangible common equity excluding integration-related expenses are
non-GAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance and capital adequacy. The calculation of return on
average tangible common equity represents full year net income or annualized net income applicable for the quarter applicable to Morgan Stanley less preferred dividends as a percentage of average tangible common equity.
Tangible common equity, also a non-GAAP financial measure, represents common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.
5 The Firm’s fourth quarter results include $231 million of integration-related expenses on a pre-tax basis ($189 million after-tax) as a
result of the E*TRADE acquisition. Total non-interest expenses include $151 million in compensation expense and $80 million in non-compensation expense.
6 The Firm expense efficiency ratio of 70.1% represents total non-interest expenses as a percentage of net revenues. The Firm expense
efficiency ratio excluding integration-related expenses of 69.6% represents total non-interest expenses adjusted for integration-related expenses as a percentage of net revenues. The Firm expense efficiency ratio excluding
integration-related expenses is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance.
7 Pre-tax margin represents income before taxes divided by net revenues. Wealth Management pre-tax margin excluding the
integration-related expenses represents income before taxes less those expenses divided by net revenues. Wealth Management pre-tax margin excluding integration-related expenses is a non-GAAP financial measure that the
Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance.
8 Pre-tax income represents income before 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, net account transfers, dividends, interest, and client fees
and exclude institutional cash management related activity.
8
11 Wealth Management net new assets represents client inflows (including dividend and interest) less client outflows (excluding activity
from business combinations/divestitures and impact of fees and commissions).
12 AUM is defined as assets under management or supervision.
13 Long-term net flows include the Equity, Fixed Income and Alternative/Other asset classes and exclude the Liquidity asset class.
14 Transactional revenues include investment banking, trading, and commissions and fee revenues. Transactional revenues excluding the
impact of mark-to-market gains on investments associated with employee deferred cash-based compensation plans 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.
15 Capital ratios are estimates as of the press release date, January 20, 2021.
16 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 Form 10-Q for the period ended September 30, 2020 and in the Firm's 2019 Form 10‐K.
17 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.
18 SLR is defined as supplementary leverage ratio. The Firm’s SLR utilizes a Tier 1 capital numerator of approximately $88.1 billion and
$73.4 billion, and supplementary leverage exposure denominator of approximately $1.19 trillion and $1.16 trillion, for the fourth quarter of 2020 and 2019, respectively. Based on a Federal Reserve interim final rule in
effect until March 31, 2021, our SLR and supplementary leverage exposure as of December 31, 2020 reflect the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. The exclusion of these assets had
the effect of increasing our SLR by 0.8% as of December 31, 2020.
9
Consolidated Income Statement Information
|
||||||||||||||||||||||||||||||||
(unaudited, dollars in millions)
|
||||||||||||||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
Twelve Months Ended
|
Percentage
|
|||||||||||||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
Dec 31, 2020
|
Dec 31, 2019
|
Change
|
|||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||||
Investment banking
|
$
|
2,435
|
$
|
1,826
|
$
|
1,696
|
33
|
%
|
44
|
%
|
$
|
7,674
|
$
|
6,163
|
25
|
%
|
||||||||||||||||
Trading
|
3,161
|
3,092
|
2,314
|
2
|
%
|
37
|
%
|
13,992
|
11,095
|
26
|
%
|
|||||||||||||||||||||
Investments
|
327
|
346
|
739
|
(5
|
%)
|
(56
|
%)
|
986
|
1,540
|
(36
|
%)
|
|||||||||||||||||||||
Commissions and fees
|
1,352
|
1,037
|
984
|
30
|
%
|
37
|
%
|
4,851
|
3,919
|
24
|
%
|
|||||||||||||||||||||
Asset management
|
3,926
|
3,664
|
3,451
|
7
|
%
|
14
|
%
|
14,272
|
13,083
|
9
|
%
|
|||||||||||||||||||||
Other
|
568
|
206
|
240
|
176
|
%
|
137
|
%
|
110
|
925
|
(88
|
%)
|
|||||||||||||||||||||
Total non-interest revenues
|
11,769
|
10,171
|
9,424
|
16
|
%
|
25
|
%
|
41,885
|
36,725
|
14
|
%
|
|||||||||||||||||||||
Interest income
|
2,245
|
2,056
|
3,952
|
9
|
%
|
(43
|
%)
|
10,162
|
17,098
|
(41
|
%)
|
|||||||||||||||||||||
Interest expense
|
374
|
570
|
2,519
|
(34
|
%)
|
(85
|
%)
|
3,849
|
12,404
|
(69
|
%)
|
|||||||||||||||||||||
Net interest
|
1,871
|
1,486
|
1,433
|
26
|
%
|
31
|
%
|
6,313
|
4,694
|
34
|
%
|
|||||||||||||||||||||
Net revenues
|
13,640
|
11,657
|
10,857
|
17
|
%
|
26
|
%
|
48,198
|
41,419
|
16
|
%
|
|||||||||||||||||||||
Non-interest expenses:
|
||||||||||||||||||||||||||||||||
Compensation and benefits
|
5,450
|
5,086
|
5,228
|
7
|
%
|
4
|
%
|
20,854
|
18,837
|
11
|
%
|
|||||||||||||||||||||
Non-compensation expenses:
|
||||||||||||||||||||||||||||||||
Brokerage, clearing and exchange fees
|
776
|
697
|
633
|
11
|
%
|
23
|
%
|
2,929
|
2,493
|
17
|
%
|
|||||||||||||||||||||
Information processing and communications
|
697
|
616
|
567
|
13
|
%
|
23
|
%
|
2,465
|
2,194
|
12
|
%
|
|||||||||||||||||||||
Professional services
|
679
|
542
|
555
|
25
|
%
|
22
|
%
|
2,205
|
2,137
|
3
|
%
|
|||||||||||||||||||||
Occupancy and equipment
|
456
|
373
|
375
|
22
|
%
|
22
|
%
|
1,559
|
1,428
|
9
|
%
|
|||||||||||||||||||||
Marketing and business development
|
161
|
78
|
200
|
106
|
%
|
(20
|
%)
|
434
|
660
|
(34
|
%)
|
|||||||||||||||||||||
Other
|
991
|
778
|
566
|
27
|
%
|
75
|
%
|
3,334
|
2,369
|
41
|
%
|
|||||||||||||||||||||
Total non-compensation expenses
|
3,760
|
3,084
|
2,896
|
22
|
%
|
30
|
%
|
12,926
|
11,281
|
15
|
%
|
|||||||||||||||||||||
Total non-interest expenses
|
9,210
|
8,170
|
8,124
|
13
|
%
|
13
|
%
|
33,780
|
30,118
|
12
|
%
|
|||||||||||||||||||||
Income before provision for income taxes
|
4,430
|
3,487
|
2,733
|
27
|
%
|
62
|
%
|
14,418
|
11,301
|
28
|
%
|
|||||||||||||||||||||
Provision for income taxes
|
1,018
|
736
|
428
|
38
|
%
|
138
|
%
|
3,239
|
2,064
|
57
|
%
|
|||||||||||||||||||||
Net income
|
$
|
3,412
|
$
|
2,751
|
$
|
2,305
|
24
|
%
|
48
|
%
|
$
|
11,179
|
$
|
9,237
|
21
|
%
|
||||||||||||||||
Net income applicable to nonredeemable noncontrolling interests
|
27
|
34
|
66
|
(21
|
%)
|
(59
|
%)
|
183
|
195
|
(6
|
%)
|
|||||||||||||||||||||
Net income applicable to Morgan Stanley
|
3,385
|
2,717
|
2,239
|
25
|
%
|
51
|
%
|
10,996
|
9,042
|
22
|
%
|
|||||||||||||||||||||
Preferred stock dividend
|
119
|
120
|
154
|
(1
|
%)
|
(23
|
%)
|
496
|
530
|
(6
|
%)
|
|||||||||||||||||||||
Earnings applicable to Morgan Stanley common shareholders
|
$
|
3,266
|
$
|
2,597
|
$
|
2,085
|
26
|
%
|
57
|
%
|
$
|
10,500
|
$
|
8,512
|
23
|
%
|
The End Notes are an integral part of this presentation. Refer to the Financial Supplement on pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms,
Supplemental Quantitative Details and Calculations, and Legal Notice for additional information.
|
10
Consolidated Financial Metrics, Ratios and Statistical Data
|
||||||||||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
Twelve Months Ended
|
Percentage
|
|||||||||||||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
Dec 31, 2020
|
Dec 31, 2019
|
Change
|
|||||||||||||||||||||||||
Financial Metrics:
|
||||||||||||||||||||||||||||||||
Earnings per basic share
|
$
|
1.84
|
$
|
1.68
|
$
|
1.33
|
10
|
%
|
38
|
%
|
$
|
6.55
|
$
|
5.26
|
25
|
%
|
||||||||||||||||
Earnings per diluted share
|
$
|
1.81
|
$
|
1.66
|
$
|
1.30
|
9
|
%
|
39
|
%
|
$
|
6.46
|
$
|
5.19
|
24
|
%
|
||||||||||||||||
Return on average common equity
|
14.7
|
%
|
13.2
|
%
|
11.3
|
%
|
13.1
|
%
|
11.7
|
%
|
||||||||||||||||||||||
Return on average tangible common equity
|
17.7
|
%
|
15.0
|
%
|
13.0
|
%
|
15.2
|
%
|
13.4
|
%
|
||||||||||||||||||||||
Book value per common share
|
$
|
51.13
|
$
|
50.67
|
$
|
45.82
|
$
|
51.13
|
$
|
45.82
|
||||||||||||||||||||||
Tangible book value per common share
|
$
|
41.95
|
$
|
44.81
|
$
|
40.01
|
$
|
41.95
|
$
|
40.01
|
||||||||||||||||||||||
Excluding integration-related expenses
|
||||||||||||||||||||||||||||||||
Adjusted earnings per diluted share
|
$
|
1.92
|
$
|
1.66
|
$
|
1.30
|
16
|
%
|
48
|
%
|
$
|
6.58
|
$
|
5.19
|
27
|
%
|
||||||||||||||||
Adjusted return on average common equity
|
15.6
|
%
|
13.2
|
%
|
11.3
|
%
|
13.3
|
%
|
11.7
|
%
|
||||||||||||||||||||||
Adjusted return on average tangible common equity
|
18.7
|
%
|
15.0
|
%
|
13.0
|
%
|
15.4
|
%
|
13.4
|
%
|
||||||||||||||||||||||
Financial Ratios:
|
||||||||||||||||||||||||||||||||
Pre-tax profit margin
|
32
|
%
|
30
|
%
|
25
|
%
|
30
|
%
|
27
|
%
|
||||||||||||||||||||||
Compensation and benefits as a % of net revenues
|
40
|
%
|
44
|
%
|
48
|
%
|
43
|
%
|
45
|
%
|
||||||||||||||||||||||
Non-compensation expenses as a % of net revenues
|
28
|
%
|
26
|
%
|
27
|
%
|
27
|
%
|
27
|
%
|
||||||||||||||||||||||
Firm expense efficiency ratio
|
68
|
%
|
70
|
%
|
75
|
%
|
70
|
%
|
73
|
%
|
||||||||||||||||||||||
Firm expense efficiency ratio excluding integration-related expenses
|
66
|
%
|
70
|
%
|
75
|
%
|
70
|
%
|
73
|
%
|
||||||||||||||||||||||
Effective tax rate
|
23.0
|
%
|
21.1
|
%
|
15.7
|
%
|
22.5
|
%
|
18.3
|
%
|
||||||||||||||||||||||
Statistical Data:
|
||||||||||||||||||||||||||||||||
Period end common shares outstanding (millions)
|
1,810
|
1,576
|
1,594
|
15
|
%
|
14
|
%
|
|||||||||||||||||||||||||
Average common shares outstanding (millions)
|
||||||||||||||||||||||||||||||||
Basic
|
1,774
|
1,542
|
1,573
|
15
|
%
|
13
|
%
|
1,603
|
1,617
|
(1
|
%)
|
|||||||||||||||||||||
Diluted
|
1,802
|
1,566
|
1,602
|
15
|
%
|
12
|
%
|
1,624
|
1,640
|
(1
|
%)
|
|||||||||||||||||||||
Worldwide employees
|
68,097
|
63,051
|
60,431
|
8
|
%
|
13
|
%
|
Notes:
|
|
- | The Firm’s fourth quarter results include $231 million of integration-related expenses on a pre-tax basis ($189 million after-tax) as a result of the E*TRADE acquisition.
Total non-interest expenses include $151 million in compensation expense and $80 million in non-compensation expense. |
- | The End Notes are an integral part of this presentation. Refer to the Financial Supplement on pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of
Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice for additional information. |
11
Exhibit 99.2
Fourth Quarter 2020 Earnings Results
|
|
Quarterly Financial Supplement
|
Page
|
Consolidated Financial Summary
|
1
|
Consolidated Financial Metrics, Ratios and Statistical Data
|
2
|
Consolidated and U.S. Bank Supplemental Financial Information
|
3
|
Consolidated Average Common Equity and Regulatory Capital Information
|
4
|
Institutional Securities Income Statement Information, Financial Metrics and Ratios
|
5
|
Wealth Management Income Statement Information, Financial Metrics and Ratios
|
6
|
Wealth Management Financial Information and Statistical Data
|
7
|
Investment Management Income Statement Information, Financial Metrics and Ratios
|
8
|
Investment Management Financial Information and Statistical Data
|
9
|
Consolidated Loans and Lending Commitments
|
10
|
Consolidated Loans and Lending Commitments Allowance for Credit Losses
|
11
|
Definition of U.S. GAAP to Non-GAAP Measures
|
12
|
Definitions of Performance Metrics and Terms
|
13 - 14
|
Supplemental Quantitative Details and Calculations
|
15 - 16
|
Legal Notice
|
17
|
The Firm's fourth quarter earnings results reflect the completed acquisition of E*TRADE Financial Corporation (E*TRADE), which closed on October 2, 2020. The comparisons of current and prior periods
are impacted by the financial results of E*TRADE reported in the Wealth Management Segment.
|
Consolidated Financial Summary
|
||||||||||||||||||||||||||||||||
(unaudited, dollars in millions)
|
||||||||||||||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
Twelve Months Ended
|
Percentage
|
|||||||||||||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
Dec 31, 2020
|
Dec 31, 2019
|
Change
|
|||||||||||||||||||||||||
Net revenues
|
||||||||||||||||||||||||||||||||
Institutional Securities
|
$
|
7,004
|
$
|
6,062
|
$
|
5,054
|
16
|
%
|
39
|
%
|
$
|
25,948
|
$
|
20,386
|
27
|
%
|
||||||||||||||||
Wealth Management
|
5,681
|
4,657
|
4,582
|
22
|
%
|
24
|
%
|
19,055
|
17,737
|
7
|
%
|
|||||||||||||||||||||
Investment Management
|
1,100
|
1,056
|
1,356
|
4
|
%
|
(19
|
%)
|
3,734
|
3,763
|
(1
|
%)
|
|||||||||||||||||||||
Intersegment Eliminations
|
(145
|
)
|
(118
|
)
|
(135
|
)
|
(23
|
%)
|
(7
|
%)
|
(539
|
)
|
(467
|
)
|
(15
|
%)
|
||||||||||||||||
Net revenues
|
$
|
13,640
|
$
|
11,657
|
$
|
10,857
|
17
|
%
|
26
|
%
|
$
|
48,198
|
$
|
41,419
|
16
|
%
|
||||||||||||||||
Non-interest expenses
|
||||||||||||||||||||||||||||||||
Institutional Securities
|
$
|
3,844
|
$
|
4,014
|
$
|
3,929
|
(4
|
%)
|
(2
|
%)
|
$
|
16,797
|
$
|
14,896
|
13
|
%
|
||||||||||||||||
Wealth Management
|
4,611
|
3,537
|
3,419
|
30
|
%
|
35
|
%
|
14,668
|
12,905
|
14
|
%
|
|||||||||||||||||||||
Investment Management
|
904
|
741
|
909
|
22
|
%
|
(1
|
%)
|
2,864
|
2,778
|
3
|
%
|
|||||||||||||||||||||
Intersegment Eliminations
|
(149
|
)
|
(122
|
)
|
(133
|
)
|
(22
|
%)
|
(12
|
%)
|
(549
|
)
|
(461
|
)
|
(19
|
%)
|
||||||||||||||||
Non-interest expenses (1)
|
$
|
9,210
|
$
|
8,170
|
$
|
8,124
|
13
|
%
|
13
|
%
|
$
|
33,780
|
$
|
30,118
|
12
|
%
|
||||||||||||||||
Income before taxes
|
||||||||||||||||||||||||||||||||
Institutional Securities
|
$
|
3,160
|
$
|
2,048
|
$
|
1,125
|
54
|
%
|
181
|
%
|
$
|
9,151
|
$
|
5,490
|
67
|
%
|
||||||||||||||||
Wealth Management
|
1,070
|
1,120
|
1,163
|
(4
|
%)
|
(8
|
%)
|
4,387
|
4,832
|
(9
|
%)
|
|||||||||||||||||||||
Investment Management
|
196
|
315
|
447
|
(38
|
%)
|
(56
|
%)
|
870
|
985
|
(12
|
%)
|
|||||||||||||||||||||
Intersegment Eliminations
|
4
|
4
|
(2
|
)
|
--
|
*
|
10
|
(6
|
)
|
*
|
||||||||||||||||||||||
Income before taxes
|
$
|
4,430
|
$
|
3,487
|
$
|
2,733
|
27
|
%
|
62
|
%
|
$
|
14,418
|
$
|
11,301
|
28
|
%
|
||||||||||||||||
Net Income applicable to Morgan Stanley
|
||||||||||||||||||||||||||||||||
Institutional Securities
|
$
|
2,422
|
$
|
1,647
|
$
|
1,034
|
47
|
%
|
134
|
%
|
$
|
7,012
|
$
|
4,599
|
52
|
%
|
||||||||||||||||
Wealth Management
|
802
|
842
|
889
|
(5
|
%)
|
(10
|
%)
|
3,361
|
3,728
|
(10
|
%)
|
|||||||||||||||||||||
Investment Management
|
158
|
225
|
317
|
(30
|
%)
|
(50
|
%)
|
615
|
719
|
(14
|
%)
|
|||||||||||||||||||||
Intersegment Eliminations
|
3
|
3
|
(1
|
)
|
--
|
*
|
8
|
(4
|
)
|
*
|
||||||||||||||||||||||
Net Income applicable to Morgan Stanley
|
$
|
3,385
|
$
|
2,717
|
$
|
2,239
|
25
|
%
|
51
|
%
|
$
|
10,996
|
$
|
9,042
|
22
|
%
|
||||||||||||||||
Earnings applicable to Morgan Stanley common shareholders
|
$
|
3,266
|
$
|
2,597
|
$
|
2,085
|
26
|
%
|
57
|
%
|
$
|
10,500
|
$
|
8,512
|
23
|
%
|
The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative
Details and Calculations, and Legal Notice.
|
1
Consolidated Financial Metrics, Ratios and Statistical Data
|
||||||||||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
Twelve Months Ended
|
Percentage
|
|||||||||||||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
Dec 31, 2020
|
Dec 31, 2019
|
Change
|
|||||||||||||||||||||||||
Financial Metrics:
|
||||||||||||||||||||||||||||||||
Earnings per basic share
|
$
|
1.84
|
$
|
1.68
|
$
|
1.33
|
10
|
%
|
38
|
%
|
$
|
6.55
|
$
|
5.26
|
25
|
%
|
||||||||||||||||
Earnings per diluted share
|
$
|
1.81
|
$
|
1.66
|
$
|
1.30
|
9
|
%
|
39
|
%
|
$
|
6.46
|
$
|
5.19
|
24
|
%
|
||||||||||||||||
Return on average common equity
|
14.7
|
%
|
13.2
|
%
|
11.3
|
%
|
13.1
|
%
|
11.7
|
%
|
||||||||||||||||||||||
Return on average tangible common equity
|
17.7
|
%
|
15.0
|
%
|
13.0
|
%
|
15.2
|
%
|
13.4
|
%
|
||||||||||||||||||||||
Book value per common share
|
$
|
51.13
|
$
|
50.67
|
$
|
45.82
|
$
|
51.13
|
$
|
45.82
|
||||||||||||||||||||||
Tangible book value per common share
|
$
|
41.95
|
$
|
44.81
|
$
|
40.01
|
$
|
41.95
|
$
|
40.01
|
||||||||||||||||||||||
Excluding integration-related expenses (1)
|
||||||||||||||||||||||||||||||||
Adjusted earnings per diluted share
|
$
|
1.92
|
$
|
1.66
|
$
|
1.30
|
16
|
%
|
48
|
%
|
$
|
6.58
|
$
|
5.19
|
27
|
%
|
||||||||||||||||
Adjusted return on average common equity
|
15.6
|
%
|
13.2
|
%
|
11.3
|
%
|
13.3
|
%
|
11.7
|
%
|
||||||||||||||||||||||
Adjusted return on average tangible common equity
|
18.7
|
%
|
15.0
|
%
|
13.0
|
%
|
15.4
|
%
|
13.4
|
%
|
||||||||||||||||||||||
Financial Ratios:
|
||||||||||||||||||||||||||||||||
Pre-tax profit margin
|
32
|
%
|
30
|
%
|
25
|
%
|
30
|
%
|
27
|
%
|
||||||||||||||||||||||
Compensation and benefits as a % of net revenues
|
40
|
%
|
44
|
%
|
48
|
%
|
43
|
%
|
45
|
%
|
||||||||||||||||||||||
Non-compensation expenses as a % of net revenues
|
28
|
%
|
26
|
%
|
27
|
%
|
27
|
%
|
27
|
%
|
||||||||||||||||||||||
Firm expense efficiency ratio
|
68
|
%
|
70
|
%
|
75
|
%
|
70
|
%
|
73
|
%
|
||||||||||||||||||||||
Firm expense efficiency ratio excluding integration-related expenses (1)
|
66
|
%
|
70
|
%
|
75
|
%
|
70
|
%
|
73
|
%
|
||||||||||||||||||||||
Effective tax rate
|
23.0
|
%
|
21.1
|
%
|
15.7
|
%
|
22.5
|
%
|
18.3
|
%
|
||||||||||||||||||||||
Statistical Data:
|
||||||||||||||||||||||||||||||||
Period end common shares outstanding (millions)
|
1,810
|
1,576
|
1,594
|
15
|
%
|
14
|
%
|
|||||||||||||||||||||||||
Average common shares outstanding (millions)
|
||||||||||||||||||||||||||||||||
Basic
|
1,774
|
1,542
|
1,573
|
15
|
%
|
13
|
%
|
1,603
|
1,617
|
(1
|
%)
|
|||||||||||||||||||||
Diluted
|
1,802
|
1,566
|
1,602
|
15
|
%
|
12
|
%
|
1,624
|
1,640
|
(1
|
%)
|
|||||||||||||||||||||
Worldwide employees
|
68,097
|
63,051
|
60,431
|
8
|
%
|
13
|
%
|
Notes:
|
|
- | The Firm’s fourth quarter results include $231 million of integration-related expenses on a pre-tax basis ($189 million after-tax) as a result of the E*TRADE acquisition. Total non-interest expenses include $151 million in compensation expense and $80 million in non-compensation expense. |
- | The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice. |
2
Consolidated and U.S. Bank Supplemental Financial Information
|
||||||||||||||||||||||||||||||||
(unaudited, dollars in millions)
|
||||||||||||||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
Twelve Months Ended
|
Percentage
|
|||||||||||||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
Dec 31, 2020
|
Dec 31, 2019
|
Change
|
|||||||||||||||||||||||||
Consolidated Balance sheet
|
||||||||||||||||||||||||||||||||
Total assets
|
$
|
1,115,862
|
$
|
955,940
|
$
|
895,429
|
17
|
%
|
25
|
%
|
||||||||||||||||||||||
Loans (1)
|
$
|
161,745
|
$
|
154,570
|
$
|
141,963
|
5
|
%
|
14
|
%
|
||||||||||||||||||||||
Deposits
|
$
|
310,782
|
$
|
239,253
|
$
|
190,356
|
30
|
%
|
63
|
%
|
||||||||||||||||||||||
Liquidity Resources (2)
|
$
|
338,623
|
$
|
267,292
|
$
|
215,868
|
27
|
%
|
57
|
%
|
||||||||||||||||||||||
Long-term debt outstanding
|
$
|
213,388
|
$
|
198,891
|
$
|
190,060
|
7
|
%
|
12
|
%
|
||||||||||||||||||||||
Maturities of long-term debt outstanding (next 12 months)
|
$
|
24,241
|
$
|
20,247
|
$
|
20,402
|
20
|
%
|
19
|
%
|
||||||||||||||||||||||
Common equity
|
$
|
92,531
|
$
|
79,874
|
$
|
73,029
|
16
|
%
|
27
|
%
|
||||||||||||||||||||||
Less: Goodwill and intangible assets
|
(16,615
|
)
|
(9,228
|
)
|
(9,249
|
)
|
80
|
%
|
80
|
%
|
||||||||||||||||||||||
Tangible common equity
|
$
|
75,916
|
$
|
70,646
|
$
|
63,780
|
7
|
%
|
19
|
%
|
||||||||||||||||||||||
Preferred equity
|
$
|
9,250
|
$
|
8,520
|
$
|
8,520
|
9
|
%
|
9
|
%
|
||||||||||||||||||||||
U.S. Bank Supplemental Financial Information
|
||||||||||||||||||||||||||||||||
Total assets
|
$
|
346,515
|
$
|
266,221
|
$
|
219,636
|
30
|
%
|
58
|
%
|
||||||||||||||||||||||
Loans
|
$
|
148,885
|
$
|
140,639
|
$
|
129,852
|
6
|
%
|
15
|
%
|
||||||||||||||||||||||
Investment securities portfolio (3)
|
$
|
142,929
|
$
|
91,096
|
$
|
68,472
|
57
|
%
|
109
|
%
|
||||||||||||||||||||||
Deposits
|
$
|
309,712
|
$
|
238,025
|
$
|
189,266
|
30
|
%
|
64
|
%
|
||||||||||||||||||||||
Regional revenues
|
||||||||||||||||||||||||||||||||
Americas
|
$
|
10,219
|
$
|
8,387
|
$
|
7,890
|
22
|
%
|
30
|
%
|
$
|
35,017
|
$
|
30,226
|
16
|
%
|
||||||||||||||||
EMEA (Europe, Middle East, Africa)
|
1,760
|
1,473
|
1,374
|
19
|
%
|
28
|
%
|
6,430
|
6,061
|
6
|
%
|
|||||||||||||||||||||
Asia
|
1,661
|
1,797
|
1,593
|
(8
|
%)
|
4
|
%
|
6,751
|
5,132
|
32
|
%
|
|||||||||||||||||||||
Consolidated net revenues
|
$
|
13,640
|
$
|
11,657
|
$
|
10,857
|
17
|
%
|
26
|
%
|
$
|
48,198
|
$
|
41,419
|
16
|
%
|
The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details
and Calculations, and Legal Notice.
|
3
Consolidated Average Common Equity and Regulatory Capital Information
|
||||||||||||||||||||||||||||||||
(unaudited, dollars in billions)
|
||||||||||||||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
Twelve Months Ended
|
Percentage
|
|||||||||||||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
Dec 31, 2020
|
Dec 31, 2019
|
Change
|
|||||||||||||||||||||||||
Average Common Equity
|
||||||||||||||||||||||||||||||||
Institutional Securities
|
$
|
42.8
|
$
|
42.8
|
$
|
40.4
|
--
|
6
|
%
|
$
|
42.8
|
$
|
40.4
|
6
|
%
|
|||||||||||||||||
Wealth Management
|
26.5
|
18.2
|
18.2
|
46
|
%
|
46
|
%
|
20.8
|
18.2
|
14
|
%
|
|||||||||||||||||||||
Investment Management
|
2.6
|
2.6
|
2.5
|
--
|
4
|
%
|
2.6
|
2.5
|
4
|
%
|
||||||||||||||||||||||
Parent
|
16.7
|
15.1
|
12.4
|
11
|
%
|
35
|
%
|
14.0
|
11.6
|
21
|
%
|
|||||||||||||||||||||
Firm
|
$
|
88.6
|
$
|
78.7
|
$
|
73.5
|
13
|
%
|
21
|
%
|
$
|
80.2
|
$
|
72.7
|
10
|
%
|
||||||||||||||||
Regulatory Capital
|
||||||||||||||||||||||||||||||||
Common Equity Tier 1 capital
|
$
|
78.7
|
$
|
71.2
|
$
|
64.8
|
11
|
%
|
21
|
%
|
||||||||||||||||||||||
Tier 1 capital
|
$
|
88.1
|
$
|
79.9
|
$
|
73.4
|
10
|
%
|
20
|
%
|
||||||||||||||||||||||
Standardized Approach
|
||||||||||||||||||||||||||||||||
Risk-weighted assets
|
$
|
453.5
|
$
|
408.9
|
$
|
394.2
|
11
|
%
|
15
|
%
|
||||||||||||||||||||||
Common Equity Tier 1 capital ratio
|
17.4
|
%
|
17.4
|
%
|
16.4
|
%
|
||||||||||||||||||||||||||
Tier 1 capital ratio
|
19.4
|
%
|
19.5
|
%
|
18.6
|
%
|
||||||||||||||||||||||||||
Advanced Approach
|
||||||||||||||||||||||||||||||||
Risk-weighted assets
|
$
|
444.9
|
$
|
420.1
|
$
|
382.5
|
6
|
%
|
16
|
%
|
||||||||||||||||||||||
Common Equity Tier 1 capital ratio
|
17.7
|
%
|
16.9
|
%
|
16.9
|
%
|
||||||||||||||||||||||||||
Tier 1 capital ratio
|
19.8
|
%
|
19.0
|
%
|
19.2
|
%
|
||||||||||||||||||||||||||
Leverage-based capital
|
||||||||||||||||||||||||||||||||
Tier 1 leverage ratio
|
8.4
|
%
|
8.3
|
%
|
8.3
|
%
|
||||||||||||||||||||||||||
Supplementary Leverage Ratio (1)
|
7.4
|
%
|
7.4
|
%
|
6.4
|
%
|
The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative
Details and Calculations, and Legal Notice.
|
4
Institutional Securities
|
||||||||||||||||||||||||||||||||
Income Statement Information, Financial Metrics and Ratios
|
||||||||||||||||||||||||||||||||
(unaudited, dollars in millions)
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
Twelve Months Ended
|
Percentage
|
|||||||||||||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
Dec 31, 2020
|
Dec 31, 2019
|
Change
|
|||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||||
Advisory
|
$
|
827
|
$
|
357
|
$
|
654
|
132
|
%
|
26
|
%
|
$
|
2,008
|
$
|
2,116
|
(5
|
%)
|
||||||||||||||||
Equity
|
1,000
|
874
|
422
|
14
|
%
|
137
|
%
|
3,092
|
1,708
|
81
|
%
|
|||||||||||||||||||||
Fixed income
|
475
|
476
|
500
|
--
|
(5
|
%)
|
2,104
|
1,910
|
10
|
%
|
||||||||||||||||||||||
Underwriting
|
1,475
|
1,350
|
922
|
9
|
%
|
60
|
%
|
5,196
|
3,618
|
44
|
%
|
|||||||||||||||||||||
Investment Banking
|
2,302
|
1,707
|
1,576
|
35
|
%
|
46
|
%
|
7,204
|
5,734
|
26
|
%
|
|||||||||||||||||||||
Equity
|
2,498
|
2,262
|
1,920
|
10
|
%
|
30
|
%
|
9,801
|
8,056
|
22
|
%
|
|||||||||||||||||||||
Fixed Income
|
1,664
|
1,924
|
1,273
|
(14
|
%)
|
31
|
%
|
8,824
|
5,546
|
59
|
%
|
|||||||||||||||||||||
Other
|
58
|
(32
|
)
|
1
|
*
|
*
|
167
|
93
|
80
|
%
|
||||||||||||||||||||||
Sales and Trading
|
4,220
|
4,154
|
3,194
|
2
|
%
|
32
|
%
|
18,792
|
13,695
|
37
|
%
|
|||||||||||||||||||||
Investments
|
68
|
87
|
68
|
(22
|
%)
|
--
|
166
|
325
|
(49
|
%)
|
||||||||||||||||||||||
Other
|
414
|
114
|
216
|
*
|
92
|
%
|
(214
|
)
|
632
|
*
|
||||||||||||||||||||||
Net revenues
|
7,004
|
6,062
|
5,054
|
16
|
%
|
39
|
%
|
25,948
|
20,386
|
27
|
%
|
|||||||||||||||||||||
Compensation and benefits
|
1,575
|
2,001
|
2,057
|
(21
|
%)
|
(23
|
%)
|
8,342
|
7,433
|
12
|
%
|
|||||||||||||||||||||
Non-compensation expenses
|
2,269
|
2,013
|
1,872
|
13
|
%
|
21
|
%
|
8,455
|
7,463
|
13
|
%
|
|||||||||||||||||||||
Total non-interest expenses
|
3,844
|
4,014
|
3,929
|
(4
|
%)
|
(2
|
%)
|
16,797
|
14,896
|
13
|
%
|
|||||||||||||||||||||
Income before taxes
|
3,160
|
2,048
|
1,125
|
54
|
%
|
181
|
%
|
9,151
|
5,490
|
67
|
%
|
|||||||||||||||||||||
Net income applicable to Morgan Stanley
|
$
|
2,422
|
$
|
1,647
|
$
|
1,034
|
47
|
%
|
134
|
%
|
$
|
7,012
|
$
|
4,599
|
52
|
%
|
||||||||||||||||
Pre-tax profit margin
|
45
|
%
|
34
|
%
|
22
|
%
|
35
|
%
|
27
|
%
|
||||||||||||||||||||||
Compensation and benefits as a % of net revenues
|
22
|
%
|
33
|
%
|
41
|
%
|
32
|
%
|
36
|
%
|
||||||||||||||||||||||
Non-compensation expenses as a % of net revenues
|
32
|
%
|
33
|
%
|
37
|
%
|
33
|
%
|
37
|
%
|
||||||||||||||||||||||
Return on Average Common Equity
|
22
|
%
|
15
|
%
|
9
|
%
|
15
|
%
|
10
|
%
|
||||||||||||||||||||||
Return on Average Tangible Common Equity (1)
|
22
|
%
|
15
|
%
|
9
|
%
|
16
|
%
|
10
|
%
|
||||||||||||||||||||||
Trading VaR (Average Daily 95% / One-Day VaR)
|
$
|
55
|
$
|
58
|
$
|
39
|
The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative
Details and Calculations, and Legal Notice.
|
5
Wealth Management
|
||||||||||||||||||||||||||||||||
Income Statement Information, Financial Metrics and Ratios
|
||||||||||||||||||||||||||||||||
(unaudited, dollars in millions)
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
Twelve Months Ended
|
Percentage
|
|||||||||||||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
Dec 31, 2020
|
Dec 31, 2019
|
Change
|
|||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||||
Asset management
|
$
|
2,975
|
$
|
2,793
|
$
|
2,655
|
7
|
%
|
12
|
%
|
$
|
10,955
|
$
|
10,199
|
7
|
%
|
||||||||||||||||
Transactional
|
1,340
|
880
|
829
|
52
|
%
|
62
|
%
|
3,694
|
2,969
|
24
|
%
|
|||||||||||||||||||||
Net interest income
|
1,207
|
889
|
1,033
|
36
|
%
|
17
|
%
|
4,022
|
4,222
|
(5
|
%)
|
|||||||||||||||||||||
Other
|
159
|
95
|
65
|
67
|
%
|
145
|
%
|
384
|
347
|
11
|
%
|
|||||||||||||||||||||
Net revenues
|
5,681
|
4,657
|
4,582
|
22
|
%
|
24
|
%
|
19,055
|
17,737
|
7
|
%
|
|||||||||||||||||||||
Compensation and benefits (1)
|
3,345
|
2,684
|
2,590
|
25
|
%
|
29
|
%
|
10,970
|
9,774
|
12
|
%
|
|||||||||||||||||||||
Non-compensation expenses (1)
|
1,266
|
853
|
829
|
48
|
%
|
53
|
%
|
3,698
|
3,131
|
18
|
%
|
|||||||||||||||||||||
Total non-interest expenses (1)
|
4,611
|
3,537
|
3,419
|
30
|
%
|
35
|
%
|
14,668
|
12,905
|
14
|
%
|
|||||||||||||||||||||
Income before taxes (1)
|
1,070
|
1,120
|
1,163
|
(4
|
%)
|
(8
|
%)
|
4,387
|
4,832
|
(9
|
%)
|
|||||||||||||||||||||
Net income applicable to Morgan Stanley
|
$
|
802
|
$
|
842
|
$
|
889
|
(5
|
%)
|
(10
|
%)
|
$
|
3,361
|
$
|
3,728
|
(10
|
%)
|
||||||||||||||||
Pre-tax profit margin
|
19
|
%
|
24
|
%
|
25
|
%
|
23
|
%
|
27
|
%
|
||||||||||||||||||||||
Pre-tax profit margin excluding integration-related expenses
|
23
|
%
|
24
|
%
|
25
|
%
|
24
|
%
|
27
|
%
|
||||||||||||||||||||||
Compensation and benefits as a % of net revenues
|
59
|
%
|
58
|
%
|
57
|
%
|
58
|
%
|
55
|
%
|
||||||||||||||||||||||
Non-compensation expenses as a % of net revenues
|
22
|
%
|
18
|
%
|
18
|
%
|
19
|
%
|
18
|
%
|
||||||||||||||||||||||
Return on Average Common Equity
|
12
|
%
|
18
|
%
|
19
|
%
|
16
|
%
|
20
|
%
|
||||||||||||||||||||||
Return on Average Tangible Common Equity (2)
|
23
|
%
|
31
|
%
|
34
|
%
|
29
|
%
|
36
|
%
|
Notes:
|
|
- | Wealth Management’s fourth quarter results include $231 million of integration-related expenses on a pre-tax basis ($189 million after-tax) as a result of the E*TRADE acquisition. Total non-interest expenses include $151 million in compensation expense and $80 million in non-compensation expense. |
- | The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice. |
6
Wealth Management
|
||||||||||||||||||||
Financial Information and Statistical Data
|
||||||||||||||||||||
(unaudited, dollars in billions)
|
||||||||||||||||||||
|
||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
|||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
||||||||||||||||
Wealth Management Metrics
|
||||||||||||||||||||
Total client assets
|
$
|
3,999
|
$
|
2,852
|
$
|
2,700
|
40
|
%
|
48
|
%
|
||||||||||
Net new assets
|
$
|
66.1
|
$
|
51.8
|
$
|
27.1
|
28
|
%
|
144
|
%
|
||||||||||
U.S. Bank loans
|
$
|
98.1
|
$
|
91.3
|
$
|
80.1
|
7
|
%
|
22
|
%
|
||||||||||
Margin and other lending (1)
|
$
|
23.1
|
$
|
9.1
|
$
|
9.7
|
154
|
%
|
138
|
%
|
||||||||||
Deposits (2)
|
$
|
306
|
$
|
234
|
$
|
187
|
31
|
%
|
64
|
%
|
||||||||||
Annualized average rate on deposits
|
0.24
|
%
|
0.38
|
%
|
0.91
|
%
|
||||||||||||||
Advisor-led channel
|
||||||||||||||||||||
Advisor-led client assets
|
$
|
3,167
|
$
|
2,759
|
$
|
2,623
|
15
|
%
|
21
|
%
|
||||||||||
Fee-based client assets
|
$
|
1,472
|
$
|
1,333
|
$
|
1,267
|
10
|
%
|
16
|
%
|
||||||||||
Fee-based asset flows
|
$
|
24.1
|
$
|
23.8
|
$
|
24.9
|
1
|
%
|
(3
|
%)
|
||||||||||
Fee-based assets as a % of advisor-led client assets
|
46
|
%
|
48
|
%
|
48
|
%
|
||||||||||||||
Wealth Management representatives
|
15,950
|
15,469
|
15,468
|
3
|
%
|
3
|
%
|
|||||||||||||
Self-directed channel
|
||||||||||||||||||||
Self-directed assets
|
$
|
832
|
$
|
93
|
$
|
77
|
*
|
*
|
||||||||||||
Daily average revenue trades (000's)
|
1,106
|
6
|
3
|
*
|
*
|
|||||||||||||||
Self-directed households (000's)
|
6,747
|
1,668
|
1,649
|
*
|
*
|
|||||||||||||||
Workplace channel
|
||||||||||||||||||||
Workplace unvested assets
|
$
|
435
|
$
|
157
|
$
|
133
|
177
|
%
|
*
|
|||||||||||
Number of participants (000's)
|
4,885
|
2,694
|
2,737
|
81
|
%
|
78
|
%
|
The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative
Details and Calculations, and Legal Notice.
|
7
Investment Management
|
||||||||||||||||||||||||||||||||
Income Statement Information, Financial Metrics and Ratios
|
||||||||||||||||||||||||||||||||
(unaudited, dollars in millions)
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
Twelve Months Ended
|
Percentage
|
|||||||||||||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
Dec 31, 2020
|
Dec 31, 2019
|
Change
|
|||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||||
Asset management
|
$
|
869
|
$
|
795
|
$
|
736
|
9
|
%
|
18
|
%
|
$
|
3,013
|
$
|
2,629
|
15
|
%
|
||||||||||||||||
Investments (1)
|
256
|
258
|
670
|
(1
|
%)
|
(62
|
%)
|
808
|
1,213
|
(33
|
%)
|
|||||||||||||||||||||
Other
|
(25
|
)
|
3
|
(50
|
)
|
*
|
50
|
%
|
(87
|
)
|
(79
|
)
|
(10
|
%)
|
||||||||||||||||||
Net revenues
|
1,100
|
1,056
|
1,356
|
4
|
%
|
(19
|
%)
|
3,734
|
3,763
|
(1
|
%)
|
|||||||||||||||||||||
Compensation and benefits
|
530
|
401
|
581
|
32
|
%
|
(9
|
%)
|
1,542
|
1,630
|
(5
|
%)
|
|||||||||||||||||||||
Non-compensation expenses
|
374
|
340
|
328
|
10
|
%
|
14
|
%
|
1,322
|
1,148
|
15
|
%
|
|||||||||||||||||||||
Total non-interest expenses
|
904
|
741
|
909
|
22
|
%
|
(1
|
%)
|
2,864
|
2,778
|
3
|
%
|
|||||||||||||||||||||
Income before taxes
|
196
|
315
|
447
|
(38
|
%)
|
(56
|
%)
|
870
|
985
|
(12
|
%)
|
|||||||||||||||||||||
Net income applicable to Morgan Stanley
|
$
|
158
|
$
|
225
|
$
|
317
|
(30
|
%)
|
(50
|
%)
|
$
|
615
|
$
|
719
|
(14
|
%)
|
||||||||||||||||
Pre-tax profit margin
|
18
|
%
|
30
|
%
|
33
|
%
|
23
|
%
|
26
|
%
|
||||||||||||||||||||||
Compensation and benefits as a % of net revenues
|
48
|
%
|
38
|
%
|
43
|
%
|
41
|
%
|
43
|
%
|
||||||||||||||||||||||
Non-compensation expenses as a % of net revenues
|
34
|
%
|
32
|
%
|
24
|
%
|
35
|
%
|
31
|
%
|
||||||||||||||||||||||
Return on Average Common Equity
|
24
|
%
|
34
|
%
|
51
|
%
|
23
|
%
|
29
|
%
|
||||||||||||||||||||||
Return on Average Tangible Common Equity (2)
|
37
|
%
|
53
|
%
|
82
|
%
|
36
|
%
|
47
|
%
|
The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative
Details and Calculations, and Legal Notice.
|
8
Investment Management
|
||||||||||||||||||||||||||||||||
Financial Information and Statistical Data
|
||||||||||||||||||||||||||||||||
(unaudited, dollars in billions)
|
||||||||||||||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
Twelve Months Ended
|
Percentage
|
|||||||||||||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
Dec 31, 2020
|
Dec 31, 2019
|
Change
|
|||||||||||||||||||||||||
Assets under management or supervision (AUM)
|
||||||||||||||||||||||||||||||||
Net flows by asset class (1)
|
||||||||||||||||||||||||||||||||
Equity
|
$
|
12.2
|
$
|
10.0
|
$
|
2.4
|
22
|
%
|
*
|
$
|
32.8
|
$
|
7.3
|
*
|
||||||||||||||||||
Fixed Income
|
(1.3
|
)
|
3.1
|
3.4
|
*
|
*
|
7.5
|
5.8
|
29
|
%
|
||||||||||||||||||||||
Alternative / Other
|
(2.4
|
)
|
(2.7
|
)
|
0.9
|
11
|
%
|
*
|
0.7
|
2.3
|
(70
|
%)
|
||||||||||||||||||||
Long-Term Net Flows
|
8.5
|
10.4
|
6.7
|
(18
|
%)
|
27
|
%
|
41.0
|
15.4
|
166
|
%
|
|||||||||||||||||||||
Liquidity
|
16.5
|
2.1
|
22.4
|
*
|
(26
|
%)
|
89.9
|
28.7
|
*
|
|||||||||||||||||||||||
Total net flows
|
$
|
25.0
|
$
|
12.5
|
$
|
29.1
|
100
|
%
|
(14
|
%)
|
$
|
130.9
|
$
|
44.1
|
197
|
%
|
||||||||||||||||
|
||||||||||||||||||||||||||||||||
Assets under management or supervision by asset class (2)
|
||||||||||||||||||||||||||||||||
Equity
|
$
|
242
|
$
|
202
|
$
|
138
|
20
|
%
|
75
|
%
|
||||||||||||||||||||||
Fixed Income
|
98
|
92
|
79
|
7
|
%
|
24
|
%
|
|||||||||||||||||||||||||
Alternative / Other
|
153
|
150
|
139
|
2
|
%
|
10
|
%
|
|||||||||||||||||||||||||
Long‐Term Assets Under Management or Supervision
|
493
|
444
|
356
|
11
|
%
|
38
|
%
|
|||||||||||||||||||||||||
Liquidity
|
288
|
271
|
196
|
6
|
%
|
47
|
%
|
|||||||||||||||||||||||||
Total Assets Under Management or Supervision
|
$
|
781
|
$
|
715
|
$
|
552
|
9
|
%
|
41
|
%
|
The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative
Details and Calculations, and Legal Notice.
|
9
Consolidated Loans and Lending Commitments
|
||||||||||||||||||||
(unaudited, dollars in billions)
|
||||||||||||||||||||
Quarter Ended
|
Percentage Change From:
|
|||||||||||||||||||
Dec 31, 2020
|
Sep 30, 2020
|
Dec 31, 2019
|
Sep 30, 2020
|
Dec 31, 2019
|
||||||||||||||||
Institutional Securities
|
||||||||||||||||||||
Loans:
|
||||||||||||||||||||
Corporate
|
$
|
14.3
|
$
|
15.8
|
$
|
11.5
|
(9
|
%)
|
24
|
%
|
||||||||||
Secured lending facilities
|
29.5
|
30.3
|
29.6
|
(3
|
%)
|
--
|
||||||||||||||
Commercial and residential real estate
|
11.1
|
9.6
|
13.1
|
16
|
%
|
(15
|
%)
|
|||||||||||||
Securities-based lending and other
|
8.3
|
7.0
|
7.4
|
19
|
%
|
12
|
%
|
|||||||||||||
Total Loans
|
63.2
|
62.7
|
61.6
|
1
|
%
|
3
|
%
|
|||||||||||||
Lending Commitments
|
113.5
|
105.5
|
106.9
|
8
|
%
|
6
|
%
|
|||||||||||||
Institutional Securities Loans and Lending Commitments
|
$
|
176.7
|
$
|
168.2
|
$
|
168.5
|
5
|
%
|
5
|
%
|
||||||||||
Wealth Management
|
||||||||||||||||||||
Loans:
|
||||||||||||||||||||
Securities-based lending and other
|
$
|
62.9
|
$
|
57.7
|
$
|
49.9
|
9
|
%
|
26
|
%
|
||||||||||
Residential real estate
|
35.2
|
33.6
|
30.2
|
5
|
%
|
17
|
%
|
|||||||||||||
Total Loans
|
98.1
|
91.3
|
80.1
|
7
|
%
|
22
|
%
|
|||||||||||||
Lending Commitments
|
14.4
|
14.6
|
13.1
|
(1
|
%)
|
10
|
%
|
|||||||||||||
Wealth Management Loans and Lending Commitments
|
$
|
112.5
|
$
|
105.9
|
$
|
93.2
|
6
|
%
|
21
|
%
|
||||||||||
Consolidated Loans and Lending Commitments (1)
|
$
|
289.2
|
$
|
274.1
|
$
|
261.7
|
6
|
%
|
11
|
%
|
The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative
Details and Calculations, and Legal Notice.
|
10
Consolidated Loans and Lending Commitments
|
||||||||||||||||
Allowance for Credit Losses (ACL) as of December 31, 2020
|
||||||||||||||||
(unaudited, dollars in millions)
|
||||||||||||||||
Loans and Lending Commitments
|
ACL (1)
|
ACL %
|
Q4 Provision (2)
|
|||||||||||||
(Gross)
|
||||||||||||||||
Loans:
|
||||||||||||||||
Held For Investment (HFI)
|
||||||||||||||||
Corporate
|
$
|
6,046
|
$
|
309
|
5.1
|
%
|
$
|
(55
|
)
|
|||||||
Secured lending facilities
|
25,727
|
198
|
0.8
|
%
|
5
|
|||||||||||
Commercial and residential real estate
|
7,346
|
211
|
2.9
|
%
|
24
|
|||||||||||
Other
|
1,279
|
21
|
1.7
|
%
|
(7
|
)
|
||||||||||
Institutional Securities - HFI
|
$
|
40,398
|
$
|
739
|
1.8
|
%
|
$
|
(33
|
)
|
|||||||
Wealth Management - HFI
|
98,215
|
96
|
0.1
|
%
|
(9
|
)
|
||||||||||
Held For Investment
|
$
|
138,613
|
$
|
835
|
0.6
|
%
|
$
|
(42
|
)
|
|||||||
Held For Sale
|
12,801
|
|||||||||||||||
Fair Value
|
10,723
|
|||||||||||||||
Total Loans
|
162,137
|
835
|
(42
|
)
|
||||||||||||
Lending Commitments
|
127,855
|
396
|
0.3
|
%
|
47
|
|||||||||||
Consolidated Loans and Lending Commitments
|
$
|
289,992
|
$
|
1,231
|
$
|
5
|
The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative
Details and Calculations, and Legal Notice.
|
11
Definition of U.S. GAAP to Non-GAAP Measures | ||
(a)
|
The Firm prepares its Consolidated Financial Statements using accounting principles generally accepted in the United
States (U.S. GAAP). From time to time, Morgan Stanley may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. The Securities
and Exchange Commission defines a “non-GAAP financial measure” as a numerical measure of historical or future financial performance, financial positions, or cash flows that is subject to adjustments that effectively exclude, or
include amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. Non-GAAP financial measures disclosed by Morgan Stanley are provided as additional information to analysts,
investors and other stakeholders in order to provide them with greater transparency about, or an alternative method for assessing, our financial condition, operating results, or prospective regulatory capital requirements.
These measures are not in accordance with, or a substitute for U.S. GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we
will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the non-GAAP financial measure
we reference and such comparable U.S. GAAP financial measure. In addition to the following notes, please also refer to the Firm's Annual Report on Form 10-K for the year ended December 31, 2019.
|
|
(b)
|
The following are considered non-GAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders
to allow comparability of operating performance and capital adequacy. These measures are calculated as follows:
|
|
- |
Earnings per diluted share excluding integration-related expenses represents net income applicable to Morgan Stanley, adjusted for the impact of the
integration-related expenses associated with the acquisition of E*TRADE, less preferred dividends divided by the average number of diluted shares outstanding.
|
|
- |
The return on average tangible common equity represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average
tangible common equity.
|
|
- |
The return on average common equity and the return on average tangible common equity excluding integration-related expenses are adjusted in both the
numerator and the denominator to exclude the integration-related expenses associated with the acquisition of E*TRADE.
|
|
- |
Segment return on average common equity and return on average tangible common equity represent full year net income or annualized net income for the
quarter applicable to Morgan Stanley for each segment, less preferred dividend segment allocation, divided by average common equity and average tangible common equity for each respective segment. The segment adjustments to
common equity to derive segment average tangible common equity are generally set at the beginning of the year, and will remain fixed throughout the year until the next annual reset unless a significant business change occurs
(e.g., acquisition or disposition).
|
|
- |
Tangible common equity represents common equity less goodwill and intangible assets net of certain mortgage servicing rights deduction. |
|
- |
Tangible book value per common share represents tangible common equity divided by period end common shares outstanding. |
|
- |
Pre-tax profit margin excluding integration-related expenses represents income before income taxes less integration-related expenses associated with the
acquisition of E*TRADE as percentages of net revenues.
|
|
- |
The Firm expense efficiency ratio excluding integration-related expenses represents total non‐interest expenses less integration-related expenses
associated with the acquisition of E*TRADE as a percentage of net revenues.
|
12
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, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating
results.
|
|
Page 1:
|
|
(a)
|
Net income applicable to Morgan Stanley represents net income, less net income applicable to nonredeemable
noncontrolling interests.
|
(b)
|
Earnings applicable to Morgan Stanley common shareholders represents net income applicable to Morgan Stanley, less
preferred dividends.
|
Page 2:
|
|
(a)
|
The return on average common equity represents annualized earnings applicable to Morgan Stanley common shareholders as
a percentage of average common equity.
|
(b)
|
Book value per common share represents common equity divided by period end common shares outstanding.
|
(c)
|
Tangible book value per common share represents tangible common equity divided by period end common shares
outstanding.
|
(d)
|
Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
|
(e)
|
The Firm expense efficiency ratio represents total non‐interest expenses as a percentage of net revenues.
|
Page 3:
|
|
(a)
|
Liquidity Resources, which are held within the bank and non-bank operating subsidiaries, are comprised of high quality liquid assets (HQLA) and cash
deposits with banks ("Liquidity Resources"). The total amount of Liquidity Resources is actively managed by us considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding
needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements.
|
(b)
|
The Firm's goodwill and intangible balances utilized in the calculation of tangible common equity are net of certain
mortgage servicing rights deduction.
|
(c)
|
U.S. Bank refers to the Firm's U.S. Bank operating subsidiaries Morgan Stanley Bank, N.A. and Morgan Stanley Private
Bank, National Association, E*TRADE Bank, and E*TRADE Savings Bank, and excludes balances between Bank subsidiaries, as well as deposits from the Parent and affiliates.
|
(d)
|
Firmwide regional revenues reflect the Firm's consolidated net revenues on a managed basis. Further discussion
regarding the geographic methodology for net revenues is disclosed in Note 21 to the consolidated financial statements included in the Firm's Annual Report on Form 10-K for the year ended December 31, 2019 (2019 Form 10-K).
|
Page 4:
|
|
(a)
|
The Firm's attribution of average common equity to the business segments is based on the Required Capital framework,
an internal capital adequacy measure. This framework is a risk-based and leverage-based capital measure, which is compared with the Firm's regulatory capital to ensure that the Firm maintains an amount of going concern capital
after absorbing potential losses from stress events, where applicable, at a point in time. The Required Capital Framework is based on the Firm's regulatory capital requirements. The Firm defines the difference between its total
average common equity and the sum of the average common equity amounts allocated to its business segments as Parent common equity. The amount of capital allocated to the business segments is generally set at the beginning of
the year, and will remain fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). We are planning to make updates to our Required Capital framework
for 2021 to take into account changes to our risk-based capital requirements resulting from the stress capital buffer and we will continue to evaluate the framework with respect to the impact of other future regulatory
requirements as appropriate. For further discussion of the framework, refer to "Quantitative and Qualitative Disclosures about Risk" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2019.
|
(b)
|
The Firm's risk-based capital ratios 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 Form 10-Q
for the period ended September 30, 2020 and in the Firm's 2019 Form 10-K.
|
(c)
|
Supplementary leverage ratio represents Tier 1 capital divided by the total supplementary leverage exposure.
|
Page 5:
|
|
(a)
|
Institutional Securities Sales and Trading net revenues includes trading, net interest income (interest income less
interest expense), asset management and commissions and fees revenues.
|
(b)
|
Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
|
(c)
|
VaR represents the unrealized loss in portfolio value that one would not expect to exceed, on average, more than five
times every one hundred trading days in the Firm's trading positions if the portfolio were held constant for a one-day period. Further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology, is
disclosed in "Quantitative and Qualitative Disclosures about Risk" included in the Firm's 2019 Form 10-K.
|
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, investors, analysts and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.
|
|
Page 6:
|
|
(a)
|
Transactional revenues for the Wealth Management segment includes investment banking, trading, and commissions and fee
revenues.
|
(b)
|
Net interest income represents interest income less interest expense.
|
(c)
|
Other revenues for the Wealth Management segment includes investments and other revenues.
|
(d)
|
Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
|
Page 7:
|
|
(a)
|
Net new assets represents client inflows (including dividend and interest) less client outflows (excluding activity from
business combinations/divestitures and impact of fees and commissions).
|
(b)
|
Margin and other lending represents Wealth Management margin lending arrangements, which allow customers to borrow against the value of qualifying securities and Wealth
Management other lending which includes non-purpose securities based lending on non-bank entities. |
(c)
|
Deposits reflects Wealth Management deposit liabilities sourced from both Wealth Management client deposits and external
funding on the US Bank entities. Deposits include internal and external brokerage sweeps deposits programs, savings and other, and time deposits.
|
(d) |
Annualized average rate on deposits represents the weighted average cost of deposits as of periods ended December 31, 2020, September 30, 2020 and
December 31, 2019. |
(e)
|
Advisor-led client assets represents client assets in accounts that have a Wealth Management representative assigned.
|
(f)
|
Fee-based client assets represents the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
|
(g)
|
Fee‐based asset flows includes net new fee‐based assets, net account transfers, dividends, interest, and client fees and
exclude institutional cash management related activity.
|
(h)
|
Self-directed assets represents active accounts which are not advisor led. Active accounts are defined as having $25 or
more in assets.
|
(i)
|
Daily average revenue trades (DARTs) represents the total client-directed trades in a period divided by the number of
trading days during that period.
|
(j)
|
Self-directed households represents the total number of households that include at least one account with self-directed
assets. Individual households or participants that are engaged in one or more of our Wealth Management channels (Advisor-Led, Self-Directed, Workplace) will be included in each of the respective channel counts.
|
(k)
|
Workplace unvested assets represents the market value at the end of the period. Workplace unvested assets represent the market value of public company
securities at the end of the period.
|
(l)
|
Workplace participants represents total accounts with vested or unvested assets >0 in the workplace channel. Individuals with accounts in multiple plans
are counted as participants in each plan.
|
Page 8:
|
|
(a)
|
Other revenues for the Investment Management segment includes investment banking, trading, net interest and other
revenues.
|
(b)
|
Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
|
Page 9:
|
|
(a)
|
Investment Management Alternative/Other asset class includes products in Fund of Funds, Real Estate, Private Equity and
Credit strategies, as well as Multi-Asset portfolios.
|
(b)
|
Investment Management net flows include new commitments, investments or reinvestments, net of client redemptions,
returns of capital post-fund investment period and dividends not reinvested and excludes the impact of the transition of funds from their commitment period to the invested capital period.
|
(c)
|
Total assets under management or supervision excludes shares of minority stake assets which represent the Investment
Management business segment’s proportional share of assets managed by third-party asset managers in which we hold investments accounted for under the equity method.
|
Page 10 and 11:
|
|
(a)
|
Corporate loans include relationship and event-driven loans and typically consist of revolving lines of credit, term
loans and bridge loans.
|
(b)
|
Secured lending facilities include loans provided to clients, which are primarily secured by loans, which are, in turn,
collateralized by various assets including residential real estate, commercial real estate, corporate and financial assets.
|
(c)
|
Securities-based lending and Other includes financing extended to sales and trading customers and corporate loans
purchased in the secondary market.
|
(d)
|
Institutional Securities Lending Commitments principally include Corporate lending activity.
|
14
Supplemental Quantitative Details and Calculations
|
|
Page 1:
|
|
(1)
|
The Firm non-interest expenses by category are as follows:
|
4Q20
|
3Q20
|
4Q19
|
4Q20 YTD
|
4Q19 YTD
|
||||||||||||||||
Compensation and benefits
|
$
|
5,450
|
$
|
5,086
|
$
|
5,228
|
$
|
20,854
|
$
|
18,837
|
||||||||||
Non-compensation expenses:
|
||||||||||||||||||||
Brokerage, clearing and exchange fees
|
776
|
697
|
633
|
2,929
|
2,493
|
|||||||||||||||
Information processing and communications
|
697
|
616
|
567
|
2,465
|
2,194
|
|||||||||||||||
Professional services
|
679
|
542
|
555
|
2,205
|
2,137
|
|||||||||||||||
Occupancy and equipment
|
456
|
373
|
375
|
1,559
|
1,428
|
|||||||||||||||
Marketing and business development
|
161
|
78
|
200
|
434
|
660
|
|||||||||||||||
Other
|
991
|
778
|
566
|
3,334
|
2,369
|
|||||||||||||||
Total non-compensation expenses
|
3,760
|
3,084
|
2,896
|
12,926
|
11,281
|
|||||||||||||||
Total non-interest expenses
|
$
|
9,210
|
$
|
8,170
|
$
|
8,124
|
$
|
33,780
|
$
|
30,118
|
Page 2:
|
|
(1)
|
The fourth quarter and full year ended December 31, 2020 also included pre-tax integration-related expenses of $231
million ($189 million after-tax) associated with the acquisition of E*TRADE. The following sets forth the impact of the integration-related expenses to earnings per diluted share, return on average common equity and return on
average tangible common equity (which are excluded):
|
4Q20
|
4Q20 YTD
|
|||||||
Earnings per diluted share - GAAP
|
$
|
1.81
|
$
|
6.46
|
||||
Impact of adjustments
|
$
|
0.11
|
$
|
0.12
|
||||
Earnings per diluted share excluding integration-related expenses - Non-GAAP
|
$
|
1.92
|
$
|
6.58
|
||||
Return on average common equity - GAAP
|
14.7
|
%
|
13.1
|
%
|
||||
Impact of adjustments
|
0.9
|
%
|
0.2
|
%
|
||||
Return on average common equity excluding integration-related expenses - Non-GAAP
|
15.6
|
%
|
13.3
|
%
|
||||
Return on average tangible common equity - GAAP
|
17.7
|
%
|
15.2
|
%
|
||||
Impact of adjustments
|
1.0
|
%
|
0.2
|
%
|
||||
Return on average tangible common equity excluding integration-related expenses - Non-GAAP
|
18.7
|
%
|
15.4
|
%
|
||||
Firm expense efficiency ratio - GAAP
|
67.5
|
%
|
70.1
|
%
|
||||
Impact of adjustments
|
(1.7
|
)%
|
(0.5
|
)%
|
||||
Firm expense efficiency ratio excluding integration-related expenses - Non-GAAP
|
65.8
|
%
|
69.6
|
%
|
Page 3:
|
|
(1)
|
Includes loans held for investment (net of allowance), loans held for sale and also includes loans at fair value which
are included in Trading assets on the balance sheet.
|
(2)
|
Beginning in the quarter ended March 31, 2020, the internal measure of liquidity was changed from Global Liquidity
Reserve to Liquidity Resources to be more aligned with the current regulatory definition HQLA. December 31, 2019 has been recast.
|
(3)
|
As of December 31, 2020, September 30, 2020 and December 31, 2019, the U.S. Bank investment securities portfolio
included held to maturity investment securities of $52.6 billion, $28.2 billion and $26.1 billion, respectively.
|
Page 4:
|
|
(1)
|
Based on a Federal Reserve interim final rule in effect until March 31, 2021, our supplementary leverage ratio (SLR)
and supplementary leverage exposure, effective June 30, 2020, reflect the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. The exclusion of these assets had the effect of increasing our SLR by 0.8% as
of December 31, 2020.
|
Page 5:
|
|
(1)
|
Institutional Securities average tangible common equity represents average common equity adjusted to exclude goodwill
and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 4Q20: $484mm; 3Q20: $484mm; 4Q19: $536mm; 4Q20 YTD: $484mm; 4Q19 YTD: $536mm
|
Page 6:
|
|
(1)
|
For the fourth quarter and full year ended December 31, 2020, integration-related compensation and non-compensation
expenses associated with the acquisition of E*TRADE are as follows:
|
4Q20
|
||||
Compensation expenses
|
$
|
151
|
||
Non-compensation expenses
|
80
|
|||
Total non-interest expenses
|
$
|
231
|
||
Income tax provision
|
42
|
|||
Total non-interest expenses (after-tax)
|
$
|
189
|
(2)
|
Wealth Management average tangible common equity represents average common equity adjusted to exclude goodwill and
intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 4Q20: $13,440mm; 3Q20: $7,802mm; 4Q19: $8,088mm; 4Q20 YTD: $9,536mm; 4Q19 YTD: $8,088mm
|
15
Supplemental Quantitative Details and Calculations |
Page 7:
|
|
(1) | Wealth Management other lending includes $3 billion of non-purpose securities based lending on non-bank entities in each period ended December
31, 2020, September 30, 2020 and December 31, 2019. |
(2)
|
For the quarter ended December 31, 2020, Wealth Management deposits of $306 billion exclude off-balance sheet deposits of $25 billion held by third parties outside of Morgan Stanley.
|
Total deposits details are as follows: |
4Q20
|
||||
Brokerage sweep deposits
|
$
|
232
|
||
Other deposits
|
74
|
|||
Total balance sheet deposits
|
306
|
|||
Off-balance sheet deposits
|
25
|
|||
Total deposits
|
$
|
331
|
Page 8:
|
|
(1)
|
Includes investment gains or losses for certain funds included in the Firm's consolidated financial statements for
which the limited partnership interests in these gains or losses were reported in net income applicable to nonredeemable noncontrolling interests.
|
(2)
|
Investment Management average tangible common equity represents average common equity adjusted to exclude goodwill and
intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 4Q20: $932mm; 3Q20: $932mm; 4Q19: $940mm; 4Q20 YTD: $932mm; 4Q19 YTD: $940mm
|
Page 9:
|
|
(1)
|
Net Flows by region for the quarters ended December 31, 2020, September 30, 2020 and December 31, 2019 were:
|
North America: $21.4 billion, $(3.5) billion and $19.4 billion
|
|
International: $3.6 billion, $16.0 billion and $9.7 billion
|
|
(2)
|
Assets under management or supervision by region for the quarters ended December 31, 2020, September 30, 2020 and
December 31, 2019 were:
|
North America: $449 billion, $409 billion and $307 billion
|
|
International: $332 billion, $306 billion and $245 billion
|
|
Page 10:
|
|
(1)
|
For the quarters ended December 31, 2020, September 30, 2020 and December 31, 2019, Investment Management reflected
loan balances of $441 million, $569 million and $256 million, respectively, and lending commitments of $21 million for the quarter ended December 31, 2019, which are not included in the Consolidated Loans and Lending Commitments
balance.
|
Page 11:
|
|
(1)
|
For the quarter ended December 31, 2020, the Allowance Rollforward for Loans and Lending Commitments is as follows:
|
Institutional
Securities
|
Wealth
Management
|
Total
|
||||||||||
Loans
|
||||||||||||
Allowance for Credit Losses (ACL)
|
||||||||||||
Beginning Balance - September 30, 2020
|
$
|
806
|
$
|
107
|
$
|
913
|
||||||
Net Charge Offs
|
(41
|
)
|
(2
|
)
|
(43
|
)
|
||||||
Provision
|
(33
|
)
|
(9
|
)
|
(42
|
)
|
||||||
Other
|
7
|
-
|
7
|
|||||||||
Ending Balance - December 31, 2020
|
$
|
739
|
$
|
96
|
$
|
835
|
||||||
Lending Commitments
|
||||||||||||
Allowance for Credit Losses (ACL)
|
||||||||||||
Beginning Balance - September 30, 2020
|
$
|
342
|
$
|
5
|
$
|
347
|
||||||
Net Charge Offs
|
-
|
-
|
-
|
|||||||||
Provision
|
47
|
-
|
47
|
|||||||||
Other
|
2
|
-
|
2
|
|||||||||
Ending Balance - December 31, 2020
|
$
|
391
|
$
|
5
|
$
|
396
|
||||||
Loans and Lending Commitments
|
||||||||||||
Allowance for Credit Losses (ACL)
|
||||||||||||
Beginning Balance - September 30, 2020
|
$
|
1,148
|
$
|
112
|
$
|
1,260
|
||||||
Net Charge Offs
|
(41
|
)
|
(2
|
)
|
(43
|
)
|
||||||
Provision
|
14
|
(9
|
)
|
5
|
||||||||
Other
|
9
|
-
|
9
|
|||||||||
Ending Balance - December 31, 2020
|
$
|
1,130
|
$
|
101
|
$
|
1,231
|
(2)
|
The provision for credit losses associated with loans held for investment is reported in other revenues while the
provision for credit losses related to lending commitments is reported in other expenses.
|
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 fourth quarter earnings press release issued January
20, 2021. |
17
Exhibit 99.3
Morgan Stanley at an Inflection Point:The Next Decade of Growth James P. Gorman, Chairman and Chief
Executive Officer January 20, 2021
Notice 2 This presentation by Morgan Stanley is copyrighted and proprietary, and all rights are
reserved. Any recording, rebroadcast or other use of this presentation, in whole or in part, without the prior written consent of Morgan Stanley is strictly prohibited. The presentation has been prepared solely for information purposes; it is
not a solicitation of any offer to buy or sell any security or instrument, and has not been updated since it was originally presented.This presentation may contain forward-looking statements including the attainment of certain financial and
other targets, objectives and goals. You 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. Morgan Stanley does not undertake any obligation to update any forward-looking statements.For a
discussion of additional risks and uncertainties that may affect the future results of Morgan Stanley, please see Morgan Stanley's most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and the
additional risk factors in Morgan Stanley’s Form 8-Ks filed on April 16, 2020 and October 2, 2020, respectively, which are available on Morgan Stanley's website www.morganstanley.com.The presentation may also include certain non-GAAP
financial measures. The reconciliation of such measures to the comparable GAAP figures is included in this presentation and in Morgan Stanley's most recent Annual Report on Form 10-K, Definitive Proxy Statement, Quarterly Reports on Form 10-Q
and / or Current Reports on Form 8-K, as applicable, which are available on Morgan Stanley's website www.morganstanley.com.The End Notes are an integral part of this presentation. See slides 19-26 at the back of this presentation for
information related to the financial metrics and defined terms in this presentation.See also slide 27 for “Important Information about the Proposed Transaction with Eaton Vance and Where to Find It”.
3 Firm Net Revenues Efficiency Ratio (3) Net Income ROTCE (4) EPS (5) Common Equity Tier 1
Ratio (6) 2015 – 2019 Year Ended December 31, 2019 $41Bn 73% $9.0Bn 13.4% $5.19 16.4% 2010 – 2014 Adjusted Year Ended December 31, 2014 (1) $34Bn 79% $4.5Bn 7.5% $2.13 10.9% The End Notes are an integral part of this
Presentation. See slides 19-26 at the back of this presentation for information related to the financial metrics and defined terms in this presentation 2020 $48Bn 70% $11.0Bn 15.4% $6.58 17.4% Year Ended December 31, 2020 (2) 2020:
Our Business Model Performed and Delivered Record Results
4 (2019) Enhance Workplace Offering (2020) Service FullSpectrum of Wealth (Expected to close2Q
2021) Create Leading Asset Manager Opportunistic Acquisitions Accelerate Growth The End Notes are an integral part of this Presentation. See slides 19-26 at the back of this presentation for information related to the financial metrics and
defined terms in this presentation
Key Drivers of Growth 5 Realize Acquisition Synergies 3 Expand Client Base and Deepen
Relationships 2 Return Excess Capital 5 Demonstrate Operating Leverage 4 Gain Market Share 1 The End Notes are an integral part of this Presentation. See slides 19-26 at the back of this presentation for information related to the
financial metrics and defined terms in this presentation
Three Connected World-Class Businesses of Scale… 6 Pre-Tax Margin (%) (1) Clients Assets
($Tn) Assets Under Management ($Tn) (2)(3) Institutional Securities Wealth Management Investment Management $26Bn 2020 Net Revenues $19Bn 2020 Net Revenues $4Bn 2020 Net Revenues (4) 1 The End Notes are an integral part of
this Presentation. See slides 19-26 at the back of this presentation for information related to the financial metrics and defined terms in this presentation
…Continue to Gain Share 7 1 Increase Share of Profits Across Competitors in WM Revenue Capture
Across ISG Industry LeadingOrganic Growth in IM Morgan Stanley ISG Wallet Share (%) (1)(2)(3) Long-Term Net Flows (%) (5)(6)(2017 – 3Q 2020) Pre-Tax Profit Wallet Share (%) (4) The End Notes are an integral part of this Presentation. See
slides 19-26 at the back of this presentation for information related to the financial metrics and defined terms in this presentation
Annual Avg. Trading VaR (1)($MM) Institutional Securities: Increased Revenues and Profitability with
Consistent Risk Management 8 2 Revenue Growth and Margin Expansion Disciplined Risk Management Pre-Tax Margin (3) 20% 29% 30% 35% ISG Net Revenues (2)($Bn) Average VaR Over the Period AverageAnnual VaR:$47MM The End Notes are an
integral part of this Presentation. See slides 19-26 at the back of this presentation for information related to the financial metrics and defined terms in this presentation
Advisor-Led (1)(2) Workplace (1)(3) Self-Directed (1)(4) Top 2 Top
3 #1 9 15%+ Proceeds Retention Opportunity $15Bn+ Assets Historically Lost to Channels with Advice Capabilities Annually $77Bn Fee-Based AssetFlows in 2020 4.9MM Number of
Participants 6.7MM Households ~2.5MM Households Further Opportunities to Capture ~$8Tn Assets Held Away (5) Wealth Management: Leadership Position in All Wealth Channels Drives New Asset and Client Acquisition 2 The End Notes are an
integral part of this Presentation. See slides 19-26 at the back of this presentation for information related to the financial metrics and defined terms in this presentation
10 2 Stock Plan Proceeds Retention (5) DARTs (2) Net New Assets (3) On/Off BalanceSheet Deposits
(4) Prior Record (1) 19%(2016) 291K(2019) $17Bn(2018) $56Bn(2019) 2020 28% 952K $44Bn $79Bn Wealth Management: E*TRADE Benefited from Dramatically Accelerated Digital Adoption E*TRADE The End Notes are an integral part of this
Presentation. See slides 19-26 at the back of this presentation for information related to the financial metrics and defined terms in this presentation
Wealth Management: Growth in Net New Assets Underscores Strong Client Engagement 11 2 Net New Assets
Evolution ~2% Net New Assets (1)($Bn) Average Net New Assets as % of Beginning Client Assets (2) % 8% 6% ~3 – 4% 6% The End Notes are an integral part of this Presentation. See slides 19-26 at the back of this presentation for
information related to the financial metrics and defined terms in this presentation
Wealth Management: Stable and High Quality Revenues 12 2 Daily Revenues
(1) 2020 2014 2016 2018 <$60MM 68% $60MM - $70MM 30% >$70MM 2% 8% 52% 8% 27% 46% 59% 65% 2% 33% 65% of Daily Revenues $70MM+ The End Notes are an integral part of this Presentation. See slides 19-26 at the back of
this presentation for information related to the financial metrics and defined terms in this presentation
Investment Management: Premier Global Asset Manager Delivers Value to Clients 13 2 $1.4Tn Pro Forma
AUM (1)(2) Private and Public Alpha Solutions Fixed Income & Liquidity ~65% ~35% MSIMGross Sales (3) ~95% ~5% EatonVanceGross Sales (3) North America International Leadership in Customization, Sustainability, Private
Alternatives, High- Conviction Equities and Value- Added Fixed Income Global Partnerships Deepen Distribution Opportunities The End Notes are an integral part of this Presentation. See slides 19-26 at the back of this presentation for
information related to the financial metrics and defined terms in this presentation
Unmatched Reach of Wealth and Investment Management Creates Growth and High Returns 14 3 Top 5
Franchise Providing Leading Advice to our Clients $5Tn+ of Client Assets Wealth Management and Investment Management Client Assets ($Tn) (1) Wealth and Investment Management Revenues Over Client Assets (bps) (3) Wealth Management and
Investment Management Client Assets ($Tn) (2) 21bps 29bps 10bps 58bps 57bps 44bps 28bps 6bps 66bps 31bps The End Notes are an integral part of this Presentation. See slides 19-26 at the back of this presentation for information
related to the financial metrics and defined terms in this presentation
15 Realize Acquisition Synergies from E*TRADE and Eaton Vance 3 Funding Synergies (2) Cost
Synergies (1) $150MM from E*TRADEat announcementIncreased to $250MM $400MM from E*TRADE$150MM from Eaton Vance$550MM in Total Cost Synergies Cost and Funding Synergies Revenue Opportunities E*TRADE Eaton Vance Deliver Customization and
Sustainability at Scale Establish Advice and Lending Relationships with E*TRADE Clients Leverage Leadership in Workplaceto Improve Stock Plan Proceeds Retention Capture Self-Directed Assetsof Morgan Stanley Clients Held Away Enhance
Multi-Asset Solutions Offering Leverage Complementary International and U.S. Distribution The End Notes are an integral part of this Presentation. See slides 19-26 at the back of this presentation for information related to the financial
metrics and defined terms in this presentation
Demonstrate Operating Leverage and Increase Profitability 16 4 Firm Expense Efficiency Ratio (%)
(1) Pre-Tax Profit ($Bn) (2) Enhances Profit Expansion Improvement in Efficiency Ratio Integration-Related Expenses The End Notes are an integral part of this Presentation. See slides 19-26 at the back of this presentation for
information related to the financial metrics and defined terms in this presentation
Well-Positioned to Return Excess Capital ROTCE (%) (1) 17 5 Despite Excess Capital Delivered
Robust Returns Common Equity Tier 1 Ratio (2) CET1 Requirement with SCB: 13.2% The End Notes are an integral part of this Presentation. See slides 19-26 at the back of this presentation for information related to the financial metrics and
defined terms in this presentation
Execute on the Next Phase of Shareholder Value 2-Year Objectives (1) 18 WM Pre-Tax Margin (2) Firm
Efficiency Ratio (3) ROTCE (4) Longer-Term Aspirations (1) 26 – 30% 69 – 72% 14 ‒ 16% 30%+ <70% 17%+ The End Notes are an integral part of this Presentation. See slides 19-26 at the back of this presentation for information
related to the financial metrics and defined terms in this presentation
End Notes 19 The Firm’s financial presentations, earnings releases, earnings conference calls, and
other communications may include certain metrics, including non-GAAP financial measures, which we believe to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an additional means of
assessing, our financial condition and operating results. The End Notes are an integral part of our presentations and other communications. For additional information refer to the Definition of U.S. GAAP to Non-GAAP Measures, Definitions of
Performance Metrics and Terms, Supplemental Quantitative Details and Calculations (includes reconciliation of GAAP to non-GAAP), and Legal Notice in the Morgan Stanley Fourth Quarter 2020 Financial Supplement included in the Current Report on
Form 8-K dated January 20, 2021 (‘Morgan Stanley Fourth Quarter 2020 Financial Supplement’).
These notes refer to the financial metrics and/or defined term presented on Slide 31. 2014 Adjusted
Operating Performance Metrics: Net revenues adjustment to exclude the positive impact of DVA. DVA represents the change in fair value resulting from fluctuations in our debt credit spreads and other credit factors related to borrowings and
other liabilities carried under the fair value option. The full amount of the Net revenues adjustment was recorded in the Institutional Securities ('ISG') segment.Compensation expense adjustment to exclude the negative impact of the
Discretionary Incentive Compensation Actions. The Discretionary Incentive Compensation Actions were recorded in the business segments as follows: ISG ($904) million; Wealth Management ('WM') ($88) million; and Investment Management ('IM')
($145) million.Non-compensation expense adjustment to exclude the negative impact of Credit Crisis Litigation. The full amount of the non-compensation adjustment was recorded in the ISG segment.Income from continuing operations before income
taxes (‘Pre-Tax Profit’) adjustment is the aggregation of the positive DVA adjustment and the negative Credit Crisis Litigation and Discretionary Incentive Compensation Actions adjustments, impacting the business segments as follows: ISG
($3.3) billion, WM ($88) million and Investment Management ($145) million.Net income applicable to Morgan Stanley (‘Net Income’) adjustment to exclude: the aggregate net after tax impacts of the positive DVA adjustment ($418 million) and the
negative Credit Crisis Litigation ($2.9 billion) and Discretionary Incentive Compensation Actions ($781 million) adjustments; and the positive Discrete Tax Benefits adjustment ($2.2 billion).Expense efficiency ratio (‘Efficiency Ratio’)
adjustment to exclude the positive impact of DVA and the negative impacts of Credit Crisis Litigation and Discretionary Incentive Compensation Actions. Expense efficiency ratio represents total Non-interest expenses as a percentage of Net
revenues.Earnings per share (‘EPS’) adjustments to exclude: the aggregate net after tax, per share impacts of the positive DVA adjustment ($0.21) and the negative Credit Crisis Litigation ($1.47) and Discretionary Incentive Compensation
Actions ($0.40) adjustments; and the positive per share impacts of the Discrete Tax Benefits adjustment ($1.13). The calculation of EPS uses Net income applicable to Morgan Stanley less preferred dividends (approximately $315 million) divided
by Average diluted common shares outstanding (1,971 million for 2014).Return on tangible common equity (‘ROTCE’) adjustment to exclude: the aggregate net after tax impacts of the positive DVA adjustment and the negative Credit Crisis
Litigation and Discretionary Incentive Compensation Actions adjustments; and the positive Discrete Tax Benefits adjustment. The calculation of ROTCE uses net income applicable to Morgan Stanley less preferred dividends (approximately $315
million) as a percentage of Average tangible common equity. Tangible Common Equity ('TCE') equals common equity less goodwill and intangible assets, net of allowable mortgage servicing rights. Average TCE reported and adjusted was
approximately $55.5 billion and $56.2 billion, respectively for 2014. Reported and adjusted ROTCE and TCE are non-GAAP financial measures. 20 To provide a comparative view of 2014 operating performance, our full year reported results are
adjusted below to exclude several significant intermittent items, which were highlighted in the Firm’s 2014 Annual Report on Form 10-K for the year ended December 31, 2014 (‘2014 Form 10-K’), as follows: Litigation costs of approximately $3.1
billion related to residential mortgage backed securities and other credit crisis-related matters ('Credit Crisis Litigation'); Net discrete tax benefits of approximately $2.2 billion related to a legal entity restructuring, the remeasurement
of reserves and related interest due to new information related to multi-year tax examinations and the repatriation of non-U.S. earnings at a lower cost than originally estimated ('Discrete Tax Benefits'); Compensation expense of
approximately $1.1 billion related to changes in the approach for awards of discretionary incentive compensation (i.e., reducing the average deferral of such awards to an approximate baseline of 50%) and the acceleration of vesting for
certain outstanding deferred cash based incentive compensation awards ('Discretionary Incentive Compensation Actions'); andThe impact of Debt Valuation Adjustment ('DVA‘) of approximately $651 million on Net revenues.These ‘2014 Adjusted
Operating Performance Metrics' will be utilized in this presentation. Adjusting reported results to exclude the intermittent impacts of Credit Crisis Litigation, Discrete Tax Benefits, Discretionary Incentive Compensation Actions and DVA are
non-GAAP financial measures. End Notes
End Notes 21 These notes refer to the financial metrics and/or defined term presented on Slide 3The
comparisons of current and prior periods are impacted by the financial results of E*TRADE reported in the Wealth Management Segment. The Firm's fourth quarter earnings results reflect the completed acquisition of E*TRADE Financial Corporation
(‘E*TRADE’), which closed on October 2, 2020. Expense efficiency ratio (‘Efficiency Ratio’) represents total non-interest expenses as a percentage of net revenues. The 2020 Efficiency Ratio was adjusted to exclude the impact of
integration‐related expenses of $231 million on a pre-tax basis. The adjusted Efficiency Ratio is a non-GAAP financial measure.Return on average tangible common equity (‘ROTCE’) represents earnings applicable to Morgan Stanley common
shareholders as a percentage of average tangible common equity. The 2020 ROTCE was adjusted to exclude the impact of integration‐related expenses of $231 million on a pre-tax basis or $189 million on an after-tax basis. The adjusted ROTCE is
a non-GAAP financial measure. Earnings Per Share (‘EPS’) represents earnings applicable to Morgan Stanley common shareholders divided by diluted common shares outstanding. The 2020 EPS was adjusted to exclude the impact of integration‐related
expenses of $231 million on a pre-tax basis or $189 million on an after-tax basis. The adjusted EPS is a non-GAAP financial measure.Common Equity Tier 1 capital ratio is based on the Basel III Standardized Approach Fully Phased-in rules for
all periods.These notes refer to the financial metrics and/or defined term presented on Slide 6Pre-Tax Margin for 2014 is adjusted to exclude the aggregation of the positive DVA adjustment and the negative Credit Crisis Litigation and
Discretionary Incentive Compensation Actions adjustments, ($3.3 billion) (refer to note (1) for Slide 3). Pre-Tax Margin represents Pre-Tax Profit as a percentage of net revenues. The adjusted Pre-Tax Margin is a non-GAAP financial measure.
Assets Under Management (AUM) represents Morgan Stanley’s Investment Management AUM. Pro Forma Assets Under Management represents the addition of Morgan Stanley’s Investment Management and Eaton Vance’s assets under management. Morgan
Stanley’s Investment Management assets under management based on Morgan Stanley Fourth Quarter 2020 Financial Supplement. Eaton Vance’s assets under management as of December 31, 2020 based on Eaton Vance’s Press Release dated January 15,
2021 available on Eaton Vance’s website (‘Eaton Vance’s January 2021 Press Release’). The Eaton Vance acquisition is still pending and subject to customary closing conditions.2020 Net Revenues represents Morgan Stanley’s Investment Management
net revenues.These notes refer to the financial metrics and/or defined term presented on Slide 7Wallet represents aggregated reported net revenues of Morgan Stanley and the following peers: Bank of America, Barclays, Citigroup, Credit Suisse,
Deutsche Bank, Goldman Sachs, JP Morgan, and UBS. Morgan Stanley’s ISG wallet share represents total ISG segment net revenues. Peer wallet includes revenues that represent Investment Banking, Equity Sales & Trading and Fixed Income Sales
& Trading, where applicable. For firms that disclose results between multiple segments, assumptions have been made based on company disclosures. Morgan Stanley’s 2014 Wallet Share is calculated as the percentage of Morgan Stanley’s net
revenues, excluding DVA to the Wallet and has been restated to conform with current reporting methodology. Peer data for 2014 has been adjusted for DVA, where it is reported and where applicable.European peer results were translated to USD
using average exchange rates for the appropriate period; sourced from Bloomberg.The 2020 Wallet estimates utilize results for peers that have reported full-year 2020 results as of January 19, 2021. For the European peers that have not yet
reported, a 2020 full year results estimate is derived assuming the aggregate share of the Wallet for European peers for the first nine months remains constant in the fourth quarter of 2020.Pre-Tax Profit Wallet represents Pre-Tax Profit of
Morgan Stanley Wealth Management and the following peers: Bank of America Global Wealth and Investment Management, UBS Wealth Management Americas and Wells Fargo Wealth and Investment Management. Morgan Stanley’s Wallet Share is calculated as
the percentage of Morgan Stanley’s Pre-Tax Profit to the Wallet. Morgan Stanley’s Pre-Tax Profit for 2020 was adjusted to exclude the impact of integration‐related expenses of $231 million on a pre-tax basis. The 2020 Wallet estimates utilize
results for peers that have reported full-year 2020 results as of January 19, 2021. For the peers that have not yet reported, a 2020 full year results estimate is derived assuming the aggregate share of their Wallet for the first nine months
remains constant in the fourth quarter of 2020.
End Notes 22 These notes refer to the financial metrics and/or defined term presented on Slide
7Long-Term Net Flows represents cumulative long-term net flows over 15 quarters from calendar 1Q 2017 to 3Q 2020 as a percentage of beginning Assets Under Management for 2017 (as of calendar 4Q 2016) for Morgan Stanley and Peers, to reflect
most recently available data for Peers over a consistent timeframe. For Eaton Vance, this represents cumulative long-term net flows over 15 fiscal quarters from fiscal 2Q 2017 to 4Q 2020 as a percentage of beginning Assets Under Management as
of fiscal 1Q 2017. Cumulative long-term net flows as a percentage of beginning Assets Under Management for Morgan Stanley over 16 quarters through 4Q 2020 is 29%.Peer Average includes AllianceBernstein, BlackRock (Active Only), DWS (Active
Only), Franklin Templeton, Goldman Sachs Asset Management, Invesco (Active Only), Janus Henderson Group, JP Morgan Asset Management and T. Rowe Price. These represent Morgan Stanley Investment Management and Eaton Vance’s peers based on
similarity of business models and Assets Under Management. In addition, all notable acquisitions have been removed from net flows. These notes refer to the financial metrics and/or defined term presented on Slide 8VaR estimates a portfolio’s
aggregate market risk exposure, representing the unrealized loss in portfolio value that one would not expect to exceed, on average, more than five times every one hundred trading days if the portfolio was held constant for a one-day period.
Since reported VaR statistics are estimates based on historical data, VaR should not be viewed as predictive of our future revenues or financial performance or our ability to monitor and manage risk. There can be no assurance that our actual
losses on a particular day will not exceed the VaR amounts indicated. VaR statistics are not readily comparable across firms because of differences in the firm’s portfolios, modeling assumptions and methodologies. These differences can result
in materially different estimates across firms for similar products. For a discussion of our primary risk exposures and market risk management, VaR methodology, assumptions and limitations, see “Quantitative and Qualitative Disclosure about
Risk – Market Risk – Trading Risks in Firm’s 2019 Annual Report on Form 10-K for the year ended December 31, 2019.ISG Net Revenues for 2014 exclude the positive impact of approximately $651 million from DVA. (refer to note (1) for Slide 3).
The adjusted Net Revenues is a non-GAAP financial measure. Pre-Tax Margin for 2014 exclude the aggregation of the positive DVA adjustment and the negative Credit Crisis Litigation and Discretionary Incentive Compensation Actions adjustments,
($3.3 billion) (refer to note (1) for Slide 3). The adjusted Pre-Tax Margin is a non-GAAP financial measure.
End Notes 23 These notes refer to the financial metrics and/or defined term presented on Slide 9
Individual households or participants that are engaged in one or more of our Wealth Management channels (Advisor-Led, Self-Directed, Workplace) will be included in each of the respective channel counts. Position in Advisor-Led represents
client assets based on internal analysis aggregated for Bank of America Merrill Lynch Global Wealth Management, UBS Wealth Management Americas and Wells Fargo Wealth and Investment Management per company filings as of most recently reported
results. For Morgan Stanley, Advisor-Led Client Assets represents client assets in accounts that have a Wealth Management representative assigned.Advisor-Led Households represents the total number of households that include at least one
account with Advisor-Led Clients Assets and is based on Morgan Stanley internal data as of December 31, 2020. Figures are adjusted for overlapping Advisor-Led Households between Morgan Stanley subsidiaries.Fee‐Based Asset Flows includes net
new fee‐based assets, net account transfers, dividends, interest, and client fees and excludes institutional cash management related activity. 3. Workplace Rank Position derived from Morgan Stanley internal analysis based on number of stock
plan participants informed by latest available data for Bank of America, Carta, Certent, Charles Schwab, Computershare, Fidelity, and UBS.Workplace Participants represents total accounts with vested or unvested assets >$0 in the Workplace
channel. Individuals with accounts in multiple plans are counted as participants in each plan.Proceeds Retention Opportunity represents the potential percentage of domestic proceeds that could be retained 12 months post exercise. 4. Position
in Self-Directed derived from Aite Group “New Realities in Wealth Management: Growth Amplifies Prior to the Storm” report (December 2020). Peers include Fidelity, Charles Schwab / TD Ameritrade, Merrill Edge and others. Self-Directed
Households represents the total number of households that include at least one account with Self-Directed Assets. Self-Directed Assets represents active accounts which are not Advisor-Led. Active accounts are defined as having $25 or more in
assets. Assets Lost to Channels with Advice represent assets lost to channels with advice capabilities based on data from Automated Customer Account Transfer Services.Assets Held Away is estimated using data from IXI as of June 2020 for
retail clients and stock plan participants.These notes refer to the financial metrics and/or defined term presented on Slide 10Prior Record represents the previous record for a full year or at year-end.Daily Average Revenue Trades (DARTs)
represents the total client-directed trades in a period divided by the number of trading days during that period. Net New Assets (NNA) represents client inflows (including dividend and interest) less client outflows (excluding activity from
business combinations/divestitures and impact of fees and commissions), and has been adjusted to conform to Morgan Stanley’s methodology.On/Off Balance Sheet Deposits represents E*TRADE’s deposit liabilities including both client deposits
(brokerage sweep and other) and off-balance sheet deposits held by third parties outside of Morgan Stanley.Stock Plan Proceeds Retention represents the percentage of domestic proceeds retained 12 months post exercise. Prior record based on
proceeds retention at year-end.
End Notes 24 These notes refer to the financial metrics and/or defined term presented on Slide 11 Net
New Assets represents client inflows (including dividend and interest) less client outflows (excluding activity from business combinations/divestitures and impact of fees and commissions). Average Net New Assets as % of Beginning Client
Assets represents an average of Morgan Stanley’s Net New Assets divided by beginning client assets for each period. 2020 Pro Forma represents the addition of Net New Assets for Morgan Stanley and E*TRADE for Full Year 2020 divided by the
addition of beginning client assets for Morgan Stanley and E*TRADE for Full Year 2020. E*TRADE’s beginning client assets represents total customer assets, excluding corporate services unvested holdings based on E*TRADE’s Annual Report on Form
10-K for the year ended December 31, 2019.These notes refer to the financial metrics and/or defined term presented on Slide 12 The daily revenue distribution reflects net revenues for the WM segment attributed as follows: Transactional
revenues on the day the revenue was recorded; and Asset Management, Net Interest and Other revenues based on the a daily average, where the reported revenue for the period is divided by the number of business days in the period. These notes
refer to the financial metrics and/or defined term presented on Slide 13Pro Forma Assets Under Management represents the addition of Morgan Stanley’s Investment Management and Eaton Vance’s assets under management. Morgan Stanley’s Investment
Management assets under management based on Morgan Stanley Fourth Quarter 2020 Financial Supplement. Eaton Vance’s assets under management based on Eaton Vance’s January 2021 Press Release. The Eaton Vance acquisition is still pending and
subject to customary closing conditions.For Morgan Stanley “Private and Public Alpha” includes public equity strategies reported under the "Equity" category and real assets, private equity, private credit and private equity fund of funds
reported under the "Alternative/Other" category as of December 31, 2020 in the Morgan Stanley Fourth Quarter 2020 Financial Supplement. For Eaton Vance “Private and Public Alpha” includes strategies reported under the "Equity" category and
the "Alternative" category as of December 31, 2020 in Eaton Vance’s January 2021 Press Release. For Morgan Stanley “Solutions” includes multi-asset portfolio strategies and hedge fund of funds reported under the "Alternative/Other" category
as of December 31, 2020 in the Morgan Stanley Fourth Quarter 2020 Financial Supplement. For Eaton Vance “Solutions” includes strategies reported under the “Parametric custom portfolios” and “Parametric overlay services” categories as of
December 31, 2020 in Eaton Vance’s January 2021 Press Release. For Morgan Stanley “Fixed Income & Liquidity” includes strategies reported under the "Fixed income" and "Liquidity" categories as of December 31, 2020 in the Morgan Stanley
Fourth Quarter 2020 Financial Supplement. For Eaton Vance “Fixed Income & Liquidity” includes strategies reported under the "Fixed income" and "Floating-rate income" categories as of December 31, 2020 in Eaton Vance’s January 2021 Press
Release.Gross Sales represents gross sales from long-term asset classes for full year 2020 period from January 1 through December 31, 2020 for Morgan Stanley and full year 2020 fiscal period from November 1, 2019 through October 31, 2020 for
Eaton Vance.
End Notes 25 These notes refer to the financial metrics and/or defined term presented on Slide 14
Wealth Management and Investment Management Client Assets represents Wealth Management client assets and Investment Management assets under management based on the 2014 Form 10-K and the Morgan Stanley Fourth Quarter 2020 Financial
Supplement.Pro Forma Client Assets represents the addition of Morgan Stanley’s client assets and Eaton Vance’s client assets. Eaton Vance’s client assets based on Eaton Vance’s January 2021 Press Release and represent total assets under
management. Client Assets Ranking based on internal analysis of combined Investment and Wealth Management client assets and assets under management with data aggregated from public filings for Allianz, Bank of America, BlackRock, Charles
Schwab / Ameritrade, Fidelity, JP Morgan, State Street, UBS and Vanguard. Rankings based on the most recently available data for combined Investment Management and Wealth Management client assets and assets under management. Most recently
available data represents 4Q 2020 for peers that have reported results as of January 19, 2021 (Bank of America, BlackRock, Charles Schwab / Ameritrade, JP Morgan and State Street), 3Q 2020 for peers that have not reported yet (Allianz,
Fidelity and UBS) and data as of January 2020 for Vanguard. Rankings exclude assets under custody and assets under administration. Morgan Stanley’s position in the rankings based on Pro Forma Client Assets. Wealth and Investment Management
Revenues Over Client Assets based on internal analysis and represents Net Revenues divided by average client assets. For peers that have reported results as of January 19, 2021, Net Revenues represent full-year 2020 results for the
combination of Wealth Management and Investment Management and average client assets represents an average of five most recent quarters. For peers that have not reported yet, except for Fidelity and Vanguard, Net Revenues are based on 2020
revenue estimates derived by annualizing revenues for the first nine months of 2020, divided by average client assets for an average of four most recent quarters. For Fidelity, Net Revenues represent 2019 total company revenues and average
client assets represent an average of 2018 and 2019 total assets under administration. For Vanguard, Revenues Over Client Assets represents the average expense ratio (U.S. asset-weighted fund expenses as a percentage of 2019 average net
assets) available on its website. Net Revenues for Morgan Stanley represent the addition of Morgan Stanley’s Wealth Management and Investment Management Net Revenues for full-year 2020, E*TRADE’s Net Revenues for first nine months of 2020 and
Eaton Vance’s fiscal 2020 Net Revenues. Morgan Stanley’s Wealth Management and Investment Management Net Revenues represent the aggregation of both segments’ net revenues and exclude intersegment activity. Morgan Stanley net revenues based on
the Morgan Stanley Fourth Quarter 2020 Financial Supplement. Eaton Vance’s Net Revenues represent total revenue and total non-operating income based on Eaton Vance’s Annual Report on Form 10-K for the fiscal year ended October 31, 2020.
E*TRADE’s 1Q and 2Q 2020 Net revenues represent Total Net Revenues based on E*TRADE’s Quarterly Report on Form10-Q for the quarter ended June 30, 2020. Client assets used in the calculation for Morgan Stanley include E*TRADE and Eaton Vance
for 2019 and 2020 fiscal quarters based on relevant Form 10-Q and Form 10-K filings.These notes refer to the financial metrics and/or defined term presented on Slide 15Cost Synergies are Morgan Stanley estimates and are expected to be phased
in from the closing dates of the E*TRADE and Eaton Vance acquisitions.Funding Synergies are Morgan Stanley estimates and are expected to be phased in from the closing date of the E*TRADE acquisition.These notes refer to the financial metrics
and/or defined term presented on Slide 16 Expense efficiency ratio (‘Efficiency Ratio’) represents total non-interest expenses as a percentage of net revenues. The 2020 Efficiency Ratio was adjusted to exclude the impact of
integration‐related expenses of $231 million on a pre-tax basis. The 2014 Efficiency Ratio was adjusted to exclude the positive impact of DVA and the negative impacts of Credit Crisis Litigation and Discretionary Incentive Compensation
Actions (refer to note (1) for Slide 3). The adjusted Efficiency Ratio is a non-GAAP financial measure. Pre-Tax Profit for 2020 was adjusted to exclude the impact of integration‐related expenses of $231 million on a pre-tax basis. Pre-Tax
Profit for 2020 including integration-related expenses was $14.4Bn. 2014 is adjusted to exclude the positive impact of DVA and the negative impacts of Credit Crisis Litigation and Discretionary Incentive Compensation Actions (refer to note
(1) for Slide 3). The adjusted Pre-Tax Profit is a non-GAAP financial measure.
End Notes 26 These notes refer to the financial metrics and/or defined term presented on Slide 17The
calculation of ROTCE for each year utilizes net income applicable to Morgan Stanley less preferred dividends as a percentage of average tangible common equity, respectively. Average tangible common equity represents average common equity
adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The calculation for 2020 ROTCE was adjusted to exclude the impact of integration‐related expenses of $231 million on a pre-tax basis or
$189 million on an after-tax basis. The 2014 ROTCE was adjusted to exclude the positive impact of DVA and the negative impacts of Credit Crisis Litigation and Discretionary Incentive Compensation Actions (refer to note (1) for Slide 3).The
adjusted ROTCE is a non-GAAP financial measure.Common Equity Tier 1 capital ratio is based on the Basel III Standardized Approach Fully Phased-in rules for all periods.These notes refer to the financial metrics and/or defined term presented
on Slide 18 Firm’s 2-Year Objectives and Longer-Term Aspirations include Eaton Vance. The Eaton Vance acquisition is still pending and subject to customary closing conditions. Pre-Tax Margin represents income (loss) from continuing operations
before taxes divided by net revenues. The Pre-Tax Margin 2-Year Objective of 26% to 30% and Longer-Term Aspiration of 30%+ exclude integration-related expenses. The adjusted Pre-Tax Margin is a non-GAAP financial measure.Efficiency Ratio
represents total non-interest expenses as a percentage of net revenues. The Efficiency Ratio 2-Year Objective of 69% to 72% and Longer-Term Aspiration of <70% exclude integration-related expenses. The adjusted Efficiency Ratio is a
non-GAAP financial measure.The calculation of ROTCE uses net income applicable to Morgan Stanley less preferred dividends as a percentage of average tangible common equity. Tangible common equity (‘TCE’) represents common equity less goodwill
and intangible assets net of allowable mortgage servicing rights. The ROTCE 2-Year Objective of 14% to 16% and Longer-Term Aspiration of 17%+ exclude integration-related expenses. The adjusted ROTCE is a non-GAAP financial measure.
Notice 27 Important Information about the Proposed Transaction with Eaton Vance and Where to Find
ItIn connection with the proposed transaction between Morgan Stanley and Eaton Vance Corp. (“Eaton Vance”), Morgan Stanley and Eaton Vance will file relevant materials with the Securities and Exchange Commission (the “SEC”), including the
Morgan Stanley registration statement on Form S-4 filed on December 4, 2020, including amendments thereto, that includes a prospectus of Morgan Stanley. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS OF MORGAN
STANLEY AND EATON VANCE ARE URGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY
WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of the registration statement, as well as other
filings containing information about Morgan Stanley or Eaton Vance, without charge at the SEC’s Internet website (http://www.sec.gov) or by contacting the investor relations department of Morgan Stanley or Eaton Vance at the following: Morgan
Stanley Eaton Vance1585 Broadway Two International PlaceNew York, NY 10036 Boston, MA 02110Media Relations: 212-761-2448 Media Relations: [email protected] [email protected] Relations: 1-212-762-8131
Investor Relations: [email protected] [email protected] No Offer or Solicitation This presentation is for informational purposes and is not intended to, and shall not, constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote of approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any such jurisdiction
Notice 28 Forward-Looking StatementsThis presentation contains “forward-looking statements” within
the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address
expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or
negatives of these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the proposed transaction and the anticipated benefits thereof. All
such forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in such forward-looking statements. Important risk factors that may cause such a
difference include, but are not limited to, (i) the completion of the proposed transaction on anticipated terms and timing, including obtaining required regulatory approvals, anticipated tax treatment, unforeseen liabilities, future capital
expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined company’s
operations and other conditions to the completion of the acquisition, including the possibility that any of the anticipated benefits of the proposed transaction will not be realized or will not be realized within the expected time period,
(ii) the ability of Morgan Stanley and Eaton Vance to integrate the business successfully and to achieve anticipated synergies, risks and costs, (iii) potential litigation relating to the proposed transaction that could be instituted against
Morgan Stanley, Eaton Vance or their respective directors, (iv) the risk that disruptions from the proposed transaction will harm Morgan Stanley’s and Eaton Vance’s business, including current plans and operations, (v) the ability of Morgan
Stanley or Eaton Vance to retain and hire key personnel, (vi) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the acquisition, (vii) continued availability of capital and
financing and rating agency actions, (viii) legislative, regulatory and economic developments, (ix) potential business uncertainty, including changes to existing business relationships, during the pendency of the acquisition that could affect
Morgan Stanley’s and/or Eaton Vance’s financial performance, (x) certain restrictions during the pendency of the acquisition that may impact Morgan Stanley’s or Eaton Vance’s ability to pursue certain business opportunities or strategic
transactions, (xi) unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as Morgan Stanley’s or Eaton Vance’s management’s response to any of the
aforementioned factors, (xii) dilution caused by Morgan Stanley’s issuance of additional shares of its common stock in connection with the proposed transaction, (xiii) the possibility that the transaction may be more expensive to complete
than anticipated, including as a result of unexpected factors or events, (xiv) those risks described in Item 1A of Morgan Stanley’s most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K, (xv) those risks
described in Item 1A of Eaton Vance’s most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K and (xvi) the additional risk factors described in the registration statement on Form S-4 filed on December 4,
2020, including amendments thereto (“Form S-4”), available from the sources indicated above. These risks, as well as other risks associated with the proposed acquisition, are more fully discussed in the registration statement on Form S-4
filed with the SEC in connection with the proposed acquisition. While the list of factors presented here is, and the list of factors presented in the registration statement on Form S-4 are, considered representative, no such list should be
considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as
compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a
material adverse effect on Morgan Stanley’s or Eaton Vance’s consolidated financial condition, results of operations, credit rating or liquidity. Neither Morgan Stanley nor Eaton Vance assumes any obligation to publicly provide revisions or
updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.