FAIR VALUE (Tables)

9 Months Ended

Jun. 30, 2023

Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis

The following tables present assets and liabilities measured at fair value on a recurring basis. Netting adjustments represent the impact of counterparty and collateral netting on our derivative balances included on our Condensed Consolidated Statements of Financial Condition. See Note 5 for additional information.


$ in millions	Level 1		Level 2		Level 3		Netting adjustments		Balance as of June 30, 2023
Assets at fair value on a recurring basis:

Trading assets:
Municipal and provincial obligations	$	—	$	257	$	—	$	—	$	257
Corporate obligations	24		598		—		—		622
Government and agency obligations	44		105		—		—		149
Agency mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMOs”) and asset-backed securities (“ABS”)	—		19		—		—		19
Non-agency CMOs and ABS	—		60		—		—		60
Total debt securities	68		1,039		—		—		1,107
Equity securities	10		2		—		—		12
Brokered certificates of deposit	—		28		—		—		28
Other	—		—		9		—		9
Total trading assets	78		1,069		9		—		1,156
Available-for-sale securities (1)	1,238		8,328		—		—		9,566
Derivative assets:
Interest rate	9		414		—		(199)		224


Foreign exchange	—		5		—		—		5

Total derivative assets	9		419		—		(199)		229

All other investments:
Government and agency obligations (2)	82		—		—		—		82
Other	93		2		29		—		124
Total all other investments	175		2		29		—		206
Other assets - client-owned fractional shares	100		—		—		—		100
Subtotal	1,600		9,818		38		(199)		11,257
Other investments - private equity - measured at net asset value (“NAV”)									100
Total assets at fair value on a recurring basis	$	1,600	$	9,818	$	38	$	(199)	$	11,357

Liabilities at fair value on a recurring basis:
Trading liabilities:
Municipal and provincial obligations	$	10	$	2	$	—	$	—	$	12
Corporate obligations	—		561		—		—		561
Government and agency obligations	129		—		—		—		129

Total debt securities	139		563		—		—		702
Equity securities	66		—		—		—		66

Total trading liabilities	205		563		—		—		768
Derivative liabilities:
Interest rate	8		461		—		(80)		389



Other	—		—		4		—		4
Total derivative liabilities	8		461		4		(80)		393
Other payables - repurchase liabilities related to client-owned fractional shares	100		—		—		—		100
Total liabilities at fair value on a recurring basis	$	313	$	1,024	$	4	$	(80)	$	1,261


$ in millions	Level 1		Level 2		Level 3		Netting adjustments		Balance as of September 30, 2022
Assets at fair value on a recurring basis:

Trading assets:
Municipal and provincial obligations	$	—	$	269	$	—	$	—	$	269
Corporate obligations	16		579		—		—		595
Government and agency obligations	86		85		—		—		171
Agency MBS, CMOs, and ABS	—		123		—		—		123
Non-agency CMOs and ABS	—		61		—		—		61
Total debt securities	102		1,117		—		—		1,219
Equity securities	20		—		—		—		20
Brokered certificates of deposit	—		30		—		—		30
Other	—		—		1		—		1
Total trading assets	122		1,147		1		—		1,270
Available-for-sale securities (1)	986		8,899		—		—		9,885
Derivative assets:
Interest rate	42		484		—		(348)		178


Foreign exchange	—		10		—		—		10
Total derivative assets	42		494		—		(348)		188

All other investments:
Government and agency obligations (2)	79		—		—		—		79
Other	92		2		29		—		123
Total all other investments	171		2		29		—		202
Other assets - client-owned fractional shares	78		—		—		—		78
Subtotal	1,399		10,542		30		(348)		11,623
Other investments - private equity - measured at NAV									90
Total assets at fair value on a recurring basis	$	1,399	$	10,542	$	30	$	(348)	$	11,713

Liabilities at fair value on a recurring basis:
Trading liabilities:
Municipal and provincial obligations	$	5	$	—	$	—	$	—	$	5
Corporate obligations	—		555		—		—		555
Government and agency obligations	249		—		—		—		249

Total debt securities	254		555		—		—		809
Equity securities	27		—		—		—		27

Total trading liabilities	281		555		—		—		836
Derivative liabilities:
Interest rate	40		547		—		(65)		522


Foreign exchange	—		5		—		—		5
Other	—		—		3		—		3
Total derivative liabilities	40		552		3		(65)		530
Other payables - repurchase liabilities related to client-owned fractional shares	78		—		—		—		78
Total liabilities at fair value on a recurring basis	$	399	$	1,107	$	3	$	(65)	$	1,444

(1) Our available-for-sale securities primarily consist of agency MBS, agency CMOs and U.S. Treasury securities (“U.S. Treasuries”). See Note 4 for further information.

(2) These assets are primarily comprised of U.S. Treasuries purchased to meet certain deposit requirements with clearing organizations.

Level 3 Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis, Roll Forward Table of Change in Balances

The following tables present the changes in fair value for Level 3 assets and liabilities measured at fair value on a recurring basis. The realized and unrealized gains and losses in the tables may include changes in fair value that were attributable to both observable and unobservable inputs. In the following tables, gains/(losses) on trading and derivative instruments are reported in “Principal transactions” and gains/(losses) on other investments are reported in “Other” revenues on our Condensed Consolidated Statements of Income and Comprehensive Income.


Three months ended June 30, 2023 Level 3 instruments at fair value
	Financial assets				Financial liabilities
	Trading assets		Other investments			Derivative liabilities
$ in millions	Other		All other			Other
Fair value beginning of period	$	3	$	28		$	(4)
Total gains/(losses) included in earnings	(1)		1			—
Purchases and contributions	19		—			—
Sales and distributions	(12)		—			—
Transfers:
Into Level 3	—		—			—
Out of Level 3	—		—			—
Fair value end of period	$	9	$	29		$	(4)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	1	$	1		$	—


Nine Months Ended June 30, 2023 Level 3 instruments at fair value
	Financial assets				Financial liabilities
	Trading assets		Other investments			Derivative liabilities
$ in millions	Other		All other			Other
Fair value beginning of period	$	1	$	29		$	(3)
Total gains/(losses) included in earnings	(1)		—			(1)
Purchases and contributions	55		—			—
Sales and distributions	(46)		—			—
Transfers:
Into Level 3	—		—			—
Out of Level 3	—		—			—
Fair value end of period	$	9	$	29		$	(4)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	1	$	—		$	(1)


Three months ended June 30, 2022 Level 3 instruments at fair value
	Financial assets						Financial liabilities
	Trading assets		Derivative assets		Other investments			Trading liabilities		Derivative liabilities
$ in millions	Other		Other		All other			Other		Other
Fair value beginning of period	$	13	$	—	$	53		$	(1)	$	—
Total gains/(losses) included in earnings	(1)		2		—			1		(1)
Purchases and contributions	37		—		—			—		—
Sales, distributions, and deconsolidations	(49)		—		(2)			—		—
Transfers:
Into Level 3	—		—		—			—		—
Out of Level 3	—		—		—			—		—
Fair value end of period	$	—	$	2	$	51		$	—	$	(1)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	—	$	2	$	5		$	—	$	(1)


Nine Months Ended June 30, 2022 Level 3 instruments at fair value
	Financial assets						Financial liabilities
	Trading assets		Derivative assets		Other investments			Derivative liabilities
$ in millions	Other		Other		All other			Other
Fair value beginning of period	$	14	$	—	$	98		$	(1)
Total gains/(losses) included in earnings	1		2		—			—
Purchases and contributions	91		—		7			—
Sales, distributions, and deconsolidations	(106)		—		(42)			—
Transfers:
Into Level 3	—		—		—			—
Out of Level 3	—		—		(12)			—
Fair value end of period	$	—	$	2	$	51		$	(1)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	—	$	2	$	5		$	(1)

Net Asset Value of Recorded Value and Unfunded Commitments

The following table presents the recorded value and unfunded commitments related to our private equity investments portfolio.


$ in millions	Recorded value		Unfunded commitment
June 30, 2023
Private equity investments measured at NAV	$	100	$	36
Private equity investments not measured at NAV	7
Total private equity investments	$	107

September 30, 2022
Private equity investments measured at NAV	$	90	$	39
Private equity investments not measured at NAV	5
Total private equity investments	$	95

Fair Value Measurements, Nonrecurring

The following table presents assets measured at fair value on a nonrecurring basis along with the valuation techniques and significant unobservable inputs used in the valuation of the assets classified as level 3. These inputs represent those that a market participant would take into account when pricing these instruments. Weighted averages are calculated by weighting each input by the relative fair value of the related financial instrument.


$ in millions	Level 2		Level 3		Total fair value		Valuation technique(s)	Unobservable input	Range (weighted-average)
June 30, 2023
Bank loans:
Residential mortgage loans	$	2	$	8	$	10	Collateral or discounted cash flow (1)	Prepayment rate	7 yrs. - 12 yrs. (10.3 yrs.)
Corporate loans	$	—	$	95	$	95	Collateral or discounted cash flow (1)	Recovery rate	41% - 70% (64%)
Loans held for sale	$	28	$	—	$	28	N/A	N/A	N/A


September 30, 2022
Bank loans:
Residential mortgage loans	$	2	$	10	$	12	Collateral or discounted cash flow (1)	Prepayment rate	7 yrs. - 12 yrs. (10.4 yrs.)
Corporate loans	$	—	$	57	$	57	Collateral or discounted cash flow (1)	Recovery rate	24% - 66% (47%)
Loans held for sale	$	3	$	—	$	3	N/A	N/A	N/A

(1) The valuation techniques used to estimate the fair values are based on collateral value less selling costs for the collateral-dependent loans and discounted cash flows for loans that are not collateral-dependent. Unobservable inputs used in the collateral valuation technique are not meaningful and unobservable inputs used in the discounted cash flow valuation technique are presented in the table.

Carrying Amounts and Estimated Fair Values of Financial Instruments Not Carried at Fair Value

The following table presents the estimated fair value and fair value hierarchy of financial assets and liabilities that are not recorded at fair value on the Condensed Consolidated Statements of Financial Condition at June 30, 2023 and September 30, 2022. This table excludes financial instruments that are carried at amounts which approximate fair value. Refer to Note 4 of our 2022 Form 10-K for a discussion of the fair value hierarchy classifications of our financial instruments that are not recorded at fair value.


$ in millions	Level 2		Level 3		Total estimated fair value		Carrying amount
June 30, 2023
Financial assets:
Bank loans, net	$	106	$	42,410	$	42,516	$	43,212
Financial liabilities:
Bank deposits - certificates of deposit	$	2,732	$	—	$	2,732	$	2,739
Other borrowings - subordinated notes payable	$	92	$	—	$	92	$	100
Senior notes payable	$	1,776	$	—	$	1,776	$	2,039

September 30, 2022
Financial assets:
Bank loans, net	$	134	$	42,336	$	42,470	$	43,167
Financial liabilities:
Bank deposits - certificates of deposit	$	400	$	579	$	979	$	999
Other borrowings - subordinated notes payable	$	95	$	—	$	95	$	100
Senior notes payable	$	1,706	$	—	$	1,706	$	2,038