FAIR VALUE

3 Months Ended

Dec. 31, 2023

Our “Financial instruments” and “Financial instrument liabilities” on our Condensed Consolidated Statements of Financial Condition are recorded at fair value. See Notes 2 and 4 of our 2023 Form 10-K for further information about such instruments and our significant accounting policies related to fair value. 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 December 31, 2023
Assets at fair value on a recurring basis:

Trading assets:
Municipal and provincial obligations	$	—	$	191	$	—	$	—	$	191
Corporate obligations	22		640		—		—		662
Government and agency obligations	44		69		—		—		113
Agency mortgage-backed securities (“MBS”), collateralized mortgage obligations (“CMOs”) and asset-backed securities (“ABS”)	—		93		—		—		93
Non-agency CMOs and ABS	—		9		—		—		9
Total debt securities	66		1,002		—		—		1,068
Equity securities	14		2		—		—		16
Brokered certificates of deposit	—		18		—		—		18
Other	—		—		1		—		1
Total trading assets	80		1,022		1		—		1,103
Available-for-sale securities (1)	1,149		8,049		—		—		9,198

Derivative assets - interest rate	8		375		—		(188)		195






All other investments:
Government and agency obligations (2)	72		—		—		—		72
Other	106		2		29		—		137
Total all other investments	178		2		29		—		209
Other assets - client-owned fractional shares	110		—		—		—		110
Subtotal	1,525		9,448		30		(188)		10,815
Other investments - private equity - measured at net asset value (“NAV”)									101
Total assets at fair value on a recurring basis	$	1,525	$	9,448	$	30	$	(188)	$	10,916

Liabilities at fair value on a recurring basis:
Trading liabilities:
Municipal and provincial obligations	$	8	$	—	$	—	$	—	$	8
Corporate obligations	—		614		—		—		614
Government and agency obligations	127		1		—		—		128

Total debt securities	135		615		—		—		750
Equity securities	44		—		—		—		44

Total trading liabilities	179		615		—		—		794
Derivative liabilities:
Interest rate	9		400		—		(114)		295


Foreign exchange	—		15		—		—		15

Total derivative liabilities	9		415		—		(114)		310
Other payables - repurchase liabilities related to client-owned fractional shares	110		—		—		—		110
Total liabilities at fair value on a recurring basis	$	298	$	1,030	$	—	$	(114)	$	1,214


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

Trading assets:
Municipal and provincial obligations	$	—	$	239	$	—	$	—	$	239
Corporate obligations	22		620		—		—		642
Government and agency obligations	24		117		—		—		141
Agency MBS, CMOs, and ABS	—		35		—		—		35
Non-agency CMOs and ABS	—		68		—		—		68
Total debt securities	46		1,079		—		—		1,125
Equity securities	20		2		—		—		22
Brokered certificates of deposit	—		36		—		—		36
Other	—		—		4		—		4
Total trading assets	66		1,117		4		—		1,187
Available-for-sale securities (1)	1,240		7,941		—		—		9,181
Derivative assets:
Interest rate	14		503		—		(261)		256


Foreign exchange	—		9		—		—		9
Total derivative assets	14		512		—		(261)		265

All other investments:
Government and agency obligations (2)	71		—		—		—		71
Other	102		2		30		—		134
Total all other investments	173		2		30		—		205
Other assets - client-owned fractional shares	98		—		—		—		98
Subtotal	1,591		9,572		34		(261)		10,936
Other investments - private equity - measured at NAV									101
Total assets at fair value on a recurring basis	$	1,591	$	9,572	$	34	$	(261)	$	11,037

Liabilities at fair value on a recurring basis:
Trading liabilities:
Municipal and provincial obligations	$	10	$	—	$	—	$	—	$	10
Corporate obligations	—		514		—		—		514
Government and agency obligations	161		1		—		—		162

Total debt securities	171		515		—		—		686
Equity securities	30		—		—		—		30

Total trading liabilities	201		515		—		—		716
Derivative liabilities:
Interest rate	13		563		—		(88)		488


Foreign exchange	—		2		—		—		2

Total derivative liabilities	13		565		—		(88)		490
Other payables - repurchase liabilities related to client-owned fractional shares	98		—		—		—		98
Total liabilities at fair value on a recurring basis	$	312	$	1,080	$	—	$	(88)	$	1,304

(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 recurring fair value measurements

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 December 31, 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	$	4	$	30		$	—
Total gains/(losses) included in earnings	—		(1)			—
Purchases and contributions	12		—			—
Sales and distributions	(15)		—			—
Transfers:
Into Level 3	—		—			—
Out of Level 3	—		—			—
Fair value end of period	$	1	$	29		$	—
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	—	$	(1)		$	—


Three months ended December 31, 2022 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	25		—			—
Sales and distributions	(20)		—			—
Transfers:
Into Level 3	—		—			—
Out of Level 3	—		—			—
Fair value end of period	$	6	$	30		$	(4)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	(1)	$	1		$	(1)

As of both December 31, 2023 and September 30, 2023, 14% of our assets and 2% of our liabilities were measured at fair value on a recurring basis. As of both December 31, 2023 and September 30, 2023, Level 3 assets represented less than 1% of our assets measured at fair value on a recurring basis.

Investments in private equity measured at net asset value per share

As more fully described in Note 2 of our 2023 Form 10-K, as a practical expedient, we utilize NAV or its equivalent to determine the recorded value of a portion of our private equity investments portfolio. We utilize NAV when the fund investment does not have a readily determinable fair value and the NAV of the fund is calculated in a manner consistent with the measurement principles of investment company accounting, including measurement of the investments at fair value.

Our private equity portfolio as of December 31, 2023 primarily included investments in third-party funds, including growth equity, venture capital, and mezzanine lending fund investments. Our investments cannot be redeemed directly with the funds. Our investments are monetized through the liquidation of underlying assets of fund investments, the timing of which is uncertain.

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


$ in millions	Recorded value		Unfunded commitment
December 31, 2023
Private equity investments measured at NAV	$	101	$	25
Private equity investments not measured at NAV	7
Total private equity investments	$	108

September 30, 2023
Private equity investments measured at NAV	$	101	$	29
Private equity investments not measured at NAV	7
Total private equity investments	$	108

Financial instruments measured at fair value on a nonrecurring basis

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)
December 31, 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	$	—	$	104	$	104	Collateral or discounted cash flow (1)	Recovery rate	3% - 63% (49%)
Loans held for sale	$	30	$	—	$	30	N/A	N/A	N/A


September 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	$	—	$	84	$	84	Collateral or discounted cash flow (1)	Recovery rate	22% - 65% (53%)
Loans held for sale	$	2	$	—	$	2	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.

Financial instruments not recorded at fair value

Many, but not all, of the financial instruments we hold were recorded at fair value on the Condensed Consolidated Statements of Financial Condition. 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 December 31, 2023 and September 30, 2023. This table excludes financial instruments that are carried at amounts which approximate fair value. See Note 4 of our 2023 Form 10-K for a discussion of our financial instruments that are not recorded at fair value.


$ in millions	Level 2		Level 3		Total estimated fair value		Carrying amount
December 31, 2023
Financial assets:
Bank loans, net	$	181	$	43,020	$	43,201	$	44,038
Financial liabilities:
Bank deposits - certificates of deposit	$	2,882	$	—	$	2,882	$	2,885
Other borrowings - subordinated notes payable	$	95	$	—	$	95	$	99
Senior notes payable	$	1,817	$	—	$	1,817	$	2,039

September 30, 2023
Financial assets:
Bank loans, net	$	142	$	42,622	$	42,764	$	43,679
Financial liabilities:
Bank deposits - certificates of deposit	$	2,817	$	—	$	2,817	$	2,831
Other borrowings - subordinated notes payable	$	94	$	—	$	94	$	100
Senior notes payable	$	1,640	$	—	$	1,640	$	2,039

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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