EX-99.2 3 a50443960ex99-2.htm EXHIBIT 99.2 a50443960ex99-2.htm
Exhibit 99.2
 
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MORGAN STANLEY
Financial Supplement - 3Q 2012
Table of Contents
 
Page #
     
       
1
 
…………….
Quarterly Financial Summary
2
 
…………….
Quarterly Consolidated Income Statement Information
3
 
…………….
Quarterly Earnings Per Share Summary
4 - 5
 
…………….
Quarterly Consolidated Financial Information and Statistical Data
6
 
…………….
Quarterly Institutional Securities Income Statement Information
7 - 9
 
…………….
Quarterly Institutional Securities Financial Information and Statistical Data
10
 
…………….
Quarterly Global Wealth Management Group Income Statement Information
11
 
…………….
Quarterly Global Wealth Management Group Financial Information and Statistical Data
12
 
…………….
Quarterly Asset Management Income Statement Information
13
 
…………….
Quarterly Asset Management Financial Information and Statistical Data
14
 
…………….
Country Risk Exposure - European Peripherals and France Appendix I
15
 
…………….
Earnings Per Share Appendix II
16 - 17
 
…………….
End Notes
18
 
…………….
Legal Notice
 
 
 
 

 
 
Logo
MORGAN STANLEY
Quarterly Financial Summary
(unaudited, dollars in millions)
 
   
Quarter Ended
 
Percentage Change From:
 
Nine Months Ended
 
Percentage
   
Sept 30, 2012
 
June 30, 2012
 
Sept 30, 2011
 
June 30, 2012
 
Sept 30, 2011
 
Sept 30, 2012
 
Sept 30, 2011
 
Change
Net revenues
                                               
Institutional Securities
  $ 1,376     $ 3,234     $ 6,410       (57 %)     (79 %)   $ 7,633     $ 15,137       (50 %)
Global Wealth Management Group
    3,336       3,305       3,226       1 %     3 %     10,055       10,070       --  
Asset Management
    631       456       205       38 %     *       1,620       1,463       11 %
Intersegment Eliminations
    (54 )     (42 )     (31 )     (29 %)     (74 %)     (131 )     (79 )     (66 %)
Consolidated net revenues
  $ 5,289     $ 6,953     $ 9,810       (24 %)     (46 %)   $ 19,177     $ 26,591       (28 %)
                                                                 
Income (loss) from continuing operations before tax
                                                               
Institutional Securities
  $ (1,917 )   $ 508     $ 3,447       *       *     $ (1,721 )   $ 5,364       *  
Global Wealth Management Group
    239       393       356       (39 %)     (33 %)     1,019       1,017       --  
Asset Management
    198       43       (118 )     *       *       369       175       111 %
Intersegment Eliminations
    0       (4 )     0       *       --       (4 )     0       *  
Consolidated income (loss) from continuing operations before tax
  $ (1,480 )   $ 940     $ 3,685       *       *     $ (337 )   $ 6,556       *  
                                                                 
Income (loss) applicable to Morgan Stanley
                                                               
Institutional Securities
  $ (1,268 )   $ 381     $ 2,072       *       *     $ (1,183 )   $ 3,827       *  
Global Wealth Management Group
    157       172       167       (9 %)     (6 %)     522       527       (1 %)
Asset Management
    104       14       (61 )     *       *       143       29       *  
Intersegment Eliminations
    0       (4 )     0       *       --       (4 )     0       *  
Consolidated income (loss) applicable to Morgan Stanley
  $ (1,007 )   $ 563     $ 2,178       *       *     $ (522 )   $ 4,383       *  
                                                                 
                                                                 
Financial Metrics:
                                                               
Return on average common equity
                                                               
from continuing operations
    *       3.5 %     14.6 %                     *       6.1 %        
Return on average common equity
    *       3.7 %     14.7 %                     *       6.0 %        
                                                                 
Tier 1 common capital ratio
    13.7 %     13.6 %     11.6 %                                        
Tier 1 capital ratio
    16.7 %     17.2 %     14.9 %                                        
                                                                 
Book value per common share
  $ 30.53     $ 31.02     $ 31.29                                          
Tangible book value per common share
  $ 26.65     $ 27.70     $ 27.79                                          
                                                                 
 
Notes:
Results for the quarters ended September 30, 2012, June 30, 2012 and September 30, 2011, include positive (negative) revenue of $(2,262) million, $350 million and $3,410 million, respectively, related to the movement in Morgan Stanley's credit spreads and other credit factors on certain long-term and short-term debt (Debt Valuation Adjustment, DVA).
 
Income (loss) applicable to Morgan Stanley represents income (loss) from continuing operations, adjusted for the portion of net income (loss) applicable to noncontrolling interests related to continuing operations.  For the quarters ended September 30, 2012, June 30, 2012, and September 30, 2011 net income (loss) applicable to noncontrolling interests include $16 million, $8 million, and $2 million respectively, reported as a gain in discontinued operations.
 
The return on average common equity and tangible book value per common share are non-GAAP measures that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance and capital adequacy.
 
Tier 1 common capital ratio equals Tier 1 common equity divided by Risk Weighted Assets (RWA).
 
Tier 1 capital ratio equals Tier 1 capital divided by RWA.
 
Book value per common share equals common equity divided by period end common shares outstanding.
 
Tangible book value per common share equals tangible common equity divided by period end common shares outstanding.
 
See page 4 of the financial supplement for additional information related to the calculation of the financial metrics.
 
Refer to Legal Notice on page 18.
 
 
1

 
 
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MORGAN STANLEY
Quarterly Consolidated Income Statement Information
(unaudited, dollars in millions)
 
   
Quarter Ended
 
Percentage Change From:
 
Nine Months Ended
 
Percentage
   
Sept 30, 2012
 
June 30, 2012
 
Sept 30, 2011
 
June 30, 2012
 
Sept 30, 2011
 
Sept 30, 2012
 
Sept 30, 2011
 
Change
Revenues:
                                               
Investment banking
  $ 1,152     $ 1,104     $ 1,031       4 %     12 %   $ 3,319     $ 3,940       (16 %)
Principal transactions:
                                                               
Trading
    607       2,469       4,960       (75 %)     (88 %)     5,483       11,421       (52 %)
Investments
    290       63       (298 )     *       *       438       433       1 %
Commissions and fees
    988       1,040       1,476       (5 %)     (33 %)     3,205       4,198       (24 %)
Asset management, distribution and admin. fees
    2,257       2,268       2,149       --       5 %     6,677       6,406       4 %
Other
    152       170       347       (11 %)     (56 %)     432       110       *  
Total non-interest revenues
    5,446       7,114       9,665       (23 %)     (44 %)     19,554       26,508       (26 %)
                                                                 
Interest income
    1,379       1,323       1,753       4 %     (21 %)     4,244       5,573       (24 %)
Interest expense
    1,536       1,484       1,608       4 %     (4 %)     4,621       5,490       (16 %)
Net interest
    (157 )     (161 )     145       2 %     *       (377 )     83       *  
Net revenues
    5,289       6,953       9,810       (24 %)     (46 %)     19,177       26,591       (28 %)
Non-interest expenses:
                                                               
Compensation and benefits
    3,929       3,633       3,638       8 %     8 %     11,993       12,545       (4 %)
Non-compensation expenses:
                                                               
Occupancy and equipment
    388       380       382       2 %     2 %     1,160       1,174       (1 %)
Brokerage, clearing and exchange fees
    359       405       443       (11 %)     (19 %)     1,167       1,254       (7 %)
Information processing and communications
    493       487       456       1 %     8 %     1,439       1,340       7 %
Marketing and business development
    138       156       143       (12 %)     (3 %)     440       436       1 %
Professional services
    477       478       440       --       8 %     1,367       1,310       4 %
Other
    985       474       623       108 %     58 %     1,948       1,976       (1 %)
Total non-compensation expenses 
    2,840       2,380       2,487       19 %     14 %     7,521       7,490       --  
                                                                 
Total non-interest expenses
    6,769       6,013       6,125       13 %     11 %     19,514       20,035       (3 %)
                                                                 
Income (loss) from continuing operations before taxes
    (1,480 )     940       3,685       *       *       (337 )     6,556       *  
Income tax provision / (benefit) from continuing operations
    (524 )     226       1,415       *       *       (244 )     1,709       *  
Income (loss) from continuing operations
    (956 )     714       2,270       *       *       (93 )     4,847       *  
Gain (loss) from discontinued operations after tax
    0       36       23       *       *       21       (18 )     *  
Net income (loss)
  $ (956 )   $ 750     $ 2,293       *       *     $ (72 )   $ 4,829       *  
Net income applicable to redeemable noncontrolling interests
    8       0       0       *       *       8       0       *  
Net income applicable to nonredeemable noncontrolling interests
    59       159       94       (63 %)     (37 %)     446       469       (5 %)
Net income (loss) applicable to Morgan Stanley
    (1,023 )     591       2,199       *       *       (526 )     4,360       *  
Preferred stock dividend / Other
    24       27       46       (11 %)     (48 %)     73       2,025       (96 %)
Earnings (loss) applicable to Morgan Stanley common shareholders
  $ (1,047 )   $ 564     $ 2,153       *       *     $ (599 )   $ 2,335       *  
                                                                 
Amounts applicable to Morgan Stanley:
                                                               
Income (loss) from continuing operations
    (1,007 )     563       2,178       *       *       (522 )     4,383       *  
Gain (loss) from discontinued operations after tax
    (16 )     28       21       *       *       (4 )     (23 )     83 %
Net income (loss) applicable to Morgan Stanley
  $ (1,023 )   $ 591     $ 2,199       *       *     $ (526 )   $ 4,360       *  
                                                                 
Pre-tax profit margin
    *       14 %     38 %                     *       25 %        
Compensation and benefits as a % of net revenues
    74 %     52 %     37 %                     63 %     47 %        
Non-compensation expenses as a % of net revenues
    54 %     34 %     25 %                     39 %     28 %        
Effective tax rate from continuing operations
    35.4 %     24.0 %     38.4 %                     72.4 %     26.1 %        
                                                                 
 
Notes:
Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance.  Percentages represent income from continuing operations before income taxes as a percentage of net revenues.
 
The portion of net income attributable to noncontrolling interests for consolidated entities is presented as either net income (loss) applicable to redeemable noncontrolling interests or net income (loss) applicable to nonredeemable noncontrolling interests.
 
During the quarter ended September 30, 2012, Morgan Stanley completed the purchase of an additional 14% stake in Morgan Stanley Smith Barney (Joint Venture) from Citigroup Inc. (Citi), increasing the Firm’s interest from 51% to 65%. Prior to September 17, 2012, Citi’s results related to its 49% interest were reported in net income (loss) applicable to nonredeemable noncontrolling interests. Due to the terms of the revised agreement with Citi, subsequent to the purchase of the additional 14% stake, Citi’s results related to the 35% interest are reported in net income (loss) applicable to redeemable noncontrolling interests.
 
The quarter ended September 30, 2012 includes an out of period net income tax provision of approximately $82 million, primarily related to the overstatement of tax benefits associated with repatriated earnings of a foreign subsidiary in 2010.
 
For the quarter ended June 30, 2012, discontinued operations included operating results related to Saxon (reported in Institutional Securities segment) and a pre-tax gain of $108 million ($73 million after-tax) and other operating income related to the sale of Quilter & Co. Ltd. (Quilter) (reported in the Global Wealth Management business segment).
 
Preferred stock dividend / other includes allocation of earnings to Participating Restricted Stock Units (RSUs).
 
 
2

 
 
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MORGAN STANLEY
Quarterly Earnings Per Share
(unaudited, dollars in millions, except for per share data)
 
   
Quarter Ended
 
Percentage Change From:
 
Nine Months Ended
 
Percentage
   
Sept 30, 2012
 
June 30, 2012
 
Sept 30, 2011
 
June 30, 2012
 
Sept 30, 2011
 
Sept 30, 2012
 
Sept 30, 2011
 
Change
                                                 
                                                 
Income (loss) from continuing operations
  $ (956 )   $ 714     $ 2,270       *       *     $ (93 )   $ 4,847       *  
Net income applicable to redeemable noncontrolling interests
    8       0       0       *       *       8       0       *  
Net income applicable to nonredeemable noncontrolling interests
    43       151       92       (72 %)     (53 %)     421       464       (9 %)
Net income (loss) from continuing operations applicable to noncontrolling interest
    51       151       92       (66 %)     (45 %)     429       464       (8 %)
Income (loss) from continuing operations applicable to Morgan Stanley
    (1,007 )     563       2,178       *       *       (522 )     4,383       *  
Less: Preferred Dividends
    24       24       24       --       --       72       268       (73 %)
Less: MUFG preferred stock conversion
    -       -       -       --       --       -       1,726       *  
Income from continuing operations applicable to Morgan Stanley, prior to allocation of income to Participating Restricted Stock Units
    (1,031 )     539       2,154       *       *       (594 )     2,389       *  
                                                                 
Basic EPS Adjustments:
                                                               
Less: Allocation of earnings to Participating Restricted Stock Units
    0       3       22       *       *       1       31       (97 %)
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders
  $ (1,031 )   $ 536     $ 2,132       *       *     $ (595 )   $ 2,358       *  
                                                                 
Gain (loss) from discontinued operations after tax
    0       36       23       *       *       21       (18 )     *  
Less: Gain (loss) from discontinued operations after tax applicable to noncontrolling interests
    16       8       2       100 %     *       25       5       *  
Gain (loss) from discontinued operations after tax applicable to Morgan Stanley
    (16 )     28       21       *       *       (4 )     (23 )     83 %
Less: Allocation of earnings to Participating Restricted Stock Units
    0       0       0       --       --       0       0       --  
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders
    (16 )     28       21       *       *       (4 )     (23 )     83 %
                                                                 
Earnings (loss) applicable to Morgan Stanley common shareholders
  $ (1,047 )   $ 564     $ 2,153       *       *     $ (599 )   $ 2,335       *  
                                                                 
Average basic common shares outstanding (millions)
    1,889       1,885       1,848       --       2 %     1,884       1,590       19 %
                                                                 
Earnings per basic share:
                                                               
Income from continuing operations
  $ (0.55 )   $ 0.28     $ 1.15       *       *     $ (0.32 )   $ 1.48       *  
Discontinued operations
  $ -     $ 0.02     $ 0.01       *       *     $ -     $ (0.01 )     *  
Earnings per basic share
  $ (0.55 )   $ 0.30     $ 1.16       *       *     $ (0.32 )   $ 1.47       *  
                                                                 
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders
  $ (1,031 )   $ 536     $ 2,132       *       *     $ (595 )   $ 2,358       *  
                                                                 
Diluted EPS Adjustments:
                                                               
Earnings (loss) from continuing operations applicable to Morgan Stanley common shareholders
  $ (1,031 )   $ 536     $ 2,132       *       *     $ (595 )   $ 2,358       *  
                                                                 
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders
    (16 )     28       21       *       *       (4 )     (23 )     83 %
                                                                 
Earnings (loss) applicable to Morgan Stanley common shareholders
  $ (1,047 )   $ 564     $ 2,153       *       *     $ (599 )   $ 2,335       *  
                                                                 
Average diluted common shares outstanding and common stock equivalents (millions)
    1,889       1,912       1,869       (1 %)     1 %     1,884       1,608       17 %
                                                                 
Earnings per diluted share:
                                                               
Income from continuing operations
  $ (0.55 )   $ 0.28     $ 1.14       *       *     $ (0.32 )   $ 1.47       *  
Discontinued operations
  $ -     $ 0.01     $ 0.01       *       *     $ -     $ (0.02 )     *  
Earnings per diluted share
  $ (0.55 )   $ 0.29     $ 1.15       *       *     $ (0.32 )   $ 1.45       *  
                                                                 
 
Notes: 
The portion of net income attributable to noncontrolling interests for consolidated entities is presented as either net income (loss) applicable to redeemable noncontrolling interests or net income (loss) applicable to nonredeemable noncontrolling interests.
 
The Firm calculates earnings per share using the two-class method as described under the accounting guidance for earnings per share.  For further discussion of the Firm's earnings per share calculations, see page 15 of the financial supplement and Note 2 to the consolidated financial statements in the Firm's Annual Report on Form 10-K for the year ended December 31, 2011.
 
Refer to Legal Notice on page 18.
 
 
3

 
 
Logo
MORGAN STANLEY
Quarterly Consolidated Financial Information and Statistical Data
(unaudited)
 
   
Quarter Ended
 
Percentage Change From:
 
Nine Months Ended
 
Percentage
   
Sept 30, 2012
 
June 30, 2012
 
Sept 30, 2011
 
June 30, 2012
 
Sept 30, 2011
 
Sept 30, 2012
 
Sept 30, 2011
 
Change
                                                 
                                                 
Regional revenues (1)
                                               
Americas
  $ 4,753     $ 5,114     $ 6,544       (7 %)     (27 %)   $ 14,657     $ 18,609       (21 %)
EMEA (Europe, Middle East, Africa)
    296       978       2,199       (70 %)     (87 %)     2,428       5,393       (55 %)
Asia
    240       861       1,067       (72 %)     (78 %)     2,092       2,589       (19 %)
Consolidated net revenues
  $ 5,289     $ 6,953     $ 9,810       (24 %)     (46 %)   $ 19,177     $ 26,591       (28 %)
                                                                 
Worldwide employees
    57,726       58,627       62,245       (2 %)     (7 %)                        
                                                                 
Firmwide deposits
  $ 70,757     $ 68,252     $ 66,184       4 %     7 %                        
Total assets
  $ 764,985     $ 748,517     $ 794,939       2 %     (4 %)                        
Risk weighted assets (2)
  $ 319,202     $ 314,583     $ 346,460       1 %     (8 %)                        
Global Liquidity Reserve (Billions) (3)
  $ 170     $ 173     $ 180       (2 %)     (6 %)                        
Long-Term Debt Outstanding
  $ 168,444     $ 167,828     $ 189,093       --       (11 %)                        
Maturities of Long-Term Debt Outstanding (next 12 months)
  $ 20,214     $ 25,356     $ 38,731       (20 %)     (48 %)                        
                                                                 
Common equity
    60,291       61,333       60,320       (2 %)     --                          
Preferred equity
    1,508       1,508       1,508       --       --                          
Morgan Stanley shareholders' equity
    61,799       62,841       61,828       (2 %)     --                          
Junior subordinated debt issued to capital trusts
    4,833       4,851       4,836       --       --                          
Less: Goodwill and intangible assets (4)
    (7,655 )     (6,568 )     (6,761 )     (17 %)     (13 %)                        
Tangible Morgan Stanley shareholders' equity
  $ 58,977     $ 61,124     $ 59,903       (4 %)     (2 %)                        
Tangible common equity
  $ 52,636     $ 54,765     $ 53,559       (4 %)     (2 %)                        
                                                                 
Leverage ratio
    13.0 x     12.2 x     13.3 x                                        
                                                                 
Tier 1 common capital (5)
  $ 43,729     $ 42,765     $ 40,326       2 %     8 %                        
Tier 1 capital (6)
  $ 53,353     $ 54,245     $ 51,613       (2 %)     3 %                        
                                                                 
Tier 1 common capital ratio
    13.7 %     13.6 %     11.6 %                                        
Tier 1 capital ratio
    16.7 %     17.2 %     14.9 %                                        
Tier 1 leverage ratio
    7.2 %     7.1 %     6.3 %                                        
                                                                 
Period end common shares outstanding (000's)
    1,975,040       1,977,403       1,927,540       --       2 %                        
                                                                 
Book value per common share
  $ 30.53     $ 31.02     $ 31.29                                          
Tangible book value per common share
  $ 26.65     $ 27.70     $ 27.79                                          
                                                                 
 
Notes:
All data presented in millions except number of employees, liquidity, ratios and book values.
 
The number of worldwide employees for all periods has been restated to exclude employees of Quilter.
 
Tangible common equity and tangible book value per common share are non-GAAP financial measures that the Firm considers to be useful measures of capital adequacy. Tangible common equity equals common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction and includes only the Firm’s share of the Joint Venture’s goodwill and intangible assets. Tangible book value per common share equals tangible common equity divided by period end common shares outstanding.
 
Leverage ratio equals total assets divided by tangible Morgan Stanley shareholders' equity.
 
Tier 1 leverage ratio equals Tier 1 capital divided by adjusted average total assets (which reflects adjustments for disallowed goodwill, certain intangible assets, deferred tax assets and financial and non-financial equity investments).
 
Refer to End Notes on pages 16-17 and Legal Notice on page 18.
 
 
4

 
 
Logo
MORGAN STANLEY
Quarterly Consolidated Financial Information and Statistical Data
(unaudited, dollars in billions)
 
   
Quarter Ended
 
Percentage Change From:
 
Nine Months Ended
 
Percentage
   
Sept 30, 2012
 
June 30, 2012
 
Sept 30, 2011
 
June 30, 2012
 
Sept 30, 2011
 
Sept 30, 2012
 
Sept 30, 2011
 
Change:
Average Tier 1 Common Capital (1)
                                           
Institutional Securities
  $ 22.0     $ 22.3     $ 25.9       (1 %)     (15 %)   $ 22.2     $ 26.5       (16 %)
Global Wealth Management Group
    3.8       3.8       3.5       --       9 %     3.7       3.3       12 %
Asset Management
    1.3       1.3       1.5       --       (13 %)     1.3       1.5       (13 %)
Parent capital
    16.3       15.1       9.4       8 %     73 %     15.1       3.1       *  
Total - continuing operations
    43.4       42.5       40.3       2 %     8 %     42.3       34.4       23 %
Discontinued operations
    0.0       0.0       0.0       --       --       0.0       0.0       --  
Firm
  $ 43.4     $ 42.5     $ 40.3       2 %     8 %   $ 42.3     $ 34.4       23 %
                                                                 
Average Common Equity (1)
                                                               
Institutional Securities
  $ 28.6     $ 29.3     $ 32.7       (2 %)     (13 %)   $ 29.2     $ 33.2       (12 %)
Global Wealth Management Group
    13.2       13.3       13.5       (1 %)     (2 %)     13.3       13.3       --  
Asset Management
    2.4       2.5       2.7       (4 %)     (11 %)     2.4       2.7       (11 %)
Parent capital
    16.8       16.3       10.2       3 %     65 %     16.1       3.1       *  
Total - continuing operations
    61.0       61.4       59.1       (1 %)     3 %     61.0       52.3       17 %
Discontinued operations
    0.0       0.0       0.0       --       --       0.0       0.0       --  
Firm
  $ 61.0     $ 61.4     $ 59.1       (1 %)     3 %   $ 61.0     $ 52.3       17 %
                                                                 
Return on average Tier 1 common capital
                                                         
Institutional Securities
    *       6 %     32 %                     *       10 %        
Global Wealth Management Group
    16 %     18 %     19 %                     18 %     12 %        
Asset Management