EX-99.2 3 a53381858_ex992.htm EXHIBIT 99.2
Exhibit 99.2


First Quarter 2023 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

Consolidated Financial Summary
                              
(unaudited, dollars in millions)
                              
                               
                               
                               
   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
Net revenues
                              
Institutional Securities
  
$
6,797
    
$
4,800
    
$
7,657
      
42
%
    
(11
%)
Wealth Management
    
6,559
      
6,626
      
5,935
      
(1
%)
    
11
%
Investment Management
    
1,289
      
1,461
      
1,335
      
(12
%)
    
(3
%)
Intersegment Eliminations
    
(128
)
    
(138
)
    
(126
)
    
7
%
    
(2
%)
Net revenues (1)
  
$
14,517
    
$
12,749
    
$
14,801
      
14
%
    
(2
%)
                                         
Provision for credit losses
  
$
234
    
$
87
    
$
57
      
169
%
    
*
  
                                         
Non-interest expenses
                                        
Institutional Securities
  
$
4,716
    
$
3,991
    
$
4,826
      
18
%
    
(2
%)
Wealth Management
    
4,802
      
4,760
      
4,349
      
1
%
    
10
%
Investment Management
    
1,123
      
1,247
      
1,107
      
(10
%)
    
1
%
Intersegment Eliminations
    
(118
)
    
(130
)
    
(126
)
    
9
%
    
6
%
Non-interest expenses (1)(2)
  
$
10,523
    
$
9,868
    
$
10,156
      
7
%
    
4
%
                                         
Income before provision for income taxes
                                        
Institutional Securities
  
$
1,892
    
$
748
    
$
2,787
      
153
%
    
(32
%)
Wealth Management
    
1,712
      
1,840
      
1,573
      
(7
%)
    
9
%
Investment Management
    
166
      
214
      
228
      
(22
%)
    
(27
%)
Intersegment Eliminations
    
(10
)
    
(8
)
    
-
      
(25
%)
    
*
  
Income before provision for income taxes
  
$
3,760
    
$
2,794
    
$
4,588
      
35
%
    
(18
%)
                                         
Net Income applicable to Morgan Stanley
                                       
Institutional Securities
  
$
1,478
    
$
656
    
$
2,191
      
125
%
    
(33
%)
Wealth Management
    
1,376
      
1,424
      
1,272
      
(3
%)
    
8
%
Investment Management
    
134
      
162
      
203
      
(17
%)
    
(34
%)
Intersegment Eliminations
    
(8
)
    
(6
)
    
-
      
(33
%)
    
*
  
Net Income applicable to Morgan Stanley
  
$
2,980
    
$
2,236
    
$
3,666
      
33
%
    
(19
%)
                                         
Earnings applicable to Morgan Stanley common shareholders
  
$
2,836
    
$
2,113
    
$
3,542
      
34
%
    
(20
%)
                                         
                                           
Notes: 
                                       
-
Firm net revenues excluding mark-to-market gains and losses on deferred cash-based compensation plans (DCP) were: 1Q23: $14,364 million, 4Q22: $12,555 million, 1Q22: $15,242 million.                     
-
Firm compensation expenses excluding DCP were: 1Q23: $6,217 million, 4Q22: $5,426 million, 1Q22: $6,562 million.
-
The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
                               
Financial Metrics:
                              
                               
Earnings per basic share
  
$
1.72
    
$
1.28
    
$
2.04
      
34
%
    
(16
%)
Earnings per diluted share
  
$
1.70
    
$
1.26
    
$
2.02
      
35
%
    
(16
%)
                                         
Return on average common equity
    
12.4
%
    
9.2
%
    
14.7
%
                
Return on average tangible common equity
    
16.9
%
    
12.6
%
    
19.8
%
                
                                         
Book value per common share
  
$
55.13
    
$
54.55
    
$
54.18
                  
Tangible book value per common share
  
$
40.68
    
$
40.06
    
$
39.91
                  
                                         
Financial Ratios:
                                        
                                         
Pre-tax profit margin
    
26
%
    
22
%
    
31
%
                
Compensation and benefits as a % of net revenues
    
44
%
    
44
%
    
42
%
                
Non-compensation expenses as a % of net revenues
    
28
%
    
33
%
    
26
%
                
Firm expense efficiency ratio (1)
    
72
%
    
77
%
    
69
%
                
Effective tax rate (2)
    
19.3
%
    
18.9
%
    
19.0
%
                
                                         
Statistical Data:
                                        
                                         
Period end common shares outstanding (millions)
    
1,670
      
1,675
      
1,756
      
--
      
(5
%)
Average common shares outstanding (millions)
                                        
Basic
    
1,645
      
1,652
      
1,733
      
--
      
(5
%)
Diluted
    
1,663
      
1,679
      
1,755
      
(1
%)
    
(5
%)
                                         
Worldwide employees
    
82,266
      
82,427
      
76,541
      
--
      
7
%
                                         
                                           
The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
                               
Consolidated Balance sheet
                              
                               
Total assets
  
$
1,199,904
    
$
1,180,231
    
$
1,222,233
      
2
%
    
(2
%)
Loans (1)
  
$
222,727
    
$
222,182
    
$
208,750
      
--
      
7
%
Deposits
  
$
347,523
    
$
356,646
    
$
360,840
      
(3
%)
    
(4
%)
Long-term debt outstanding
  
$
245,595
    
$
233,867
    
$
225,671
      
5
%
    
9
%
Maturities of long-term debt outstanding (next 12 months)
  
$
20,382
    
$
18,910
    
$
21,205
      
8
%
    
(4
%)
                                         
Average liquidity resources
  
$
321,195
    
$
312,250
    
$
338,281
      
3
%
    
(5
%)
                                         
Common equity
  
$
92,076
    
$
91,391
    
$
95,151
      
1
%
    
(3
%)
Less: Goodwill and intangible assets
    
(24,125
)
    
(24,268
)
    
(25,068
)
    
(1
%)
    
(4
%)
Tangible common equity
  
$
67,951
    
$
67,123
    
$
70,083
      
1
%
    
(3
%)
                                         
Preferred equity
  
$
8,750
    
$
8,750
    
$
7,750
      
--
      
13
%
                                         
U.S. Bank Supplemental Financial Information
                                        
Total assets
  
$
384,794
    
$
390,963
    
$
389,978
      
(2
%)
    
(1
%)
Loans
 
$
206,785
    
$
206,344
    
$
194,791
      
--
      
6
%
Investment securities portfolio (2)
  
$
123,250
    
$
123,254
    
$
129,886
      
--
      
(5
%)
Deposits
  
$
340,926
    
$
350,553
    
$
352,078
      
(3
%)
    
(3
%)
                                         
Regional revenues
                                        
Americas
  
$
10,791
    
$
9,897
    
$
10,464
      
9
%
    
3
%
EMEA (Europe, Middle East, Africa)
    
1,737
      
1,430
      
2,311
      
21
%
    
(25
%)
Asia
   
1,989
      
1,422
      
2,026
      
40
%
    
(2
%)
Consolidated net revenues
  
$
14,517
    
$
12,749
    
$
14,801
      
14
%
    
(2
%)
                                         
                                           
The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
                               
Average Common Equity
                              
Institutional Securities
  
$
45.6
    
$
48.8
    
$
48.8
      
(7
%)
    
(7
%)
Wealth Management
    
28.8
      
31.0
      
31.0
      
(7
%)
    
(7
%)
Investment Management
    
10.4
      
10.6
      
10.6
      
(2
%)
    
(2
%)
Parent
   
6.6
      
1.1
      
6.3
      
*
      
5
%
Firm
 
$
91.4
    
$
91.5
    
$
96.7
      
--
      
(5
%)
                                         
                                         
                                         
Regulatory Capital
                                        
                                         
Common Equity Tier 1 capital
  
$
69.4
    
$
68.7
    
$
72.5
      
1
%
    
(4
%)
Tier 1 capital
  
$
77.9
    
$
77.2
    
$
80.1
      
1
%
    
(3
%)
                                         
Standardized Approach
                                        
Risk-weighted assets
  
$
459.1
    
$
447.8
    
$
501.4
      
3
%
    
(8
%)
Common Equity Tier 1 capital ratio
    
15.1
%
    
15.3
%
    
14.5
%
                
Tier 1 capital ratio
    
17.0
%
    
17.2
%
    
16.0
%
                
                                         
Advanced Approach
                                        
Risk-weighted assets
  
$
445.3
    
$
438.8
    
$
456.5
      
1
%
    
(2
%)
Common Equity Tier 1 capital ratio
    
15.6
%
    
15.6
%
    
15.9
%
                
Tier 1 capital ratio
    
17.5
%
    
17.6
%
    
17.6
%
                
                                         
Leverage-based capital
                                        
Tier 1 leverage ratio
    
6.7
%
    
6.7
%
    
6.8
%
                
Supplementary Leverage Ratio
    
5.5
%
    
5.5
%
    
5.5
%
                
                                         
                                           
The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
Revenues:
                              
                               
Advisory
  
$
638
    
$
711
    
$
944
      
(10
%)
    
(32
%)
Equity
    
202
      
227
      
258
      
(11
%)
    
(22
%)
Fixed income
    
407
      
314
      
432
      
30
%
    
(6
%)
Underwriting
    
609
      
541
      
690
      
13
%
    
(12
%)
Investment banking
    
1,247
      
1,252
      
1,634
      
--
      
(24
%)
                                         
Equity
    
2,729
      
2,176
      
3,174
      
25
%
    
(14
%)
Fixed income
    
2,576
      
1,418
      
2,923
      
82
%
    
(12
%)
Other
    
245
      
(46
)
    
(74
)
    
*
      
*
  
                                         
Net revenues
    
6,797
      
4,800
      
7,657
      
42
%
    
(11
%)
                                         
Provision for credit losses
    
189
      
61
      
44
      
*
      
*
  
                                         
Compensation and benefits
    
2,365
      
1,644
      
2,604
      
44
%
    
(9
%)
Non-compensation expenses
    
2,351
      
2,347
      
2,222
      
--
      
6
%
Total non-interest expenses
    
4,716
      
3,991
      
4,826
      
18
%
    
(2
%)
                                         
Income before provision for income taxes
    
1,892
      
748
      
2,787
      
153
%
    
(32
%)
Net income applicable to Morgan Stanley
  
$
1,478
    
$
656
    
$
2,191
      
125
%
    
(33
%)
                                         
Pre-tax profit margin
    
28
%
    
16
%
    
36
%
                
Compensation and benefits as a % of net revenues
    
35
%
    
34
%
    
34
%
                
Non-compensation expenses as a % of net revenues
    
35
%
    
49
%
    
29
%
                
                                         
Return on Average Common Equity
    
12
%
    
5
%
    
17
%
                
Return on Average Tangible Common Equity (1)
    
12
%
    
5
%
    
17
%
                
                                         
Trading VaR (Average Daily 95% / One-Day VaR)
  
$
55
    
$
64
    
$
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, Definition 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:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
Revenues:
                              
Asset management
  
$
3,382
    
$
3,347
    
$
3,626
      
1
%
    
(7
%)
Transactional
    
921
      
931
      
635
      
(1
%)
    
45
%
Net interest income
    
2,158
      
2,138
      
1,540
      
1
%
    
40
%
Other
    
98
      
210
      
134
      
(53
%)
    
(27
%)
Net revenues (1)
    
6,559
      
6,626
      
5,935
      
(1
%)
    
11
%
                                         
Provision for credit losses
    
45
      
26
      
13
      
73
%
    
*
  
                                         
Compensation and benefits (1)
    
3,477
      
3,343
      
3,125
      
4
%
    
11
%
Non-compensation expenses
    
1,325
      
1,417
      
1,224
      
(6
%)
    
8
%
Total non-interest expenses
    
4,802
      
4,760
      
4,349
      
1
%
    
10
%
                                         
Income before provision for income taxes
    
1,712
      
1,840
      
1,573
      
(7
%)
    
9
%
Net income applicable to Morgan Stanley
  
$
1,376
    
$
1,424
    
$
1,272
      
(3
%)
    
8
%
                                         
Pre-tax profit margin
    
26
%
    
28
%
    
27
%
                
Compensation and benefits as a % of net revenues
    
53
%
    
50
%
    
53
%
                
Non-compensation expenses as a % of net revenues
    
20
%
    
21
%
    
21
%
                
                                         
Return on Average Common Equity
    
19
%
    
18
%
    
16
%
                
Return on Average Tangible Common Equity (2)
    
36
%
    
34
%
    
30
%
                

 
 
Notes:
-
Wealth Management net revenues excluding DCP were: 1Q23: $6,458 million, 4Q22: $6,520 million, 1Q22: $6,231 million.
-
Wealth Management compensation expenses excluding DCP were: 1Q23: $3,358 million, 4Q22: $3,228 million, 1Q22: $3,325 million.
-
The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
                               
Wealth Management Metrics
                              
                               
Total client assets
  
$
4,558
    
$
4,187
    
$
4,869
      
9
%
    
(6
%)
Net new assets
  
$
109.6
    
$
51.6
    
$
142.0
      
112
%
    
(23
%)
U.S. Bank loans
  
$
143.7
    
$
146.1
    
$
136.7
      
(2
%)
    
5
%
Margin and other lending (1)
  
$
21.1
    
$
22.0
    
$
29.2
      
(4
%)
    
(28
%)
Deposits (2)
  
$
341
    
$
351
    
$
352
      
(3
%)
    
(3
%)
Annualized weighted average cost of deposits
                                        
Period end
    
2.05
%
    
1.59
%
    
0.09
%
                
Period average
    
1.86
%
    
1.32
%
    
0.10
%
                
                                         
Advisor-led channel
                                        
                                         
Advisor-led client assets
  
$
3,582
    
$
3,392
    
$
3,835
      
6
%
    
(7
%)
                                         
Fee-based client assets
  
$
1,769
    
$
1,678
    
$
1,873
      
5
%
    
(6
%)
Fee-based asset flows
  
$
22.4
    
$
20.4
    
$
97.2
      
10
%
    
(77
%)
Fee-based assets as a % of advisor-led client assets
    
49
%
    
49
%
    
49
%
                
                                         
Self-directed channel
                                        
                                         
Self-directed assets
  
$
976
    
$
795
    
$
1,034
      
23
%
    
(6
%)
Daily average revenue trades (000's)
    
831
      
755
      
1,016
      
10
%
    
(18
%)
Self-directed households (millions)
    
8.1
      
8.0
      
7.6
      
1
%
    
7
%
                                         
Workplace channel
                                        
                                         
Stock plan unvested assets
  
$
358
    
$
302
    
$
454
      
19
%
    
(21
%)
Number of stock plan participants (millions)
    
6.5
      
6.3
      
5.8
      
3
%
    
12
%


 
 
The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
Revenues:
                              
Asset management and related fees
  
$
1,248
    
$
1,371
    
$
1,388
      
(9
%)
    
(10
%)
Performance-based income and other
    
41
      
90
      
(53
)
    
(54
%)
    
*
  
Net revenues
    
1,289
      
1,461
      
1,335
      
(12
%)
    
(3
%)
                                         
Compensation and benefits
    
568
      
628
      
545
      
(10
%)
    
4
%
Non-compensation expenses
    
555
      
619
      
562
      
(10
%)
    
(1
%)
Total non-interest expenses
    
1,123
      
1,247
      
1,107
      
(10
%)
    
1
%
                                         
Income before provision for income taxes
    
166
      
214
      
228
      
(22
%)
    
(27
%)
Net income applicable to Morgan Stanley
  
$
134
    
$
162
    
$
203
      
(17
%)
    
(34
%)
                                         
Pre-tax profit margin
    
13
%
    
15
%
    
17
%
                
Compensation and benefits as a % of net revenues
    
44
%
    
43
%
    
41
%
                
Non-compensation expenses as a % of net revenues
    
43
%
    
42
%
    
42
%
                
                                         
Return on Average Common Equity
    
5
%
    
6
%
    
8
%
                
Return on Average Tangible Common Equity (1)
    
73
%
    
85
%
    
106
%
                


 
 
The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
                               
                               
Assets under management or supervision (AUM)
                              
                               
Net flows by asset class
                              
Equity
  
$
(2.1
)
  
$
(6.1
)
  
$
(7.5
)
    
66
%
    
72
%
Fixed Income
    
(2.0
)
    
(3.8
)
    
(3.9
)
    
47
%
    
49
%
Alternatives and Solutions
    
1.7
      
3.9
      
(3.0
)
    
(56
%)
    
*
  
Long-Term Net Flows
    
(2.4
)
    
(6.0
)
    
(14.4
)
    
60
%
    
83
%
                                         
Liquidity and Overlay Services
    
13.9
      
(18.5
)
    
(28.1
)
    
*
      
*
  
                                         
Total Net Flows
  
$
11.5
    
$
(24.5
)
  
$
(42.5
)
    
*
      
*
  
                                         
Assets under management or supervision by asset class
                                        
Equity
  
$
277
    
$
259
    
$
337
      
7
%
    
(18
%)
Fixed Income
    
175
      
173
      
195
      
1
%
    
(10
%)
Alternatives and Solutions
    
448
      
431
      
449
      
4
%
    
--
  
Long-Term Assets Under Management or Supervision
  
$
900
    
$
863
    
$
981
      
4
%
    
(8
%)
                                         
Liquidity and Overlay Services
    
462
      
442
      
466
      
5
%
    
(1
%)
                                         
Total Assets Under Management or Supervision
  
$
1,362
    
$
1,305
    
$
1,447
      
4
%
    
(6
%)


 
 
The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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:
  
   
Mar 31, 2023
    
Dec 31, 2022
    
Mar 31, 2022
    
Dec 31, 2022
    
Mar 31, 2022
  
                               
Institutional Securities
                              
                               
Loans:
                              
Corporate
  
$
18.3
    
$
17.0
    
$
13.0
      
8
%
    
41
%
Secured lending facilities
    
40.0
      
38.6
      
34.4
      
4
%
    
16
%
Commercial and residential real estate
    
11.8
      
11.7
      
14.6
      
1
%
    
(19
%)
Securities-based lending and other
    
8.7
      
8.5
      
9.7
      
2
%
    
(10
%)
                                         
Total Loans
    
78.8
      
75.8
      
71.7
      
4
%
    
10
%
                                         
Lending Commitments
    
122.3
      
119.7
      
128.0
      
2
%
    
(4
%)
                                         
Institutional Securities Loans and Lending Commitments
  
$
201.1
    
$
195.5
    
$
199.7
      
3
%
    
1
%
                                         
                                         
Wealth Management
                                        
                                         
Loans:
                                        
Securities-based lending and other
  
$
88.4
    
$
91.7
    
$
89.5
      
(4
%)
    
(1
%)
Residential real estate
    
55.3
      
54.4
      
47.2
      
2
%
    
17
%
                                         
Total Loans
    
143.7
      
146.1
      
136.7
      
(2
%)
    
5
%
                                         
Lending Commitments
    
17.8
      
17.3
      
14.5
      
3
%
    
23
%
                                         
Wealth Management Loans and Lending Commitments
  
$
161.5
    
$
163.4
    
$
151.2
      
(1
%)
    
7
%
                                         
Consolidated Loans and Lending Commitments (1)
  
$
362.6
    
$
358.9
    
$
350.9
      
1
%
    
3
%


 
 
The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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 March 31, 2023
                        
(unaudited, dollars in millions)
                        
                         
                         
   
Loans and Lending Commitments
    
ACL (1)
    
ACL %
    
Q1 Provision
  
   
(Gross)
                    
Loans:
                        
Held For Investment (HFI)
                        
                         
Corporate
  
$
7,435
    
$
265
      
3.6
%
  
$
31
  
Secured lending facilities
    
37,187
      
152
      
0.4
%
    
-
  
Commercial and residential real estate
    
8,601
      
335
      
3.9
%
    
129
  
Other
    
3,430
      
13
      
0.4
%
    
-
  
Institutional Securities - HFI
  
$
56,653
    
$
765
      
1.4
%
  
$
160
  
                                 
Wealth Management - HFI
    
143,863
      
205
      
0.1
%
    
41
  
                                 
Held For Investment
  
$
200,516
    
$
970
      
0.5
%
  
$
201
  
                                 
Held For Sale
    
15,146
                          
                                 
Fair Value
    
7,817
                          
                                 
Total Loans
    
223,479
      
970
              
201
  
                                 
Lending Commitments
    
140,096
      
539
      
0.4
%
    
33
  
                                 
Consolidated Loans and Lending Commitments
  
$
363,575
    
$
1,509
            
$
234
  


 
 
The End Notes are an integral part of this presentation.  See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definition 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, 2022 (2022 Form 10-K).
(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:
 
-
The return on average tangible common equity represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average tangible common equity.
 
-
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.
 
-
Net revenues excluding DCP represents net revenues adjusted for the impact of mark-to-market gains/losses on economic hedges associated with certain employee deferred cash-based compensation plans.
  -
Compensation expense excluding DCP represents compensation adjusted for the impact related to certain deferred cash-based compensation plans linked to investment performance.

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, analysts, investors and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.
   
Page 1:
(a)
Provision for credit losses represents the provision for credit losses on loans held for investment and unfunded lending commitments.
(b)
Net income applicable to Morgan Stanley represents net income, less net income applicable to nonredeemable noncontrolling interests.
(c)
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 provision for 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 primarily held within the Parent and its major 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. Average Liquidity Resources represents the average daily balance for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022.
(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, 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 23 to the consolidated financial statements included in the Firm's 2022 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). The Firm continues to evaluate its required capital framework with respect to the impact of evolving regulatory requirements, as appropriate. For further discussion of the framework, refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s 2022 Form 10‐K.
(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 2022 Form 10‐K.
(c)
Supplementary leverage ratio represents Tier 1 capital divided by the total supplementary leverage exposure.
   
Page 5:
(a)
Institutional Securities Equity and Fixed income net revenues include trading, net interest income (interest income less interest expense), asset management, commissions and fees, investments and other revenues which are directly attributable to those businesses.
(b)
Pre-tax profit margin percentages represent income before provision for 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 2022 Form 10-K.
   
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 provision for income taxes as percentages of net revenues.

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, analysts, investors and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.

Page 7:
(a)
Client assets represent those for which Wealth Management is providing services including financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration, and retirement plan services.
(b)
Net new assets represent client inflows, including dividends and interest, and asset acquisitions, less client outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions.
(c)
Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities.
(d)
Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits.
(e)
Annualized weighted average cost of deposits represents the total annualized weighted average cost of the various deposit products, excluding the effect of related hedging derivatives. The period end cost of deposits is based upon balances and rates as of March 31, 2023, December 31, 2022 and March 31, 2022. The period average is based on both daily average deposit balances and rates for the period.
(f)
Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned.
(g)
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.
(h)
Fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets in the 2022 Form 10-K.
(i)
Self-directed assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets.
(j)
Daily average revenue trades (DARTs) represent the total self-directed trades in a period divided by the number of trading days during that period.
(k)
Self-directed households represent 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 are included in each of the respective channel counts.
(l)
The workplace channel assets includes equity compensation solutions for companies, their executives and employees. Stock plan unvested assets represent the market value of public company securities at the end of the period.
(m)
Stock plan participants represent total accounts with vested and/or unvested stock plan assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.
   
Page 8:
(a)
Asset management and related fees represents management and administrative fees, distribution fees, and performance-based fees, not in the form of carried interest. Asset management and related fees represents Asset management as reported on the Firm’s consolidated income statement.
(b)
Performance-based income and other includes performance-based fees in the form of carried interest, gains and losses from investments, gains and losses from hedges on seed capital and certain employee deferred compensation plans, net interest, and other revenues. Performance-based income and other represents investments, investment banking, trading, net interest and other revenues as reported on the Firm’s consolidated income statement.
(c)
Pre-tax profit margin percentages represent income before provision for income taxes as percentages of net revenues.
   
Page 9:
(a)
Investment Management Alternatives and Solutions asset class includes products in Fund of Funds, Real Estate, Private Equity and Credit strategies, Multi‐Asset portfolios, as well as Custom Separate Account 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)
Overlay Services represents investment strategies that use passive exposure instruments to obtain, offset, or substitute specific portfolio exposures beyond those provided by the underlying holdings of the fund.
(d)
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 following sets forth the net revenue impact of mark-to-market gains and losses on investments associated with DCP and compensation expense impact related to DCP:

       
1Q23
      
4Q22
      
1Q22
  
 
Net revenues
  
$
14,517
    
$
12,749
    
$
14,801
  
 
Adjustment for mark-to-market on DCP
    
(153
)
    
(194
)
    
441
  
 
Adjusted Net revenues - non-GAAP
  
$
14,364
    
$
12,555
    
$
15,242
  
                           
 
Compensation expense
  
$
6,410
    
$
5,615
    
$
6,274
  
 
Adjustment for mark-to-market on DCP
    
(193
)
    
(189
)
    
288
  
 
Adjusted Compensation expense - non-GAAP
  
$
6,217
    
$
5,426
    
$
6,562
  


-
Compensation expense for deferred cash-based compensation awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards.
-
The Firm invests directly, as a principal, in financial instruments and other investments to economically hedge certain of its obligations under these deferred cash-based compensation plans. Changes in the fair value of such investments, net of financing costs, are recorded in Net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and losses on the Firm’s investments and the deferred recognition of the related compensation expense over the vesting period.  While this timing difference may not be material to Income before provision for income taxes for the Firm in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially significant impacts to net revenues and compensation expenses.
   
(2)
The Firm non-interest expenses by category are as follows:

       
1Q23
      
4Q22
      
1Q22
  
 
Compensation and benefits (a)
  
$
6,410
    
$
5,615
    
$
6,274
  
                           
 
Non-compensation expenses:
                        
 
Brokerage, clearing and exchange fees
    
881
      
851
      
882
  
 
Information processing and communications
    
915
      
933
      
829
  
 
Professional services
    
710
      
853
      
705
  
 
Occupancy and equipment
    
440
      
443
      
427
  
 
Marketing and business development
    
247
      
295
      
175
  
 
Other
    
920
      
878
      
864
  
 
Total non-compensation expenses
    
4,113
      
4,253
      
3,882
  
 
Total non-interest expenses
  
$
10,523
    
$
9,868
    
$
10,156
  



(a)
The Firm recorded severance costs of $133 million in the fourth quarter of 2022, associated with a December employee action, which were reported in the business segments’ results as follows: Institutional Securities $88 million, Wealth Management $30 million and Investment Management $15 million.

Page 2:
(1)
For the quarter ended March 31, 2023, Firm results include pre-tax integration-related expenses of $77 million, of which $53 million is reported in the Wealth Management business segment and $24 million is reported in the Investment Management business segment.
(2)
The income tax consequences related to employee share‐based payments are recognized in Provision for income taxes in the consolidated income statement, and may be either a benefit or a provision. The impacts of recognizing excess tax benefits upon conversion of awards are $149 million and $205 million for the first quarter of 2023 and 2022, respectively.
   
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)
As of March 31, 2023, December 31, 2022 and March 31, 2022, the U.S. Bank investment securities portfolio included held to maturity investment securities of $55.7 billion, $56.4 billion and $60.6 billion, respectively.

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: 1Q23: $471mm; 4Q22: $576mm; 1Q22: $576mm
   
Page 6:
(1)
The following sets forth the net revenue impact of mark-to-market gains and losses on investments associated with DCP and compensation expense impact related to DCP:

       
1Q23
      
4Q22
      
1Q22
  
 
Net revenues
  
$
6,559
    
$
6,626
    
$
5,935
  
 
Adjustment for mark-to-market on DCP
    
(101
)
    
(106
)
    
296
  
 
Adjusted Net revenues - non-GAAP
  
$
6,458
    
$
6,520
    
$
6,231
  
                           
 
Compensation expense
  
$
3,477
    
$
3,343
    
$
3,125
  
 
Adjustment for mark-to-market on DCP
    
(119
)
    
(115
)
    
200
  
 
Adjusted Compensation expense - non-GAAP
  
$
3,358
    
$
3,228
    
$
3,325
  


(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: 1Q23: $14,075mm; 4Q22: $14,746mm; 1Q22: $14,746mm

15
Supplemental Quantitative Details and Calculations

Page 7:
(1)
Wealth Management other lending includes $2 billion, $2 billion and $3 billion, respectively, of non-purpose securities based lending on non-bank entities in the periods ended March 31, 2023, December 31, 2022 and March 31, 2022.
(2)
For the quarters ended March 31, 2023, December 31, 2022 and March 31, 2022, Wealth Management deposits of $341 billion, $351 billion and $352 billion, respectively, exclude off-balance sheet deposits of $2 billion, $6 billion and $8 billion, respectively, held by third parties outside of Morgan Stanley. Total deposits details are as follows:

       
1Q23
      
4Q22
      
1Q22
  
 
Brokerage sweep deposits
  
$
172
    
$
198
    
$
309
  
 
Other deposits
    
169
      
153
      
43
  
 
Total balance sheet deposits
    
341
      
351
      
352
  
 
Off-balance sheet deposits
    
2
      
6
      
8
  
 
Total deposits
  
$
343
    
$
357
    
$
360
  

Page 8:
(1)
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: 1Q23: $9,687mm; 4Q22: $9,815mm; 1Q22: $9,815mm
   
Page 10:
(1)
For the quarters ended March 31, 2023, December 31, 2022 and March 31, 2022, Investment Management reflected loan balances of $219 million, $222 million and $362 million, respectively.
   
Page 11: 
(1)
For the quarter ended March 31, 2023, the Allowance Rollforward for Loans and Lending Commitments is as follows:

     
Institutional
Securities
    
Wealth
Management
    
Total
  
 
Loans
                  
                     
 
Allowance for Credit Losses (ACL)
                  
 
Beginning Balance - December 31, 2022
  
$
674
    
$
165
    
$
839
  
 
Net Charge Offs
    
(70
)
    
(1
)
    
(71
)
 
Provision
    
160
      
41
      
201
  
 
Other
    
1
      
-
      
1
  
 
Ending Balance - March 31, 2023
  
$
765
    
$
205
    
$
970
  
                           
                           
 
Lending Commitments
                        
                           
 
Allowance for Credit Losses (ACL)
                        
 
Beginning Balance - December 31, 2022
  
$
484
    
$
20
    
$
504
  
 
Net Charge Offs
    
-
      
-
      
-
  
 
Provision
    
29
      
4
      
33
  
 
Other
    
2
      
-
      
2
  
 
Ending Balance - March 31, 2023
  
$
515
    
$
24
    
$
539
  
                           
                           
 
Loans and Lending Commitments
                        
                           
 
Allowance for Credit Losses (ACL)
                        
 
Beginning Balance - December 31, 2022
  
$
1,158
    
$
185
    
$
1,343
  
 
Net Charge Offs
    
(70
)
    
(1
)
    
(71
)
 
Provision
    
189
      
45
      
234
  
 
Other
    
3
      
-
      
3
  
 
Ending Balance - March 31, 2023
  
$
1,280
    
$
229
    
$
1,509
  


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 first quarter earnings press release issued April 19, 2023.


17