MORGAN STANLEY | |||||||
Financial Supplement - 2Q2005 | |||||||
Table of Contents | |||||||
Page # | |||||||
1 | Quarterly Financial Summary | ||||||
2 | Quarterly Consolidated Income Statement | ||||||
3 | Quarterly Consolidated Financial Information and Statistical Data | ||||||
4 | Quarterly Institutional Securities Income Statement | ||||||
5-6 | Quarterly Institutional Securities Financial Information and Statistical Data | ||||||
7 | Quarterly Individual Investor Group Income Statement | ||||||
8 | Quarterly Individual Investor Group Financial Information and Statistical Data | ||||||
9 | Quarterly Investment Management Income Statement | ||||||
10 | Quarterly Investment Management Financial Information | ||||||
11 | Quarterly Consolidated Assets Under Management or Supervision | ||||||
12 | Quarterly Credit Services Income Statement | ||||||
13 | Quarterly Credit Services Income Statement (Managed Loan Basis) | ||||||
14 | Quarterly Credit Services Financial Information and Statistical Data | ||||||
15 | Quarterly Intersegment Eliminations Income Statement | ||||||
16 | Quarterly Inst'l. Securities, Individual Investor Group and Investment Mgmt. Combined Income Statement | ||||||
17 | Quarterly Credit Services Financial Information (Managed Loan Basis) | ||||||
18 | Quarterly Reconciliation of General Purpose Credit Card Loan Data (Current Year) | ||||||
19 | Quarterly Reconciliation of General Purpose Credit Card Loan Data (Prior Year) | ||||||
20 | YTD Reconciliation of General Purpose Credit Card Loan Data | ||||||
21 | Quarterly Reconciliation of Managed Income Statement Data | ||||||
22 | Quarterly Reconciliation of Adjusted Assets | ||||||
23 | Legal Notice |
MORGAN STANLEY | |||||||||||||||||||||||||||||||||||||
Quarterly Financial Summary | |||||||||||||||||||||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | |||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | ||||||||||||||||||||||||
Net revenues | ||||||||||||||||||||||||||||||||||
Institutional Securities | $ | 3,504 | $ | 3,947 | $ | 2,776 | $ | 2,836 | $ | 3,985 | $ | 3,357 | (15 | %) | (16 | %) | $ | 7,451 | $ | 7,342 | (1 | %) | ||||||||||||
Individual Investor Group | 1,211 | 1,209 | 1,124 | 1,071 | 1,238 | 1,228 | 2 | % | (1 | %) | 2,420 | 2,466 | 2 | % | ||||||||||||||||||||
Investment Management | 642 | 690 | 692 | 714 | 696 | 642 | (7 | %) | (8 | %) | 1,332 | 1,338 | -- | |||||||||||||||||||||
Credit Services | 958 | 879 | 897 | 900 | 996 | 878 | -- | (12 | %) | 1,837 | 1,874 | 2 | % | |||||||||||||||||||||
Intersegment Eliminations | (74 | ) | (75 | ) | (64 | ) | (72 | ) | (69 | ) | (66 | ) | 12 | % | 4 | % | (149 | ) | (135 | ) | 9 | % | ||||||||||||
Consolidated net revenues | $ | 6,241 | $ | 6,650 | $ | 5,425 | $ | 5,449 | $ | 6,846 | $ | 6,039 | (9 | %) | (12 | %) | $ | 12,891 | $ | 12,885 | -- | |||||||||||||
Income before taxes (1) | ||||||||||||||||||||||||||||||||||
Institutional Securities | $ | 1,183 | $ | 1,135 | $ | 682 | $ | 1,097 | $ | 1,045 | $ | 830 | (27 | %) | (21 | %) | $ | 2,318 | $ | 1,875 | (19 | %) | ||||||||||||
Individual Investor Group | 166 | 132 | 22 | 51 | 353 | 118 | (11 | %) | (67 | %) | 298 | 471 | 58 | % | ||||||||||||||||||||
Investment Management | 170 | 209 | 217 | 231 | 287 | 175 | (16 | %) | (39 | %) | 379 | 462 | 22 | % | ||||||||||||||||||||
Credit Services | 365 | 298 | 330 | 279 | 380 | 242 | (19 | %) | (36 | %) | 663 | 622 | (6 | %) | ||||||||||||||||||||
Intersegment Eliminations | 29 | 29 | 31 | 29 | 24 | 25 | (14 | %) | 4 | % | 58 | 49 | (16 | %) | ||||||||||||||||||||
Consolidated income before taxes | $ | 1,913 | $ | 1,803 | $ | 1,282 | $ | 1,687 | $ | 2,089 | $ | 1,390 | (23 | %) | (33 | %) | $ | 3,716 | $ | 3,479 | (6 | %) | ||||||||||||
Earnings per basic share: (2) | ||||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 1.14 | $ | 1.13 | $ | 0.80 | $ | 1.11 | $ | 1.25 | $ | 0.88 | (22 | %) | (30 | %) | $ | 2.27 | $ | 2.14 | (6 | %) | ||||||||||||
Discontinued operations | $ | - | $ | - | $ | (0.02 | ) | $ | - | $ | 0.01 | $ | - | -- | * | $ | - | $ | 0.01 | * | ||||||||||||||
Cumulative effect of accounting change (3) | $ | - | $ | - | $ | - | $ | - | $ | 0.05 | $ | - | -- | * | $ | - | $ | 0.05 | * | |||||||||||||||
Earnings per basic share | $ | 1.14 | $ | 1.13 | $ | 0.78 | $ | 1.11 | $ | 1.31 | $ | 0.88 | (22 | %) | (33 | %) | $ | 2.27 | $ | 2.20 | (3 | %) | ||||||||||||
Earnings per diluted share: (2) | ||||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 1.11 | $ | 1.10 | $ | 0.78 | $ | 1.09 | $ | 1.23 | $ | 0.86 | (22 | %) | (30 | %) | $ | 2.21 | $ | 2.09 | (5 | %) | ||||||||||||
Discontinued operations | $ | - | $ | - | $ | (0.02 | ) | $ | - | $ | 0.01 | $ | - | -- | * | $ | - | $ | 0.01 | * | ||||||||||||||
Cumulative effect of accounting change (3) | $ | - | $ | - | $ | - | $ | - | $ | 0.05 | $ | - | -- | * | $ | - | $ | 0.05 | * | |||||||||||||||
Earnings per diluted share | $ | 1.11 | $ | 1.10 | $ | 0.76 | $ | 1.09 | $ | 1.29 | $ | 0.86 | (22 | %) | (33 | %) | $ | 2.21 | $ | 2.15 | (3 | %) | ||||||||||||
Average common shares outstanding | ||||||||||||||||||||||||||||||||||
Basic | 1,078,718,046 | 1,082,211,511 | 1,081,448,663 | 1,076,221,276 | 1,069,097,162 | 1,053,812,487 | 1,080,776,922 | 1,061,632,036 | ||||||||||||||||||||||||||
Diluted | 1,106,000,596 | 1,110,357,415 | 1,105,546,130 | 1,098,282,118 | 1,090,166,326 | 1,079,811,172 | 1,108,270,257 | 1,084,988,764 | ||||||||||||||||||||||||||
Period end common shares outstanding | 1,097,652,112 | 1,098,127,106 | 1,096,707,183 | 1,087,087,116 | 1,103,263,369 | 1,086,652,691 | 1,098,127,106 | 1,086,652,691 | ||||||||||||||||||||||||||
Return on common equity | 19.2 | % | 18.4 | % | 12.3 | % | 17.4 | % | 19.7 | % | 13.1 | % | 18.8 | % | 16.4 | % | ||||||||||||||||||
(1) Represents consolidated income from continuing operations before losses from unconsolidated investees, taxes, dividends on preferred securities subject to mandatory redemption and cumulative effect of accounting change. | |||||||||||||||||||||||||||||||||||||
(2) Summation of the quarters' earnings per common share may not equal the annual amounts due to the averaging effect of the number of shares and share equivalents throughout the year. | |||||||||||||||||||||||||||||||||||||
(3) Represents the effects of the adoption of SFAS 123(R) in the first quarter of fiscal 2005. | |||||||||||||||||||||||||||||||||||||
Note: Certain reclassifications have been made to prior period amounts to conform to the current presentation. | |||||||||||||||||||||||||||||||||||||
Refer to Legal Notice page 23. | |||||||||||||||||||||||||||||||||||||
1
MORGAN STANLEY Quarterly Consolidated Income Statement Information (unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | ||||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | |||||||||||||||||||||||||
Investment banking | $ | 829 | $ | 983 | $ | 783 | $ | 746 | $ | 821 | $ | 814 | (17 | %) | (1 | %) | $ | 1,812 | $ | 1,635 | (10 | %) | |||||||||||||
Principal transactions: | |||||||||||||||||||||||||||||||||||
Trading | 1,832 | 2,064 | 695 | 934 | 1,850 | 1,911 | (7 | %) | 3 | % | 3,896 | 3,761 | (3 | %) | |||||||||||||||||||||
Investments | 29 | 191 | 125 | 167 | 117 | 123 | (36 | %) | 5 | % | 220 | 240 | 9 | % | |||||||||||||||||||||
Commissions | 868 | 846 | 733 | 817 | 824 | 824 | (3 | %) | -- | 1,714 | 1,648 | (4 | %) | ||||||||||||||||||||||
Fees: | |||||||||||||||||||||||||||||||||||
Asset management, distribution and admin. | 1,093 | 1,132 | 1,111 | 1,076 | 1,178 | 1,217 | 8 | % | 3 | % | 2,225 | 2,395 | 8 | % | |||||||||||||||||||||
Merchant, cardmember and other | 337 | 306 | 349 | 326 | 308 | 318 | 4 | % | 3 | % | 643 | 626 | (3 | %) | |||||||||||||||||||||
Servicing | 572 | 485 | 459 | 477 | 526 | 413 | (15 | %) | (21 | %) | 1,057 | 939 | (11 | %) | |||||||||||||||||||||
Interest and dividends | 3,782 | 3,663 | 5,410 | 5,735 | 5,843 | 6,035 | 65 | % | 3 | % | 7,445 | 11,878 | 60 | % | |||||||||||||||||||||
Other | 133 | 130 | 189 | 142 | 174 | 190 | 46 | % | 9 | % | 263 | 364 | 38 | % | |||||||||||||||||||||
Total revenues | 9,475 | 9,800 | 9,854 | 10,420 | 11,641 | 11,845 | 21 | % | 2 | % | 19,275 | 23,486 | 22 | % | |||||||||||||||||||||
Interest expense | 2,972 | 2,950 | 4,189 | 4,748 | 4,660 | 5,597 | 90 | % | 20 | % | 5,922 | 10,257 | 73 | % | |||||||||||||||||||||
Provision for consumer loan losses | 262 | 200 | 240 | 223 | 135 | 209 | 5 | % | 55 | % | 462 | 344 | (26 | %) | |||||||||||||||||||||
Net revenues | 6,241 | 6,650 | 5,425 | 5,449 | 6,846 | 6,039 | (9 | %) | (12 | %) | 12,891 | 12,885 | -- | ||||||||||||||||||||||
Compensation and benefits | 2,712 | 2,923 | 2,347 | 1,898 | 2,861 | 2,630 | (10 | %) | (8 | %) | 5,635 | 5,491 | (3 | %) | |||||||||||||||||||||
Occupancy and equipment | 200 | 206 | 228 | 215 | 333 | 233 | 13 | % | (30 | %) | 406 | 566 | 39 | % | |||||||||||||||||||||
Brokerage, clearing and exchange fees | 224 | 237 | 231 | 240 | 260 | 276 | 16 | % | 6 | % | 461 | 536 | 16 | % | |||||||||||||||||||||
Information processing and communications | 320 | 318 | 326 | 346 | 342 | 349 | 10 | % | 2 | % | 638 | 691 | 8 | % | |||||||||||||||||||||
Marketing and business development | 254 | 263 | 279 | 333 | 259 | 299 | 14 | % | 15 | % | 517 | 558 | 8 | % | |||||||||||||||||||||
Professional services | 318 | 356 | 400 | 475 | 380 | 441 | 24 | % | 16 | % | 674 | 821 | 22 | % | |||||||||||||||||||||
Other | 300 | 544 | 332 | 255 | 573 | 421 | (23 | %) | (27 | %) | 844 | 994 | 18 | % | |||||||||||||||||||||
September 11th related insurance recoveries, net | 0 | 0 | 0 | 0 | (251 | ) | 0 | -- | * | 0 | (251 | ) | * | ||||||||||||||||||||||
Total non-interest expenses | 4,328 | 4,847 | 4,143 | 3,762 | 4,757 | 4,649 | (4 | %) | (2 | %) | 9,175 | 9,406 | 3 | % | |||||||||||||||||||||
Income from continuing operations before losses from unconsolidated investees, taxes, dividends on preferred securities subject to mandatory redemption and cumulative effect of accounting change | 1,913 | 1,803 | 1,282 | 1,687 | 2,089 | 1,390 | (23 | %) | (33 | %) | 3,716 | 3,479 | (6 | %) | |||||||||||||||||||||
Losses from unconsolidated investees | 93 | 81 | 77 | 77 | 73 | 67 | (17 | %) | (8 | %) | 174 | 140 | (20 | %) | |||||||||||||||||||||
Provision for income taxes | 551 | 498 | 343 | 411 | 671 | 395 | (21 | %) | (41 | %) | 1,049 | 1,066 | 2 | % | |||||||||||||||||||||
Div. on pref. sec. subject to mandatory redemption (1) | 45 | 0 | 0 | 0 | 0 | 0 | -- | -- | 45 | 0 | * | ||||||||||||||||||||||||
Income from continuing operations | 1,224 | 1,224 | 862 | 1,199 | 1,345 | 928 | (24 | %) | (31 | %) | 2,448 | 2,273 | (7 | %) | |||||||||||||||||||||
Discontinued operations | |||||||||||||||||||||||||||||||||||
Gain/(loss) from discontinued operations (including loss on disposal of $42 million in 2004) | 3 | (1 | ) | (42 | ) | 2 | 13 | 0 | * | * | 2 | 13 | * | ||||||||||||||||||||||
Income tax benefit/(provision) | (1 | ) | 0 | 17 | (1 | ) | (5 | ) | 0 | -- | * | (1 | ) | (5 | ) | * | |||||||||||||||||||
Gain/(loss) from discontinued operations | 2 | (1 | ) | (25 | ) | 1 | 8 | 0 | * | * | 1 | 8 | * | ||||||||||||||||||||||
Cumulative effect of accounting change (2) | 0 | 0 | 0 | 0 | 49 | 0 | -- | * | 0 | 49 | * | ||||||||||||||||||||||||
Net income | $ | 1,226 | $ | 1,223 | $ | 837 | $ | 1,200 | $ | 1,402 | $ | 928 | (24 | %) | (34 | %) | $ | 2,449 | $ | 2,330 | (5 | %) | |||||||||||||
Compensation and benefits as a % of net revenues | 44 | % | 44 | % | 43 | % | 35 | % | 42 | % | 44 | % | 44 | % | 43 | % | |||||||||||||||||||
(1) | At February 29, 2004, preferred securities subject to mandatory redemption were reclassified to junior subordinated debt issued to capital trusts (a component of long-term debt) pursuant to the adoption of FASB Interpretation No. 46, "Consolidation of Variable Interest Entities". Dividends on junior subordinated debt issued to capital trusts are included in interest expense from February 29, 2004 forward. | |||||||||||||||||||||||||||||
(2) | Represents the effects of the adoption of SFAS 123(R) in the first quarter of fiscal 2005. | |||||||||||||||||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | |||||||||||||||||||||||||||||
Refer to Legal Notice page 23. |
2
MORGAN STANLEY | |||||||||||||||||||||||||||||||
Quarterly Financial Information and Statistical Data | |||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||
Quarter Ended | Percentage Change From: | ||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | ||||||||||||||||||||||||
Morgan Stanley | |||||||||||||||||||||||||||||||
Total assets (millions) (1) | $ | 656,898 | $ | 729,501 | $ | 745,033 | $ | 745,513 | $ | 802,210 | $ | 818,711 | 12 | % | 2 | % | |||||||||||||||
Adjusted assets (millions) (2) | $ | 428,470 | $ | 448,135 | $ | 465,105 | $ | 408,270 | $ | 447,221 | $ | 440,189 | (2 | %) | (2 | %) | |||||||||||||||
Period end common shares outstanding (millions) | 1,097.7 | 1,098.1 | 1,096.7 | 1,087.1 | 1,103.3 | 1,086.7 | (1 | %) | (2 | %) | |||||||||||||||||||||
Book value per common share | $ | 23.75 | $ | 24.59 | $ | 25.00 | $ | 25.95 | $ | 25.83 | $ | 26.07 | 6 | % | 1 | % | |||||||||||||||
Shareholders' equity (millions) (3) | $ | 28,961 | $ | 29,899 | $ | 30,317 | $ | 31,103 | $ | 31,328 | $ | 31,224 | 4 | % | -- | ||||||||||||||||
Total capital (millions) (4) | $ | 96,359 | $ | 100,127 | $ | 101,237 | $ | 110,793 | $ | 122,230 | $ | 113,867 | 14 | % | (7 | %) | |||||||||||||||
Worldwide employees | 50,979 | 51,580 | 52,812 | 53,284 | 53,718 | 54,142 | 5 | % | 1 | % | |||||||||||||||||||||
Average Daily 99%/One-Day Value-at-Risk ("VaR") (5) | |||||||||||||||||||||||||||||||
Primary Market Risk Category ($ millions, pre-tax) | |||||||||||||||||||||||||||||||
Interest rate and credit spread | $ | 42 | $ | 50 | $ | 52 | $ | 51 | $ | 66 | $ | 62 | |||||||||||||||||||
Equity price | 30 | 32 | 36 | 37 | 41 | 31 | |||||||||||||||||||||||||
Foreign exchange rate | 11 | 12 | 12 | 10 | 12 | 12 | |||||||||||||||||||||||||
Commodity price | 27 | 34 | 40 | 30 | 34 | 35 | |||||||||||||||||||||||||
Trading VaR | $ | 62 | $ | 72 | $ | 79 | $ | 80 | $ | 96 | $ | 87 | |||||||||||||||||||
(1) | Effective December 1, 2004, the Company offsets cash paid or received pursuant to credit support agreements ("cash collateral netting") |
against its OTC derivatives inventory. Total assets as of November 30, 2004 have been restated to reflect cash collateral netting. | |
Prior periods presented do not reflect such cash collateral netting. | |
(2) | Adjusted assets exclude certain self-funded assets considered to have minimal market, credit and/or liquidity risk that are generally attributable to |
matched book and securities lending businesses as measured by aggregate resale agreements and securities borrowed less non-derivative short | |
positions. See page 22 for further information. | |
(3) | Includes common equity and junior subordinated debt issued to capital trusts. |
(4) | Includes common equity, junior subordinated debt issued to capital trusts, capital units and the non-current portion of long-term debt. |
(5) | 99%/One-Day VaR represents the loss amount that one would not expect to exceed, on average, more than one time every one hundred trading |
days in the Company's trading positions if the portfolio were held constant for a one day period. The Company's VaR incorporates substantially | |
all financial instruments generating market risk that are managed by the Company's trading businesses. For a further discussion of the calculation | |
of VaR and the limitations of the Company's VaR methodology, see Part II, Item 7A "Quantitative and Qualitative Disclosures about Market | |
Risk" in the Company's Form 10-K for fiscal 2004. | |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. | |
3
MORGAN STANLEY | |||||||||||||||
Quarterly Institutional Securities Income Statement Information | |||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | ||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | |||||||||||||||||||||||
Investment banking | $ | 739 | $ | 891 | $ | 711 | $ | 667 | $ | 742 | $ | 735 | (18 | %) | (1 | %) | $ | 1,630 | $ | 1,477 | (9 | %) | |||||||||||
Principal transactions: | |||||||||||||||||||||||||||||||||
Trading | 1,691 | 1,923 | 565 | 828 | 1,730 | 1,800 | (6 | %) | 4 | % | 3,614 | 3,530 | (2 | %) | |||||||||||||||||||
Investments | 16 | 136 | 38 | 79 | 55 | 123 | (10 | %) | 124 | % | 152 | 178 | 17 | % | |||||||||||||||||||
Commissions | 505 | 527 | 462 | 504 | 503 | 538 | 2 | % | 7 | % | 1,032 | 1,041 | 1 | % | |||||||||||||||||||
Asset management, distribution and admin. fees | 34 | 32 | 36 | 42 | 34 | 39 | 22 | % | 15 | % | 66 | 73 | 11 | % | |||||||||||||||||||
Interest and dividends | 3,225 | 3,151 | 4,831 | 5,160 | 5,265 | 5,371 | 70 | % | 2 | % | 6,376 | 10,636 | 67 | % | |||||||||||||||||||
Other | 75 | 57 | 137 | 123 | 109 | 122 | 114 | % | 12 | % | 132 | 231 | 75 | % | |||||||||||||||||||
Total revenues | 6,285 | 6,717 | 6,780 | 7,403 | 8,438 | 8,728 | 30 | % | 3 | % | 13,002 | 17,166 | 32 | % | |||||||||||||||||||
Interest expense | 2,781 | 2,770 | 4,004 | 4,567 | 4,453 | 5,371 | 94 | % | 21 | % | 5,551 | 9,824 | 77 | % | |||||||||||||||||||
Net revenues | 3,504 | 3,947 | 2,776 | 2,836 | 3,985 | 3,357 | (15 | %) | (16 | %) | 7,451 | 7,342 | (1 | %) | |||||||||||||||||||
Total non-interest expenses | 2,321 | 2,812 | 2,094 | 1,739 | 2,940 | 2,527 | (10 | %) | (14 | %) | 5,133 | 5,467 | 7 | % | |||||||||||||||||||
Income from continuing operations before | |||||||||||||||||||||||||||||||||
losses from unconsolidated investees, | |||||||||||||||||||||||||||||||||
taxes, dividends on preferred securities | |||||||||||||||||||||||||||||||||
subject to mandatory redemption and | |||||||||||||||||||||||||||||||||
cumulative effect of accounting change | 1,183 | 1,135 | 682 | 1,097 | 1,045 | 830 | (27 | %) | (21 | %) | 2,318 | 1,875 | (19 | %) | |||||||||||||||||||
Losses from unconsolidated investees | 93 | 81 | 77 | 77 | 73 | 67 | (17 | %) | (8 | %) | 174 | 140 | (20 | %) | |||||||||||||||||||
Div. on pref. sec. subject to mandatory redemption (1) | 45 | 0 | 0 | 0 | 0 | 0 | -- | -- | 45 | 0 | * | ||||||||||||||||||||||
Income before taxes, discontinued operations and cumulative effect of accounting change | $ | 1,045 | $ | 1,054 | $ | 605 | $ | 1,020 | $ | 972 | $ | 763 | (28 | %) | (22 | %) | $ | 2,099 | $ | 1,735 | (17 | %) | |||||||||||
Pre-tax profit margin (2) | 33 | % | 29 | % | 25 | % | 39 | % | 26 | % | 25 | % | 31 | % | 26 | % | |||||||||||||||||
(1) | At February 29, 2004, preferred securities subject to mandatory redemption were reclassified to junior subordinated debt issued to capital trusts |
(a component of long-term debt) pursuant to the adoption of FIN 46. Dividends on junior subordinated debt issued to capital trusts are included | |
in interest expense from February 29, 2004 forward. | |
(2) | Income before taxes, discontinued operations and cumulative effect of accounting change, excluding losses from unconsolidated investees, as a % of net revenues. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
4
Quarterly Financial Information and Statistical Data | |||||||||||||
Institutional Securites | |||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | |||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | ||||||||||||||||||||||||
Advisory revenue (millions) | $ | 232 | $ | 324 | $ | 310 | $ | 290 | $ | 254 | $ | 357 | 10 | % | 41 | % | $ | 556 | $ | 611 | 10 | % | ||||||||||||
Underwriting revenue (millions) | ||||||||||||||||||||||||||||||||||
Equity | 314 | 314 | 200 | 165 | 202 | 145 | (54 | %) | (28 | %) | 628 | 347 | (45 | %) | ||||||||||||||||||||
Fixed income | 193 | 253 | 201 | 212 | 286 | 233 | (8 | %) | (19 | %) | 446 | 519 | 16 | % | ||||||||||||||||||||
Total underwriting revenue | $ | 507 | $ | 567 | $ | 401 | $ | 377 | $ | 488 | $ | 378 | (33 | %) | (23 | %) | $ | 1,074 | $ | 866 | (19 | %) | ||||||||||||
Sales and trading net revenue (millions) (1) | ||||||||||||||||||||||||||||||||||
Equity | 1,105 | 1,113 | 883 | 966 | 1,214 | 1,119 | 1 | % | (8 | %) | 2,218 | 2,333 | 5 | % | ||||||||||||||||||||
Fixed income | 1,651 | 1,828 | 1,186 | 890 | 1,996 | 1,323 | (28 | %) | (34 | %) | 3,479 | 3,319 | (5 | %) | ||||||||||||||||||||
Total sales and trading net revenue | $ | 2,756 | $ | 2,941 | $ | 2,069 | $ | 1,856 | $ | 3,210 | $ | 2,442 | (17 | %) | (24 | %) | $ | 5,697 | $ | 5,652 | (1 | %) | ||||||||||||
Fiscal View | Calendar View | |||||||||||||||||||||||||||||||||
Quarter Ended (2) | Five Months Ended (2) | |||||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | May 31, 2004 | May 31, 2005 | |||||||||||||||||||||||||||
Mergers and acquisitions announced transactions | ||||||||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 114.7 | $ | 76.5 | $ | 80.0 | $ | 51.2 | $ | 189.7 | $ | 208.1 | $ | 181.2 | $ | 322.0 | ||||||||||||||||||
Market share | 27.9 | % | 21.7 | % | 21.6 | % | 12.7 | % | 29.0 | % | 39.0 | % | 26.6 | % | 35.9 | % | ||||||||||||||||||
Rank | 3 | 3 | 3 | 7 | 3 | 1 | 2 | 1 | ||||||||||||||||||||||||||
Mergers and acquisitions completed transactions | ||||||||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 58.6 | $ | 132.6 | $ | 139.2 | $ | 53.7 | $ | 42.7 | $ | 92.2 | $ | 148.2 | $ | 122.3 | ||||||||||||||||||
Market share | 22.2 | % | 35.7 | % | 29.8 | % | 14.5 | % | 13.8 | % | 30.1 | % | 30.0 | % | 24.3 | % | ||||||||||||||||||
Rank | 4 | 2 | 3 | 7 | 7 | 1 | 2 | 3 | ||||||||||||||||||||||||||
Global equity and related issues | ||||||||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 16.2 | $ | 16.4 | $ | 9.3 | $ | 11.4 | $ | 13.8 | $ | 5.7 | $ | 28.6 | $ | 14.6 | ||||||||||||||||||
Market share | 11.5 | % | 12.7 | % | 8.9 | % | 8.1 | % | 11.5 | % | 6.4 | % | 13.3 | % | 9.2 | % | ||||||||||||||||||
Rank | 1 | 2 | 2 | 3 | 2 | 6 | 1 | 4 | ||||||||||||||||||||||||||
Global initial public offerings | ||||||||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 3.7 | $ | 3.1 | $ | 5.3 | $ | 0.9 | $ | 2.7 | $ | 2.1 | $ | 6.8 | $ | 4.0 | ||||||||||||||||||
Market share | 13.5 | % | 10.2 | % | 13.7 | % | 2.3 | % | 9.0 | % | 8.8 | % | 15.3 | % | 9.8 | % | ||||||||||||||||||
Rank | 1 | 2 | 1 | 13 | 3 | 2 | 1 | 2 | ||||||||||||||||||||||||||
Global debt | ||||||||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 90.4 | $ | 104.0 | $ | 90.7 | $ | 92.0 | $ | 82.5 | $ | 81.1 | $ | 166.5 | $ | 150.8 | ||||||||||||||||||
Market share | 7.1 | % | 7.6 | % | 7.6 | % | 6.5 | % | 6.1 | % | 5.9 | % | 7.1 | % | 6.2 | % | ||||||||||||||||||
Rank | 5 | 2 | 2 | 3 | 3 | 5 | 3 | 4 | ||||||||||||||||||||||||||
(1) | Includes principal trading, commissions and net interest revenue. |
(2) | Source: Thomson Financial, data as of June 9, 2005. |
Notes: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
5
Quarterly Financial Information and Statistical Data | |||||||||||||
Institutional Securities | |||||||||||||
(unaudited, dollars in billions) |
Quarter Ended | Percentage Change From: | ||||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | ||||||||||||||||||||||||||
Loans | |||||||||||||||||||||||||||||||||
Investment grade | $ | 0.5 | $ | 1.1 | $ | 0.8 | $ | 1.2 | $ | 1.5 | $ | 1.8 | 64 | % | 20% | ||||||||||||||||||
Non-investment grade | 1.1 | 1.8 | 1.0 | 0.5 | 1.0 | 1.9 | 6 | % | 90% | ||||||||||||||||||||||||
Total loans | $ | 1.6 | $ | 2.9 | $ | 1.8 | $ | 1.7 | $ | 2.5 | $ | 3.7 | 28 | % | 48% | ||||||||||||||||||
Commitments | |||||||||||||||||||||||||||||||||
Investment grade | $ | 13.7 | $ | 16.5 | $ | 18.3 | $ | 19.0 | $ | 18.7 | $ | 21.1 | 28 | % | 13% | ||||||||||||||||||
Non-investment grade | 2.8 | 2.2 | 2.7 | 1.4 | 2.0 | 5.6 | * | * | |||||||||||||||||||||||||
Total commitments | $ | 16.5 | $ | 18.7 | $ | 21.0 | $ | 20.4 | $ | 20.7 | $ | 26.7 | 43 | % | 29% | ||||||||||||||||||
Loans plus commitments | |||||||||||||||||||||||||||||||||
Investment grade | $ | 14.2 | $ | 17.6 | $ | 19.1 | $ | 20.2 | $ | 20.2 | $ | 22.9 | 30 | % | 13% | ||||||||||||||||||
Non-investment grade | $ | 3.9 | $ | 4.0 | $ | 3.7 | $ | 1.9 | $ | 3.0 | $ | 7.5 | 88 | % | 150% | ||||||||||||||||||
% investment grade | 78 | % | 81 | % | 84 | % | 91 | % | 87 | % | 75 | % | |||||||||||||||||||||
% non-investment grade | 22 | % | 19 | % | 16 | % | 9 | % | 13 | % | 25 | % | |||||||||||||||||||||
Total loans and commitments | $ | 18.1 | $ | 21.6 | $ | 22.8 | $ | 22.1 | $ | 23.2 | $ | 30.4 | 41 | % | 31% | ||||||||||||||||||
Hedges (1) | $ | 7.7 | $ | 9.1 | $ | 12.9 | $ | 11.6 | $ | 13.1 | $ | 14.3 | 57 | % | 9% | ||||||||||||||||||
Total loans and commitments net of hedges | $ | 10.4 | $ | 12.5 | $ | 9.9 | $ | 10.5 | $ | 10.1 | $ | 16.1 | 29 | % | 59% | ||||||||||||||||||
(1) | Includes both internal and external hedges utilized by the lending business. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
6
MORGAN STANLEY | |||||||||||||||
Quarterly Individual Investor Group Income Statement Information | |||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | |||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | ||||||||||||||||||||||||
Investment banking | $ | 77 | $ | 82 | $ | 64 | $ | 67 | $ | 71 | $ | 68 | (17 | %) | (4 | %) | $ | 159 | $ | 139 | (13 | %) | ||||||||||||
Principal transactions: | ||||||||||||||||||||||||||||||||||
Trading | 141 | 141 | 130 | 106 | 120 | 111 | (21 | %) | (8 | %) | 282 | 231 | (18 | %) | ||||||||||||||||||||
Investments | 4 | (4 | ) | (3 | ) | (2 | ) | (2 | ) | (2 | ) | 50 | % | -- | 0 | (4 | ) | * | ||||||||||||||||
Commissions | 385 | 336 | 281 | 325 | 329 | 295 | (12 | %) | (10 | %) | 721 | 624 | (13 | %) | ||||||||||||||||||||
Asset management, distribution and admin fees | 492 | 530 | 536 | 480 | 581 | 603 | 14 | % | 4 | % | 1,022 | 1,184 | 16 | % | ||||||||||||||||||||
Interest and dividends | 93 | 95 | 103 | 118 | 135 | 149 | 57 | % | 10 | % | 188 | 284 | 51 | % | ||||||||||||||||||||
Other | 52 | 64 | 57 | 21 | 64 | 74 | 16 | % | 16 | % | 116 | 138 | 19 | % | ||||||||||||||||||||
Total revenues | 1,244 | 1,244 | 1,168 | 1,115 | 1,298 | 1,298 | 4 | % | -- | 2,488 | 2,596 | 4 | % | |||||||||||||||||||||
Interest expense | 33 | 35 | 44 | 44 | 60 | 70 | 100 | % | 17 | % | 68 | 130 | 91 | % | ||||||||||||||||||||
Net revenues | 1,211 | 1,209 | 1,124 | 1,071 | 1,238 | 1,228 | 2 | % | (1 | %) | 2,420 | 2,466 | 2 | % | ||||||||||||||||||||
Total non-interest expenses | 1,045 | 1,077 | 1,102 | 1,020 | 885 | 1,110 | 3 | % | 25 | % | 2,122 | 1,995 | (6 | %) | ||||||||||||||||||||
Income before taxes and cumulative | ||||||||||||||||||||||||||||||||||
effect of accounting change | $ | 166 | $ | 132 | $ | 22 | $ | 51 | $ | 353 | $ | 118 | (11 | %) | (67 | %) | $ | 298 | $ | 471 | 58 | % | ||||||||||||
Pre-tax profit margin (1) | 14 | % | 11 | % | 2 | % | 5 | % | 29 | % | 10 | % | 12 | % | 19 | % | ||||||||||||||||||
(1) | Income before taxes and cumulative effect of accounting change as a % of net revenues. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
7
Quarterly Financial Information and Statistical Data | |||||||||||||||||
Individual Investor Group | |||||||||||||||||
(unaudited) |
Quarter Ended | Percentage Change From: | ||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | ||||||||||||||||||
Global representatives | 10,832 | 10,722 | 10,785 | 10,962 | 10,471 | 10,438 | (3 | %) | -- | ||||||||||||||||
Annualized revenue per global | |||||||||||||||||||||||||
representative (thousands) (1) | $ | 442 | $ | 449 | $ | 418 | $ | 394 | $ | 462 | $ | 470 | 5 | % | 2 | % | |||||||||
Total client assets (billions) | $ | 595 | $ | 579 | $ | 576 | $ | 602 | $ | 618 | $ | 613 | 6 | % | (1 | %) | |||||||||
Fee-based client account assets (billions) (2) | $ | 143 | $ | 145 | $ | 146 | $ | 157 | $ | 166 | $ | 165 | 14 | % | (1 | %) | |||||||||
Fee-based assets as a % of client assets | 24 | % | 25 | % | 25 | % | 26 | % | 27 | % | 27 | % | |||||||||||||
Client assets per global | |||||||||||||||||||||||||
representative (millions) (3) | $ | 55 | $ | 54 | $ | 53 | $ | 55 | $ | 59 | $ | 59 | 9 | % | -- | ||||||||||
Domestic retail net new assets (billions) (4) | $ | 2.8 | $ | 2.8 | $ | 3.7 | $ | 2.3 | $ | 3.7 | 3.8 | 36 | % | 3 | % | ||||||||||
Domestic retail locations | 526 | 526 | 525 | 525 | 524 | 526 | -- | -- | |||||||||||||||||
(1) | Annualized revenue divided by average global representative headcount. |
(2) | Represents the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets. |
(3) | Total IIG client assets divided by period end global representative headcount. |
(4) | Represents net new assets in the U.S. broad-based branch system. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
8
MORGAN STANLEY | |||||||||||||||||||||||
Quarterly Investment Management Income Statement Information | |||||||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | |||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | ||||||||||||||||||||||||
Investment banking | $ | 13 | $ | 10 | $ | 8 | $ | 12 | $ | 11 | $ | 11 | 10 | % | -- | $ | 23 | $ | 22 | (4 | %) | |||||||||||||
Principal transactions: | ||||||||||||||||||||||||||||||||||
Investments | 9 | 59 | 90 | 90 | 64 | 2 | (97 | %) | (97 | %) | 68 | 66 | (3 | %) | ||||||||||||||||||||
Commissions | 7 | 8 | 7 | 5 | 7 | 7 | (13 | %) | -- | 15 | 14 | (7 | %) | |||||||||||||||||||||
Asset management, distribution and admin fees | 604 | 607 | 579 | 600 | 605 | 615 | 1 | % | 2 | % | 1,211 | 1,220 | 1 | % | ||||||||||||||||||||
Interest and dividends | 2 | 1 | 3 | 2 | 3 | 3 | * | -- | 3 | 6 | 100 | % | ||||||||||||||||||||||
Other | 9 | 6 | 7 | 6 | 8 | 6 | -- | (25 | %) | 15 | 14 | (7 | %) | |||||||||||||||||||||
Total revenues | 644 | 691 | 694 | 715 | 698 | 644 | (7 | %) | (8 | %) | 1,335 | 1,342 | 1 | % | ||||||||||||||||||||
Interest expense | 2 | 1 | 2 | 1 | 2 | 2 | 100 | % | -- | 3 | 4 | 33 | % | |||||||||||||||||||||
Net revenues | 642 | 690 | 692 | 714 | 696 | 642 | (7 | %) | (8 | %) | 1,332 | 1,338 | -- | |||||||||||||||||||||
Total non-interest expenses | 472 | 481 | 475 | 483 | 409 | 467 | (3 | %) | 14 | % | 953 | 876 | (8 | %) | ||||||||||||||||||||
Income before taxes and cumulative | ||||||||||||||||||||||||||||||||||
effect of accounting change | $ | 170 | $ | 209 | $ | 217 | $ | 231 | $ | 287 | $ | 175 | (16 | %) | (39 | %) | $ | 379 | $ | 462 | 22 | % | ||||||||||||
Pre-tax profit margin (1) | 27 | % | 30 | % | 31 | % | 32 | % | 41 | % | 27 | % | 29 | % | 35 | % | ||||||||||||||||||
(1) | Income before taxes and cumulative effect of accounting change as a % of net revenues. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
9
MORGAN STANLEY | ||||||||||||||||||||||||
Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||||
Investment Management | ||||||||||||||||||||||||
(unaudited, dollars in billions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | |||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | ||||||||||||||||||||||||
Assets under management or supervision | ||||||||||||||||||||||||||||||||||
Net flows | ||||||||||||||||||||||||||||||||||
Retail | $ | 0.5 | $ | (0.6 | ) | $ | (0.3 | ) | $ | 0.4 | $ | (0.7 | ) | $ | (0.9 | ) | (50 | %) | (29 | %) | $ | (0.1 | ) | $ | (1.6 | ) | * | |||||||
Institutional | 1.4 | 5.7 | (0.2 | ) | 1.2 | (7.3 | ) | (3.0 | ) | * | 59 | % | 7.1 | (10.3 | ) | * | ||||||||||||||||||
Net flows excluding money markets | 1.9 | 5.1 | (0.5 | ) | 1.6 | (8.0 | ) | (3.9 | ) | * | 51 | % | 7.0 | (11.9 | ) | * | ||||||||||||||||||
Money markets | 1.4 | 4.2 | 9.2 | 5.8 | 0.9 | (3.2 | ) | * | * | 5.6 | (2.3 | ) | (141 | %) | ||||||||||||||||||||
Assets under management or supervision by distribution channel | ||||||||||||||||||||||||||||||||||
Retail | $ | 200 | $ | 195 | $ | 194 | $ | 202 | $ | 201 | $ | 199 | 2 | % | (1 | %) | ||||||||||||||||||
Institutional | 180 | 189 | 200 | 222 | 226 | 217 | 15 | % | (4 | %) | ||||||||||||||||||||||||
Total | $ | 380 | $ | 384 | $ | 394 | $ | 424 | $ | 427 | $ | 416 | 8 | % | (3 | %) | ||||||||||||||||||
Assets under management or supervision by asset class | ||||||||||||||||||||||||||||||||||
Equity | $ | 186 | $ | 182 | $ | 179 | $ | 200 | $ | 209 | $ | 206 | 13 | % | (1 | %) | ||||||||||||||||||
Fixed income | 111 | 114 | 116 | 114 | 108 | 103 | (10 | %) | (5 | %) | ||||||||||||||||||||||||
Money market | 62 | 66 | 76 | 83 | 84 | 80 | 21 | % | (5 | %) | ||||||||||||||||||||||||
Other (1) | 21 | 22 | 23 | 27 | 26 | 27 | 23 | % | 4 | % | ||||||||||||||||||||||||
Total | $ | 380 | $ | 384 | $ | 394 | $ | 424 | $ | 427 | $ | 416 | 8 | % | (3 | %) | ||||||||||||||||||
(1) | Includes Alternative Investments. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
10
MORGAN STANLEY | ||||||||||||||||||
Quarterly Financial Information and Statistical Data | ||||||||||||||||||
Consolidated Assets Under Management or Supervision | ||||||||||||||||||
(unaudited, dollars in billions) |
Quarter Ended | Percentage Change From: | ||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | ||||||||||||||||||
Consolidated assets under management or supervision by distribution channel | |||||||||||||||||||||||||
Retail | $ | 294 | $ | 290 | $ | 290 | $ | 305 | $ | 321 | $ | 319 | 10 | % | (1 | %) | |||||||||
Institutional | 211 | 220 | 229 | 251 | 255 | 246 | 12 | % | (4 | %) | |||||||||||||||
Total (1) | $ | 505 | $ | 510 | $ | 519 | $ | 556 | $ | 576 | $ | 565 | 11 | % | (2 | %) | |||||||||
Consolidated assets under management or supervision by asset class | |||||||||||||||||||||||||
Equity | $ | 231 | $ | 226 | $ | 224 | $ | 251 | $ | 272 | $ | 270 | 19 | % | (1 | %) | |||||||||
Fixed income | 124 | 128 | 130 | 130 | 123 | 118 | (8 | %) | (4 | %) | |||||||||||||||
Money market | 65 | 70 | 80 | 87 | 88 | 84 | 20 | % | (5 | %) | |||||||||||||||
Other (2) | 85 | 86 | 85 | 88 | 93 | 93 | 8 | % | -- | ||||||||||||||||
Total (1) | $ | 505 | $ | 510 | $ | 519 | $ | 556 | $ | 576 | $ | 565 | 11 | % | (2 | %) | |||||||||
(1) | Revenues and expenses associated with customer assets of $126 billion, $103 billion and $127 billion |
for fiscal 2Q05, fiscal 2Q04 and fiscal 1Q05, respectively, are included in the Company's Individual | |
Investor Group segment, and $23 billion, $23 billion and $22 billion for fiscal 2Q05, fiscal 2Q04 | |
and fiscal 1Q05, respectively, are included in the Company's Institutional Securities segment. | |
(2) | Includes Alternative Investments. |
Notes: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
11
MORGAN STANLEY | |||||||||||||||||||||||
Quarterly Credit Services Income Statement Information | |||||||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | |||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | ||||||||||||||||||||||||
Fees: | ||||||||||||||||||||||||||||||||||
Merchant, cardmember and other | $ | 337 | $ | 306 | $ | 349 | $ | 326 | $ | 308 | $ | 318 | 4 | % | 3 | % | $ | 643 | $ | 626 | (3 | %) | ||||||||||||
Servicing | 572 | 485 | 459 | 477 | 526 | 413 | (15 | %) | (21 | %) | 1,057 | 939 | (11 | %) | ||||||||||||||||||||
Other | 5 | 16 | (5 | ) | 1 | 2 | (2 | ) | (113 | %) | * | 21 | 0 | * | ||||||||||||||||||||
Total non-interest revenues | 914 | 807 | 803 | 804 | 836 | 729 | (10 | %) | (13 | %) | 1,721 | 1,565 | (9 | %) | ||||||||||||||||||||
Interest revenue | 480 | 435 | 496 | 482 | 468 | 544 | 25 | % | 16 | % | 915 | 1,012 | 11 | % | ||||||||||||||||||||
Interest expense | 174 | 163 | 162 | 163 | 173 | 186 | 14 | % | 8 | % | 337 | 359 | 7 | % | ||||||||||||||||||||
Net interest income | 306 | 272 | 334 | 319 | 295 | 358 | 32 | % | 21 | % | 578 | 653 | 13 | % | ||||||||||||||||||||
Provision for consumer loan losses | 262 | 200 | 240 | 223 | 135 | 209 | 5 | % | 55 | % | 462 | 344 | (26 | %) | ||||||||||||||||||||
Net credit income | 44 | 72 | 94 | 96 | 160 | 149 | 107 | % | (7 | %) | 116 | 309 | * | |||||||||||||||||||||
Net revenues | 958 | 879 | 897 | 900 | 996 | 878 | -- | (12 | %) | 1,837 | 1,874 | 2 | % | |||||||||||||||||||||
Total non-interest expenses | 593 | 581 | 567 | 621 | 616 | 636 | 9 | % | 3 | % | 1,174 | 1,252 | 7 | % | ||||||||||||||||||||
Income before taxes and cumulative | ||||||||||||||||||||||||||||||||||
effect of accounting change | $ | 365 | $ | 298 | $ | 330 | $ | 279 | $ | 380 | $ | 242 | (19 | %) | (36 | %) | $ | 663 | $ | 622 | (6 | %) | ||||||||||||
Pre-tax profit margin (1) | 38 | % | 34 | % | 37 | % | 31 | % | 38 | % | 28 | % | 36 | % | 33 | % | ||||||||||||||||||
(1) | Income before taxes and cumulative effect of accounting change as a % of net revenues. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
12
MORGAN STANLEY | |||||||||||||||||||||||
Quarterly Credit Services Income Statement Information | |||||||||||||||||||||||
(Managed loan basis) | |||||||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | |||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | ||||||||||||||||||||||||
Fees: | ||||||||||||||||||||||||||||||||||
Merchant, cardmember and other | $ | 519 | $ | 467 | $ | 499 | $ | 485 | $ | 479 | $ | 486 | 4 | % | 1 | % | $ | 986 | $ | 965 | (2 | %) | ||||||||||||
Servicing | 0 | 0 | 0 | 0 | 0 | 0 | -- | -- | 0 | 0 | -- | |||||||||||||||||||||||
Other | 35 | 16 | (10 | ) | 9 | 59 | (38 | ) | * | * | 51 | 21 | (59 | %) | ||||||||||||||||||||
Total non-interest revenues | 554 | 483 | 489 | 494 | 538 | 448 | (7 | %) | (17 | %) | 1,037 | 986 | (5 | %) | ||||||||||||||||||||
Interest revenue | 1,524 | 1,450 | 1,422 | 1,407 | 1,416 | 1,460 | 1 | % | 3 | % | 2,974 | 2,876 | (3 | %) | ||||||||||||||||||||
Interest expense | 350 | 337 | 337 | 368 | 420 | 455 | 35 | % | 8 | % | 687 | 875 | 27 | % | ||||||||||||||||||||
Net interest income | 1,174 | 1,113 | 1,085 | 1,039 | 996 | 1,005 | (10 | %) | 1 | % | 2,287 | 2,001 | (13 | %) | ||||||||||||||||||||
Provision for consumer loan losses | 770 | 717 | 677 | 633 | 538 | 575 | (20 | %) | 7 | % | 1,487 | 1,113 | (25 | %) | ||||||||||||||||||||
Net credit income | 404 | 396 | 408 | 406 | 458 | 430 | 9 | % | (6 | %) | 800 | 888 | 11 | % | ||||||||||||||||||||
Net revenues | 958 | 879 | 897 | 900 | 996 | 878 | -- | (12 | %) | 1,837 | 1,874 | 2 | % | |||||||||||||||||||||
Total non-interest expenses | 593 | 581 | 567 | 621 | 616 | 636 | 9 | % | 3 | % | 1,174 | 1,252 | 7 | % | ||||||||||||||||||||
Income before taxes and cumulative | ||||||||||||||||||||||||||||||||||
effect of accounting change | $ | 365 | $ | 298 | $ | 330 | $ | 279 | $ | 380 | $ | 242 | (19 | %) | (36 | %) | $ | 663 | $ | 622 | (6 | %) | ||||||||||||
Pre-tax profit margin (1) | 38 | % | 34 | % | 37 | % | 31 | % | 38 | % | 28 | % | 36 | % | 33 | % | ||||||||||||||||||
(1) | Income before taxes and cumulative effect of accounting change as a % of net revenues. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
13
Quarterly Financial Information and Statistical Data | |||||||||||||||||||||||
Credit Services | |||||||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | |||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | ||||||||||||||||||||||||
Total owned credit card loans | ||||||||||||||||||||||||||||||||||
Period end | $ | 15,850 | $ | 17,506 | $ | 18,471 | $ | 19,724 | $ | 18,908 | $ | 19,385 | 11 | % | 3 | % | $ | 17,506 | $ | 19.385 | 11 | % | ||||||||||||
Average | $ | 17,880 | $ | 16,202 | $ | 17,787 | $ | 18,579 | $ | 19,210 | $ | 18,753 | 16 | % | (2 | %) | $ | 17,036 | $ | 18,979 | 11 | % | ||||||||||||
Total managed credit card loans (1)(2) | ||||||||||||||||||||||||||||||||||
Period end | $ | 47,336 | $ | 46,828 | $ | 47,126 | $ | 48,261 | $ | 47,770 | $ | 46,845 | -- | (2 | %) | $ | 46,828 | $ | 46,845 | -- | ||||||||||||||
Average | $ | 48,667 | $ | 46,929 | $ | 46,873 | $ | 47,090 | $ | 48,930 | $ | 47,146 | -- | (4 | %) | $ | 47,793 | $ | 48,028 | -- | ||||||||||||||
Interest yield | 12.20 | % | 11.88 | % | 11.69 | % | 11.59 | % | 11.23 | % | 11.69 | % | (19 | bp) | 46 | bp | 12.04 | % | 11.46 | % | (58 | bp) | ||||||||||||
Interest spread | 9.35 | % | 9.06 | % | 8.83 | % | 8.43 | % | 7.79 | % | 7.96 | % | (110 | bp) | 17 | bp | 9.21 | % | 7.88 | % | (133 | bp) | ||||||||||||
Transaction volume (billions) | $ | 24.2 | $ | 24.4 | $ | 25.4 | $ | 25.7 | $ | 25.9 | $ | 25.4 | 4 | % | (2 | %) | $ | 48.5 | $ | 51.3 | 6 | % | ||||||||||||
Accounts (millions) | 45.9 | 46.0 | 46.0 | 46.2 | 46.0 | 45.9 | -- | -- | 46.0 | 45.9 | -- | |||||||||||||||||||||||
Active accounts (millions) | 20.3 | 19.9 | 19.6 | 19.7 | 19.5 | 19.3 | (3 | %) | (1 | %) | 19.9 | 19.3 | (3 | %) | ||||||||||||||||||||
Average receivables per avg. active account (actual $) | $ | 2,360 | $ | 2,330 | $ | 2,381 | $ | 2,407 | $ | 2,476 | $ | 2,426 | 4 | % | (2 | %) | $ | 2,345 | $ | 2,451 | 5 | % | ||||||||||||
Trans volume per avg. active account (actual $) | $ | 1,173 | $ | 1,209 | $ | 1,290 | $ | 1,312 | $ | 1,311 | $ | 1,306 | 8 | % | -- | $ | 2,382 | $ | 2,618 | 10 | % | |||||||||||||
Net gain on securitization | $ | 19 | $ | (12 | ) | $ | (14 | ) | $ | (1 | ) | $ | 32 | $ | (16 | ) | (33 | %) | (150 | %) | $ | 7 | $ | 16 | 129 | % | ||||||||
Credit quality | ||||||||||||||||||||||||||||||||||
Net charge-off rate | 6.31 | % | 6.48 | % | 5.76 | % | 5.45 | % | 5.11 | % | 4.94 | % | (154 | bp) | (17 | bp) | 6.40 | % | 5.03 | % | (137 | bp) | ||||||||||||
Delinquency rate (over 30 days) | 5.80 | % | 4.88 | % | 4.81 | % | 4.55 | % | 4.24 | % | 3.90 | % | (98 | bp) | (34 | bp) | 4.88 | % | 3.90 | % | (98 | bp) | ||||||||||||
Delinquency rate (over 90 days) | 2.86 | % | 2.40 | % | 2.22 | % | 2.18 | % | 2.05 | % | 1.83 | % | (57 | bp) | (22 | bp) | 2.40 | % | 1.83 | % | (57 | bp) | ||||||||||||
Allowance for loan losses at period end | $ | 985 | $ | 940 | $ | 939 | $ | 929 | $ | 840 | $ | 828 | (12 | %) | (1 | %) | $ | 940 | $ | 828 | (12 | %) | ||||||||||||
International managed credit card loans (2) | ||||||||||||||||||||||||||||||||||
Period end | $ | 2,463 | $ | 2,409 | $ | 2,337 | $ | 2,571 | $ | 2,648 | $ | 2,479 | 3 | % | (6 | %) | $ | 2,409 | $ | 2,479 | 3 | % | ||||||||||||
Average | $ | 2,302 | $ | 2,411 | $ | 2,389 | $ | 2,372 | $ | 2,606 | $ | 2,578 | 7 | % | (1 | %) | $ | 2,357 | $ | 2,592 | 10 | % | ||||||||||||
Accounts (millions) | 1.2 | 1.2 | 1.2 | 1.3 | 1.4 | 1.4 | 17 | % | -- | 1.2 | 1.4 | 17 | % | |||||||||||||||||||||
Payment services (millions) | ||||||||||||||||||||||||||||||||||
Discover network transaction volume | 304 | 300 | 313 | 309 | 314 | 314 | 5 | % | -- | 604 | 628 | 4 | ||||||||||||||||||||||
PULSE network transaction volume (3) | 0 | 0 | 0 | 0 | 213 | 452 | * | 112 | % | 0 | 665 | * | ||||||||||||||||||||||
Total network transaction volume | 304 | 300 | 313 | 309 | 527 | 766 | * | 45 | % | 604 | 1,293 | 114 | % | |||||||||||||||||||||
Mortgages | ||||||||||||||||||||||||||||||||||
Mortgage originations | $ | 959 | $ | 1,380 | $ | 1,231 | $ | 1,046 | $ | 760 | $ | 921 | (33 | %) | 21 | % | $ | 2,339 | $ | 1,681 | (28 | %) | ||||||||||||
(1) | Includes domestic and international credit card businesses. |
(2) | Includes owned and securitized credit card loans. |
(3) | Reflects volume subsequent to date of acquisition. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. | |
14
MORGAN STANLEY | ||||||||||||||||||||||||
Quarterly Intersegment Eliminations Income Statement Information | ||||||||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | |||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | ||||||||||||||||||||||||
Investment banking | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | (3 | ) | $ | 0 | -- | * | $ | 0 | $ | (3 | ) | * | |||||||||||||
Principal transactions: | ||||||||||||||||||||||||||||||||||
Trading | 0 | 0 | 0 | 0 | 0 | 0 | -- | -- | 0 | 0 | -- | |||||||||||||||||||||||
Investments | 0 | 0 | 0 | 0 | 0 | 0 | -- | -- | 0 | 0 | -- | |||||||||||||||||||||||
Commissions | (29 | ) | (25 | ) | (17 | ) | (17 | ) | (15 | ) | (16 | ) | 36 | % | (7 | %) | (54 | ) | (31 | ) | 43 | % | ||||||||||||
Asset management, distribution and admin. fees | (37 | ) | (37 | ) | (40 | ) | (46 | ) | (42 | ) | (40 | ) | (8 | %) | 5 | % | (74 | ) | (82 | ) | (11 | %) | ||||||||||||
Interest and dividends | (18 | ) | (19 | ) | (23 | ) | (27 | ) | (28 | ) | (32 | ) | (68 | %) | (14 | %) | (37 | ) | (60 | ) | (62 | %) | ||||||||||||
Other | (8 | ) | (13 | ) | (7 | ) | (9 | ) | (9 | ) | (10 | ) | 23 | % | (11 | %) | (21 | ) | (19 | ) | 10 | % | ||||||||||||
Total revenues | (92 | ) | (94 | ) | (87 | ) | (99 | ) | (97 | ) | (98 | ) | (4 | %) | (1 | %) | (186 | ) | (195 | ) | (5 | %) | ||||||||||||
Interest expense | (18 | ) | (19 | ) | (23 | ) | (27 | ) | (28 | ) | (32 | ) | (68 | %) | (14 | %) | (37 | ) | (60 | ) | (62 | %) | ||||||||||||
Net revenues | (74 | ) | (75 | ) | (64 | ) | (72 | ) | (69 | ) | (66 | ) | 12 | % | 4 | % | (149 | ) | (135 | ) | 9 | % | ||||||||||||
Total non-interest expenses | (103 | ) | (104 | ) | (95 | ) | (101 | ) | (93 | ) | (91 | ) | 13 | % | 2 | % | (207 | ) | (184 | ) | 11 | % | ||||||||||||
Income before taxes | $ | 29 | $ | 29 | $ | 31 | $ | 29 | $ | 24 | $ | 25 | (14 | %) | 4 | % | $ | 58 | $ | 49 | (16 | %) | ||||||||||||
Notes: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
15
MORGAN STANLEY |
The following (page 16) presents more detailed financial information regarding the results of operations for the combined | ||||||||||||||||||
institutional securities, individual investor group and investment management businesses. Morgan Stanley believes that a | ||||||||||||||||||
combined presentation is informative due to certain synergies among these businesses, as well as to facilitate comparisons of | ||||||||||||||||||
the Company’s results with those of other companies in the financial services industry that have securities and asset | ||||||||||||||||||
management businesses. Morgan Stanley provides this type of presentation for its credit services activities (page 17) in order | ||||||||||||||||||
to provide helpful comparison to other credit card issuers. |
MORGAN STANLEY | ||||||||||||||||||||||||||
Quarterly Institutional Securities, Individual Investor Group and Investment Management (1) | ||||||||||||||||||||||||||
Combined Income Statement Information | ||||||||||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | |||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | ||||||||||||||||||||||||
Investment banking | $ | 829 | $ | 983 | $ | 783 | $ | 746 | $ | 824 | $ | 814 | (17 | %) | (1 | %) | $ | 1,812 | $ | 1,638 | (10 | %) | ||||||||||||
Principal transactions: | ||||||||||||||||||||||||||||||||||
Trading | 1,832 | 2,064 | 695 | 934 | 1,850 | 1,911 | (7 | %) | 3 | % | 3,896 | 3,761 | (3 | %) | ||||||||||||||||||||
Investments | 29 | 191 | 125 | 167 | 117 | 123 | (36 | %) | 5 | % | 220 | 240 | 9 | % | ||||||||||||||||||||
Commissions | 868 | 846 | 733 | 817 | 824 | 824 | (3 | %) | -- | 1,714 | 1,648 | (4 | %) | |||||||||||||||||||||
Asset management, distribution and administration fees | 1,093 | 1,132 | 1,111 | 1,076 | 1,178 | 1,217 | 8 | % | 3 | % | 2,225 | 2,395 | 8 | % | ||||||||||||||||||||
Interest and dividends | 3,314 | 3,241 | 4,929 | 5,270 | 5,395 | 5,513 | 70 | % | 2 | % | 6,555 | 10,908 | 66 | % | ||||||||||||||||||||
Other | 130 | 117 | 196 | 143 | 173 | 194 | 66 | % | 12 | % | 247 | 367 | 49 | % | ||||||||||||||||||||
Total revenues | 8,095 | 8,574 | 8,572 | 9,153 | 10,361 | 10,596 | 24 | % | 2 | % | 16,669 | 20,957 | 26 | % | ||||||||||||||||||||
Interest expense | 2,810 | 2,800 | 4,042 | 4,602 | 4,507 | 5,433 | 94 | % | 21 | % | 5,610 | 9,940 | 77 | % | ||||||||||||||||||||
Net revenues | 5,285 | 5,774 | 4,530 | 4,551 | 5,854 | 5,163 | (11 | %) | (12 | %) | 11,059 | 11,017 | -- | |||||||||||||||||||||
Compensation and benefits | 2,514 | 2,725 | 2,155 | 1,711 | 2,641 | 2,415 | (11 | %) | (9 | %) | 5,239 | 5,056 | (3 | %) | ||||||||||||||||||||
Occupancy and equipment | 179 | 185 | 205 | 193 | 308 | 210 | 14 | % | (32 | %) | 364 | 518 | 42 | % | ||||||||||||||||||||
Brokerage, clearing and exchange fees | 224 | 237 | 231 | 240 | 260 | 276 | 16 | % | 6 | % | 461 | 536 | 16 | % | ||||||||||||||||||||
Information processing and communications | 234 | 232 | 242 | 258 | 258 | 265 | 14 | % | 3 | % | 466 | 523 | 12 | % | ||||||||||||||||||||
Marketing and business development | 111 | 137 | 143 | 161 | 113 | 144 | 5 | % | 27 | % | 248 | 257 | 4 | % | ||||||||||||||||||||
Professional services | 253 | 291 | 334 | 401 | 314 | 367 | 26 | % | 17 | % | 544 | 681 | 25 | % | ||||||||||||||||||||
Other | 222 | 462 | 268 | 179 | 502 | 338 | (27 | %) | (33 | %) | 684 | 840 | 23 | % | ||||||||||||||||||||
September 11th related insurance recoveries, net | 0 | 0 | 0 | 0 | (251 | ) | 0 | -- | * | 0 | (251 | ) | * | |||||||||||||||||||||
Total non-interest expenses | 3,737 | 4,269 | 3,578 | 3,143 | 4,145 | 4,015 | (6 | %) | (3 | %) | 8,006 | 8,160 | 2 | % | ||||||||||||||||||||
Income from continuing operations | ||||||||||||||||||||||||||||||||||
before losses from unconsolidated | ||||||||||||||||||||||||||||||||||
investees, taxes, dividends on preferred | ||||||||||||||||||||||||||||||||||
securities subject to mandatory | ||||||||||||||||||||||||||||||||||
redemption and cumulative | ||||||||||||||||||||||||||||||||||
effect of accounting change | 1,548 | 1,505 | 952 | 1,408 | 1,709 | 1,148 | (24 | %) | (33 | %) | 3,053 | 2,857 | (6 | %) | ||||||||||||||||||||
Losses from unconsolidated investees | 93 | 81 | 77 | 77 | 73 | 67 | (17 | %) | (8 | %) | 174 | 140 | (20 | %) | ||||||||||||||||||||
Div. on pref. sec. subject to mandatory redemption (2) | 45 | 0 | 0 | 0 | 0 | 0 | -- | -- | 45 | 0 | * | |||||||||||||||||||||||
Income before taxes, discontinued | ||||||||||||||||||||||||||||||||||
operations and cumulative | ||||||||||||||||||||||||||||||||||
effect of accounting change | $ | 1,410 | $ | 1,424 | $ | 875 | $ | 1,331 | $ | 1,636 | $ | 1,081 | (24 | %) | (34 | %) | $ | 2,834 | $ | 2,717 | (4 | %) | ||||||||||||
Compensation and benefits as a % of net revenues | 48 | % | 47 | % | 48 | % | 38 | % | 45 | % | 47 | % | 47 | % | 46 | % | ||||||||||||||||||
Non-compensation expenses as a % of net revenues | 23 | % | 27 | % | 31 | % | 32 | % | 26 | % | 31 | % | 25 | % | 28 | % | ||||||||||||||||||
Pre-tax profit margin (3) | 28 | % | 26 | % | 21 | % | 31 | % | 29 | % | 22 | % | 27 | % | 26 | % | ||||||||||||||||||
Number of employees (4) | 37,455 | 38,058 | 39,494 | 39,639 | 39,641 | 40,267 | 6 | % | 2 | % | ||||||||||||||||||||||||
(1) | Includes the elimination of intersegment activity between Institutional Securities, Individual Investor Group and Investment Management. |
(2) | At February 29, 2004, preferred securities subject to mandatory redemption were reclassified to junior subordinated debt issued to capital trusts |
(a component of long-term debt) pursuant to the adoption of FIN 46. Dividends on junior subordinated debt issued to capital trusts are included | |
in interest expense from February 29, 2004 forward. | |
(3) | Income before taxes, discontinued operations and cumulative effect of accounting change, excluding losses from unconsolidated investees, as a % of net revenues. |
(4) | Includes Institutional Securities, Individual Investor Group, Investment Management and Infrastructure / Company areas. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. | |
16
MORGAN STANLEY | ||||||||||||||||||||||||||||||
Quarterly Credit Services Income Statement Information | ||||||||||||||||||||||||||||||
(Managed loan basis) | ||||||||||||||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | Six Months Ended | Percentage | |||||||||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | 2Q05 vs. 2Q04 | 2Q05 vs. 1Q05 | May 31, 2004 | May 31, 2005 | Change | ||||||||||||||||||||||||
Fees: | ||||||||||||||||||||||||||||||||||
Merchant, cardmember and other | $ | 519 | $ | 467 | $ | 499 | $ | 485 | $ | 479 | $ | 486 | 4 | % | 1 | % | $ | 986 | $ | 965 | (2 | %) | ||||||||||||
Servicing | 0 | 0 | 0 | 0 | 0 | 0 | -- | -- | 0 | 0 | -- | |||||||||||||||||||||||
Other | 35 | 16 | (10 | ) | 9 | 59 | (38 | ) | * | * | 51 | 21 | (59 | %) | ||||||||||||||||||||
Total non-interest revenues | 554 | 483 | 489 | 494 | 538 | 448 | (7 | %) | (17 | %) | 1,037 | 986 | (5 | %) | ||||||||||||||||||||
Interest revenue | 1,524 | 1,450 | 1,422 | 1,407 | 1,416 | 1,460 | 1 | % | 3 | % | 2,974 | 2,876 | (3 | %) | ||||||||||||||||||||
Interest expense | 350 | 337 | 337 | 368 | 420 | 455 | 35 | % | 8 | % | 687 | 875 | 27 | % | ||||||||||||||||||||
Net interest income | 1,174 | 1,113 | 1,085 | 1,039 | 996 | 1,005 | (10 | %) | 1 | % | 2,287 | 2,001 | (13 | %) | ||||||||||||||||||||
Provision for consumer loan losses | 770 | 717 | 677 | 633 | 538 | 575 | (20 | %) | 7 | % | 1,487 | 1,113 | (25 | %) | ||||||||||||||||||||
Net credit income | 404 | 396 | 408 | 406 | 458 | 430 | 9 | % | (6 | %) | 800 | 888 | 11 | % | ||||||||||||||||||||
Net revenues | 958 | 879 | 897 | 900 | 996 | 878 | -- | (12 | %) | 1,837 | 1,874 | 2 | % | |||||||||||||||||||||
Compensation and benefits | 198 | 198 | 192 | 187 | 220 | 215 | 9 | % | (2 | %) | 396 | 435 | 10 | % | ||||||||||||||||||||
Occupancy and equipment | 21 | 21 | 23 | 22 | 25 | 23 | 10 | % | (8 | %) | 42 | 48 | 14 | % | ||||||||||||||||||||
Information processing and communications | 86 | 86 | 84 | 88 | 84 | 84 | (2 | %) | -- | 172 | 168 | (2 | %) | |||||||||||||||||||||
Marketing and business development | 143 | 126 | 136 | 172 | 146 | 155 | 23 | % | 6 | % | 269 | 301 | 12 | % | ||||||||||||||||||||
Professional services | 65 | 65 | 66 | 74 | 69 | 74 | 14 | % | 7 | % | 130 | 143 | 10 | % | ||||||||||||||||||||
Other | 80 | 85 | 66 | 78 | 72 | 85 | -- | 18 | % | 165 | 157 | (5 | %) | |||||||||||||||||||||
Total non-interest expenses | 593 | 581 | 567 | 621 | 616 | 636 | 9 | % | 3 | % | 1,174 | 1,252 | 7 | % | ||||||||||||||||||||
Income before taxes and cumulative | ||||||||||||||||||||||||||||||||||
effect of accounting change | $ | 365 | $ | 298 | $ | 330 | $ | 279 | $ | 380 | $ | 242 | (19 | %) | (36 | %) | $ | 663 | $ | 622 | (6 | %) | ||||||||||||
Compensation and benefits as a % of net revenues | 21 | % | 23 | % | 21 | % | 21 | % | 22 | % | 25 | % | 22 | % | 23 | % | ||||||||||||||||||
Non-compensation expenses as a % of net revenues | 41 | % | 44 | % | 42 | % | 48 | % | 40 | % | 48 | % | 42 | % | 44 | % | ||||||||||||||||||
Pre-tax profit margin (1) | 38 | % | 34 | % | 37 | % | 31 | % | 38 | % | 28 | % | 36 | % | 33 | % | ||||||||||||||||||
Number of employees | 13,524 | 13,522 | 13,318 | 13,645 | 14,077 | 13,875 | 3 | % | (1 | %) | ||||||||||||||||||||||||
(1) | Income before taxes and cumulative effect of accounting change as a % of net revenues. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
17
MORGAN STANLEY | ||||||||||||||||||
The following (pages 18 - 21) present a reconciliation for certain information disclosed on pages 13, 14 and 17. | ||||||||||||||||||
The data is presented on both a "managed" loan basis and as reported under generally accepted accounting principles ("owned" loan basis). | ||||||||||||||||||
Managed loan data assume that the Company's securitized loan receivables have not been sold and presents the results of securitized loan | ||||||||||||||||||
receivables in the same manner as the Company's owned loans. The Company operates its Credit Services business and analyzes its financial | ||||||||||||||||||
performance on a managed basis. Accordingly, underwriting and servicing standards are comparable for both owned and securitized loans. | ||||||||||||||||||
The Company believes that managed loan information is useful to investors because it provides information regarding the quality of loan | ||||||||||||||||||
origination and credit performance of the entire managed portfolio and allows investors to understand the related credit risks inherent in owned | ||||||||||||||||||
loans and retained interests in securitizations. In addition, investors often request information on a managed basis, which provides a more | ||||||||||||||||||
meaningful comparison to industry competitors. | ||||||||||||||||||
MORGAN STANLEY | |||||||||||||||||||
Quarterly Financial Information and Statistical Data (1) | |||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended May 31, 2005 | ||||||||||||||||||||||||
Delinquency Rate | ||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 19,385 | $ | 18,753 | 10.56 | % | 6.50 | % | 4.62 | % | 3.48 | % | 1.64 | % | ||||||||||
Securitized | 27,460 | 28,393 | 12.43 | % | 8.90 | % | 5.15 | % | 4.19 | % | 1.97 | % | ||||||||||||
Managed | $ | 46,845 | $ | 47,146 | 11.69 | % | 7.96 | % | 4.94 | % | 3.90 | % | 1.83 | % | ||||||||||
Quarter Ended Feb 28, 2005 | ||||||||||||||||||||||||
Delinquency Rate | ||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 18,908 | $ | 19,210 | 9.07 | % | 5.21 | % | 4.62 | % | 3.75 | % | 1.81 | % | ||||||||||
Securitized | 28,862 | 29,720 | 12.63 | % | 9.44 | % | 5.43 | % | 4.55 | % | 2.20 | % | ||||||||||||
Managed | $ | 47,770 | $ | 48,930 | 11.23 | % | 7.79 | % | 5.11 | % | 4.24 | % | 2.05 | % | ||||||||||
(1) | The tables provide a reconciliation of certain managed and owned basis statistical data (period-end and average loan balances, |
interest yield, interest spread, net charge-off rates, and 30- and 90-day delinquency rates) for the periods indicated. | |
Notes: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
18
MORGAN STANLEY | |||||||||||||||||||
Quarterly Credit Services Reconciliation of General Purpose Credit Card Loan Data (1) | |||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended Nov 30, 2004 | ||||||||||||||||||||||||
Delinquency Rate | ||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 19,724 | $ | 18,579 | 9.69 | % | 5.85 | % | 5.01 | % | 4.08 | % | 1.97 | % | ||||||||||
Securitized | 28,537 | 28,511 | 12.82 | % | 10.06 | % | 5.74 | % | 4.87 | % | 2.34 | % | ||||||||||||
Managed | $ | 48,261 | $ | 47,090 | 11.59 | % | 8.43 | % | 5.45 | % | 4.55 | % | 2.18 | % | ||||||||||
Quarter Ended Aug 31, 2004 | ||||||||||||||||||||||||
Delinquency Rate | ||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 18,471 | $ | 17,787 | 10.45 | % | 6.54 | % | 5.36 | % | 4.35 | % | 2.01 | % | ||||||||||
Securitized | 28,655 | 29,086 | 12.44 | % | 10.15 | % | 6.01 | % | 5.10 | % | 2.35 | % | ||||||||||||
Managed | $ | 47,126 | $ | 46,873 | 11.69 | % | 8.83 | % | 5.76 | % | 4.81 | % | 2.22 | % | ||||||||||
Quarter Ended May 31, 2004 | ||||||||||||||||||||||||
Delinquency Rate | ||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 17,506 | $ | 16,202 | 9.93 | % | 5.67 | % | 6.02 | % | 4.37 | % | 2.15 | % | ||||||||||
Securitized | 29,322 | 30,727 | 12.91 | % | 10.77 | % | 6.73 | % | 5.18 | % | 2.55 | % | ||||||||||||
Managed | $ | 46,828 | $ | 46,929 | 11.88 | % | 9.06 | % | 6.48 | % | 4.88 | % | 2.40 | % | ||||||||||
Quarter Ended Feb 29, 2004 | ||||||||||||||||||||||||
Delinquency Rate | ||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 15,850 | $ | 17,880 | 10.13 | % | 6.08 | % | 5.81 | % | 5.17 | % | 2.54 | % | ||||||||||
Securitized | 31,486 | 30,787 | 13.40 | % | 11.20 | % | 6.60 | % | 6.11 | % | 3.01 | % | ||||||||||||
Managed | $ | 47,336 | $ | 48,667 | 12.20 | % | 9.35 | % | 6.31 | % | 5.80 | % | 2.86 | % | ||||||||||
(1) | The tables provide a reconciliation of certain managed and owned basis statistical data (period-end and average loan balances, |
interest yield, interest spread, net charge-off rates, and 30- and 90-day delinquency rates) for the periods indicated. | |
Notes: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
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MORGAN STANLEY | |||||||||||||||||||
Year to Date Credit Services Reconciliation of General Purpose Credit Card Loan Data (1) | |||||||||||||||||||
(unaudited, dollars in millions) |
Six Months Ended May 31, 2005 | ||||||||||||||||||||||||
Delinquency Rate | ||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 19,385 | $ | 18,979 | 9.81 | % | 5.85 | % | 4.62 | % | 3.48 | % | 1.64 | % | ||||||||||
Securitized | 27,460 | 29,049 | 12.53 | % | 9.17 | % | 5.30 | % | 4.19 | % | 1.97 | % | ||||||||||||
Managed | $ | 46,845 | $ | 48,028 | 11.46 | % | 7.88 | % | 5.03 | % | 3.90 | % | 1.83 | % | ||||||||||
Six Months Ended May 31, 2004 | ||||||||||||||||||||||||
Delinquency Rate | ||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 17,506 | $ | 17,036 | 10.03 | % | 5.88 | % | 5.91 | % | 4.37 | % | 2.15 | % | ||||||||||
Securitized | 29,322 | 30,757 | 13.15 | % | 10.98 | % | 6.67 | % | 5.18 | % | 2.55 | % | ||||||||||||
Managed | $ | 46,828 | $ | 47,793 | 12.04 | % | 9.21 | % | 6.40 | % | 4.88 | % | 2.40 | % | ||||||||||
(1) | The tables provide a reconciliation of certain managed and owned basis statistical data (period-end and average loan balances, interest yield, |
interest spread, net charge-off rates, and 30- and 90-day delinquency rates) for the periods indicated. | |
Notes: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
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MORGAN STANLEY | |||||||||||||||||||||
Quarterly Reconciliation of Managed Income Statement Data (1) | |||||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Six Months Ended | ||||||||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | May 31, 2004 | May 31, 2005 | ||||||||||||||||||
Merchant and cardmember and other fees: | |||||||||||||||||||||||||
Owned | $ | 337 | $ | 306 | $ | 349 | $ | 326 | $ | 308 | $ | 318 | $ | 643 | $ | 626 | |||||||||
Securitization adjustment | 182 | 161 | 150 | 159 | 171 | 168 | 343 | 339 | |||||||||||||||||
Managed | $ | 519 | $ | 467 | $ | 499 | $ | 485 | $ | 479 | $ | 486 | $ | 986 | $ | 965 | |||||||||
Servicing fees: | |||||||||||||||||||||||||
Owned | $ | 572 | $ | 485 | $ | 459 | $ | 477 | $ | 526 | $ | 413 | $ | 1,057 | $ | 939 | |||||||||
Securitization adjustment | (572 | ) | (485 | ) | (459 | ) | (477 | ) | (526 | ) | (413 | ) | (1,057 | ) | (939 | ) | |||||||||
Managed | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||
Other: | |||||||||||||||||||||||||
Owned | $ | 5 | $ | 16 | $ | (5 | ) | $ | 1 | $ | 2 | $ | (2 | ) | $ | 21 | $ | - | |||||||
Securitization adjustment | 30 | 0 | (5 | ) | 8 | 57 | (36 | ) | 30 | 21 | |||||||||||||||
Managed | $ | 35 | $ | 16 | $ | (10 | ) | $ | 9 | $ | 59 | $ | (38 | ) | $ | 51 | $ | 21 | |||||||
Interest revenue: | |||||||||||||||||||||||||
Owned | $ | 480 | $ | 435 | $ | 496 | $ | 482 | $ | 468 | $ | 544 | $ | 915 | $ | 1,012 | |||||||||
Securitization adjustment | 1,044 | 1,015 | 926 | 925 | 948 | 916 | 2,059 | 1,864 | |||||||||||||||||
Managed | $ | 1,524 | $ | 1,450 | $ | 1,422 | $ | 1,407 | $ | 1,416 | $ | 1,460 | $ | 2,974 | $ | 2,876 | |||||||||
Interest expense: | |||||||||||||||||||||||||
Owned | $ | 174 | $ | 163 | $ | 162 | $ | 163 | $ | 173 | $ | 186 | $ | 337 | $ | 359 | |||||||||
Securitization adjustment | 176 | 174 | 175 | 205 | 247 | 269 | 350 | 516 | |||||||||||||||||
Managed | $ | 350 | $ | 337 | $ | 337 | $ | 368 | $ | 420 | $ | 455 | $ | 687 | $ | 875 | |||||||||
Provision for consumer loan losses: | |||||||||||||||||||||||||
Owned | $ | 262 | $ | 200 | $ | 240 | $ | 223 | $ | 135 | $ | 209 | $ | 462 | $ | 344 | |||||||||
Securitization adjustment | 508 | 517 | 437 | 410 | 403 | 366 | 1,025 | 769 | |||||||||||||||||
Managed | $ | 770 | $ | 717 | $ | 677 | $ | 633 | $ | 538 | $ | 575 | $ | 1,487 | $ | 1,113 | |||||||||
(1) | The tables provide a reconciliation of certain managed and owned basis income statement data |
(merchant and cardmember fees, servicing fees, other revenue, interest revenue, interest expense | |
and provision for consumer loan losses) for the periods indicated. | |
Notes: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
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MORGAN STANLEY | ||||||||||||||||||||
The following (page 22) presents a reconciliation for adjusted assets. | ||||||||||||||||||||
Balance sheet leverage ratios are one indicator of capital adequacy when viewed in the context of a company's | ||||||||||||||||||||
overall liquidity and capital policies. The Company views the adjusted leverage ratio as a more relevant measure of | ||||||||||||||||||||
financial risk when comparing financial services firms and evaluating leverage trends. Adjusted assets exclude | ||||||||||||||||||||
certain self-funded assets considered to have minimal market, credit and/or liquidity risk that are generally | ||||||||||||||||||||
attributable to matched book and securities lending businesses as measured by aggregate resale agreements | ||||||||||||||||||||
and securities borrowed less non-derivative short positions. In addition, the adjusted leverage ratio reflects | ||||||||||||||||||||
the deduction from shareholders' equity of the amount of equity used to support goodwill and intangible assets, | ||||||||||||||||||||
as the Company does not view this amount of equity as available to support its risk capital needs. |
MORGAN STANLEY | ||||||||||||||||||||
Quarterly Reconciliation of Adjusted Assets | ||||||||||||||||||||
(unaudited, dollars in millions, except ratios) |
Quarter Ended | ||||||||||||||||||
Feb 29, 2004 | May 31, 2004 | Aug 31, 2004 | Nov 30, 2004 | Feb 28, 2005 | May 31, 2005 | |||||||||||||
Total assets (1) | $ | 656,898 | $ | 729,501 | $ | 745,033 | $ | 745,513 | $ | 802,210 | $ | 818,711 | ||||||
Less: Securities purchased under agreements to resell | (76,755 | ) | (96,042 | ) | (92,816 | ) | (123,041 | ) | (143,462 | ) | (145,579) | |||||||
Securities borrowed | (179,288 | ) | (202,412 | ) | (202,863 | ) | (208,349 | ) | (207,985 | ) | (228,454) | |||||||
Add: Financial instruments sold, not yet purchased (1) | 129,711 | 130,440 | 132,618 | 111,315 | 119,913 | 131,901 | ||||||||||||
Less: Derivative contracts sold, not yet purchased (1) | (43,857 | ) | (41,615 | ) | (39,425 | ) | (43,540 | ) | (37,389 | ) | (39,835) | |||||||
Subtotal | 486,709 | 519,872 | 542,547 | 481,898 | 533,287 | 536,744 | ||||||||||||
Less: Segregated customer cash and securities balances | (16,935 | ) | (29,918 | ) | (35,194 | ) | (26,534 | ) | (26,461 | ) | (36,539) | |||||||
Assets recorded under certain provisions of SFAS No.140 and FIN 46 | (39,756 | ) | (40,279 | ) | (40,057 | ) | (44,895 | ) | (57,042 | ) | (57,488) | |||||||
Goodwill and intangible assets | (1,548 | ) | (1,540 | ) | (2,191 | ) | (2,199 | ) | (2,563 | ) | (2,528) | |||||||
Adjusted assets | $ | 428,470 | $ | 448,135 | $ | 465,105 | $ | 408,270 | $ | 447,221 | $ | 440,189 | ||||||
Shareholders' equity | $ | 26,064 | $ | 27,002 | $ | 27,420 | $ | 28,206 | $ | 28,495 | $ | 28,330 | ||||||
Junior subordinated debt issued to capital trusts (2) | 2,897 | 2,897 | 2,897 | 2,897 | 2,833 | 2,894 | ||||||||||||
Subtotal | 28,961 | 29,899 | 30,317 | 31,103 | 31,328 | 31,224 | ||||||||||||
Less: Goodwill and intangible assets | (1,548 | ) | (1,540 | ) | (2,191 | ) | (2,199 | ) | (2,563 | ) | (2,528) | |||||||
Tangible shareholders' equity | $ | 27,413 | $ | 28,359 | $ | 28,126 | $ | 28,904 | $ | 28,765 | $ | 28,696 | ||||||
Leverage ratio (3) | 24.0x | 25.7x | 26.5x | 25.8x | 27.9x | 28.5x | ||||||||||||
Adjusted leverage ratio (4) | 15.6x | 15.8x | 16.5x | 14.1x | 15.5x | 15.3x | ||||||||||||
(1) | Effective December 1, 2004, the Company offsets cash paid or received pursuant to credit support agreements ("cash collateral netting") |
against its OTC derivatives inventory. Total assets as of November 30, 2004 have been restated to reflect cash collateral netting. | |
Prior periods presented do not reflect such cash collateral netting. | |
(2) | The Company views the junior subordinated debt issued to capital trusts as a component of its equity capital base |
given the inherent characteristics of the securities. These characteristics include the long dated nature (final maturity | |
at issuance of thirty years extendable at the Company's option by a further nineteen years), the Company's ability to | |
defer coupon interest for up to 20 consecutive quarters, and the subordinated nature of the obligations in the capital | |
structure. The Company also receives rating agency equity credit for these securities. | |
(3) | Leverage ratio equals total assets divided by tangible shareholders' equity. |
(4) | Adjusted leverage ratio equals adjusted total assets divided by tangible shareholders' equity. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 23. |
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MORGAN STANLEY 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 Company's second quarter earnings press release issued June 22, 2005. |
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