Exhibit 99.2
MORGAN STANLEY | |||
Financial Supplement - 1Q 2006 | |||
Table of Contents | |||
Page # | |||
1 | ……………. | Quarterly Financial Summary | |
2 | ……………. | Quarterly Consolidated Income Statement Information | |
3-4 | ……………. | Quarterly Consolidated Financial Information and Statistical Data | |
5 | ……………. | Consolidated Investment Assets | |
6 | ……………. | Quarterly Institutional Securities Income Statement Information | |
7-8 | ……………. | Quarterly Institutional Securities Financial Information and Statistical Data | |
9 | ……………. | Quarterly Global Wealth Management Group Income Statement Information | |
10 | ……………. | Quarterly Global Wealth Management Group Financial Information and Statistical Data | |
11 | ……………. | Quarterly Asset Management Income Statement Information | |
12 | ……………. | Quarterly Asset Management Financial Information and Statistical Data | |
13 | ……………. | Quarterly Consolidated Assets Under Management or Supervision | |
14 | ……………. | Quarterly Discover Income Statement Information | |
15 | ……………. | Quarterly Discover Income Statement Information (Managed Loan Basis) | |
16 | ……………. | Quarterly Discover Financial Information and Statistical Data | |
17 | ……………. | Quarterly Intersegment Eliminations Income Statement Information | |
18 | ……………. | Quarterly Inst'l. Securities, Global Wealth Management Group and Asset Mgmt. Combined Income Statement Information | |
19 | ……………. | Quarterly Discover Financial Information (Managed Loan Basis) | |
20 | ……………. | Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (Current Year) | |
21 | ……………. | Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (Prior Year) | |
22 | ……………. | Quarterly Discover Reconciliation of Managed Income Statement Data | |
23 | ……………. | Quarterly Reconciliation of Adjusted Assets | |
24 | ……………. | Illustration of Standard Equity Award Amortization | |
25 | ……………. | Legal Notice |
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Financial Summary | ||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Net revenues | ||||||||||||||||||||||
Institutional Securities | $ | 4,015 | $ | 3,340 | $ | 4,164 | $ | 4,154 | $ | 5,474 | 36 | % | 32 | % | ||||||||
Global Wealth Management Group | 1,238 | 1,228 | 1,255 | 1,298 | 1,284 | 4 | % | (1 | %) | |||||||||||||
Asset Management | 696 | 642 | 679 | 890 | 695 | -- | (22 | %) | ||||||||||||||
Discover | 959 | 888 | 911 | 694 | 1,089 | 14 | % | 57 | % | |||||||||||||
Intersegment Eliminations | (70 | ) | (67 | ) | (62 | ) | (74 | ) | (59 | ) | 16 | % | 20 | % | ||||||||
Consolidated net revenues | $ | 6,838 | $ | 6,031 | $ | 6,947 | $ | 6,962 | $ | 8,483 | 24 | % | 22 | % | ||||||||
Income before taxes (1) | ||||||||||||||||||||||
Institutional Securities | $ | 1,077 | $ | 813 | $ | 1,288 | $ | 1,576 | $ | 1,754 | 63 | % | 11 | % | ||||||||
Global Wealth Management Group | 353 | 118 | 30 | 84 | 23 | (93 | %) | (73 | %) | |||||||||||||
Asset Management | 287 | 175 | 162 | 383 | 172 | (40 | %) | (55 | %) | |||||||||||||
Discover | 354 | 263 | 239 | 65 | 479 | 35 | % | * | ||||||||||||||
Intersegment Eliminations | 24 | 25 | 23 | 22 | 19 | (21 | %) | (14 | %) | |||||||||||||
Consolidated income before taxes | $ | 2,095 | $ | 1,394 | $ | 1,742 | $ | 2,130 | $ | 2,447 | 17 | % | 15 | % | ||||||||
Earnings per basic share: | ||||||||||||||||||||||
Income from continuing operations | $ | 1.26 | $ | 0.88 | $ | 1.12 | $ | 1.69 | $ | 1.56 | 24 | % | (8 | %) | ||||||||
Discontinued operations | $ | - | $ | - | $ | (0.98 | ) | $ | 0.70 | $ | 0.04 | * | (94 | %) | ||||||||
Cumulative effect of accounting change (2) | $ | 0.05 | $ | - | $ | - | $ | - | $ | - | * | -- | ||||||||||
Earnings per basic share | $ | 1.31 | $ | 0.88 | $ | 0.14 | $ | 2.39 | $ | 1.60 | 22 | % | (33 | %) | ||||||||
Earnings per diluted share: | ||||||||||||||||||||||
Income from continuing operations | $ | 1.24 | $ | 0.86 | $ | 1.09 | $ | 1.64 | $ | 1.50 | 21 | % | (9 | %) | ||||||||
Discontinued operations | $ | - | $ | - | $ | (0.96 | ) | $ | 0.68 | $ | 0.04 | * | (94 | %) | ||||||||
Cumulative effect of accounting change (2) | $ | 0.05 | $ | - | $ | - | $ | - | $ | - | * | -- | ||||||||||
Earnings per diluted share | $ | 1.29 | $ | 0.86 | $ | 0.13 | $ | 2.32 | $ | 1.54 | 19 | % | (34 | %) | ||||||||
Average common shares outstanding | ||||||||||||||||||||||
Basic | 1,069,097,162 | 1,053,812,487 | 1,045,874,085 | 1,031,343,423 | 1,020,041,181 | |||||||||||||||||
Diluted | 1,090,166,326 | 1,079,811,172 | 1,072,033,275 | 1,063,147,962 | 1,061,764,798 | |||||||||||||||||
Period end common shares outstanding | 1,103,263,369 | 1,086,652,691 | 1,082,727,000 | 1,057,677,994 | 1,070,407,513 | |||||||||||||||||
Return on average common equity | ||||||||||||||||||||||
from continuing operations | 20.0 | % | 13.8 | % | 17.1 | % | 24.9 | % | 21.5 | % | ||||||||||||
Return on average common equity | 19.7 | % | 13.1 | % | 2.0 | % | 34.6 | % | 22.1 | % | ||||||||||||
(1) | Represents consolidated income from continuing operations before losses from unconsolidated investees, taxes, gain/(loss) from discontinued operations and cumulative effect of accounting change. | |||||||||||||
(2) | Represents the effects of the adoption of SFAS 123R 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 25. |
1
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Consolidated Income Statement Information | ||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Investment banking | $ | 821 | $ | 814 | $ | 992 | $ | 1,216 | $ | 982 | 20 | % | (19 | %) | ||||||||
Principal transactions: | ||||||||||||||||||||||
Trading | 1,846 | 1,794 | 2,150 | 1,575 | 3,067 | 66 | % | 95 | % | |||||||||||||
Investments | 153 | 226 | 103 | 499 | 314 | 105 | % | (37 | %) | |||||||||||||
Commissions | 824 | 824 | 804 | 911 | 929 | 13 | % | 2 | % | |||||||||||||
Fees: | ||||||||||||||||||||||
Asset management, distribution and admin. | 1,204 | 1,246 | 1,249 | 1,259 | 1,279 | 6 | % | 2 | % | |||||||||||||
Merchant, cardmember and other | 308 | 318 | 357 | 340 | 289 | (6 | %) | (15 | %) | |||||||||||||
Servicing and securitization income | 494 | 423 | 398 | 294 | 596 | 21 | % | 103 | % | |||||||||||||
Interest and dividends | 5,843 | 6,035 | 6,998 | 9,299 | 10,549 | 81 | % | 13 | % | |||||||||||||
Other | 105 | 121 | 106 | 132 | 114 | 9 | % | (14 | %) | |||||||||||||
Total revenues | 11,598 | 11,801 | 13,157 | 15,525 | 18,119 | 56 | % | 17 | % | |||||||||||||
Interest expense | 4,625 | 5,561 | 5,986 | 8,253 | 9,481 | 105 | % | 15 | % | |||||||||||||
Provision for consumer loan losses | 135 | 209 | 224 | 310 | 155 | 15 | % | (50 | %) | |||||||||||||
Net revenues | 6,838 | 6,031 | 6,947 | 6,962 | 8,483 | 24 | % | 22 | % | |||||||||||||
Compensation and benefits | 2,854 | 2,622 | 3,165 | 2,672 | 4,183 | 47 | % | 57 | % | |||||||||||||
Occupancy and equipment | 332 | 232 | 239 | 243 | 232 | (30 | %) | (5 | %) | |||||||||||||
Brokerage, clearing and exchange fees | 260 | 276 | 267 | 267 | 292 | 12 | % | 9 | % | |||||||||||||
Information processing and communications | 342 | 349 | 349 | 365 | 347 | 1 | % | (5 | %) | |||||||||||||
Marketing and business development | 257 | 298 | 276 | 331 | 238 | (7 | %) | (28 | %) | |||||||||||||
Professional services | 379 | 438 | 505 | 581 | 434 | 15 | % | (25 | %) | |||||||||||||
Other | 570 | 422 | 404 | 373 | 310 | (46 | %) | (17 | %) | |||||||||||||
September 11th related insurance recoveries, net | (251 | ) | 0 | 0 | 0 | 0 | * | -- | ||||||||||||||
Total non-interest expenses | 4,743 | 4,637 | 5,205 | 4,832 | 6,036 | 27 | % | 25 | % | |||||||||||||
Income from continuing operations before losses | ||||||||||||||||||||||
from unconsolidated investees, taxes | ||||||||||||||||||||||
and cumulative effect of accounting change | 2,095 | 1,394 | 1,742 | 2,130 | 2,447 | 17 | % | 15 | % | |||||||||||||
Losses from unconsolidated investees | 73 | 67 | 105 | 66 | 69 | (5 | %) | 5 | % | |||||||||||||
Provision for income taxes | 673 | 396 | 471 | 318 | 784 | 16 | % | 147 | % | |||||||||||||
Income from continuing operations | 1,349 | 931 | 1,166 | 1,746 | 1,594 | 18 | % | (9 | %) | |||||||||||||
Discontinued operations | ||||||||||||||||||||||
Gain/(loss) from discontinued operations | 7 | (5 | ) | (1,700 | ) | 1,212 | 70 | * | (94 | %) | ||||||||||||
Income tax benefit/(provision) | (3 | ) | 2 | 678 | (493 | ) | (28 | ) | * | 94 | % | |||||||||||
Gain/(loss) from discontinued operations | 4 | (3 | ) | (1,022 | ) | 719 | 42 | * | (94 | %) | ||||||||||||
Cumulative effect of accounting change (1) | 49 | 0 | 0 | 0 | 0 | * | -- | |||||||||||||||
Net income | $ | 1,402 | $ | 928 | $ | 144 | $ | 2,465 | $ | 1,636 | 17 | % | (34 | %) | ||||||||
Return on average common equity | ||||||||||||||||||||||
from continuing operations | 20.0 | % | 13.8 | % | 17.1 | % | 24.9 | % | 21.5 | % | ||||||||||||
Return on average common equity | 19.7 | % | 13.1 | % | 2.0 | % | 34.6 | % | 22.1 | % | ||||||||||||
Compensation and benefits as a % of net revenues | 42 | % | 44 | % | 46 | % | 38 | % | 49 | % | ||||||||||||
(1) | Represents the effects of the adoption of SFAS 123R 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 25. |
2
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Consolidated Financial Information and Statistical Data | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Morgan Stanley | ||||||||||||||||||||||
Total assets (millions) | $ | 802,210 | $ | 818,711 | $ | 837,391 | $ | 898,523 | $ | 959,688 | 20 | % | 7 | % | ||||||||
Adjusted assets (millions) (1) | $ | 447,221 | $ | 440,283 | $ | 458,190 | $ | 481,869 | $ | 528,211 | 18 | % | 10 | % | ||||||||
Period end common shares outstanding (millions) | 1,103.3 | 1,086.7 | 1,082.7 | 1,057.7 | 1,070.4 | (3 | %) | 1 | % | |||||||||||||
Book value per common share | $ | 25.83 | $ | 26.07 | $ | 26.07 | $ | 27.59 | $ | 28.21 | 9 | % | 2 | % | ||||||||
Shareholders' equity (millions) (2) | $ | 31,328 | $ | 31,224 | $ | 31,107 | $ | 31,946 | $ | 33,850 | 8 | % | 6 | % | ||||||||
Total capital (millions) (3) | $ | 122,230 | $ | 113,324 | $ | 118,415 | $ | 125,891 | $ | 134,330 | 10 | % | 7 | % | ||||||||
Worldwide employees | 53,718 | 54,142 | 53,760 | 53,218 | 53,870 | -- | 1 | % | ||||||||||||||
Average Daily 99%/One-Day Value-at-Risk ("VaR") (4) | ||||||||||||||||||||||
Primary Market Risk Category ($ millions, pre-tax) | ||||||||||||||||||||||
Interest rate and credit spread | $ | 66 | $ | 62 | $ | 51 | $ | 53 | $ | 53 | ||||||||||||
Equity price | 41 | 31 | 33 | 34 | 36 | |||||||||||||||||
Foreign exchange rate | 12 | 12 | 12 | 12 | 14 | |||||||||||||||||
Commodity price | $ | 34 | $ | 35 | $ | 38 | $ | 46 | $ | 49 | ||||||||||||
Trading VaR | $ | 96 | $ | 87 | $ | 78 | $ | 81 | $ | 84 | ||||||||||||
Non - trading VaR | $ | 28 | $ | 21 | $ | 24 | $ | 29 | $ | 33 | ||||||||||||
Aggregate trading and non - trading VaR | $ | 105 | $ | 99 | $ | 87 | $ | 92 | $ | 94 | ||||||||||||
(1) | 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 23 for further information. | |||||||||||||||||||
(2) | Includes common equity and junior subordinated debt issued to capital trusts. | |||||||||||||||||||
(3) | Includes common equity, junior subordinated debt issued to capital trusts, capital units and the non-current portion of long-term debt. | |||||||||||||||||||
(4) | 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 2005. | |||||||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | |||||||||||||||||||
Refer to Legal Notice page 25. |
3
MORGAN STANLEY | |||||||||||||||||||||||||||||||
Quarterly Consolidated Financial Information and Statistical Data | |||||||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | |||||||||||||||||||||||||||
Average common equity (billions) (1) | Return on average common equity | Average common equity (billions) (1) | Return on average common equity | Average common equity (billions) (1) | Return on average common equity | Average common equity (billions) (1) | Return on average common equity | Average common equity (billions) (1) | Return on average common equity | ||||||||||||||||||||||
Institutional Securities | $ | 13.8 | 21 | % | $ | 14.3 | 16 | % | $ | 14.6 | 24 | % | $ | 15.6 | 35 | % | $ | 16.2 | 29 | % | |||||||||||
Global Wealth Management Group | 3.8 | 23 | % | 3.6 | 8 | % | 3.5 | 2 | % | 3.7 | 9 | % | 3.5 | 2 | % | ||||||||||||||||
Asset Management | 1.8 | 41 | % | 1.7 | 25 | % | 1.7 | 24 | % | 1.7 | 55 | % | 2.0 | 21 | % | ||||||||||||||||
Securities Business | 19.4 | 23 | % | 19.6 | 16 | % | 19.8 | 21 | % | 21.0 | 32 | % | 21.7 | 24 | % | ||||||||||||||||
Discover | 4.3 | 20 | % | 4.2 | 16 | % | 4.6 | 13 | % | 4.6 | 4 | % | 4.6 | 26 | % | ||||||||||||||||
Capital surplus (unallocated) | 3.2 | 3.1 | 3.0 | 2.5 | 3.3 | ||||||||||||||||||||||||||
Total - continuing operations | 26.9 | 20 | % | 26.9 | 14 | % | 27.4 | 17 | % | 28.1 | 25 | % | 29.6 | 22 | % | ||||||||||||||||
Discontinued operations | 1.5 | 1.5 | 1.2 | 0.4 | 0.0 | ||||||||||||||||||||||||||
Firm | $ | 28.4 | 20 | % | $ | 28.4 | 13 | % | $ | 28.6 | 2 | % | $ | 28.5 | 35 | % | $ | 29.6 | 22 | % | |||||||||||
(1) | The Company uses an economic capital model to determine the amount of equity capital needed to support the risk of its business activities and to ensure that the Company remains adequately capitalized. Economic capital is defined as the amount of capital needed to run the business through the business cycle and satisfy the requirements of regulators, rating agencies and the market. The Company's methodology is based on a going concern approach that assigns economic capital to each segment based on regulatory capital usage plus additional capital for stress losses, goodwill and principal investment risk. The economic capital model and allocation methodology may be enhanced over time in response to changes in the business and regulatory environment. | ||||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | ||||||||||||||||
Refer to Legal Notice page 25. |
4
MORGAN STANLEY | ||||||||||||||||
Quarterly Financial Information | ||||||||||||||||
Consolidated Investment Assets | ||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||
Feb 28, 2006 | ||||||||||||||||
Global Wealth | ||||||||||||||||
Institutional Securities | Management Group | Asset Management | Discover | Total | ||||||||||||
Business facilitation: | ||||||||||||||||
Private equity funds | $ | 4 | $ | - | $ | 156 | $ | - | $ | 160 | ||||||
Real estate funds | 366 | - | - | - | 366 | |||||||||||
Asset management seed capital | - | - | 353 | - | 353 | |||||||||||
Industry utilities (1) | 587 | - | - | - | 587 | |||||||||||
Other | 227 | 35 | - | 8 | 270 | |||||||||||
Total business facilitation | 1,184 | 35 | 509 | 8 | 1,736 | |||||||||||
Principal investments | 1,337 | - | - | - | 1,337 | |||||||||||
Total investments | $ | 2,521 | $ | 35 | $ | 509 | $ | 8 | $ | 3,073 | ||||||
Nov 30, 2005 | ||||||||||||||||
Global Wealth | ||||||||||||||||
Institutional Securities | Management Group | Asset Management | Discover | Total | ||||||||||||
Business facilitation: | ||||||||||||||||
Private equity funds | $ | 3 | $ | - | $ | 185 | $ | - | $ | 188 | ||||||
Real estate funds | 359 | - | - | - | 359 | |||||||||||
Asset management seed capital | - | - | 248 | - | 248 | |||||||||||
Industry utilities (1) | 371 | - | - | - | 371 | |||||||||||
Other | 149 | 37 | - | 9 | 195 | |||||||||||
Total business facilitation | 882 | 37 | 433 | 9 | 1,361 | |||||||||||
Principal investments | 1,190 | - | - | - | 1,190 | |||||||||||
Total investments | $ | 2,072 | $ | 37 | $ | 433 | $ | 9 | $ | 2,551 | ||||||
Note: | The above tables include investments made by the Company that represent business facilitation or principal investing activities. Business facilitation investments are strategic investments undertaken by the Company to facilitate core business activities. Principal investing activities are capital commitments provided to private companies, generally, for proprietary purposes to maximize total returns to the Company. | ||||||||||||
(1) | Any investment made to participate in an industry consortium or an industry service with the intention to support core business activities and advance business growth. | ||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | ||||||||||||
Refer to Legal Notice page 25. |
5
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Institutional Securities Income Statement Information | ||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Investment banking | $ | 742 | $ | 735 | $ | 898 | $ | 1,102 | $ | 903 | 22 | % | (18 | %) | ||||||||
Principal transactions: | ||||||||||||||||||||||
Trading | 1,727 | 1,684 | 2,035 | 1,460 | 2,945 | 71 | % | 102 | % | |||||||||||||
Investments | 91 | 226 | 69 | 270 | 284 | * | 5 | % | ||||||||||||||
Commissions | 503 | 538 | 501 | 618 | 610 | 21 | % | (1 | %) | |||||||||||||
Asset management, distribution and admin. fees | 34 | 39 | 46 | 33 | 44 | 29 | % | 33 | % | |||||||||||||
Interest and dividends | 5,275 | 5,379 | 6,263 | 8,538 | 9,791 | 86 | % | 15 | % | |||||||||||||
Other | 66 | 78 | 69 | 88 | 78 | 18 | % | (11 | %) | |||||||||||||
Total revenues | 8,438 | 8,679 | 9,881 | 12,109 | 14,655 | 74 | % | 21 | % | |||||||||||||
Interest expense | 4,423 | 5,339 | 5,717 | 7,955 | 9,181 | 108 | % | 15 | % | |||||||||||||
Net revenues | 4,015 | 3,340 | 4,164 | 4,154 | 5,474 | 36 | % | 32 | % | |||||||||||||
Total non-interest expenses | 2,938 | 2,527 | 2,876 | 2,578 | 3,720 | 27 | % | 44 | % | |||||||||||||
Income from continuing operations before losses | ||||||||||||||||||||||
from unconsolidated investees, taxes, | ||||||||||||||||||||||
and cumulative effect of accounting change | 1,077 | 813 | 1,288 | 1,576 | 1,754 | 63 | % | 11 | % | |||||||||||||
Losses from unconsolidated investees | 73 | 67 | 105 | 66 | 68 | (7 | %) | 3 | % | |||||||||||||
Income before taxes | 1,004 | 746 | 1,183 | 1,510 | 1,686 | 68 | % | 12 | % | |||||||||||||
Provision for income taxes | 284 | 172 | 305 | 148 | 523 | 84 | % | * | ||||||||||||||
Income from continuing operations (1) | $ | 720 | $ | 574 | $ | 878 | $ | 1,362 | $ | 1,163 | 62 | % | (15 | %) | ||||||||
Return on average common equity (2) | 21 | % | 16 | % | 24 | % | 35 | % | 29 | % | ||||||||||||
Pre-tax profit margin (3) | 27 | % | 24 | % | 31 | % | 38 | % | 32 | % | ||||||||||||
(1) | Excludes gain/(loss) from discontinued operations and cumulative effect of accounting change. | ||||||||
(2) | Refer to page 4 for the allocation of average common equity. | ||||||||
(3) | Income before taxes, 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 25. |
6
MORGAN STANLEY | ||||||||||||||||||||||||||||
Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||||||||
Institutional Securities | ||||||||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||||||||
Investment Banking | ||||||||||||||||||||||||||||
Advisory revenue | $ | 254 | $ | 357 | $ | 388 | $ | 479 | $ | 355 | 40 | % | (26 | %) | ||||||||||||||
Underwriting revenue | ||||||||||||||||||||||||||||
Equity | 202 | 145 | 200 | 358 | 197 | (2 | %) | (45 | %) | |||||||||||||||||||
Fixed income | 286 | 233 | 310 | 265 | 351 | 23 | % | 32 | % | |||||||||||||||||||
Total underwriting revenue | $ | 488 | $ | 378 | $ | 510 | $ | 623 | $ | 548 | 12 | % | (12 | %) | ||||||||||||||
Sales and Trading | ||||||||||||||||||||||||||||
Sales and trading net revenue (1) | ||||||||||||||||||||||||||||
Equity | 1,214 | 1,119 | 1,280 | 1,191 | 1,654 | 36 | % | 39 | % | |||||||||||||||||||
Fixed income | 1,998 | 1,211 | 1,964 | 1,609 | 2,724 | 36 | % | 69 | % | |||||||||||||||||||
Total sales and trading net revenue | $ | 3,212 | $ | 2,330 | $ | 3,244 | $ | 2,800 | $ | 4,378 | 36 | % | 56 | % | ||||||||||||||
Fiscal View | Calendar View | |||||||||||||||||||||||||||
Quarter Ended (2) | Two Months Ended (2) | |||||||||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | Feb 28, 2005 | Feb 28, 2006 | ||||||||||||||||||||||
Mergers and acquisitions announced transactions | ||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 169.4 | $ | 208.9 | $ | 104.4 | $ | 133.3 | $ | 279.3 | $ | 117.7 | $ | 115.0 | ||||||||||||||
Market share | 25.5 | % | 34.8 | % | 20.6 | % | 19.6 | % | 34.8 | % | 30.6 | % | 23.7 | % | ||||||||||||||
Rank | 3 | 1 | 3 | 6 | 4 | 3 | 9 | |||||||||||||||||||||
Mergers and acquisitions completed transactions | ||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 43.0 | $ | 95.5 | $ | 154.8 | $ | 178.1 | $ | 146.3 | $ | 30.2 | $ | 92.6 | ||||||||||||||
Market share | 12.3 | % | 25.6 | % | 23.4 | % | 30.6 | % | 26.9 | % | 13.2 | % | 27.2 | % | ||||||||||||||
Rank | 7 | 2 | 5 | 2 | 3 | 7 | 3 | |||||||||||||||||||||
Global equity and related issues | ||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 13.8 | $ | 5.7 | $ | 9.0 | $ | 15.5 | $ | 10.8 | $ | 8.9 | $ | 4.8 | ||||||||||||||
Market share | 11.2 | % | 6.3 | % | 6.2 | % | 10.2 | % | 7.7 | % | 12.5 | % | 6.2 | % | ||||||||||||||
Rank | 2 | 6 | 5 | 1 | 4 | 2 | 5 | |||||||||||||||||||||
Global IPO's | ||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 2.7 | $ | 2.1 | $ | 3.2 | $ | 5.4 | $ | 2.7 | $ | 2.0 | $ | 1.4 | ||||||||||||||
MarketShare | 8.6 | % | 8.6 | % | 6.6 | % | 9.9 | % | 6.7 | % | 11.0 | % | 6.3 | % | ||||||||||||||
Rank | 4 | 2 | 4 | 2 | 5 | 1 | 4 | |||||||||||||||||||||
Global debt | ||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 81.6 | $ | 82.7 | $ | 90.8 | $ | 80.7 | $ | 93.6 | $ | 68.8 | $ | 73.8 | ||||||||||||||
MarketShare | 6.0 | % | 5.7 | % | 6.1 | % | 5.1 | % | 6.2 | % | 6.6 | % | 7.2 | % | ||||||||||||||
Rank | 4 | 5 | 5 | 7 | 4 | 3 | 2 | |||||||||||||||||||||
(1) | Includes principal transactions trading, commissions and net interest revenue. | ||||||||||||||
(2) | Source: Thomson Financial, data as of March 8, 2006. | ||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | ||||||||||||||
Refer to Legal Notice page 25. |
7
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||
Institutional Securities | ||||||||||||||||||||||
(unaudited, dollars in billions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Loans | ||||||||||||||||||||||
Investment grade | $ | 1.5 | $ | 1.8 | $ | 3.0 | $ | 5.0 | $ | 5.6 | * | 12 | % | |||||||||
Non-investment grade | 1.0 | 1.9 | 2.8 | 2.3 | 2.9 | * | 26 | % | ||||||||||||||
Total loans | $ | 2.5 | $ | 3.7 | $ | 5.8 | $ | 7.3 | $ | 8.5 | * | 16 | % | |||||||||
Commitments | ||||||||||||||||||||||
Investment grade | $ | 18.7 | $ | 21.1 | $ | 27.6 | $ | 23.9 | $ | 29.2 | 56 | % | 22 | % | ||||||||
Non-investment grade | 2.0 | 5.6 | 3.0 | 13.1 | 5.3 | * | (60 | %) | ||||||||||||||
Total commitments | $ | 20.7 | $ | 26.7 | $ | 30.6 | $ | 37.0 | $ | 34.5 | 67 | % | (7 | %) | ||||||||
Loans plus commitments | ||||||||||||||||||||||
Investment grade | $ | 20.2 | $ | 22.9 | $ | 30.6 | $ | 28.9 | $ | 34.8 | 72 | % | 20 | % | ||||||||
Non-investment grade | $ | 3.0 | $ | 7.5 | $ | 5.8 | $ | 15.4 | $ | 8.2 | * | (47 | %) | |||||||||
% investment grade | 87 | % | 75 | % | 84 | % | 65 | % | 81 | % | ||||||||||||
% non-investment grade | 13 | % | 25 | % | 16 | % | 35 | % | 19 | % | ||||||||||||
Total loans and commitments | $ | 23.2 | $ | 30.4 | $ | 36.4 | $ | 44.3 | $ | 43.0 | 85 | % | (3 | %) | ||||||||
Hedges (1) | $ | 13.1 | $ | 14.3 | $ | 16.1 | $ | 17.8 | $ | 17.7 | 35 | % | (1 | %) | ||||||||
Total loans and commitments net of hedges | $ | 10.1 | $ | 16.1 | $ | 20.3 | $ | 26.5 | $ | 25.3 | * | (5 | %) | |||||||||
(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 25. |
8
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Global Wealth Management Group Income Statement Information | ||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Investment banking | $ | 71 | $ | 68 | $ | 81 | $ | 100 | $ | 67 | (6 | %) | (33 | %) | ||||||||
Principal transactions: | ||||||||||||||||||||||
Trading | 120 | 111 | 116 | 117 | 124 | 3 | % | 6 | % | |||||||||||||
Investments | (2 | ) | (2 | ) | 1 | 2 | 0 | * | * | |||||||||||||
Commissions | 329 | 295 | 306 | 298 | 319 | (3 | %) | 7 | % | |||||||||||||
Asset management, distribution and admin fees | 607 | 632 | 629 | 649 | 649 | 7 | % | -- | ||||||||||||||
Interest and dividends | 135 | 149 | 174 | 204 | 206 | 53 | % | 1 | % | |||||||||||||
Other | 38 | 45 | 38 | 46 | 36 | (5 | %) | (22 | %) | |||||||||||||
Total revenues | 1,298 | 1,298 | 1,345 | 1,416 | 1,401 | 8 | % | (1 | %) | |||||||||||||
Interest expense | 60 | 70 | 90 | 118 | 117 | 95 | % | (1 | %) | |||||||||||||
Net revenues | 1,238 | 1,228 | 1,255 | 1,298 | 1,284 | 4 | % | (1 | %) | |||||||||||||
Total non-interest expenses | 885 | 1,110 | 1,225 | 1,214 | 1,261 | 42 | % | 4 | % | |||||||||||||
Income before taxes | 353 | 118 | 30 | 84 | 23 | (93 | %) | (73 | %) | |||||||||||||
Provision for income taxes | 139 | 48 | 11 | (1 | ) | 9 | (94 | %) | * | |||||||||||||
Income from continuing operations (1) | $ | 214 | $ | 70 | $ | 19 | $ | 85 | $ | 14 | (93 | %) | (84 | %) | ||||||||
Return on average common equity (2) | 23 | % | 8 | % | 2 | % | 9 | % | 2 | % | ||||||||||||
Pre-tax profit margin (3) | 29 | % | 10 | % | 2 | % | 7 | % | 2 | % | ||||||||||||
(1) | Excludes cumulative effect of accounting change. | |||||||||
(2) | Refer to page 4 for the allocation of average common equity. | |||||||||
(3) | Income before taxes 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 25. |
9
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||
Global Wealth Management Group | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Global representatives | 10,471 | 10,438 | 9,311 | 9,526 | 9,000 | (14 | %) | (6 | %) | |||||||||||||
Annualized revenue per global | ||||||||||||||||||||||
representative (thousands) (1) | $ | 462 | $ | 470 | $ | 508 | $ | 551 | $ | 554 | 20 | % | 1 | % | ||||||||
Retail brokerage assets by client segment (billions) | ||||||||||||||||||||||
$10m or more | 117 | 117 | 120 | 124 | 129 | 10 | % | 4 | % | |||||||||||||
$1m - $10m | 196 | 196 | 201 | 204 | 208 | 6 | % | 2 | % | |||||||||||||
$100k - $1m | 186 | 184 | 182 | 174 | 174 | (6 | %) | -- | ||||||||||||||
< $100k | 37 | 35 | 33 | 31 | 31 | (16 | %) | -- | ||||||||||||||
Total U.S. retail brokerage assets | 536 | 532 | 536 | 533 | 542 | 1 | % | 2 | % | |||||||||||||
International | 55 | 54 | 55 | 56 | 63 | 15 | % | 13 | % | |||||||||||||
Corporate / other | 27 | 27 | 28 | 28 | 28 | 4 | % | -- | ||||||||||||||
Total client assets (billions) | $ | 618 | $ | 613 | $ | 619 | $ | 617 | $ | 633 | 2 | % | 3 | % | ||||||||
Fee-based client account assets (billions) (2) | $ | 166 | $ | 165 | $ | 170 | $ | 173 | $ | 182 | 10 | % | 5 | % | ||||||||
Fee-based assets as a % of client assets | 27 | % | 27 | % | 27 | % | 28 | % | 29 | % | ||||||||||||
Bank deposit program (millions) | $ | 496 | $ | 446 | $ | 449 | $ | 1,689 | $ | 7,319 | * | * | ||||||||||
Client assets per global | ||||||||||||||||||||||
representative (millions) (3) | $ | 59 | $ | 59 | $ | 66 | $ | 65 | $ | 70 | 19 | % | 8 | % | ||||||||
Domestic retail net new assets (billions) (4) | $ | 3.7 | $ | 3.8 | $ | (2.1 | ) | $ | (8.1 | ) | $ | - | * | * | ||||||||
Domestic retail locations | 524 | 526 | 517 | 485 | 484 | (8 | %) | -- | ||||||||||||||
(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 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 25. |
10
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Asset Management Income Statement Information | ||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Investment banking | $ | 11 | $ | 11 | $ | 13 | $ | 15 | $ | 12 | 9 | % | (20 | %) | ||||||||
Principal transactions: | ||||||||||||||||||||||
Investments | 64 | 2 | 33 | 227 | 30 | (53 | %) | (87 | %) | |||||||||||||
Commissions | 7 | 7 | 9 | 6 | 7 | -- | 17 | % | ||||||||||||||
Asset management, distribution and admin fees | 605 | 615 | 612 | 628 | 639 | 6 | % | 2 | % | |||||||||||||
Interest and dividends | 3 | 3 | 4 | 13 | 5 | 67 | % | (62 | %) | |||||||||||||
Other | 8 | 6 | 11 | 5 | 6 | (25 | %) | 20 | % | |||||||||||||
Total revenues | 698 | 644 | 682 | 894 | 699 | -- | (22 | %) | ||||||||||||||
Interest expense | 2 | 2 | 3 | 4 | 4 | 100 | % | -- | ||||||||||||||
Net revenues | 696 | 642 | 679 | 890 | 695 | -- | (22 | %) | ||||||||||||||
Total non-interest expenses | 409 | 467 | 517 | 507 | 523 | 28 | % | 3 | % | |||||||||||||
Income before taxes | 287 | 175 | 162 | 383 | 172 | (40 | %) | (55 | %) | |||||||||||||
Provision for income taxes | 107 | 68 | 57 | 146 | 67 | (37 | %) | (54 | %) | |||||||||||||
Income from continuing operations (1) | $ | 180 | $ | 107 | $ | 105 | $ | 237 | $ | 105 | (42 | %) | (56 | %) | ||||||||
Return on average common equity (2) | 41 | % | 25 | % | 24 | % | 55 | % | 21 | % | ||||||||||||
Pre-tax profit margin (3) | 41 | % | 27 | % | 24 | % | 43 | % | 25 | % | ||||||||||||
(1) | Excludes cumulative effect of accounting change. | ||||||||
(2) | Refer to page 4 for the allocation of average common equity. | ||||||||
(3) | Income before taxes 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 25. |
11
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||
Asset Management | ||||||||||||||||||||||
(unaudited, dollars in billions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Assets under management or supervision | ||||||||||||||||||||||
Net flows | ||||||||||||||||||||||
Retail | $ | (0.7 | ) | $ | (0.9 | ) | $ | (1.0 | ) | $ | (2.5 | ) | $ | (3.1 | ) | * | (24 | %) | ||||
Institutional | (7.3 | ) | (3.0 | ) | (1.4 | ) | 2.3 | (2.1 | ) | 71 | % | * | ||||||||||
Net flows excluding money markets | (8.0 | ) | (3.9 | ) | (2.4 | ) | (0.2 | ) | (5.2 | ) | 35 | % | * | |||||||||
Money markets | 0.9 | (3.2 | ) | 2.2 | (3.9 | ) | (1.7 | ) | * | 56 | % | |||||||||||
Assets under management or supervision by distribution channel | ||||||||||||||||||||||
Retail | $ | 201 | $ | 199 | $ | 201 | $ | 199 | $ | 195 | (3 | %) | (2 | %) | ||||||||
Institutional | 226 | 217 | 227 | 232 | 247 | 9 | % | 7 | % | |||||||||||||
Total assets under management or supervision | $ | 427 | $ | 416 | $ | 428 | $ | 431 | $ | 442 | 4 | % | 3 | % | ||||||||
Assets under management or supervision by asset class | ||||||||||||||||||||||
Equity | $ | 207 | $ | 205 | $ | 212 | $ | 218 | $ | 230 | 11 | % | 6 | % | ||||||||
Fixed income | 97 | 92 | 92 | 91 | 90 | (7 | %) | (1 | %) | |||||||||||||
Money market | 83 | 80 | 83 | 79 | 78 | (6 | %) | (1 | %) | |||||||||||||
Alternatives | 19 | 18 | 18 | 19 | 18 | (5 | %) | (5 | %) | |||||||||||||
Real estate | 10 | 10 | 11 | 12 | 14 | 40 | % | 17 | % | |||||||||||||
Total assets under management | 416 | 405 | 416 | 419 | 430 | 3 | % | 3 | % | |||||||||||||
Unit investment trust | 11 | 11 | 12 | 12 | 12 | 9 | % | - | ||||||||||||||
Total assets under management or supervision | $ | 427 | $ | 416 | $ | 428 | $ | 431 | $ | 442 | 4 | % | 3 | % | ||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | |||||||||||||||
Refer to Legal Notice page 25. |
12
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||
Consolidated Assets Under Management or Supervision | ||||||||||||||||||||||
(unaudited, dollars in billions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Consolidated assets under management or supervision by distribution channel | ||||||||||||||||||||||
Retail | $ | 321 | $ | 319 | $ | 327 | $ | 331 | $ | 337 | 5 | % | 2 | % | ||||||||
Institutional | 255 | 246 | 260 | 268 | 285 | 12 | % | 6 | % | |||||||||||||
Total assets under management or supervision (1) | $ | 576 | $ | 565 | $ | 587 | $ | 599 | $ | 622 | 8 | % | 4 | % | ||||||||
Consolidated assets under management or supervision by asset class | ||||||||||||||||||||||
Equity | $ | 267 | $ | 265 | $ | 276 | $ | 285 | $ | 301 | 13 | % | 6 | % | ||||||||
Fixed income | 111 | 106 | 107 | 108 | 108 | (3 | %) | – | ||||||||||||||
Money market | 87 | 84 | 87 | 83 | 83 | (5 | %) | – | ||||||||||||||
Alternatives | 19 | 18 | 18 | 19 | 18 | (5 | %) | (5 | %) | |||||||||||||
Real estate | 32 | 33 | 38 | 41 | 45 | 41 | % | 10 | % | |||||||||||||
Total assets under management | 516 | 506 | 526 | 536 | 555 | 8 | % | 4 | % | |||||||||||||
Unit investment trust | 11 | 11 | 12 | 12 | 12 | 9 | % | – | ||||||||||||||
Other (2) | 49 | 48 | 49 | 51 | 55 | 12 | % | 8 | % | |||||||||||||
Total assets under management or supervision (1) | $ | 576 | $ | 565 | $ | 587 | $ | 599 | $ | 622 | 8 | % | 4 | % | ||||||||
(1) | Revenues and expenses associated with customer assets of $149 billion, $127 billion and $139 billion as of Feb 28, 2006, Feb 28, 2005 and Nov 30, 2005, respectively, are included in the Company's Global Wealth Management Group segment, and $31 billion, $22 billion and $29 billion as of Feb 28, 2006, Feb 28, 2005 and Nov 30, 2005, respectively, are included in the Company's Institutional Securities segment. | ||||||||||||||||||||||||
(2) | Includes assets under management or supervision associated with the Global Wealth Management Group. | ||||||||||||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | ||||||||||||||||||||||||
Refer to Legal Notice page 25. |
13
Quarterly Discover Income Statement Information | |
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Merchant, cardmember and other fees | $ | 308 | $ | 318 | $ | 357 | $ | 340 | $ | 289 | (6 | %) | (15 | %) | ||||||||
Servicing and securitization income | 494 | 423 | 398 | 294 | 596 | 21 | % | 103 | % | |||||||||||||
Other | 2 | 2 | (1 | ) | 2 | 4 | 100 | % | 100 | % | ||||||||||||
Total non-interest revenues | 804 | 743 | 754 | 636 | 889 | 11 | % | 40 | % | |||||||||||||
Interest revenue | 458 | 536 | 593 | 587 | 586 | 28 | % | – | ||||||||||||||
Interest expense | 168 | 182 | 212 | 219 | 231 | 38 | % | 5 | % | |||||||||||||
Net interest income | 290 | 354 | 381 | 368 | 355 | 22 | % | (4 | %) | |||||||||||||
Provision for consumer loan losses | 135 | 209 | 224 | 310 | 155 | 15 | % | (50 | %) | |||||||||||||
Net credit income | 155 | 145 | 157 | 58 | 200 | 29 | % | * | ||||||||||||||
Net revenues | 959 | 888 | 911 | 694 | 1,089 | 14 | % | 57 | % | |||||||||||||
Total non-interest expenses | 605 | 625 | 672 | 629 | 610 | 1 | % | (3 | %) | |||||||||||||
Income before losses from unconsolidated | ||||||||||||||||||||||
investees and taxes | 354 | 263 | 239 | 65 | 479 | 35 | % | * | ||||||||||||||
Losses from unconsolidated investees | 0 | 0 | 0 | 0 | 1 | * | * | |||||||||||||||
Income before taxes | 354 | 263 | 239 | 65 | 478 | 35 | % | * | ||||||||||||||
Provision for income taxes | 134 | 99 | 89 | 18 | 178 | 33 | % | * | ||||||||||||||
Income from continuing operations (1) | $ | 220 | $ | 164 | $ | 150 | $ | 47 | $ | 300 | 36 | % | * | |||||||||
Return on average common equity (2) | 20 | % | 16 | % | 13 | % | 4 | % | 26 | % | ||||||||||||
Pre-tax profit margin (3) | 37 | % | 30 | % | 26 | % | 9 | % | 44 | % | ||||||||||||
(1) | Excludes cumulative effect of accounting change. | ||||||||||||||
(2) | Refer to page 4 for the allocation of average common equity. | ||||||||||||||
(3) | Income before taxes 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 25. |
14
MORGAN STANLEY | |
Quarterly Discover Income Statement Information | |
(Managed loan basis) | |
(unaudited, dollars in millions) | |
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Merchant, cardmember and other fees | $ | 481 | $ | 484 | $ | 532 | $ | 520 | $ | 519 | 8 | % | – | |||||||||
Servicing and securitization income | 0 | 0 | 0 | 0 | 0 | – | – | |||||||||||||||
Other | 34 | (14 | ) | (19 | ) | (74 | ) | 143 | * | * | ||||||||||||
Total non-interest revenues | 515 | 470 | 513 | 446 | 662 | 29 | % | 48 | % | |||||||||||||
Interest revenue | 1,383 | 1,426 | 1,463 | 1,432 | 1,475 | 7 | % | 3 | % | |||||||||||||
Interest expense | 401 | 433 | 475 | 497 | 541 | 35 | % | 9 | % | |||||||||||||
Net interest income | 982 | 993 | 988 | 935 | 934 | (5 | %) | – | ||||||||||||||
Provision for consumer loan losses | 538 | 575 | 590 | 687 | 507 | (6 | %) | (26 | %) | |||||||||||||
Net credit income | 444 | 418 | 398 | 248 | 427 | (4 | %) | 72 | % | |||||||||||||
Net revenues | 959 | 888 | 911 | 694 | 1,089 | 14 | % | 57 | % | |||||||||||||
Total non-interest expenses | 605 | 625 | 672 | 629 | 610 | 1 | % | (3 | %) | |||||||||||||
Income before losses from unconsolidated | ||||||||||||||||||||||
investees and taxes | 354 | 263 | 239 | 65 | 479 | 35 | % | * | ||||||||||||||
Losses from unconsolidated investees | 0 | 0 | 0 | 0 | 1 | * | * | |||||||||||||||
Income before taxes | 354 | 263 | 239 | 65 | 478 | 35 | % | * | ||||||||||||||
Provision for income taxes | 134 | 99 | 89 | 18 | 178 | 33 | % | * | ||||||||||||||
Income from continuing operations (1) | $ | 220 | $ | 164 | $ | 150 | $ | 47 | $ | 300 | 36 | % | * | |||||||||
Return on average common equity (2) | 20 | % | 16 | % | 13 | % | 4 | % | 26 | % | ||||||||||||
Pre-tax profit margin (3) | 37 | % | 30 | % | 26 | % | 9 | % | 44 | % | ||||||||||||
(1) | Excludes cumulative effect of accounting change. | |||||||||||||||
(2) | Refer to page 4 for the allocation of average common equity. | |||||||||||||||
(3) | Income before taxes 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 25. |
15
MORGAN STANLEY |
Quarterly Financial Information and Statistical Data |
Discover |
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Total owned credit card loans | ||||||||||||||||||||||
Period end | $ | 18,908 | $ | 19,385 | $ | 20,570 | $ | 22,496 | $ | 19,924 | 5 | % | (11 | %) | ||||||||
Average | $ | 19,210 | $ | 18,753 | $ | 19,835 | $ | 21,934 | $ | 21,976 | 14 | % | – | |||||||||
Total managed credit card loans (1)(2) | ||||||||||||||||||||||
Period end | $ | 47,770 | $ | 46,845 | $ | 47,105 | $ | 46,936 | $ | 47,825 | – | 2 | % | |||||||||
Average | $ | 48,930 | $ | 47,146 | $ | 46,769 | $ | 46,502 | $ | 47,575 | (3 | %) | 2 | % | ||||||||
Interest yield | 11.23 | % | 11.69 | % | 12.04 | % | 11.94 | % | 12.13 | % | 90 bp | 19 bp | ||||||||||
Interest spread | 7.79 | % | 7.96 | % | 7.95 | % | 7.55 | % | 7.44 | % | (35 bp | ) | (11 bp | ) | ||||||||
Transaction volume (billions) | $ | 25.9 | $ | 25.4 | $ | 26.7 | $ | 26.1 | $ | 26.8 | 3 | % | 3 | % | ||||||||
Net Sales | 20.8 | 21.1 | 22.4 | 21.6 | 22.5 | 8 | % | 4 | % | |||||||||||||
Other transaction volume | 5.1 | 4.3 | 4.3 | 4.5 | 4.3 | (16 | %) | (4 | %) | |||||||||||||
Accounts (millions) | 45.9 | 45.9 | 45.6 | 45.5 | 46.1 | – | 1 | % | ||||||||||||||
Active accounts (millions) | 19.5 | 19.3 | 19.2 | 19.2 | 19.6 | 1 | % | 2 | % | |||||||||||||
Average receivables per avg. active account (actual $) | $ | 2,476 | $ | 2,426 | $ | 2,429 | $ | 2,420 | $ | 2,457 | (1 | %) | 2 | % | ||||||||
Trans volume per avg. active account (actual $) | $ | 1,311 | $ | 1,306 | $ | 1,387 | $ | 1,360 | $ | 1,385 | 6 | % | 2 | % | ||||||||
Net gain on securitization | $ | 32 | $ | (16 | ) | $ | (18 | ) | $ | (76 | ) | $ | 139 | * | * | |||||||
Return on managed receivables (3) | 1.82 | % | 1.38 | % | 1.28 | % | 0.40 | % | 2.56 | % | 74 bp | 216 bp | ||||||||||
Credit quality | ||||||||||||||||||||||
Net charge-off rate | 5.11 | % | 4.94 | % | 5.12 | % | 5.76 | % | 5.06 | % | (5 bp | ) | (70 bp | ) | ||||||||
Delinquency rate (over 30 days) | 4.24 | % | 3.90 | % | 3.91 | % | 3.98 | % | 3.45 | % | (79 bp | ) | (53 bp | ) | ||||||||
Delinquency rate (over 90 days) | 2.05 | % | 1.83 | % | 1.80 | % | 1.75 | % | 1.61 | % | (44 bp | ) | (14 bp | ) | ||||||||
Allowance for loan losses at period end | $ | 840 | $ | 828 | $ | 817 | $ | 829 | $ | 777 | (8 | %) | (6 | %) | ||||||||
International managed credit card loans (2) | ||||||||||||||||||||||
Period end | $ | 2,648 | $ | 2,479 | $ | 2,684 | $ | 2,675 | $ | 4,183 | 58 | % | 56 | % | ||||||||
Average | $ | 2,606 | $ | 2,578 | $ | 2,523 | $ | 2,667 | $ | 2,911 | 12 | % | 9 | % | ||||||||
Accounts (millions) | 1.4 | 1.4 | 1.5 | 1.5 | 2.6 | 86 | % | 73 | % | |||||||||||||
Payment services (millions of transactions) | ||||||||||||||||||||||
Discover network transaction volume | 314 | 315 | 338 | 334 | 339 | 8 | % | 1 | % | |||||||||||||
PULSE network transaction volume (4) | 216 | 457 | 466 | 417 | 425 | 97 | % | 2 | % | |||||||||||||
Total network transaction volume | 530 | 772 | 804 | 751 | 764 | 44 | % | 2 | % | |||||||||||||
(1) | Includes domestic and international credit card businesses. | |||||||||||||||
(2) | Includes owned and securitized credit card loans. | |||||||||||||||
(3) | Annualized net income divided by average managed receivables. | |||||||||||||||
(4) | 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 25. |
16
MORGAN STANLEY | ||||||||||||||||
Quarterly Intersegment Eliminations Income Statement Information | ||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Investment banking | $ | (3 | ) | $ | 0 | $ | 0 | $ | (1 | ) | $ | 0 | * | * | ||||||||
Principal transactions: | ||||||||||||||||||||||
Trading | (1 | ) | (1 | ) | (1 | ) | (2 | ) | (2 | ) | (100 | %) | – | |||||||||
Investments | 0 | 0 | 0 | 0 | 0 | – | – | |||||||||||||||
Commissions | (15 | ) | (16 | ) | (12 | ) | (11 | ) | (7 | ) | 53 | % | 36 | % | ||||||||
Asset management, distribution and admin. fees | (42 | ) | (40 | ) | (38 | ) | (51 | ) | (53 | ) | (26 | %) | (4 | %) | ||||||||
Interest and dividends | (28 | ) | (32 | ) | (36 | ) | (43 | ) | (39 | ) | (39 | %) | 9 | % | ||||||||
Other | (9 | ) | (10 | ) | (11 | ) | (9 | ) | (10 | ) | (11 | %) | (11 | %) | ||||||||
Total revenues | (98 | ) | (99 | ) | (98 | ) | (117 | ) | (111 | ) | (13 | %) | 5 | % | ||||||||
Interest expense | (28 | ) | (32 | ) | (36 | ) | (43 | ) | (52 | ) | (86 | %) | (21 | %) | ||||||||
Net revenues | (70 | ) | (67 | ) | (62 | ) | (74 | ) | (59 | ) | 16 | % | 20 | % | ||||||||
Total non-interest expenses | (94 | ) | (92 | ) | (85 | ) | (96 | ) | (78 | ) | 17 | % | 19 | % | ||||||||
Income before taxes | 24 | 25 | 23 | 22 | 19 | (21 | %) | (14 | %) | |||||||||||||
Provision for income taxes | 9 | 10 | 8 | 7 | 7 | (22 | %) | – | ||||||||||||||
Income from continuing operations (1) | $ | 15 | $ | 15 | $ | 15 | $ | 15 | $ | 12 | (20 | %) | (20 | %) | ||||||||
(1) | Excludes cumulative effect of accounting change. | |||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | |||||||||||||||
Refer to Legal Notice page 25. |
17
MORGAN STANLEY
The following (page 18) presents more detailed financial information regarding the results of operations for the combined |
Institutional Securities, Global Wealth Management Group and Asset 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 also provides this type of presentation for its Discover business (page 19) |
in order to provide helpful comparison to other credit card issuers. |
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Institutional Securities, Global Wealth Management Group and Asset Management (1) | ||||||||||||||||||||||
Combined Income Statement Information | ||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Investment banking | $ | 824 | $ | 814 | $ | 992 | $ | 1,216 | $ | 982 | 19 | % | (19 | %) | ||||||||
Principal transactions: | ||||||||||||||||||||||
Trading | 1,847 | 1,795 | 2,151 | 1,577 | 3,069 | 66 | % | 95 | % | |||||||||||||
Investments | 153 | 226 | 103 | 499 | 314 | 105 | % | (37 | %) | |||||||||||||
Commissions | 824 | 824 | 804 | 911 | 929 | 13 | % | 2 | % | |||||||||||||
Asset management, distribution and administration fees | 1,204 | 1,246 | 1,249 | 1,259 | 1,279 | 6 | % | 2 | % | |||||||||||||
Interest and dividends | 5,405 | 5,521 | 6,429 | 8,738 | 9,991 | 85 | % | 14 | % | |||||||||||||
Other | 103 | 119 | 107 | 130 | 110 | 7 | % | (16 | %) | |||||||||||||
Total revenues | 10,360 | 10,545 | 11,835 | 14,330 | 16,674 | 61 | % | 16 | % | |||||||||||||
Interest expense | 4,477 | 5,401 | 5,798 | 8,060 | 9,278 | 107 | % | 15 | % | |||||||||||||
Net revenues | 5,883 | 5,144 | 6,037 | 6,270 | 7,396 | 26 | % | 18 | % | |||||||||||||
Compensation and benefits | 2,639 | 2,413 | 2,923 | 2,473 | 3,939 | 49 | % | 59 | % | |||||||||||||
Occupancy and equipment | 308 | 209 | 217 | 220 | 209 | (32 | %) | (5 | %) | |||||||||||||
Brokerage, clearing and exchange fees | 260 | 276 | 267 | 267 | 292 | 12 | % | 9 | % | |||||||||||||
Information processing and communications | 260 | 265 | 263 | 269 | 259 | - | (4 | %) | ||||||||||||||
Marketing and business development | 112 | 143 | 143 | 177 | 119 | 6 | % | (33 | %) | |||||||||||||
Professional services | 315 | 365 | 425 | 507 | 370 | 17 | % | (27 | %) | |||||||||||||
Other | 499 | 342 | 296 | 292 | 240 | (52 | %) | (18 | %) | |||||||||||||
September 11th related insurance recoveries, net | (251 | ) | 0 | 0 | 0 | 0 | * | - | ||||||||||||||
Total non-interest expenses | 4,142 | 4,013 | 4,534 | 4,205 | 5,428 | 31 | % | 29 | % | |||||||||||||
Income from continuing operations before losses | ||||||||||||||||||||||
from unconsolidated investees, taxes | ||||||||||||||||||||||
and cumulative effect of accounting change | 1,741 | 1,131 | 1,503 | 2,065 | 1,968 | 13 | % | (5 | %) | |||||||||||||
Losses from unconsolidated investees | 73 | 67 | 105 | 66 | 68 | (7 | %) | 3 | % | |||||||||||||
Income before taxes | 1,668 | 1,064 | 1,398 | 1,999 | 1,900 | 14 | % | (5 | %) | |||||||||||||
Provision for income taxes | 539 | 298 | 381 | 300 | 606 | 12 | % | 102 | % | |||||||||||||
Income from continuing operations (2) | $ | 1,129 | $ | 766 | $ | 1,017 | $ | 1,699 | $ | 1,294 | 15 | % | (24 | %) | ||||||||
Return on average common equity (3) | 23 | % | 16 | % | 21 | % | 32 | % | 24 | % | ||||||||||||
Compensation and benefits as a % of net revenues | 45 | % | 47 | % | 48 | % | 39 | % | 53 | % | ||||||||||||
Non-compensation expenses as a % of net revenues | 26 | % | 31 | % | 27 | % | 28 | % | 20 | % | ||||||||||||
Pre-tax profit margin (4) | 30 | % | 22 | % | 25 | % | 33 | % | 27 | % | ||||||||||||
Number of employees (5) | 39,641 | 40,267 | 40,226 | 39,723 | 40,188 | 1 | % | 1 | % | |||||||||||||
(1) | Includes the elimination of intersegment activity between Institutional Securities, Global Wealth Management Group and Asset Management. | ||||||||||||||||||||||
(2) | Excludes gain/(loss) from discontinued operations and cumulative effect of accounting change. | ||||||||||||||||||||||
(3) | Refer to page 4 for the allocation of average common equity. | ||||||||||||||||||||||
(4) | Income before taxes, excluding losses from unconsolidated investees, as a % of net revenues. | ||||||||||||||||||||||
(5) | Includes Institutional Securities, Global Wealth Management Group, Asset 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 25. |
18
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Discover Income Statement Information | ||||||||||||||||||||||
(Managed loan basis) | ||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | 1Q06 vs. 1Q05 | 1Q06 vs. 4Q05 | ||||||||||||||||
Merchant, cardmember and other fees | $ | 481 | $ | 484 | $ | 532 | $ | 520 | $ | 519 | 8 | % | - | |||||||||
Servicing and securitization income | 0 | 0 | 0 | 0 | 0 | - | - | |||||||||||||||
Other | 34 | (14 | ) | (19 | ) | (74 | ) | 143 | * | * | ||||||||||||
Total non-interest revenues | 515 | 470 | 513 | 446 | 662 | 29 | % | 48 | % | |||||||||||||
Interest revenue | 1,383 | 1,426 | 1,463 | 1,432 | 1,475 | 7 | % | 3 | % | |||||||||||||
Interest expense | 401 | 433 | 475 | 497 | 541 | 35 | % | 9 | % | |||||||||||||
Net interest income | 982 | 993 | 988 | 935 | 934 | (5 | %) | - | ||||||||||||||
Provision for consumer loan losses | 538 | 575 | 590 | 687 | 507 | (6 | %) | (26 | %) | |||||||||||||
Net credit income | 444 | 418 | 398 | 248 | 427 | (4 | %) | 72 | % | |||||||||||||
Net revenues | 959 | 888 | 911 | 694 | 1,089 | 14 | % | 57 | % | |||||||||||||
Compensation and benefits | 215 | 209 | 242 | 199 | 244 | 13 | % | 23 | % | |||||||||||||
Occupancy and equipment | 24 | 23 | 22 | 23 | 23 | (4 | %) | - | ||||||||||||||
Information processing and communications | 83 | 85 | 87 | 98 | 90 | 8 | % | (8 | %) | |||||||||||||
Marketing and business development | 145 | 155 | 133 | 154 | 119 | (18 | %) | (23 | %) | |||||||||||||
Professional services | 67 | 73 | 80 | 74 | 64 | (4 | %) | (14 | %) | |||||||||||||
Other | 71 | 80 | 108 | 81 | 70 | (1 | %) | (14 | %) | |||||||||||||
Total non-interest expenses | 605 | 625 | 672 | 629 | 610 | 1 | % | (3 | %) | |||||||||||||
Income before losses from unconsolidated | ||||||||||||||||||||||
investees and taxes | 354 | 263 | 239 | 65 | 479 | 35 | % | * | ||||||||||||||
Losses from unconsolidated investees | 0 | 0 | 0 | 0 | 1 | * | * | |||||||||||||||
Income before taxes | 354 | 263 | 239 | 65 | 478 | 35 | % | * | ||||||||||||||
Provision for income taxes | 134 | 99 | 89 | 18 | 178 | 33 | % | * | ||||||||||||||
Income from continuing operations (1) | $ | 220 | $ | 164 | $ | 150 | $ | 47 | $ | 300 | 36 | % | * | |||||||||
Return on average common equity (2) | 20 | % | 16 | % | 13 | % | 4 | % | 26 | % | ||||||||||||
Compensation and benefits as a % of net revenues | 22 | % | 24 | % | 27 | % | 29 | % | 22 | % | ||||||||||||
Non-compensation expenses as a % of net revenues | 41 | % | 47 | % | 47 | % | 62 | % | 34 | % | ||||||||||||
Pre-tax profit margin (3) | 37 | % | 30 | % | 26 | % | 9 | % | 44 | % | ||||||||||||
Number of employees | 14,077 | 13,875 | 13,534 | 13,495 | 13,683 | (3 | %) | 1 | % | |||||||||||||
(1) | Excludes cumulative effect of accounting change. | ||||||||||||||||||||||
(2) | Refer to page 4 for the allocation of average common equity. | ||||||||||||||||||||||
(3) | Income before taxes 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 25. |
19
MORGAN STANLEY
The following (pages 20 - 22) present a reconciliation for certain information disclosed on pages 14, 15, 16 and 19. |
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 Discover 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 Discover Reconciliation of General Purpose Credit Card Loan Data (1) | |||||||||||||||||||||||||
(unaudited, dollars in millions) | |||||||||||||||||||||||||
Quarter Ended Feb 28, 2006 | |||||||||||||||||||||||||
Delinquency Rate | |||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Return on Receivables | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 19,924 | $ | 21,976 | 5.54 | % | 9.87 | % | 5.41 | % | 4.54 | % | 2.97 | % | 1.36 | % | |||||||||
Securitized | 27,901 | 25,599 | 4.75 | % | 14.08 | % | 9.20 | % | 5.51 | % | 3.79 | % | 1.79 | % | |||||||||||
Managed | $ | 47,825 | $ | 47,575 | 2.56 | % | 12.13 | % | 7.44 | % | 5.06 | % | 3.45 | % | 1.61 | % | |||||||||
(1) | The table provides a reconciliation of certain managed and owned basis statistical data (period-end and average loan balances, return on receivables, interest yield, interest spread, net charge-off rates, and 30-and 90-day delinquency rates) for the periods indicated. | |||||||||||||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | |||||||||||||||||||||||||
Refer to Legal Notice page 25. |
20
MORGAN STANLEY | |||||||||||||||||||||||||
Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (1) | |||||||||||||||||||||||||
(unaudited, dollars in millions) | |||||||||||||||||||||||||
Quarter Ended Nov 30, 2005 | |||||||||||||||||||||||||
Delinquency Rate | |||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Return on Receivables | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 22,496 | $ | 21,934 | 0.86 | % | 9.89 | % | 5.53 | % | 5.35 | % | 3.69 | % | 1.62 | % | |||||||||
Securitized | 24,440 | 24,568 | 0.77 | % | 13.77 | % | 9.36 | % | 6.13 | % | 4.24 | % | 1.87 | % | |||||||||||
Managed | $ | 46,936 | $ | 46,502 | 0.40 | % | 11.94 | % | 7.55 | % | 5.76 | % | 3.98 | % | 1.75 | % | |||||||||
Quarter Ended Aug 31, 2005 | |||||||||||||||||||||||||
Delinquency Rate | |||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Return on Receivables | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 20,570 | $ | 19,835 | 3.01 | % | 10.96 | % | 6.63 | % | 4.69 | % | 3.62 | % | 1.67 | % | |||||||||
Securitized | 26,535 | 26,934 | 2.21 | % | 12.83 | % | 8.93 | % | 5.43 | % | 4.13 | % | 1.90 | % | |||||||||||
Managed | $ | 47,105 | $ | 46,769 | 1.28 | % | 12.04 | % | 7.95 | % | 5.12 | % | 3.91 | % | 1.80 | % | |||||||||
Quarter Ended May 31, 2005 | |||||||||||||||||||||||||
Delinquency Rate | |||||||||||||||||||||||||
General Purpose Credit Card Loans: | Period End | Average | Return on Receivables | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 19,385 | $ | 18,753 | 3.48 | % | 10.56 | % | 6.47 | % | 4.62 | % | 3.48 | % | 1.64 | % | |||||||||
Securitized | 27,460 | 28,393 | 2.30 | % | 12.43 | % | 8.92 | % | 5.15 | % | 4.19 | % | 1.97 | % | |||||||||||
Managed | $ | 46,845 | $ | 47,146 | 1.38 | % | 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 | Return on Receivables | Interest Yield | Interest Spread | Net Charge-offs | 30 Days | 90 Days | |||||||||||||||||
Owned | $ | 18,908 | $ | 19,210 | 4.64 | % | 9.07 | % | 5.15 | % | 4.62 | % | 3.75 | % | 1.81 | % | |||||||||
Securitized | 28,862 | 29,720 | 3.00 | % | 12.63 | % | 9.47 | % | 5.43 | % | 4.55 | % | 2.20 | % | |||||||||||
Managed | $ | 47,770 | $ | 48,930 | 1.82 | % | 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, return on receivables, 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 25. |
21
MORGAN STANLEY | ||||||||||||||||
Quarterly Discover Reconciliation of Managed Income Statement Data (1) | ||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||
Quarter Ended | ||||||||||||||||
Feb 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | ||||||||||||
Merchant, cardmember and other fees: | ||||||||||||||||
Owned | $ | 308 | $ | 318 | $ | 357 | $ | 340 | $ | 289 | ||||||
Securitization adjustment | 173 | 166 | 175 | 180 | 230 | |||||||||||
Managed | $ | 481 | $ | 484 | $ | 532 | $ | 520 | $ | 519 | ||||||
Servicing and securitizations income: | ||||||||||||||||
Owned | $ | 494 | $ | 423 | $ | 398 | $ | 294 | $ | 596 | ||||||
Securitization adjustment | (494 | ) | (423 | ) | (398 | ) | (294 | ) | (596 | ) | ||||||
Managed | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
Other: | ||||||||||||||||
Owned | $ | 2 | $ | 2 | $ | (1 | ) | $ | 2 | $ | 4 | |||||
Securitization adjustment | 32 | (16 | ) | (18 | ) | (76 | ) | 139 | ||||||||
Managed | $ | 34 | $ | (14 | ) | $ | (19 | ) | $ | (74 | ) | $ | 143 | |||
Interest revenue: | ||||||||||||||||
Owned | $ | 458 | $ | 536 | $ | 593 | $ | 587 | $ | 586 | ||||||
Securitization adjustment | 925 | 890 | 870 | 845 | 889 | |||||||||||
Managed | $ | 1,383 | $ | 1,426 | $ | 1,463 | $ | 1,432 | $ | 1,475 | ||||||
Interest expense: | ||||||||||||||||
Owned | $ | 168 | $ | 182 | $ | 212 | $ | 219 | $ | 231 | ||||||
Securitization adjustment | 233 | 251 | 263 | 278 | 310 | |||||||||||
Managed | $ | 401 | $ | 433 | $ | 475 | $ | 497 | $ | 541 | ||||||
Provision for consumer loan losses: | ||||||||||||||||
Owned | $ | 135 | $ | 209 | $ | 224 | $ | 310 | $ | 155 | ||||||
Securitization adjustment | 403 | 366 | 366 | 377 | 352 | |||||||||||
Managed | $ | 538 | $ | 575 | $ | 590 | $ | 687 | $ | 507 | ||||||
(1) | The tables provide a reconciliation of certain managed and owned basis income statement data (merchant, cardmember and other fees, servicing fees, other revenue, interest revenue, interest expense and provision for consumer loan losses) for the periods indicated. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 25. |
22
MORGAN STANLEY
The following (page 23) 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 28, 2005 | May 31, 2005 | Aug 31, 2005 | Nov 30, 2005 | Feb 28, 2006 | ||||||||||||
Total assets | $ | 802,210 | $ | 818,711 | $ | 837,391 | $ | 898,523 | $ | 959,688 | ||||||
Less: Securities purchased under agreements to resell | (143,462 | ) | (145,579 | ) | (143,642 | ) | (174,330 | ) | (176,260 | ) | ||||||
Securities borrowed | (207,985 | ) | (228,454 | ) | (227,098 | ) | (244,241 | ) | (252,896 | ) | ||||||
Add: Financial instruments sold, not yet purchased | 119,913 | 131,901 | 137,443 | 147,000 | 149,561 | |||||||||||
Less: Derivative contracts sold, not yet purchased | (37,389 | ) | (39,835 | ) | (48,395 | ) | (44,952 | ) | (42,928 | ) | ||||||
Subtotal | 533,287 | 536,744 | 555,699 | 582,000 | 637,165 | |||||||||||
Less: Segregated customer cash and securities balances | (26,461 | ) | (36,539 | ) | (30,912 | ) | (30,540 | ) | (27,156 | ) | ||||||
Assets recorded under certain provisions of SFAS No.140 and FIN 46 | (57,042 | ) | (57,394 | ) | (64,066 | ) | (67,091 | ) | (78,925 | ) | ||||||
Goodwill and intangible assets | (2,563 | ) | (2,528 | ) | (2,531 | ) | (2,500 | ) | (2,873 | ) | ||||||
Adjusted assets | $ | 447,221 | $ | 440,283 | $ | 458,190 | $ | 481,869 | $ | 528,211 | ||||||
Shareholders' equity | $ | 28,495 | $ | 28,330 | $ | 28,226 | $ | 29,182 | $ | 30,198 | ||||||
Junior subordinated debt issued to capital trusts (1) | 2,833 | 2,894 | 2,881 | 2,764 | 3,652 | |||||||||||
Subtotal | 31,328 | 31,224 | 31,107 | 31,946 | 33,850 | |||||||||||
Less: Goodwill and intangible assets | (2,563 | ) | (2,528 | ) | (2,531 | ) | (2,500 | ) | (2,873 | ) | ||||||
Tangible shareholders' equity | $ | 28,765 | $ | 28,696 | $ | 28,576 | $ | 29,446 | $ | 30,977 | ||||||
Leverage ratio (2) | 27.9x | 28.5x | 29.3x | 30.5x | 31.0x | |||||||||||
Adjusted leverage ratio (3) | 15.5x | 15.3x | 16.0x | 16.4x | 17.1x | |||||||||||
(1) | 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. | |
(2) | Leverage ratio equals total assets divided by tangible shareholders' equity. |
(3) | 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 25. |
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MORGAN STANLEY
This page represents an addendum to the 1Q 2006 Financial Supplement. |
In accordance with SFAS 123R, fiscal 2005 compensation expense included the amortization of fiscal 2003 and fiscal 2004 awards but did not include any amortization for fiscal 2005 year-end awards. Compensation expense for fiscal 2006 will include the full cost of equity awards granted to retirement-eligible employees during fiscal 2006, which includes the fiscal 2005 year-end awards granted in December 2005. Additionally, in fiscal 2006 the firm will expense the equity awards to be granted to retirement-eligible employees in December 2006. As a result, fiscal 2006 compensation expense includes amortization related to fiscal 2003, 2004 and 2005 equity awards as well as the estimated cost of 2006 year-end awards to be granted to retirement-eligible employees in December 2006. Fiscal 2005 and Fiscal 2006 year-end awards to non-retirement-eligible employees will be amortized over the period from the grant date to the earlier of the employee's retirement eligibility date or the vesting date specified in the award terms. The tables below illustrate the percentage of each year-end award, to both non-retirement-eligible and retirement-eligible employees, amortized into compensation expense in a given fiscal year. |
For a further discussion of the Company's previous accounting for stock-based compensation, see the Company's Form 10-K for the fiscal year ended November 30, 2005 |
Illustration of Standard Equity Award Amortization to Non-Retirement-Eligible and Retirement-Eligible Employees | |||||||||||||||||
Non-Retirement-Eligible Employees - Fiscal Year Ended | |||||||||||||||||
Year of | Cumulative Amort. | ||||||||||||||||
Award | Nov 30, 2003 | Nov 30, 2004 | Nov 30, 2005 | Nov 30, 2006 | Nov 30, 2007 | Nov 30, 2008 | Nov 30, 2009 | By Grant | |||||||||
2003 | 28% | 28% | 28% | 15% | 1% | 0% | 0% | 100% | |||||||||
2004 | 28% | 28% | 28% | 15% | 1% | 0% | 100% | ||||||||||
2005 | 39% | 39% | 20% | 2% | 100% | ||||||||||||
2006 | 39% | 39% | 20% | 98% | |||||||||||||
2007 | 39% | 39% | 78% | ||||||||||||||
2008 | 39% | 39% | |||||||||||||||
Retirement-Eligible Employees - Fiscal Year Ended | |||||||||||||||||
Year of | Cumulative Amort. | ||||||||||||||||
Award | Nov 30, 2003 | Nov 30, 2004 | Nov 30, 2005 | Nov 30, 2006 | Nov 30, 2007 | Nov 30, 2008 | Nov 30, 2009 | By Grant | |||||||||
2003 | 28% | 28% | 28% | 15% | 1% | 0% | 0% | 100% | |||||||||
2004 | 28% | 28% | 28% | 15% | 1% | 0% | 100% | ||||||||||
2005 | 100% | 0% | 0% | 0% | 100% | ||||||||||||
2006 | 100% | 0% | 0% | 0% | 100% | ||||||||||||
2007 | 100% | 0% | 0% | 100% | |||||||||||||
2008 | 100% | 0% | 100% | ||||||||||||||
2009 | 100% | 100% | |||||||||||||||
Note: The actual fiscal impact depends on several factors including, but not limited to, forfeitures, award terms and modifications. | |||||||||||||||||
Refer to Legal Notice page 25. |
24
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 first quarter earnings press release issued March 22, 2006. |
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