MORGAN STANLEY | |||||
Financial Supplement - 1Q 2007 | |||||
Table of Contents | |||||
Page # | |||||
1 | ……………. | Quarterly Financial Summary | |||
2 | ……………. | Quarterly Consolidated Income Statement Information | |||
3-4 | ……………. | Quarterly Consolidated Financial Information and Statistical Data | |||
5 | ……………. | Quarterly Institutional Securities Income Statement Information | |||
6-7 | ……………. | Quarterly Institutional Securities Financial Information and Statistical Data | |||
8 | ……………. | Quarterly Global Wealth Management Group Income Statement Information | |||
9 | ……………. | Quarterly Global Wealth Management Group Financial Information and Statistical Data | |||
10 | ……………. | Quarterly Asset Management Income Statement Information | |||
11 | ……………. | Quarterly Asset Management Financial Information and Statistical Data | |||
12 | ……………. | Quarterly Consolidated Assets Under Management or Supervision | |||
13 | ……………. | Quarterly Discover Income Statement Information | |||
14 | ……………. | Quarterly Discover Income Statement Information (Managed Loan Basis) | |||
15 | ……………. | Quarterly Discover Financial Information and Statistical Data | |||
16 | ……………. | Quarterly Intersegment Eliminations Income Statement Information | |||
17 | ……………. | Quarterly Inst'l. Securities, Global Wealth Management Group and Asset Mgmt. Combined Income Statement Information | |||
18 | ……………. | Quarterly Discover Financial Information (Managed Loan Basis) | |||
19 | ……………. | Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (Current Year) | |||
20 | ……………. | Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (Prior Year) | |||
21 | ……………. | Quarterly Discover Reconciliation of Managed Income Statement Data | |||
22 | ……………. | Quarterly Reconciliation of Adjusted Assets | |||
23 | ……………. | Illustration of Standard Equity Award Amortization | |||
24 | ……………. | Legal Notice |
MORGAN STANLEY | |||||||||||||||||||||||
Quarterly Financial Summary | |||||||||||||||||||||||
(unaudited, dollars in millions) | |||||||||||||||||||||||
Quarter Ended | Percentage Change From: | ||||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | |||||||||||||||||
Net revenues | |||||||||||||||||||||||
Institutional Securities | $ | 5,551 | $ | 5,637 | $ | 5,153 | $ | 5,702 | $ | 7,631 | 37 | % | 34 | % | |||||||||
Global Wealth Management Group | 1,266 | 1,377 | 1,349 | 1,430 | 1,490 | 18 | % | 4 | % | ||||||||||||||
Asset Management | 705 | 723 | 637 | 728 | 905 | 28 | % | 24 | % | ||||||||||||||
Discover | 1,089 | 1,191 | 1,047 | 963 | 1,025 | (6 | %) | 6 | % | ||||||||||||||
Intersegment Eliminations | (59 | ) | (98 | ) | (53 | ) | (59 | ) | (53 | ) | 10 | % | 10 | % | |||||||||
Consolidated net revenues | $ | 8,552 | $ | 8,830 | $ | 8,133 | $ | 8,764 | $ | 10,998 | 29 | % | 25 | % | |||||||||
Income before taxes (1) | |||||||||||||||||||||||
Institutional Securities | $ | 1,775 | $ | 2,088 | $ | 1,999 | $ | 2,297 | $ | 3,031 | 71 | % | 32 | % | |||||||||
Global Wealth Management Group | 15 | 149 | 154 | 165 | 220 | * | 33 | % | |||||||||||||||
Asset Management | 172 | 224 | 125 | 190 | 236 | 37 | % | 24 | % | ||||||||||||||
Discover | 479 | 541 | 368 | 199 | 372 | (22 | %) | 87 | % | ||||||||||||||
Intersegment Eliminations | 19 | (13 | ) | 15 | 12 | 5 | (74 | %) | (58 | %) | |||||||||||||
Consolidated income before taxes | $ | 2,460 | $ | 2,989 | $ | 2,661 | $ | 2,863 | $ | 3,864 | 57 | % | 35 | % | |||||||||
Earnings per basic share: | |||||||||||||||||||||||
Income from continuing operations | $ | 1.57 | $ | 1.81 | $ | 1.83 | $ | 2.19 | $ | 2.52 | 61 | % | 15 | % | |||||||||
Discontinued operations | $ | (0.03 | ) | $ | 0.01 | $ | - | $ | - | $ | 0.11 | * | * | ||||||||||
Earnings per basic share | $ | 1.54 | $ | 1.82 | $ | 1.83 | $ | 2.19 | $ | 2.63 | 71 | % | 20 | % | |||||||||
Earnings per diluted share: | |||||||||||||||||||||||
Income from continuing operations | $ | 1.51 | $ | 1.74 | $ | 1.75 | $ | 2.08 | $ | 2.40 | 59 | % | 15 | % | |||||||||
Discontinued operations | $ | (0.03 | ) | $ | 0.01 | $ | - | $ | - | $ | 0.11 | * | * | ||||||||||
Earnings per diluted share | $ | 1.48 | $ | 1.75 | $ | 1.75 | $ | 2.08 | $ | 2.51 | 70 | % | 21 | % | |||||||||
Average common shares outstanding | |||||||||||||||||||||||
Basic | 1,020,041,181 | 1,013,241,715 | 1,010,468,365 | 997,892,310 | 1,009,186,993 | ||||||||||||||||||
Diluted | 1,061,764,798 | 1,054,733,745 | 1,055,664,392 | 1,052,831,345 | 1,057,912,545 | ||||||||||||||||||
Period end common shares outstanding | 1,070,407,513 | 1,071,786,172 | 1,058,664,567 | 1,048,877,006 | 1,061,644,077 | ||||||||||||||||||
Return on average common equity | |||||||||||||||||||||||
from continuing operations | 21.9 | % | 23.7 | % | 22.8 | % | 26.1 | % | 28.8 | % | |||||||||||||
Return on average common equity | 21.3 | % | 23.7 | % | 22.7 | % | 26.0 | % | 29.9 | % | |||||||||||||
(1) | Represents consolidated income from continuing operations before losses from unconsolidated investees, taxes and gain/(loss) from discontinued operations. | |||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | |||||||||||||||
Refer to Legal Notice page 24. |
1
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Consolidated Income Statement Information | ||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Investment banking | $ | 982 | $ | 1,132 | $ | 1,138 | $ | 1,503 | $ | 1,227 | 25 | % | (18 | %) | ||||||||
Principal transactions: | ||||||||||||||||||||||
Trading | 3,086 | 3,559 | 2,843 | 2,317 | 4,158 | 35 | % | 79 | % | |||||||||||||
Investments | 349 | 755 | 322 | 567 | 920 | 164 | % | 62 | % | |||||||||||||
Commissions | 920 | 994 | 880 | 976 | 1,005 | 9 | % | 3 | % | |||||||||||||
Fees: | ||||||||||||||||||||||
Asset management, distribution and admin. | 1,268 | 1,321 | 1,312 | 1,337 | 1,479 | 17 | % | 11 | % | |||||||||||||
Merchant, cardmember and other | 289 | 277 | 312 | 289 | 297 | 3 | % | 3 | % | |||||||||||||
Servicing and securitization income | 596 | 651 | 565 | 526 | 556 | (7 | %) | 6 | % | |||||||||||||
Interest and dividends | 10,544 | 10,111 | 12,664 | 11,880 | 14,814 | 40 | % | 25 | % | |||||||||||||
Other | 134 | 125 | 132 | 228 | 222 | 66 | % | (3 | %) | |||||||||||||
Total revenues | 18,168 | 18,925 | 20,168 | 19,623 | 24,678 | 36 | % | 26 | % | |||||||||||||
Interest expense | 9,461 | 9,965 | 11,803 | 10,620 | 13,485 | 43 | % | 27 | % | |||||||||||||
Provision for consumer loan losses | 155 | 130 | 232 | 239 | 195 | 26 | % | (18 | %) | |||||||||||||
Net revenues | 8,552 | 8,830 | 8,133 | 8,764 | 10,998 | 29 | % | 25 | % | |||||||||||||
Compensation and benefits (1) | 4,242 | 3,802 | 3,305 | 3,506 | 4,992 | 18 | % | 42 | % | |||||||||||||
Occupancy and equipment | 230 | 236 | 253 | 274 | 280 | 22 | % | 2 | % | |||||||||||||
Brokerage, clearing and exchange fees | 292 | 340 | 339 | 334 | 361 | 24 | % | 8 | % | |||||||||||||
Information processing and communications | 346 | 364 | 369 | 384 | 369 | 7 | % | (4 | %) | |||||||||||||
Marketing and business development | 238 | 297 | 291 | 418 | 294 | 24 | % | (30 | %) | |||||||||||||
Professional services | 433 | 537 | 548 | 724 | 499 | 15 | % | (31 | %) | |||||||||||||
Other | 311 | 265 | 367 | 261 | 339 | 9 | % | 30 | % | |||||||||||||
Total non-interest expenses | 6,092 | 5,841 | 5,472 | 5,901 | 7,134 | 17 | % | 21 | % | |||||||||||||
Income from continuing operations before losses | ||||||||||||||||||||||
from unconsolidated investees and taxes | 2,460 | 2,989 | 2,661 | 2,863 | 3,864 | 57 | % | 35 | % | |||||||||||||
Losses from unconsolidated investees | 69 | 103 | 2 | 54 | 44 | (36 | %) | (19 | %) | |||||||||||||
Provision for income taxes | 789 | 1,058 | 811 | 607 | 1,261 | 60 | % | 108 | % | |||||||||||||
Income from continuing operations | 1,602 | 1,828 | 1,848 | 2,202 | 2,559 | 60 | % | 16 | % | |||||||||||||
Discontinued operations(2) | ||||||||||||||||||||||
Gain/(loss) from discontinued operations | (48 | ) | 21 | 5 | 6 | 174 | * | * | ||||||||||||||
Income tax benefit/(provision) | 20 | (8 | ) | (2 | ) | (2 | ) | (61 | ) | * | * | |||||||||||
Gain/(loss) from discontinued operations | (28 | ) | 13 | 3 | 4 | 113 | * | * | ||||||||||||||
Net income | $ | 1,574 | $ | 1,841 | $ | 1,851 | $ | 2,206 | $ | 2,672 | 70 | % | 21 | % | ||||||||
Preferred stock dividend requirements | $ | - | $ | - | $ | - | $ | 19 | $ | 17 | * | (11 | %) | |||||||||
Earnings applicable to common shareholders | $ | 1,574 | $ | 1,841 | $ | 1,851 | $ | 2,187 | $ | 2,655 | 69 | % | 21 | % | ||||||||
Return on average common equity | ||||||||||||||||||||||
from continuing operations | 21.9 | % | 23.7 | % | 22.8 | % | 26.1 | % | 28.8 | % | ||||||||||||
Return on average common equity | 21.3 | % | 23.7 | % | 22.7 | % | 26.0 | % | 29.9 | % | ||||||||||||
Pre-tax profit margin (3) | 29 | % | 34 | % | 33 | % | 33 | % | 35 | % | ||||||||||||
Compensation and benefits as a % of net revenues | 50 | % | 43 | % | 41 | % | 40 | % | 45 | % | ||||||||||||
(1) | The Company maintains various deferred compensation plans for the benefit of certain employees. Beginning in the quarter ended Feb 28, 2007, increases or decreases in assets or earnings associated with such plans are reflected in net revenues, and increases or decreases in liabilities associated with such plans are reflected in compensation expense. For the quarter ended Feb 28, 2007, such net revenues and compensation expense totaled approximately $300 million and $280 million, respectively. Previously, the increases or decreases in assets and liabilities associated with these plans were both recorded in net revenues. Prior period activity has been reclassified to conform to the current presentation. | |||||||||||||||
(2) | Gain/(loss) from discontinued operations for the quarter ended Feb 28, 2007 reflects the operating results for Quilter Holdings Limited and the gain related to the sale of this business. | |||||||||||||||
(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 24. |
2
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Consolidated Financial Information and Statistical Data | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 (1) | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Morgan Stanley | ||||||||||||||||||||||
Total assets (millions) | $ | 959,950 | $ | 1,027,419 | $ | 1,029,354 | $ | 1,121,192 | $ | 1,182,310 | 23 | % | 5 | % | ||||||||
Adjusted assets (millions) (2) | $ | 528,473 | $ | 548,961 | $ | 557,236 | $ | 651,862 | $ | 669,723 | 27 | % | 3 | % | ||||||||
Period end common shares outstanding (millions) | 1,070.4 | 1,071.8 | 1,058.7 | 1,048.9 | 1,061.6 | (1 | %) | 1 | % | |||||||||||||
Book value per common share | $ | 28.12 | $ | 29.97 | $ | 31.24 | $ | 32.67 | $ | 34.71 | 23 | % | 6 | % | ||||||||
Shareholders' equity (millions) (3) | $ | 33,886 | $ | 35,902 | $ | 37,956 | $ | 40,248 | $ | 42,839 | 26 | % | 6 | % | ||||||||
Total capital (millions) (4) | $ | 134,366 | $ | 145,849 | $ | 149,956 | $ | 162,134 | $ | 177,270 | 32 | % | 9 | % | ||||||||
Worldwide employees | 53,870 | 53,163 | 54,349 | 56,310 | 57,845 | 7 | % | 3 | % | |||||||||||||
Average Daily 95%/One-Day Value-at-Risk ("VaR") (5) | ||||||||||||||||||||||
Primary Market Risk Category ($ millions, pre-tax) | ||||||||||||||||||||||
Interest rate and credit spread | $ | 35 | $ | 39 | $ | 33 | $ | 34 | $ | 39 | ||||||||||||
Equity price | $ | 25 | $ | 29 | $ | 26 | $ | 32 | $ | 45 | ||||||||||||
Foreign exchange rate | $ | 9 | $ | 9 | $ | 7 | $ | 12 | $ | 15 | ||||||||||||
Commodity price | $ | 31 | $ | 28 | $ | 33 | $ | 30 | $ | 40 | ||||||||||||
Trading VaR | $ | 58 | $ | 63 | $ | 56 | $ | 61 | $ | 90 | ||||||||||||
Non - trading VaR | $ | 20 | $ | 26 | $ | 24 | $ | 18 | $ | 14 | ||||||||||||
Aggregate trading and non - trading VaR | $ | 65 | $ | 70 | $ | 66 | $ | 67 | $ | 92 | ||||||||||||
(1) | Effective December 1, 2006, the Company elected early adoption of SFAS No. 157, "Fair Value Measurements", and SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115." As a result of the adoption of SFAS No. 157 and SFAS No. 159, the Company recorded an after-tax cumulative effect adjustment of $186 million as an increase to the opening balance of retained earnings as of December 1, 2006. | |||||||||||||||
(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, preferred equity and junior subordinated debt issued to capital trusts. | |||||||||||||||
(4) | Includes common equity, preferred equity, junior subordinated debt issued to capital trusts, capital units and the non-current portion of long-term debt. | |||||||||||||||
(5) | 95%/One-Day VaR represents the loss amount that one would not expect to exceed, on average, more than five times every one hundred trading days in the Company's trading positions if the portfolio were held constant for a one day period. 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 2006. | |||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | |||||||||||||||
Refer to Legal Notice page 24. |
3
MORGAN STANLEY | ||||||||||||||||||||||||||||||||||||||
Quarterly Consolidated Financial Information and Statistical Data | ||||||||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||||||
Quarter Ended | ||||||||||||||||||||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 (1) | ||||||||||||||||||||||||||||||||||
Average common equity (billions) | Return on average common equity | Average common equity (billions) | Return on average common equity | Average common equity (billions) | Return on average common equity | Average common equity (billions) | Return on average common equity | Average tier 1 equity (billions) (2) | Average common equity (billions) (2) | Return on average common equity | ||||||||||||||||||||||||||||
Institutional Securities | $ | 16.2 | 29 | % | $ | 18.1 | 28 | % | $ | 18.8 | 30 | % | $ | 19.6 | 36 | % | $ | 21.3 | $ | 20.3 | 40 | % | ||||||||||||||||
Global Wealth Management Group | 3.3 | 1 | % | 3.1 | 13 | % | 2.8 | 15 | % | 2.8 | 17 | % | 1.5 | 1.7 | 32 | % | ||||||||||||||||||||||
Asset Management | 2.0 | 21 | % | 2.1 | 26 | % | 2.3 | 13 | % | 2.5 | 18 | % | 2.0 | 2.7 | 20 | % | ||||||||||||||||||||||
Securities Business | 21.5 | 24 | % | 23.3 | 26 | % | 23.9 | 27 | % | 24.9 | 32 | % | 24.8 | 24.7 | 37 | % | ||||||||||||||||||||||
Discover | 4.6 | 26 | % | 5.0 | 27 | % | 5.1 | 19 | % | 5.1 | 15 | % | 4.6 | 5.5 | 17 | % | ||||||||||||||||||||||
Capital surplus (unallocated) | 3.2 | 2.6 | 3.4 | 3.5 | 5.1 | 5.1 | ||||||||||||||||||||||||||||||||
Total - continuing operations | 29.3 | 22 | % | 30.9 | 24 | % | 32.4 | 23 | % | 33.5 | 26 | % | 34.5 | 35.3 | 29 | % | ||||||||||||||||||||||
Discontinued operations | 0.2 | 0.2 | 0.2 | 0.2 | n/a | 0.2 | ||||||||||||||||||||||||||||||||
Firm | $ | 29.5 | 21 | % | $ | 31.1 | 24 | % | $ | 32.6 | 23 | % | $ | 33.7 | 26 | % | $ | 34.5 | $ | 35.5 | 30 | % | ||||||||||||||||
(1) | For the quarter ended Feb 28, 2007 the Company had reassessed the amount of capital required to support the market risks and credit risks in its Global Wealth Management business. | ||||||||||||||||||||||
(2) | 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. Beginning in 1Q07, economic capital will be met by regulatory Tier 1 equity (including common shareholders' equity, certain preferred stock, eligible hybrid capital instruments and deductions of goodwill and certain intangibles and deferred tax assets), subject to regulatory limits. This enhancement to the Company's equity capital model and related disclosures will be made on a prospective basis. | ||||||||||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. The average common equity related to Quilter Holdings Limited has been reclassed to discontinued operations in all periods. | ||||||||||||||||||||||
Refer to Legal Notice page 24. |
4
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Institutional Securities Income Statement Information | ||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Investment banking | $ | 903 | $ | 1,055 | $ | 1,009 | $ | 1,351 | $ | 1,049 | 16 | % | (22 | %) | ||||||||
Principal transactions: | ||||||||||||||||||||||
Trading | 2,963 | 3,442 | 2,728 | 2,193 | 4,029 | 36 | % | 84 | % | |||||||||||||
Investments | 312 | 658 | 306 | 503 | 801 | 157 | % | 59 | % | |||||||||||||
Commissions | 610 | 693 | 630 | 673 | 691 | 13 | % | 3 | % | |||||||||||||
Asset management, distribution and admin. fees | 43 | 75 | 71 | 71 | 88 | 105 | % | 24 | % | |||||||||||||
Servicing income | 0 | 0 | 0 | 0 | 35 | * | * | |||||||||||||||
Interest and dividends | 9,789 | 9,319 | 11,826 | 11,045 | 13,961 | 43 | % | 26 | % | |||||||||||||
Other | 96 | 85 | 89 | 176 | 145 | 51 | % | (18 | %) | |||||||||||||
Total revenues | 14,716 | 15,327 | 16,659 | 16,012 | 20,799 | 41 | % | 30 | % | |||||||||||||
Interest expense | 9,165 | 9,690 | 11,506 | 10,310 | 13,168 | 44 | % | 28 | % | |||||||||||||
Net revenues | 5,551 | 5,637 | 5,153 | 5,702 | 7,631 | 37 | % | 34 | % | |||||||||||||
Total non-interest expenses | 3,776 | 3,549 | 3,154 | 3,405 | 4,600 | 22 | % | 35 | % | |||||||||||||
Income from continuing operations before losses | ||||||||||||||||||||||
from unconsolidated investees and taxes | 1,775 | 2,088 | 1,999 | 2,297 | 3,031 | 71 | % | 32 | % | |||||||||||||
Losses from unconsolidated investees | 68 | 103 | 1 | 53 | 43 | (37 | %) | (19 | %) | |||||||||||||
Income before taxes | 1,707 | 1,985 | 1,998 | 2,244 | 2,988 | 75 | % | 33 | % | |||||||||||||
Provision for income taxes | 531 | 723 | 578 | 475 | 942 | 77 | % | 98 | % | |||||||||||||
Income from continuing operations (1) | $ | 1,176 | $ | 1,262 | $ | 1,420 | $ | 1,769 | $ | 2,046 | 74 | % | 16 | % | ||||||||
Return on average common equity (2) | 29 | % | 28 | % | 30 | % | 36 | % | 40 | % | ||||||||||||
Pre-tax profit margin (3) | 32 | % | 37 | % | 39 | % | 40 | % | 40 | % | ||||||||||||
(1) | Excludes (gain)/loss from discontinued operations. | |||||||||||||||
(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 24. |
5
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||
Institutional Securities | ||||||||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | ||||||||||||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | |||||||||||||||||||||||||
Investment Banking | |||||||||||||||||||||||||||||||
Advisory revenue | $ 355 | $ 385 | $ 461 | $ 642 | $ 390 | 10% | (39%) | ||||||||||||||||||||||||
Underwriting revenue | |||||||||||||||||||||||||||||||
Equity | 197 | 371 | 237 | 254 | 300 | 52% | 18% | ||||||||||||||||||||||||
Fixed income | 351 | 299 | 311 | 455 | 359 | 2% | (21%) | ||||||||||||||||||||||||
Total underwriting revenue | $ 548 | $ 670 | $ 548 | $ 709 | $ 659 | 20% | (7%) | ||||||||||||||||||||||||
Total investment banking revenue | $ 903 | $ 1,055 | $ 1,009 | $ 1,351 | $ 1,049 | 16% | (22%) | ||||||||||||||||||||||||
Sales & Trading(1) | |||||||||||||||||||||||||||||||
Equity | 1,654 | 1,724 | 1,509 | 1,433 | 2,243 | 36% | 57% | ||||||||||||||||||||||||
Fixed income | 2,724 | 2,366 | 2,221 | 2,266 | 3,566 | 31% | 57% | ||||||||||||||||||||||||
Total sales & trading net revenue | $ 4,378 | $ 4,090 | $ 3,730 | $ 3,699 | $ 5,809 | 33% | 57% |
Fiscal View | Calendar View | ||||||||||||||||||||||||||||||
Quarter Ended | Two Months Ended (2) | ||||||||||||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | Feb 28, 2006 | Feb 28, 2007 | |||||||||||||||||||||||||
Mergers and acquisitions announced transactions (2) | |||||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 304.7 | $ | 178.9 | $ | 170.4 | $ | 363.3 | $ | 259.6 | $ | 139.2 | $ | 147.0 | |||||||||||||||||
Market share | 38.2 | % | 20.5 | % | 24.1 | % | 36.4 | % | 26.8 | % | 29.4 | % | 25.9 | % | |||||||||||||||||
Rank | 4 | 3 | 4 | 1 | 2 | 9 | 6 | ||||||||||||||||||||||||
Mergers and acquisitions completed transactions (2) | |||||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 176.5 | $ | 182.3 | $ | 172.6 | $ | 226.5 | $ | 175.0 | $ | 107.8 | $ | 141.5 | |||||||||||||||||
Market share | 27.6 | % | 29.6 | % | 25.9 | % | 32.3 | % | 23.1 | % | 26.1 | % | 33.7 | % | |||||||||||||||||
Rank | 3 | 2 | 5 | 1 | 3 | 3 | 2 | ||||||||||||||||||||||||
Global equity and related issues (2) | |||||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 10.8 | $ | 19.2 | $ | 10.5 | $ | 14.9 | $ | 13.9 | $ | 4.8 | $ | 6.0 | |||||||||||||||||
Market share | 7.4 | % | 9.5 | % | 8.7 | % | 6.9 | % | 7.9 | % | 6.0 | % | 6.0 | % | |||||||||||||||||
Rank | 4 | 2 | 3 | 6 | 4 | 5 | 8 | ||||||||||||||||||||||||
Global IPO's (2) | |||||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 2.7 | $ | 7.6 | $ | 5.2 | $ | 6.1 | $ | 4.0 | $ | 1.5 | $ | 1.7 | |||||||||||||||||
Market Share | 6.8 | % | 11.1 | % | 11.4 | % | 6.3 | % | 7.7 | % | 6.5 | % | 7.2 | % | |||||||||||||||||
Rank | 5 | 3 | 1 | 6 | 3 | 4 | 5 | ||||||||||||||||||||||||
Global debt (2) | |||||||||||||||||||||||||||||||
Morgan Stanley global market volume (billions) | $ | 96.1 | $ | 102.2 | $ | 89.2 | $ | 112.6 | $ | 96.1 | $ | 76.1 | $ | 66.4 | |||||||||||||||||
Market share | 5.9 | % | 5.9 | % | 5.6 | % | 5.3 | % | 5.7 | % | 6.7 | % | 5.6 | % | |||||||||||||||||
Rank | 5 | 5 | 7 | 7 | 6 | 3 | 6 | ||||||||||||||||||||||||
(1) | Includes principal transactions trading, commissions and applicable net interest revenue. | ||||||||||||||||||||||||
(2) | Source: Thomson Financial, data as of March 7, 2007. | ||||||||||||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. Refer to Legal Notice page 24. | ||||||||||||||||||||||||
6
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||
Institutional Securities | ||||||||||||||||||||||
(unaudited, dollars in billions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Corporate funded loans | ||||||||||||||||||||||
Investment grade | $ | 5.6 | $ | 6.2 | $ | 7.4 | $ | 6.4 | $ | 6.2 | 11 | % | (3 | %) | ||||||||
Non-investment grade | 2.9 | 2.9 | 5.4 | 3.4 | 3.9 | 34 | % | 15 | % | |||||||||||||
Total corporate funded loans | $ | 8.5 | $ | 9.1 | $ | 12.8 | $ | 9.8 | $ | 10.1 | 19 | % | 3 | % | ||||||||
Corporate lending commitments | ||||||||||||||||||||||
Investment grade | $ | 29.2 | $ | 27.1 | $ | 26.2 | $ | 32.2 | $ | 30.3 | 4 | % | (6 | %) | ||||||||
Non-investment grade | 5.3 | 8.2 | 18.4 | 17.0 | 22.9 | * | 35 | % | ||||||||||||||
Total corporate lending commitments | $ | 34.5 | $ | 35.3 | $ | 44.6 | $ | 49.2 | $ | 53.2 | 54 | % | 8 | % | ||||||||
Corporate funded loans plus lending commitments | ||||||||||||||||||||||
Investment grade | $ | 34.8 | $ | 33.3 | $ | 33.6 | $ | 38.6 | $ | 36.5 | 5 | % | (5 | %) | ||||||||
Non-investment grade | $ | 8.2 | $ | 11.1 | $ | 23.8 | $ | 20.4 | $ | 26.8 | * | 31 | % | |||||||||
% investment grade | 81 | % | 75 | % | 59 | % | 65 | % | 58 | % | ||||||||||||
% non-investment grade | 19 | % | 25 | % | 42 | % | 35 | % | 42 | % | ||||||||||||
Total corporate funded loans and lending commitments | $ | 43.0 | $ | 44.4 | $ | 57.4 | $ | 59.0 | $ | 63.3 | 47 | % | 7 | % | ||||||||
Hedges (1) | $ | 17.7 | $ | 23.8 | $ | 24.3 | $ | 26.5 | $ | 29.9 | 69 | % | 13 | % | ||||||||
Total corporate funded loans and lending commitments net of hedges | $ | 25.3 | $ | 20.6 | $ | 33.1 | $ | 32.5 | $ | 33.4 | 32 | % | 3 | % | ||||||||
(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 24. |
7
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Global Wealth Management Group Income Statement Information | ||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||
Quarter Ended (1) | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Investment banking | $ | 67 | $ | 95 | $ | 120 | $ | 146 | $ | 166 | 148 | % | 14 | % | ||||||||
Principal transactions: | ||||||||||||||||||||||
Trading | 125 | 120 | 117 | 125 | 129 | 3 | % | 3 | % | |||||||||||||
Investments | 1 | 27 | 16 | 13 | (2 | ) | * | (115 | %) | |||||||||||||
Commissions | 310 | 302 | 252 | 304 | 315 | 2 | % | 4 | % | |||||||||||||
Asset management, distribution and admin fees | 638 | 662 | 675 | 667 | 702 | 10 | % | 5 | % | |||||||||||||
Interest and dividends | 203 | 242 | 264 | 292 | 274 | 35 | % | (6 | %) | |||||||||||||
Other | 37 | 43 | 34 | 44 | 44 | 19 | % | -- | ||||||||||||||
Total revenues | 1,381 | 1,491 | 1,478 | 1,591 | 1,628 | 18 | % | 2 | % | |||||||||||||
Interest expense | 115 | 114 | 129 | 161 | 138 | 20 | % | (14 | %) | |||||||||||||
Net revenues | 1,266 | 1,377 | 1,349 | 1,430 | 1,490 | 18 | % | 4 | % | |||||||||||||
Total non-interest expenses | 1,251 | 1,228 | 1,195 | 1,265 | 1,270 | 2 | % | -- | ||||||||||||||
Income before taxes | 15 | 149 | 154 | 165 | 220 | * | 33 | % | ||||||||||||||
Provision for income taxes | 6 | 48 | 52 | 49 | 83 | * | 69 | % | ||||||||||||||
Income from continuing operations | $ | 9 | $ | 101 | $ | 102 | $ | 116 | $ | 137 | * | 18 | % | |||||||||
Return on average common equity (2) | 1 | % | 13 | % | 15 | % | 17 | % | 32 | % | ||||||||||||
Pre-tax profit margin (3) | 1 | % | 11 | % | 11 | % | 12 | % | 15 | % | ||||||||||||
(1) | All periods have been restated to exclude the operating results for Quilter Holdings Limited. The gain on the sale of this business is included in discontinued operations on the Company's consolidated income statement. Refer to page 2 of this supplement. | |||||||||
(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 24. | ||||||||||
8
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||
Global Wealth Management Group | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||
Quarter Ended (1) | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Global representatives | 8,913 | 8,091 | 7,982 | 7,944 | 7,993 | (10 | %) | 1 | % | |||||||||||||
Annualized revenue per global | ||||||||||||||||||||||
representative (thousands) (2) | $ | 552 | $ | 648 | $ | 671 | $ | 718 | $ | 748 | 36 | % | 4 | % | ||||||||
Assets by client segment (billions) | ||||||||||||||||||||||
$10m or more | 166 | 170 | 176 | 199 | 210 | 27 | % | 6 | % | |||||||||||||
$1m - $10m | 220 | 220 | 229 | 243 | 248 | 13 | % | 2 | % | |||||||||||||
Subtotal - > $1m | 386 | 390 | 405 | 442 | 458 | 19 | % | 4 | % | |||||||||||||
$100k - $1m | 177 | 180 | 180 | 177 | 174 | (2 | %) | (2 | %) | |||||||||||||
< $100k | 32 | 29 | 28 | 27 | 26 | (19 | %) | (4 | %) | |||||||||||||
Client assets excluding corporate/other | 595 | 599 | 613 | 646 | 658 | 11 | % | 2 | % | |||||||||||||
Corporate / other | 29 | 30 | 29 | 30 | 32 | 10 | % | 7 | % | |||||||||||||
Total client assets (billions) | $ | 624 | $ | 629 | $ | 642 | $ | 676 | $ | 690 | 11 | % | 2 | % | ||||||||
Fee-based client account assets (billions) (3) | $ | 173 | $ | 180 | $ | 183 | $ | 195 | $ | 202 | 17 | % | 4 | % | ||||||||
Fee-based assets as a % of client assets | 28 | % | 29 | % | 29 | % | 29 | % | 29 | % | ||||||||||||
Bank deposit program (millions) | $ | 7,319 | $ | 9,114 | $ | 9,839 | $ | 13,301 | $ | 16,364 | 124 | % | 23 | % | ||||||||
Client assets per global | ||||||||||||||||||||||
representative (millions) (4) | $ | 70 | $ | 78 | $ | 80 | $ | 85 | $ | 86 | 23 | % | 1 | % | ||||||||
Domestic retail net new assets (billions) (5) | $ | - | $ | 2.4 | $ | 5.4 | $ | 0.7 | $ | 6.7 | * | * | ||||||||||
Domestic retail locations | 484 | 473 | 460 | 453 | 451 | (7 | %) | -- | ||||||||||||||
(1) | All periods have been restated to exclude Quilter Holdings Limited. | |||||||||||||||
(2) | Annualized revenue divided by average global representative headcount. | |||||||||||||||
(3) | Represents the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets. | |||||||||||||||
(4) | Total client assets divided by period end global representative headcount. | |||||||||||||||
(5) | 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 24. |
9
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Asset Management Income Statement Information | ||||||||||||||||||||||
(unaudited, dollars in millions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Investment banking | $ | 12 | $ | 15 | $ | 9 | $ | 12 | $ | 14 | 17 | % | 17 | % | ||||||||
Principal transactions: | ||||||||||||||||||||||
Investments | 36 | 70 | 0 | 51 | 121 | * | 137 | % | ||||||||||||||
Commissions | 7 | 7 | 5 | 6 | 6 | (14 | %) | -- | ||||||||||||||
Asset management, distribution and admin fees | 640 | 619 | 606 | 639 | 732 | 14 | % | 15 | % | |||||||||||||
Interest and dividends | 5 | 10 | 19 | 11 | 13 | 160 | % | 18 | % | |||||||||||||
Other | 7 | 7 | 6 | 7 | 34 | * | * | |||||||||||||||
Total revenues | 707 | 728 | 645 | 726 | 920 | 30 | % | 27 | % | |||||||||||||
Interest expense | 2 | 5 | 8 | (2 | ) | 15 | * | * | ||||||||||||||
Net revenues | 705 | 723 | 637 | 728 | 905 | 28 | % | 24 | % | |||||||||||||
Total non-interest expenses | 533 | 499 | 512 | 538 | 669 | 26 | % | 24 | % | |||||||||||||
Income before taxes | 172 | 224 | 125 | 190 | 236 | 37 | % | 24 | % | |||||||||||||
Provision for income taxes | 67 | 89 | 50 | 79 | 96 | 43 | % | 22 | % | |||||||||||||
Income from continuing operations | $ | 105 | $ | 135 | $ | 75 | $ | 111 | $ | 140 | 33 | % | 26 | % | ||||||||
Return on average common equity (1) | 21 | % | 26 | % | 13 | % | 18 | % | 20 | % | ||||||||||||
Pre-tax profit margin (2) | 24 | % | 31 | % | 20 | % | 26 | % | 26 | % | ||||||||||||
(1) | Refer to page 4 for the allocation of average common equity. | |||||||||||||||
(2) | 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 24. |
10
MORGAN STANLEY | ||||||||||||||||||||||
Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||
Asset Management | ||||||||||||||||||||||
(unaudited, dollars in billions) | ||||||||||||||||||||||
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Assets under management or supervision | ||||||||||||||||||||||
Net flows by distribution channel | ||||||||||||||||||||||
Americas Retail Morgan Stanley Brand | (3.0 | ) | (2.2 | ) | (2.2 | ) | (2.1 | ) | (1.9 | ) | 37 | % | 10 | % | ||||||||
Americas Retail Van Kampen Brand | (0.7 | ) | (0.4 | ) | (0.8 | ) | (0.1 | ) | 0.0 | * | * | |||||||||||
Americas Intermediary | 1.7 | 4.0 | 1.5 | 1.0 | 1.0 | (41 | %) | -- | ||||||||||||||
U.S. Institutional | (4.3 | ) | (4.6 | ) | (2.3 | ) | (2.3 | ) | 0.0 | * | * | |||||||||||
Non- U.S. | 1.1 | 2.0 | 0.2 | 1.7 | 4.5 | * | 165 | % | ||||||||||||||
Net flows excluding money markets | (5.2 | ) | (1.2 | ) | (3.6 | ) | (1.8 | ) | 3.6 | 169 | % | * | ||||||||||
Money Market Net Flows | ||||||||||||||||||||||
Institutional | 4.0 | (1.4 | ) | 2.8 | 7.7 | 2.5 | (38 | %) | (68 | %) | ||||||||||||
Retail | (5.7 | ) | (3.0 | ) | (0.7 | ) | (3.3 | ) | (1.8 | ) | 68 | % | 45 | % | ||||||||
Total money market net flows | (1.7 | ) | (4.4 | ) | 2.1 | 4.4 | 0.7 | 141 | % | (84 | %) | |||||||||||
Assets under management or supervision by distribution channel | ||||||||||||||||||||||
Americas Retail Morgan Stanley Brand | $ | 64 | $ | 62 | $ | 60 | $ | 62 | $ | 61 | (5 | %) | (2 | %) | ||||||||
Americas Retail Van Kampen Brand | 90 | 89 | 90 | 94 | 96 | 7 | % | 2 | % | |||||||||||||
Americas Intermediary | 47 | 51 | 55 | 58 | 61 | 30 | % | 5 | % | |||||||||||||
U.S. Institutional | 88 | 86 | 85 | 88 | 95 | 8 | % | 8 | % | |||||||||||||
Non- U.S. | 75 | 77 | 80 | 88 | 97 | 29 | % | 10 | % | |||||||||||||
Total long term assets under management or supervision | 364 | 365 | 370 | 390 | 410 | 13 | % | 5 | % | |||||||||||||
Institutional money markets/liquidity | 37 | 37 | 40 | 49 | 52 | 41 | % | 6 | % | |||||||||||||
Retail money markets | 41 | 38 | 38 | 35 | 33 | (20 | %) | (6 | %) | |||||||||||||
Total Money Markets | 78 | 75 | 78 | 84 | 85 | 9 | % | 1 | % | |||||||||||||
Total assets under management or supervision | $ | 442 | $ | 440 | $ | 448 | $ | 474 | $ | 495 | 12 | % | 4 | % | ||||||||
Share of minority interest assets (1) | 0 | 0 | 0 | 4 | 5 | * | 25 | % | ||||||||||||||
Total | $ | 442 | $ | 440 | $ | 448 | $ | 478 | $ | 500 | 13 | % | 5 | % | ||||||||
Assets under management or supervision by asset class | ||||||||||||||||||||||
Equity | $ | 230 | $ | 226 | $ | 226 | $ | 239 | $ | 245 | 7 | % | 3 | % | ||||||||
Fixed income | 90 | 91 | 93 | 94 | 94 | 4 | % | -- | ||||||||||||||
Money market | 78 | 75 | 78 | 84 | 85 | 9 | % | 1 | % | |||||||||||||
Alternatives | 18 | 20 | 20 | 21 | 29 | 61 | % | 38 | % | |||||||||||||
Real estate | 14 | 15 | 18 | 22 | 27 | 93 | % | 23 | % | |||||||||||||
Subtotal | 430 | 427 | 435 | 460 | 480 | 12 | % | 4 | % | |||||||||||||
Unit trusts | 12 | 13 | 13 | 14 | 15 | 25 | % | 7 | % | |||||||||||||
Total assets under management or supervision | $ | 442 | $ | 440 | $ | 448 | $ | 474 | $ | 495 | 12 | % | 4 | % | ||||||||
Share of minority interest assets (1) | 0 | 0 | 0 | 4 | 5 | * | 25 | % | ||||||||||||||
Total | $ | 442 | $ | 440 | $ | 448 | $ | 478 | $ | 500 | 13 | % | 5 | % | ||||||||
(1) | Amount represents Asset Management's proportional share of assets managed by entities in which it owns a minority interest. | |||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | |||||
Refer to Legal Notice page 24. |
11
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, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Assets under management or supervision by distribution channel | ||||||||||||||||||||||
Americas Retail Morgan Stanley Brand | $ | 64 | $ | 62 | $ | 60 | $ | 62 | $ | 61 | (5 | %) | (2 | %) | ||||||||
Americas Retail Van Kampen Brand | 90 | 89 | 90 | 94 | 96 | 7 | % | 2 | % | |||||||||||||
Americas Intermediary | 47 | 51 | 55 | 58 | 61 | 30 | % | 5 | % | |||||||||||||
U.S. Institutional | 88 | 86 | 85 | 88 | 95 | 8 | % | 8 | % | |||||||||||||
Non - U.S. | 75 | 77 | 80 | 88 | 97 | 29 | % | 10 | % | |||||||||||||
Total long term assets under management or supervision | 364 | 365 | 370 | 390 | 410 | 13 | % | 5 | % | |||||||||||||
Institutional money markets/liquidity | 37 | 37 | 40 | 49 | 52 | 41 | % | 6 | % | |||||||||||||
Retail money markets | 41 | 38 | 38 | 35 | 33 | (20 | %) | (6 | %) | |||||||||||||
Total Money Markets | 78 | 75 | 78 | 84 | 85 | 9 | % | 1 | % | |||||||||||||
Sub-total assets under management or supervision | 442 | 440 | 448 | 474 | 495 | 12 | % | 4 | % | |||||||||||||
Global wealth management group (1) | 129 | 127 | 142 | 153 | 153 | 19 | % | 8 | % | |||||||||||||
Institutional securities | 31 | 37 | 38 | 42 | 49 | 58 | % | 17 | % | |||||||||||||
Total assets under management or supervision | $ | 602 | $ | 604 | $ | 628 | $ | 669 | $ | 697 | 16 | % | 4 | % | ||||||||
Share of minority interest assets (2) | 0 | 0 | 0 | 4 | 5 | * | 25 | % | ||||||||||||||
Total | $ | 602 | $ | 604 | $ | 628 | $ | 673 | $ | 702 | 17 | % | 4 | % | ||||||||
Consolidated assets under management or supervision by asset class (1) | ||||||||||||||||||||||
Equity | $ | 288 | $ | 288 | $ | 289 | $ | 307 | $ | 317 | 10 | % | 3 | % | ||||||||
Fixed income | 105 | 106 | 109 | 111 | 111 | 6 | % | -- | ||||||||||||||
Money market | 82 | 79 | 83 | 89 | 90 | 10 | % | 1 | % | |||||||||||||
Alternatives | 18 | 20 | 20 | 21 | 29 | 61 | % | 38 | % | |||||||||||||
Real estate | 45 | 52 | 56 | 64 | 76 | 69 | % | 19 | % | |||||||||||||
Subtotal | 538 | 545 | 557 | 592 | 623 | 16 | % | 5 | % | |||||||||||||
Unit trusts | 12 | 13 | 13 | 14 | 15 | 25 | % | 7 | % | |||||||||||||
Other (3) | 52 | 46 | 58 | 63 | 59 | 13 | % | (6 | %) | |||||||||||||
Total assets under management or supervision | $ | 602 | $ | 604 | $ | 628 | $ | 669 | $ | 697 | 16 | % | 4 | % | ||||||||
Share of minority interest assets (2) | 0 | 0 | 0 | 4 | 5 | * | 25 | % | ||||||||||||||
Total | $ | 602 | $ | 604 | $ | 628 | $ | 673 | $ | 702 | 17 | % | 4 | % | ||||||||
(1) | All periods have been restated to exclude Quilter Holdings Limited. | |||||||||||||||
(2) | Amount represents Asset Management's proportional share of assets managed by entities in which it owns a minority interest. | |||||||||||||||
(3) | Includes assets under management or supervision associated with the Global Wealth Management Group. All periods have been restated to exclude Quilter Holdings Limited. | |||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | |||||||||||||||
Refer to Legal Notice page 24. |
12
MORGAN STANLEY |
Quarterly Discover Income Statement Information |
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Merchant, cardmember and other fees | $ | 289 | $ | 277 | $ | 312 | $ | 289 | $ | 297 | 3 | % | 3 | % | ||||||||
Servicing and securitization income | 596 | 651 | 565 | 526 | 521 | (13 | %) | (1 | %) | |||||||||||||
Other | 4 | 5 | 13 | 13 | 9 | 125 | % | (31 | %) | |||||||||||||
Total non-interest revenues | 889 | 933 | 890 | 828 | 827 | (7 | %) | -- | ||||||||||||||
Interest revenue | 586 | 608 | 642 | 622 | 680 | 16 | % | 9 | % | |||||||||||||
Interest expense | 231 | 220 | 253 | 248 | 287 | 24 | % | 16 | % | |||||||||||||
Net interest income | 355 | 388 | 389 | 374 | 393 | 11 | % | 5 | % | |||||||||||||
Provision for consumer loan losses | 155 | 130 | 232 | 239 | 195 | 26 | % | (18 | %) | |||||||||||||
Net credit income | 200 | 258 | 157 | 135 | 198 | (1 | %) | 47 | % | |||||||||||||
Net revenues | 1,089 | 1,191 | 1,047 | 963 | 1,025 | (6 | %) | 6 | % | |||||||||||||
Total non-interest expenses | 610 | 650 | 679 | 764 | 653 | 7 | % | (15 | %) | |||||||||||||
Income before losses from | ||||||||||||||||||||||
unconsolidated investees and taxes | 479 | 541 | 368 | 199 | 372 | (22 | %) | 87 | % | |||||||||||||
Losses from unconsolidated investees | 1 | 0 | 1 | 1 | 1 | -- | -- | |||||||||||||||
Income before taxes | 478 | 541 | 367 | 198 | 371 | (22 | %) | 87 | % | |||||||||||||
Provision for income taxes | 178 | 203 | 125 | - | 138 | (22 | %) | * | ||||||||||||||
Income from continuing operations | $ | 300 | $ | 338 | $ | 242 | $ | 198 | $ | 233 | (22 | %) | 18 | % | ||||||||
Return on average common equity (1) | 26 | % | 27 | % | 19 | % | 15 | % | 17 | % | ||||||||||||
Pre-tax profit margin (2) | 44 | % | 45 | % | 35 | % | 21 | % | 36 | % | ||||||||||||
(1) | Refer to page 4 for the allocation of average common equity. |
(2) | 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 24. |
13
MORGAN STANLEY |
Quarterly Discover Income Statement Information |
(Managed loan basis) |
(unaudited, dollars in millions) |
Percentage Change From: | ||||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Merchant, cardmember and other fees | $ | 519 | $ | 541 | $ | 579 | $ | 542 | $ | 552 | 6 | % | 2 | % | ||||||||
Servicing and securitization income | 0 | 0 | 0 | 0 | 0 | -- | -- | |||||||||||||||
Other | 143 | 22 | 11 | 18 | 5 | (97 | %) | (72 | %) | |||||||||||||
Total non-interest revenues | 662 | 563 | 590 | 560 | 557 | (16 | %) | (1 | %) | |||||||||||||
Interest revenue | 1,475 | 1,576 | 1,572 | 1,544 | 1,599 | 8 | % | 4 | % | |||||||||||||
Interest expense | 541 | 576 | 619 | 614 | 649 | 20 | % | 6 | % | |||||||||||||
Net interest income | 934 | 1,000 | 953 | 930 | 950 | 2 | % | 2 | % | |||||||||||||
Provision for consumer loan losses | 507 | 372 | 496 | 527 | 482 | (5 | %) | (9 | %) | |||||||||||||
Net credit income | 427 | 628 | 457 | 403 | 468 | 10 | % | 16 | % | |||||||||||||
Net revenues | 1,089 | 1,191 | 1,047 | 963 | 1,025 | (6 | %) | 6 | % | |||||||||||||
Total non-interest expenses | 610 | 650 | 679 | 764 | 653 | 7 | % | (15 | %) | |||||||||||||
Income before losses from | ||||||||||||||||||||||
unconsolidated investees and taxes | 479 | 541 | 368 | 199 | 372 | (22 | %) | 87 | % | |||||||||||||
Losses/(gains) from unconsolidated investees | 1 | 0 | 1 | 1 | 1 | -- | -- | |||||||||||||||
Income before taxes | 478 | 541 | 367 | 198 | 371 | (22 | %) | 87 | % | |||||||||||||
Provision for income taxes | 178 | 203 | 125 | - | 138 | (22 | %) | * | ||||||||||||||
Income from continuing operations | $ | 300 | $ | 338 | $ | 242 | $ | 198 | $ | 233 | (22 | %) | 18 | % | ||||||||
Return on average common equity (1) | 26 | % | 27 | % | 19 | % | 15 | % | 17 | % | ||||||||||||
Pre-tax profit margin (2) | 44 | % | 45 | % | 35 | % | 21 | % | 36 | % | ||||||||||||
(1) | Refer to page 4 for the allocation of average common equity. |
(2) | 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 24. |
14
MORGAN STANLEY |
Quarterly Financial Information and Statistical Data |
Discover |
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Total owned credit card loans (1) | ||||||||||||||||||||||
Period end | $ | 19,924 | $ | 21,764 | $ | 22,922 | $ | 23,588 | $ | 22,410 | 12 | % | (5 | %) | ||||||||
Average | $ | 21,976 | $ | 19,664 | $ | 22,424 | $ | 22,539 | $ | 24,672 | 12 | % | 9 | % | ||||||||
Total managed credit card loans (1)(2) | ||||||||||||||||||||||
Period end | $ | 47,825 | $ | 48,539 | $ | 49,585 | $ | 50,291 | $ | 50,730 | 6 | % | 1 | % | ||||||||
Average | $ | 47,575 | $ | 47,307 | $ | 48,763 | $ | 49,181 | $ | 51,390 | 8 | % | 4 | % | ||||||||
Interest yield | 12.13 | % | 12.69 | % | 12.38 | % | 12.23 | % | 12.27 | % | 14 bp | 4 bp | ||||||||||
Interest spread | 7.44 | % | 7.78 | % | 7.07 | % | 6.86 | % | 6.85 | % | (59 bp | ) | (1 bp | ) | ||||||||
Transaction volume (billions) | $ | 26.8 | $ | 28.5 | $ | 30.2 | $ | 29.1 | $ | 30.3 | 13 | % | 4 | % | ||||||||
Net Sales | 22.5 | 24.0 | 25.7 | 24.5 | 25.1 | 12 | % | 2 | % | |||||||||||||
Other transaction volume | 4.3 | 4.5 | 4.5 | 4.6 | 5.2 | 21 | % | 13 | % | |||||||||||||
Accounts (millions) | 46.1 | 45.9 | 45.6 | 45.3 | 44.9 | (3 | %) | (1 | %) | |||||||||||||
Active accounts (millions) | 19.6 | 19.6 | 19.7 | 19.8 | 19.7 | 1 | % | (1 | %) | |||||||||||||
Average receivables per avg. active account (actual $) | $ | 2,457 | $ | 2,415 | $ | 2,484 | $ | 2,500 | $ | 2,590 | 5 | % | 4 | % | ||||||||
Trans volume per avg. active account (actual $) | $ | 1,385 | $ | 1,457 | $ | 1,538 | $ | 1,481 | $ | 1,528 | 10 | % | 3 | % | ||||||||
Net gain on securitization | $ | 139 | $ | 18 | $ | (2 | ) | $ | 5 | $ | (4 | ) | (103 | %) | (180 | %) | ||||||
Return on managed receivables (3) | 2.56 | % | 2.84 | % | 1.96 | % | 1.62 | % | 1.84 | % | (72 bp | ) | 22 bp | |||||||||
Credit quality | ||||||||||||||||||||||
Net charge-off rate | 5.06 | % | 3.30 | % | 3.81 | % | 4.15 | % | 4.05 | % | (101 bp | ) | (10 bp | ) | ||||||||
Delinquency rate (over 30 days) | 3.45 | % | 3.29 | % | 3.41 | % | 3.51 | % | 3.45 | % | 0 bp | (6 bp | ) | |||||||||
Delinquency rate (over 90 days) | 1.61 | % | 1.53 | % | 1.59 | % | 1.65 | % | 1.69 | % | 8 bp | 4 bp | ||||||||||
Allowance for loan losses at period end | $ | 777 | $ | 773 | $ | 808 | $ | 828 | $ | 787 | 1 | % | (5 | %) | ||||||||
International managed credit card loans (2) | ||||||||||||||||||||||
Period end | $ | 4,183 | $ | 4,406 | $ | 4,522 | $ | 4,644 | $ | 4,575 | 9 | % | (1 | %) | ||||||||
Average | $ | 2,911 | $ | 4,049 | $ | 4,361 | $ | 4,419 | $ | 4,608 | 58 | % | 4 | % | ||||||||
Accounts (millions) | 2.6 | 2.9 | 2.9 | 3.0 | 3.0 | 15 | % | -- | ||||||||||||||
Payment services (millions of transactions) | ||||||||||||||||||||||
Discover network transaction volume | 339 | 340 | 362 | 358 | 361 | 6 | % | 1 | % | |||||||||||||
PULSE network transaction volume | 425 | 471 | 473 | 488 | 521 | 23 | % | 7 | % | |||||||||||||
Total network transaction volume | 764 | 811 | 835 | 846 | 882 | 15 | % | 4 | % | |||||||||||||
(1) | Includes domestic and international consumer credit card businesses. |
(2) | Includes owned and securitized credit card loans. |
(3) | Annualized net income divided by average managed receivables. |
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. |
Refer to Legal Notice page 24. |
15
Quarterly Intersegment Eliminations Income Statement Information | ||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Investment banking (1) | $ | 0 | $ | (33 | ) | $ | 0 | $ | (6 | ) | $ | (2 | ) | * | 67 | % | ||||||
Principal transactions: | ||||||||||||||||||||||
Trading | (2 | ) | (3 | ) | (2 | ) | (1 | ) | 0 | * | * | |||||||||||
Investments | 0 | 0 | 0 | 0 | 0 | -- | -- | |||||||||||||||
Commissions | (7 | ) | (8 | ) | (7 | ) | (7 | ) | (7 | ) | -- | -- | ||||||||||
Asset management, distribution and admin. fees | (53 | ) | (35 | ) | (40 | ) | (40 | ) | (43 | ) | 19 | % | (8 | %) | ||||||||
Interest and dividends | (39 | ) | (68 | ) | (87 | ) | (90 | ) | (114 | ) | (192 | %) | (27 | %) | ||||||||
Other | (10 | ) | (15 | ) | (10 | ) | (12 | ) | (10 | ) | -- | 17 | % | |||||||||
Total revenues | (111 | ) | (162 | ) | (146 | ) | (156 | ) | (176 | ) | (59 | %) | (13 | %) | ||||||||
Interest expense | (52 | ) | (64 | ) | (93 | ) | (97 | ) | (123 | ) | (137 | %) | (27 | %) | ||||||||
Net revenues | (59 | ) | (98 | ) | (53 | ) | (59 | ) | (53 | ) | 10 | % | 10 | % | ||||||||
Total non-interest expenses | (78 | ) | (85 | ) | (68 | ) | (71 | ) | (58 | ) | 26 | % | 18 | % | ||||||||
Income before taxes | 19 | (13 | ) | 15 | 12 | 5 | (74 | %) | (58 | %) | ||||||||||||
Provision for income taxes | 7 | (5 | ) | 6 | 4 | 2 | (71 | %) | (50 | %) | ||||||||||||
Income from continuing operations | $ | 12 | $ | (8 | ) | $ | 9 | $ | 8 | $ | 3 | (75 | %) | (63 | %) | |||||||
(1) | Included in the May 31, 2006 amount is $30m related to the sale of the Company's aircraft leasing business. | |||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | |||||||
Refer to Legal Notice page 24. |
16
MORGAN STANLEY
The following (page 17) 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 on a managed basis for its Discover business (page 18) 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, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Investment banking | $ | 982 | $ | 1,165 | $ | 1,138 | $ | 1,503 | $ | 1,227 | 25 | % | (18 | %) | ||||||||
Principal transactions: | ||||||||||||||||||||||
Trading | 3,088 | 3,562 | 2,845 | 2,318 | 4,158 | 35 | % | 79 | % | |||||||||||||
Investments | 349 | 755 | 322 | 567 | 920 | 164 | % | 62 | % | |||||||||||||
Commissions | 920 | 994 | 880 | 976 | 1,005 | 9 | % | 3 | % | |||||||||||||
Asset management, distribution and administration fees | 1,268 | 1,321 | 1,313 | 1,338 | 1,480 | 17 | % | 11 | % | |||||||||||||
Servicing income | 0 | 0 | 0 | 0 | 35 | * | * | |||||||||||||||
Interest and dividends | 9,986 | 9,534 | 12,065 | 11,304 | 14,196 | 42 | % | 26 | % | |||||||||||||
Other | 130 | 120 | 119 | 215 | 213 | 64 | % | (1 | %) | |||||||||||||
Total revenues | 16,723 | 17,451 | 18,681 | 18,221 | 23,234 | 39 | % | 28 | % | |||||||||||||
Interest expense | 9,258 | 9,776 | 11,593 | 10,419 | 13,261 | 43 | % | 27 | % | |||||||||||||
Net revenues | 7,465 | 7,675 | 7,088 | 7,802 | 9,973 | 34 | % | 28 | % | |||||||||||||
Compensation and benefits (2) | 3,998 | 3,578 | 3,070 | 3,287 | 4,762 | 19 | % | 45 | % | |||||||||||||
Occupancy and equipment | 207 | 215 | 230 | 250 | 258 | 25 | % | 3 | % | |||||||||||||
Brokerage, clearing and exchange fees | 292 | 340 | 339 | 334 | 361 | 24 | % | 8 | % | |||||||||||||
Information processing and communications | 258 | 271 | 273 | 282 | 276 | 7 | % | (2 | %) | |||||||||||||
Marketing and business development | 119 | 155 | 146 | 220 | 152 | 28 | % | (31 | %) | |||||||||||||
Professional services | 369 | 448 | 455 | 605 | 416 | 13 | % | (31 | %) | |||||||||||||
Other | 241 | 190 | 282 | 160 | 254 | 5 | % | 59 | % | |||||||||||||
Total non-interest expenses | 5,484 | 5,197 | 4,795 | 5,138 | 6,478 | 18 | % | 26 | % | |||||||||||||
Income from continuing operations before losses | ||||||||||||||||||||||
from unconsolidated investees and taxes | 1,981 | 2,478 | 2,293 | 2,664 | 3,495 | 76 | % | 31 | % | |||||||||||||
Losses from unconsolidated investees | 68 | 103 | 1 | 53 | 43 | (37 | %) | (19 | %) | |||||||||||||
Income before taxes | 1,913 | 2,375 | 2,292 | 2,611 | 3,452 | 80 | % | 32 | % | |||||||||||||
Provision for income taxes | 611 | 855 | 686 | 607 | 1,123 | 84 | % | 85 | % | |||||||||||||
Income from continuing operations (3) | $ | 1,302 | $ | 1,520 | $ | 1,606 | $ | 2,004 | $ | 2,329 | 79 | % | 16 | % | ||||||||
Return on average common equity (4) | 24 | % | 26 | % | 27 | % | 32 | % | 37 | % | ||||||||||||
Compensation and benefits as a % of net revenues | 54 | % | 47 | % | 43 | % | 42 | % | 48 | % | ||||||||||||
Non-compensation expenses as a % of net revenues | 20 | % | 21 | % | 24 | % | 24 | % | 17 | % | ||||||||||||
Pre-tax profit margin (5) | 27 | % | 32 | % | 32 | % | 34 | % | 35 | % | ||||||||||||
Number of employees (6) | 40,188 | 40,088 | 41,416 | 43,124 | 44,797 | 11 | % | 4 | % | |||||||||||||
(1) | Includes the elimination of intersegment activity between Institutional Securities, Global Wealth Management Group and Asset Management. | ||||||||||||||||
(2) | The Company maintains various deferred compensation plans for the benefit of certain employees. Beginning in the quarter ended Feb 28, 2007, increases or decreases in assets or earnings associated with such plans are reflected in net revenues, and increases or decreases in liabilities associated with such plans are reflected in compensation expense. For the quarter ended Feb 28, 2007, such net revenues and compensation expense totaled approximately $300 million and $280 million, respectively. Previously, the increases or decreases in assets and liabilities associated with these plans were both recorded in net revenues. Prior period activity has been reclassified to conform to the current presentation. | ||||||||||||||||
(3) | Excludes gain/(loss) from discontinued operations. | ||||||||||||||||
(4) | Refer to page 4 for the allocation of average common equity. | ||||||||||||||||
(5) | Income before taxes, excluding losses from unconsolidated investees, as a % of net revenues. | ||||||||||||||||
(6) | 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 24. |
17
MORGAN STANLEY | |||||||||||
Quarterly Discover Income Statement Information | |||||||||||
(Managed loan basis) | |||||||||||
(unaudited, dollars in millions) |
Quarter Ended | Percentage Change From: | |||||||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | 1Q07 vs. 1Q06 | 1Q07 vs. 4Q06 | ||||||||||||||||
Merchant, cardmember and other fees | $ | 519 | $ | 541 | $ | 579 | $ | 542 | $ | 552 | 6 | % | 2 | % | ||||||||
Servicing and securitization income | 0 | 0 | 0 | 0 | 0 | -- | -- | |||||||||||||||
Other | 143 | 22 | 11 | 18 | 5 | (97 | %) | (72 | %) | |||||||||||||
Total non-interest revenues | 662 | 563 | 590 | 560 | 557 | (16 | %) | (1 | %) | |||||||||||||
Interest revenue | 1,475 | 1,576 | 1,572 | 1,544 | 1,599 | 8 | % | 4 | % | |||||||||||||
Interest expense | 541 | 576 | 619 | 614 | 649 | 20 | % | 6 | % | |||||||||||||
Net interest income | 934 | 1,000 | 953 | 930 | 950 | 2 | % | 2 | % | |||||||||||||
Provision for consumer loan losses | 507 | 372 | 496 | 527 | 482 | (5 | %) | (9 | %) | |||||||||||||
Net credit income | 427 | 628 | 457 | 403 | 468 | 10 | % | 16 | % | |||||||||||||
Net revenues | 1,089 | 1,191 | 1,047 | 963 | 1,025 | (6 | %) | 6 | % | |||||||||||||
Compensation and benefits | 244 | 224 | 235 | 219 | 230 | (6 | %) | 5 | % | |||||||||||||
Occupancy and equipment | 23 | 21 | 23 | 24 | 22 | (4 | %) | (8 | %) | |||||||||||||
Information processing and communications | 90 | 96 | 98 | 103 | 94 | 4 | % | (9 | %) | |||||||||||||
Marketing and business development | 119 | 142 | 145 | 198 | 142 | 19 | % | (28 | %) | |||||||||||||
Professional services | 64 | 92 | 93 | 119 | 81 | 27 | % | (32 | %) | |||||||||||||
Other | 70 | 75 | 85 | 101 | 84 | 20 | % | (17 | %) | |||||||||||||
Total non-interest expenses | 610 | 650 | 679 | 764 | 653 | 7 | % | (15 | %) | |||||||||||||
Income before losses from | ||||||||||||||||||||||
unconsolidated investees and taxes | 479 | 541 | 368 | 199 | 372 | (22 | %) | 87 | % | |||||||||||||
Losses from unconsolidated investees | 1 | 0 | 1 | 1 | 1 | -- | -- | |||||||||||||||
Income before taxes | 478 | 541 | 367 | 198 | 371 | (22 | %) | 87 | % | |||||||||||||
Provision for income taxes | 178 | 203 | 125 | 0 | 138 | (22 | %) | * | ||||||||||||||
Income from continuing operations | $ | 300 | $ | 338 | $ | 242 | $ | 198 | $ | 233 | (22 | %) | 18 | % | ||||||||
Return on average common equity (1) | 26 | % | 27 | % | 19 | % | 15 | % | 17 | % | ||||||||||||
Compensation and benefits as a % of net revenues | 22 | % | 19 | % | 22 | % | 23 | % | 22 | % | ||||||||||||
Non-compensation expenses as a % of net revenues | 34 | % | 36 | % | 42 | % | 57 | % | 41 | % | ||||||||||||
Pre-tax profit margin (2) | 44 | % | 45 | % | 35 | % | 21 | % | 36 | % | ||||||||||||
Number of employees | 13,683 | 13,075 | 12,933 | 13,186 | 13,048 | (5 | %) | (1 | %) | |||||||||||||
(1) | Refer to page 4 for the allocation of average common equity. | |||||||||||||||
(2) | 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 24. |
18
MORGAN STANLEY
The following (pages 19 - 21) present a reconciliation for certain information disclosed on pages 13, 14, 15 and 18. | |||
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, 2007 | |||||||||||||||||||||||||
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 | $ | 22,410 | $ | 24,672 | 3.84 | % | 10.44 | % | 5.20 | % | 3.78 | % | 3.16 | % | 1.56 | % | |||||||||
Securitized | 28,320 | 26,718 | 3.55 | % | 13.96 | % | 8.39 | % | 4.30 | % | 3.67 | % | 1.79 | % | |||||||||||
Managed | $ | 50,730 | $ | 51,390 | 1.84 | % | 12.27 | % | 6.85 | % | 4.05 | % | 3.45 | % | 1.69 | % |
(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 24. |
19
MORGAN STANLEY | |||||||||||||||||
Quarterly Discover Reconciliation of General Purpose Credit Card Loan Data (1) | |||||||||||||||||
(unaudited, dollars in millions) |
Quarter Ended Nov 30, 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 | $ | 23,588 | $ | 22,539 | 3.53 | % | 10.28 | % | 5.18 | % | 3.95 | % | 3.22 | % | 1.53 | % | |||||||||
Securitized | 26,703 | 26,642 | 2.99 | % | 13.88 | % | 8.32 | % | 4.32 | % | 3.76 | % | 1.75 | % | |||||||||||
Managed | $ | 50,291 | $ | 49,181 | 1.62 | % | 12.23 | % | 6.86 | % | 4.15 | % | 3.51 | % | 1.65 | % | |||||||||
Quarter Ended Aug 31, 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 | $ | 22,922 | $ | 22,424 | 4.27 | % | 10.45 | % | 5.40 | % | 3.57 | % | 3.17 | % | 1.48 | % | |||||||||
Securitized | 26,663 | 26,339 | 3.64 | % | 14.02 | % | 8.52 | % | 4.01 | % | 3.62 | % | 1.68 | % | |||||||||||
Managed | $ | 49,585 | $ | 48,763 | 1.96 | % | 12.38 | % | 7.07 | % | 3.81 | % | 3.41 | % | 1.59 | % |
Quarter Ended May 31, 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 | $ | 21,764 | $ | 19,664 | 6.83 | % | 11.01 | % | 6.41 | % | 3.02 | % | 2.97 | % | 1.38 | % | |||||||||
Securitized | 26,775 | 27,643 | 4.86 | % | 13.89 | % | 8.76 | % | 3.50 | % | 3.56 | % | 1.65 | % | |||||||||||
Managed | $ | 48,539 | $ | 47,307 | 2.84 | % | 12.69 | % | 7.78 | % | 3.30 | % | 3.29 | % | 1.53 | % |
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 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. | ||||||||||||||||||||
Note: | Certain reclassifications have been made to prior period amounts to conform to the current presentation. | ||||||||||||||||||||
Refer to Legal Notice page 24. |
20
MORGAN STANLEY | |||||||||||
Quarterly Discover Reconciliation of Managed Income Statement Data (1) | |||||||||||
(unaudited, dollars in millions) |
Quarter Ended | ||||||||||||||||
Feb 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 | ||||||||||||
Merchant, cardmember and other fees: | ||||||||||||||||
Owned | $ | 289 | $ | 277 | $ | 312 | $ | 289 | $ | 297 | ||||||
Securitization adjustment | 230 | 264 | 267 | 253 | 255 | |||||||||||
Managed | $ | 519 | $ | 541 | $ | 579 | $ | 542 | $ | 552 | ||||||
Servicing and securitizations income: | ||||||||||||||||
Owned | $ | 596 | $ | 651 | $ | 565 | $ | 526 | $ | 521 | ||||||
Securitization adjustment | (596 | ) | (651 | ) | (565 | ) | (526 | ) | (521 | ) | ||||||
Managed | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||
Other: | ||||||||||||||||
Owned | $ | 4 | $ | 5 | $ | 13 | $ | 13 | $ | 9 | ||||||
Securitization adjustment | 139 | 17 | (2 | ) | 5 | (4 | ) | |||||||||
Managed | $ | 143 | $ | 22 | $ | 11 | $ | 18 | $ | 5 | ||||||
Interest revenue: | ||||||||||||||||
Owned | $ | 586 | $ | 608 | $ | 642 | $ | 622 | $ | 680 | ||||||
Securitization adjustment | 889 | 968 | 930 | 922 | 919 | |||||||||||
Managed | $ | 1,475 | $ | 1,576 | $ | 1,572 | $ | 1,544 | $ | 1,599 | ||||||
Interest expense: | ||||||||||||||||
Owned | $ | 231 | $ | 220 | $ | 253 | $ | 248 | $ | 287 | ||||||
Securitization adjustment | 310 | 356 | 366 | 366 | 362 | |||||||||||
Managed | $ | 541 | $ | 576 | $ | 619 | $ | 614 | $ | 649 | ||||||
Provision for consumer loan losses: | ||||||||||||||||
Owned | $ | 155 | $ | 130 | $ | 232 | $ | 239 | $ | 195 | ||||||
Securitization adjustment | 352 | 242 | 264 | 288 | 287 | |||||||||||
Managed | $ | 507 | $ | 372 | $ | 496 | $ | 527 | $ | 482 | ||||||
(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 24. |
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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 28, 2006 | May 31, 2006 | Aug 31, 2006 | Nov 30, 2006 | Feb 28, 2007 (1) | |||||||||||||
Total assets | $ | 959,950 | $ | 1,027,419 | $ | 1,029,354 | $ | 1,121,192 | $ | 1,182,310 | |||||||
Less: | Securities purchased under agreements to resell | (176,260 | ) | (190,289 | ) | (171,547 | ) | (174,866 | ) | (192,038 | ) | ||||||
Securities borrowed | (252,896 | ) | (274,581 | ) | (283,024 | ) | (299,631 | ) | (277,093 | ) | |||||||
Add: | Financial instruments sold, not yet purchased | 149,561 | 159,822 | 152,979 | 183,119 | 157,807 | |||||||||||
Less: | Derivative contracts sold, not yet purchased | (42,928 | ) | (48,747 | ) | (47,017 | ) | (57,491 | ) | (51,574 | ) | ||||||
Subtotal | 637,427 | 673,624 | 680,745 | 772,323 | 819,412 | ||||||||||||
Less: | Segregated customer cash and securities balances | (27,156 | ) | (31,685 | ) | (30,917 | ) | (16,782 | ) | (21,264 | ) | ||||||
Assets recorded under certain provisions of SFAS No.140 and FIN 46 | (78,925 | ) | (90,046 | ) | (89,649 | ) | (100,236 | ) | (124,163 | ) | |||||||
Goodwill and intangible assets | (2,873 | ) | (2,932 | ) | (2,943 | ) | (3,443 | ) | (4,262 | ) | |||||||
Adjusted assets | $ | 528,473 | $ | 548,961 | $ | 557,236 | $ | 651,862 | $ | 669,723 | |||||||
Common equity | $ | 30,103 | $ | 32,118 | $ | 33,072 | $ | 34,264 | $ | 36,854 | |||||||
Preferred equity | 0 | 0 | 1,100 | 1,100 | 1,100 | ||||||||||||
Shareholders' equity | 30,103 | 32,118 | 34,172 | 35,364 | 37,954 | ||||||||||||
Junior subordinated debt issued to capital trusts (2) | 3,783 | 3,784 | 3,784 | 4,884 | 4,885 | ||||||||||||
Subtotal | 33,886 | 35,902 | 37,956 | 40,248 | 42,839 | ||||||||||||
Less: | Goodwill and intangible assets | (2,873 | ) | (2,932 | ) | (2,943 | ) | (3,443 | ) | (4,262 | ) | ||||||
Tangible shareholders' equity | $ | 31,013 | $ | 32,970 | $ | 35,013 | $ | 36,805 | $ | 38,577 | |||||||
Leverage ratio (3) | 31.0x | 31.2x | 29.4x | 30.5x | 30.6x | ||||||||||||
Adjusted leverage ratio (4) | 17.0x | 16.7x | 15.9x | 17.7x | 17.4x | ||||||||||||
(1) | Effective December 1, 2006, the Company elected early adoption of SFAS No. 157, "Fair Value Measurements", and SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115." As a result of the adoption of SFAS No. 157 and SFAS No. 159, the Company recorded an after-tax cumulative effect adjustment of $186 million as an increase to the opening balance of retained earnings as of December 1, 2006. | |||||||||||
(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 (some have final maturity at issuance of thirty years extendible at the Company's option by a further nineteen years, others have a sixty year final maturity at issuance), 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 24. |
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MORGAN STANLEY
This page represents an addendum to the 1Q 2007 Financial Supplement. | |||||||||||||||||
Fiscal 2007 compensation expense primarily includes the amortization related to fiscal 2004 awards, as well as fiscal 2005 awards and fiscal 2006 awards granted to non-retirement-eligible employees, and an accrual for the estimated full cost of fiscal 2007 year-end equity awards expected to be granted to retirement-eligible employees in December 2007. | |||||||||||||||||
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. | |||||||||||||||||
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, 2006. |
Illustration of Standard Equity Award Amortization to Non-Retirement-Eligible and Retirement-Eligible Employees | |||||||||||||||||||||||||
Non-Retirement-Eligible Employees - Fiscal Year Ended | |||||||||||||||||||||||||
Year of Award | Nov 30, 2003 | Nov 30, 2004 | Nov 30, 2005 | Nov 30, 2006 | Nov 30, 2007 | Nov 30, 2008 | Nov 30, 2009 | Cumulative Amort. By Grant | |||||||||||||||||
2003 | 28 | % | 28 | % | 28 | % | 15 | % | 1 | % | 0 | % | 0 | % | 100 | % | |||||||||
2004 | 28 | % | 28 | % | 28 | % | 15 | % | 1 | % | 0 | % | 100 | % | |||||||||||
2005 | 40 | % | 40 | % | 18 | % | 2 | % | 100 | % | |||||||||||||||
2006 | 40 | % | 40 | % | 18 | % | 98 | % | |||||||||||||||||
2007 | 40 | % | 40 | % | 80 | % | |||||||||||||||||||
2008 | 40 | % | 40 | % |
Retirement-Eligible Employees - Fiscal Year Ended | |||||||||||||||||||||||||
Year of Award | Nov 30, 2003 | Nov 30, 2004 | Nov 30, 2005 | Nov 30, 2006 | Nov 30, 2007 | Nov 30, 2008 | Nov 30, 2009 | Cumulative Amort. 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 24. |
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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 first quarter earnings press release issued March 21, 2007. |
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