Exhibit 99.2
| MORGAN STANLEY | ||||
| Financial Supplement - 3Q 2010 | ||||
| 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 | ……………. | Earnings Per Share Appendix I | ||
| 13 | ……………. | Earnings Per Share Appendix II | ||
| 14 - 15 | ……………. | End Notes | ||
| 16 | ……………. | Legal Notice | ||
| MORGAN STANLEY | ||||||||||||||||||||||||||||||||
| Quarterly Financial Summary | ||||||||||||||||||||||||||||||||
| (unaudited, dollars in millions) | ||||||||||||||||||||||||||||||||
| Quarter Ended | Percentage Change From: | Nine Months Ended | Percentage | |||||||||||||||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Sept 30, 2009 | June 30, 2010 | Sept 30, 2009 | Sept 30, 2010 | Sept 30, 2009 | Change | |||||||||||||||||||||||||
| Net revenues | ||||||||||||||||||||||||||||||||
| Institutional Securities | $ | 2,894 | $ | 4,505 | $ | 5,018 | (36 | %) | (42 | %) | $ | 12,738 | $ | 9,620 | 32 | % | ||||||||||||||||
| Global Wealth Management Group | 3,104 | 3,074 | 3,029 | 1 | % | 2 | % | 9,283 | 6,251 | 49 | % | |||||||||||||||||||||
| Asset Management | 802 | 410 | 447 | 96 | % | 79 | % | 1,865 | 827 | 126 | % | |||||||||||||||||||||
| Intersegment Eliminations | (21 | ) | (36 | ) | (26 | ) | 42 | % | 19 | % | (81 | ) | (102 | ) | 21 | % | ||||||||||||||||
| Consolidated net revenues | $ | 6,779 | $ | 7,953 | $ | 8,468 | (15 | %) | (20 | %) | $ | 23,805 | $ | 16,596 | 43 | % | ||||||||||||||||
| Income / (loss) from continuing operations before tax | ||||||||||||||||||||||||||||||||
| Institutional Securities | $ | 240 | $ | 1,587 | $ | 1,339 | (85 | %) | (82 | %) | $ | 3,894 | $ | 618 | * | |||||||||||||||||
| Global Wealth Management Group | 281 | 207 | 280 | 36 | % | -- | 766 | 328 | 134 | % | ||||||||||||||||||||||
| Asset Management | 279 | (86 | ) | (124 | ) | * | * | 367 | (616 | ) | * | |||||||||||||||||||||
| Intersegment Eliminations | 0 | (13 | ) | (2 | ) | * | * | (15 | ) | (9 | ) | (67 | %) | |||||||||||||||||||
| Consolidated income / (loss) from continuing operations before tax | $ | 800 | $ | 1,695 | $ | 1,493 | (53 | %) | (46 | %) | $ | 5,012 | $ | 321 | * | |||||||||||||||||
| Income / (loss) applicable to Morgan Stanley | ||||||||||||||||||||||||||||||||
| Institutional Securities | $ | 98 | $ | 1,380 | $ | 898 | (93 | %) | (89 | %) | $ | 3,210 | $ | 969 | * | |||||||||||||||||
| Global Wealth Management Group | 144 | 110 | 105 | 31 | % | 37 | % | 353 | 254 | 39 | % | |||||||||||||||||||||
| Asset Management | 71 | (44 | ) | (66 | ) | * | * | 42 | (404 | ) | * | |||||||||||||||||||||
| Intersegment Eliminations | 0 | (11 | ) | (1 | ) | * | * | (12 | ) | (5 | ) | (140 | %) | |||||||||||||||||||
| Consolidated income / (loss) applicable to Morgan Stanley | $ | 313 | $ | 1,435 | $ | 936 | (78 | %) | (67 | %) | $ | 3,593 | $ | 814 | * | |||||||||||||||||
| Earnings / (loss) applicable to Morgan Stanley common shareholders | $ | (91 | ) | $ | 1,578 | $ | 498 | * | * | $ | 2,971 | $ | (1,301 | ) | * | |||||||||||||||||
| Earnings per basic share: | ||||||||||||||||||||||||||||||||
| Income from continuing operations | $ | 0.07 | $ | 0.84 | $ | 0.51 | (92 | %) | (86 | %) | $ | 2.04 | $ | (1.06 | ) | * | ||||||||||||||||
| Discontinued operations | $ | (0.14 | ) | $ | 0.36 | $ | (0.12 | ) | * | (17 | %) | $ | 0.18 | $ | (0.07 | ) | * | |||||||||||||||
| Earnings per basic share | $ | (0.07 | ) | $ | 1.20 | $ | 0.39 | * | * | $ | 2.22 | $ | (1.13 | ) | * | |||||||||||||||||
| Earnings per diluted share: | ||||||||||||||||||||||||||||||||
| Income from continuing operations | $ | 0.05 | $ | 0.80 | $ | 0.50 | (94 | %) | (90 | %) | $ | 1.98 | $ | (1.06 | ) | * | ||||||||||||||||
| Discontinued operations | $ | (0.12 | ) | $ | 0.29 | $ | (0.12 | ) | * | -- | $ | 0.17 | $ | (0.07 | ) | * | ||||||||||||||||
| Earnings per diluted share | $ | (0.07 | ) | $ | 1.09 | $ | 0.38 | * | * | $ | 2.15 | $ | (1.13 | ) | * | |||||||||||||||||
| Notes: | - | Results include Morgan Stanley Smith Barney (MSSB) effective from May 31, 2009. |
| - | Results for the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009 include positive / (negative) revenue of $(0.7) billion, $0.7 billion and $(0.8) billion, respectively, related to the movement in Morgan Stanley's credit spreads on certain long-term debt. | |
| - | Income / (loss) applicable to Morgan Stanley represents consolidated income / (loss) from continuing operations applicable to Morgan Stanley before gain / (loss) from discontinued operations. | |
| - | For the quarter ended September 30, 2010, discontinued operations included a loss of $229 million due to a write-down and related costs associated with the planned disposition of Revel Entertainment Group, LLC (Revel). For the quarter ended June 30, 2010, discontinued operations primarily included the operating results of the retail asset management business including Van Kampen and an after-tax gain of approximately $514 million related to the sale of this business. For the quarter ended March 31, 2010, discontinued operations included a loss of $932 million (reported in Institutional Sec urities) on the disposition of Revel, a gain of $775 million (not reported in a business segment) related to a legal settlement with Discover Financial Services and the operating results of the retail asset management business, including Van Kampen (reported in Asset Management). | |
| - | Summation of the quarters' earnings per common share may not equal the year-to-date amounts due to the averaging effect of the number of shares and share equivalents throughout the year. | |
| - | Refer to Legal Notice on page 16. |
1
| MORGAN STANLEY | ||||||||||||||||||||||||||||||||
| Quarterly Consolidated Income Statement Information | ||||||||||||||||||||||||||||||||
| (unaudited, dollars in millions) | ||||||||||||||||||||||||||||||||
| Quarter Ended | Percentage Change From: | Nine Months Ended | Percentage | |||||||||||||||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Sept 30, 2009 | June 30, 2010 | Sept 30, 2009 | Sept 30, 2010 | Sept 30, 2009 | Change | |||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||
| Investment banking | $ | 1,221 | $ | 1,080 | $ | 1,208 | 13 | % | 1 | % | $ | 3,361 | $ | 3,347 | -- | |||||||||||||||||
| Principal transactions: | ||||||||||||||||||||||||||||||||
| Trading | 1,439 | 3,353 | 3,399 | (57 | %) | (58 | %) | 8,552 | 6,536 | 31 | % | |||||||||||||||||||||
| Investments | 820 | (52 | ) | 95 | * | * | 1,137 | (1,180 | ) | * | ||||||||||||||||||||||
| Commissions | 1,068 | 1,307 | 1,244 | (18 | %) | (14 | %) | 3,636 | 2,986 | 22 | % | |||||||||||||||||||||
| Asset management, distribution and admin. fees | 1,940 | 1,974 | 1,886 | (2 | %) | 3 | % | 5,877 | 3,910 | 50 | % | |||||||||||||||||||||
| Other | 186 | 151 | 139 | 23 | % | 34 | % | 630 | 775 | (19 | %) | |||||||||||||||||||||
| Total non-interest revenues | 6,674 | 7,813 | 7,971 | (15 | %) | (16 | %) | 23,193 | 16,374 | 42 | % | |||||||||||||||||||||
| Interest income | 1,859 | 1,742 | 1,851 | 7 | % | -- | 5,334 | 5,722 | (7 | %) | ||||||||||||||||||||||
| Interest expense | 1,754 | 1,602 | 1,354 | 9 | % | 30 | % | 4,722 | 5,500 | (14 | %) | |||||||||||||||||||||
| Net interest | 105 | 140 | 497 | (25 | %) | (79 | %) | 612 | 222 | 176 | % | |||||||||||||||||||||
| Net revenues | 6,779 | 7,953 | 8,468 | (15 | %) | (20 | %) | 23,805 | 16,596 | 43 | % | |||||||||||||||||||||
| Non-interest expenses: | ||||||||||||||||||||||||||||||||
| Compensation and benefits | 3,686 | 3,885 | 4,896 | (5 | %) | (25 | %) | 11,987 | 10,673 | 12 | % | |||||||||||||||||||||
| Non-compensation expenses: | ||||||||||||||||||||||||||||||||
| Occupancy and equipment | 401 | 400 | 419 | -- | (4 | %) | 1,190 | 1,126 | 6 | % | ||||||||||||||||||||||
| Brokerage, clearing and exchange fees | 332 | 371 | 285 | (11 | %) | 16 | % | 1,051 | 800 | 31 | % | |||||||||||||||||||||
| Information processing and communications | 412 | 416 | 356 | (1 | %) | 16 | % | 1,223 | 951 | 29 | % | |||||||||||||||||||||
| Marketing and business development | 134 | 153 | 118 | (12 | %) | 14 | % | 421 | 348 | 21 | % | |||||||||||||||||||||
| Professional services | 460 | 496 | 381 | (7 | %) | 21 | % | 1,351 | 1,068 | 26 | % | |||||||||||||||||||||
| Other | 554 | 537 | 520 | 3 | % | 7 | % | 1,570 | 1,309 | 20 | % | |||||||||||||||||||||
Total non-compensation expenses | 2,293 | 2,373 | 2,079 | (3 | %) | 10 | % | 6,806 | 5,602 | 21 | % | |||||||||||||||||||||
| Total non-interest expenses | 5,979 | 6,258 | 6,975 | (4 | %) | (14 | %) | 18,793 | 16,275 | 15 | % | |||||||||||||||||||||
| Income / (loss) from continuing operations before taxes | 800 | 1,695 | 1,493 | (53 | %) | (46 | %) | 5,012 | 321 | * | ||||||||||||||||||||||
| Income tax provision / (benefit) from continuing operations | (23 | ) | 236 | 521 | * | * | 650 | (384 | ) | * | ||||||||||||||||||||||
| Income / (loss) from continuing operations | 823 | 1,459 | 972 | (44 | %) | (15 | %) | 4,362 | 705 | * | ||||||||||||||||||||||
| Gain / (loss) from discontinued operations after tax | (182 | ) | 525 | (179 | ) | * | (2 | %) | 274 | (69 | ) | * | ||||||||||||||||||||
| Net income / (loss) | $ | 641 | $ | 1,984 | $ | 793 | (68 | %) | (19 | %) | $ | 4,636 | $ | 636 | * | |||||||||||||||||
| Net income / (loss) applicable to non-controlling interests | 510 | 24 | 36 | * | * | 769 | (93 | ) | * | |||||||||||||||||||||||
| Net income / (loss) applicable to Morgan Stanley | 131 | 1,960 | 757 | (93 | %) | (83 | %) | 3,867 | 729 | * | ||||||||||||||||||||||
| Earnings / (loss) applicable to Morgan Stanley common shareholders | $ | (91 | ) | $ | 1,578 | $ | 498 | * | * | $ | 2,971 | $ | (1,301 | ) | * | |||||||||||||||||
| Amounts applicable to Morgan Stanley: | ||||||||||||||||||||||||||||||||
| Income / (loss) from continuing operations | 313 | 1,435 | 936 | (78 | %) | (67 | %) | 3,593 | 814 | * | ||||||||||||||||||||||
| Gain / (loss) from discontinued operations after tax | (182 | ) | 525 | (179 | ) | * | (2 | %) | 274 | (85 | ) | * | ||||||||||||||||||||
| Net income / (loss) applicable to Morgan Stanley | $ | 131 | $ | 1,960 | $ | 757 | (93 | %) | (83 | %) | $ | 3,867 | $ | 729 | * | |||||||||||||||||
| Pre-tax profit margin | 12 | % | 21 | % | 18 | % | 21 | % | 2 | % | ||||||||||||||||||||||
| Compensation and benefits as a % of net revenues | 54 | % | 49 | % | 58 | % | 50 | % | 64 | % | ||||||||||||||||||||||
| Non-compensation expenses as a % of net revenues | 34 | % | 30 | % | 25 | % | 29 | % | 34 | % | ||||||||||||||||||||||
| Effective tax rate from continuing operations | * | 13.9 | % | 34.9 | % | 13.0 | % | * | ||||||||||||||||||||||||
| Notes: | - | Results include MSSB effective from May 31, 2009. |
| - | Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance. Percentages represent income from continuing operations before income taxes as a percentage of net revenues. | |
| - | The quarter ended September 30, 2010 included a tax gain of $176 million associated with the repatriation of non-U.S. earnings at a cost lower than originally estimated. Excluding the discrete tax gain, the effective tax rate for the quarter would have been 19.1%. | |
| - | The quarter ended June 30, 2010 included a discrete tax benefit of $345 million related to the remeasurement of tax reserves based on the status of federal and state tax examinations. Excluding this benefit, the effective tax rate for the quarter would have been 34.3%. | |
| - | Refer to Legal Notice on page 16. |
2
| MORGAN STANLEY | ||||||||||||||||||||||||||||||||
| Quarterly Consolidated Financial Information and Statistical Data | ||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||
| Quarter Ended | Percentage Change From: | Nine Months Ended | Percentage | |||||||||||||||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Sept 30, 2009 | June 30, 2010 | Sept 30, 2009 | Sept 30, 2010 | Sept 30, 2009 | Change | |||||||||||||||||||||||||
| Morgan Stanley | ||||||||||||||||||||||||||||||||
Regional revenue (1) | ||||||||||||||||||||||||||||||||
| Americas | $ | 4,777 | $ | 5,663 | $ | 6,142 | (16 | %) | (22 | %) | $ | 16,639 | $ | 13,254 | 26 | % | ||||||||||||||||
| EMEA (Europe, Middle East, Africa) | 1,001 | 1,720 | 1,660 | (42 | %) | (40 | %) | 4,729 | 1,760 | 169 | % | |||||||||||||||||||||
| Asia | 1,001 | 570 | 666 | 76 | % | 50 | % | 2,437 | 1,582 | 54 | % | |||||||||||||||||||||
| Consolidated net revenues | $ | 6,779 | $ | 7,953 | $ | 8,468 | (15 | %) | (20 | %) | $ | 23,805 | $ | 16,596 | 43 | % | ||||||||||||||||
| Worldwide employees | 62,864 | 61,958 | 60,800 | 1 | % | 3 | % | |||||||||||||||||||||||||
| Total assets | $ | 841,398 | $ | 809,456 | $ | 769,503 | 4 | % | 9 | % | ||||||||||||||||||||||
| Firmwide Deposits | 61,202 | 61,368 | 62,415 | -- | (2 | %) | ||||||||||||||||||||||||||
| Consolidated assets under management or supervision (billions): | ||||||||||||||||||||||||||||||||
| Asset Management | 273 | 251 | 250 | 9 | % | 9 | % | |||||||||||||||||||||||||
| Global Wealth Management | 449 | 403 | 363 | 11 | % | 24 | % | |||||||||||||||||||||||||
| Total | 722 | 654 | 613 | 10 | % | 18 | % | |||||||||||||||||||||||||
| Common equity | 47,279 | 41,415 | 36,752 | 14 | % | 29 | % | |||||||||||||||||||||||||
| Preferred equity | 9,597 | 9,597 | 9,597 | -- | -- | |||||||||||||||||||||||||||
| Morgan Stanley shareholders' equity | 56,876 | 51,012 | 46,349 | 11 | % | 23 | % | |||||||||||||||||||||||||
| Junior subordinated debt issued to capital trusts | 4,822 | 10,508 | 10,701 | (54 | %) | (55 | %) | |||||||||||||||||||||||||
Less: Goodwill and intangible assets (2) | (7,091 | ) | (7,148 | ) | (7,902 | ) | 1 | % | 10 | % | ||||||||||||||||||||||
| Tangible Morgan Stanley shareholders' equity | $ | 54,607 | $ | 54,372 | $ | 49,148 | -- | 11 | % | |||||||||||||||||||||||
| Tangible common equity | $ | 40,188 | $ | 34,267 | $ | 28,850 | 17 | % | 39 | % | ||||||||||||||||||||||
| Leverage Ratio | 15.4 | x | 14.9 | x | 15.7 | x | ||||||||||||||||||||||||||
Aggregate trading and non-trading Value-at-Risk (pre-tax) (3) | $ | 189 | $ | 164 | $ | 168 | ||||||||||||||||||||||||||
| Average common shares outstanding (000's) | ||||||||||||||||||||||||||||||||
| Basic | 1,377,230 | 1,317,686 | 1,294,298 | 5 | % | 6 | % | |||||||||||||||||||||||||
| Diluted | 1,443,101 | 1,748,209 | 1,300,070 | (17 | %) | 11 | % | |||||||||||||||||||||||||
| Period end common shares outstanding (000's) | 1,512,990 | 1,397,007 | 1,358,901 | 8 | % | 11 | % | |||||||||||||||||||||||||
| Return on average common equity | ||||||||||||||||||||||||||||||||
| from continuing operations | 0.8 | % | 12.1 | % | 7.8 | % | ||||||||||||||||||||||||||
| Return on average common equity | * | 17.4 | % | 5.8 | % | |||||||||||||||||||||||||||
Book value per common share (4) | $ | 31.25 | $ | 29.65 | $ | 27.05 | 5 | % | 16 | % | ||||||||||||||||||||||
| Tangible book value per common share | $ | 26.56 | $ | 24.53 | $ | 21.23 | 8 | % | 25 | % | ||||||||||||||||||||||
| Notes: | - | All data presented in millions except ratios, book values and number of employees. |
| - | Results include MSSB effective from May 31, 2009. | |
| - | The number of worldwide employees for all periods has been recast to exclude employees of the retail asset management business, including Van Kampen. | |
| - | Goodwill and intangible assets exclude non-controlling interests and reflect the Firm's share of MSSB's goodwill and intangible assets. | |
| - | Tangible common equity is a non-GAAP measure that the Firm considers to be a useful measure that the Firm and investors use to assess capital adequacy. Tangible common equity equals common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction. | |
| - | Leverage ratio is a non-GAAP measure that the Firm considers to be a useful measure that the Firm and investors use to assess capital adequacy. Leverage ratio equals total assets divided by tangible Morgan Stanley shareholders' equity. | |
| - | Book value per common share equals common equity divided by period end common shares outstanding. | |
| - | Tangible book value per common share is a non-GAAP measure that the Firm considers to be a useful measure that the Firm and investors use to assess capital adequacy. Tangible book value per common share equals tangible common equity divided by period end common shares outstanding. | |
| - | Tangible MS shareholders' equity is a non-GAAP measure that the Firm considers to be a useful measure that the Firm and investors use to assess capital adequacy. | |
| - | Refer to page 12 for the components of average diluted common shares outstanding. | |
| - | Refer to End Notes on pages 14-15 and Legal Notice on page 16. |
3
| MORGAN STANLEY | ||||||||||||||||||||||||||||||||||||
| Quarterly Consolidated Financial Information and Statistical Data | ||||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||||
| Quarter Ended (Billions) | ||||||||||||||||||||||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Mar 31, 2010 | ||||||||||||||||||||||||||||||||||
Average tier 1 capital (1) | Average common equity (1) | Return on average common equity | Average tier 1 capital (1) | Average common equity (1) | Return on average common equity | Average tier 1 capital (1) | Average common equity (1) | Return on average common equity | ||||||||||||||||||||||||||||
| Institutional Securities | $ | 26.2 | $ | 17.2 | * | $ | 26.3 | $ | 17.5 | 30% | $ | 24.9 | $ | 17.3 | 39% | |||||||||||||||||||||
| Global Wealth Management Group | 2.5 | 6.6 | 8% | 3.0 | 6.8 | 6% | 3.0 | 6.9 | 5% | |||||||||||||||||||||||||||
| Asset Management | 2.4 | 1.9 | 13% | 2.0 | 1.7 | * | 2.2 | 2.1 | 2% | |||||||||||||||||||||||||||
| Parent capital | 22.6 | 18.4 | 20.2 | 13.6 | 18.4 | 11.3 | ||||||||||||||||||||||||||||||
| Total - continuing operations | 53.7 | 44.1 | 1% | 51.5 | 39.6 | 12% | 48.5 | 37.6 | 17% | |||||||||||||||||||||||||||
| Discontinued operations | 0.1 | 0.1 | 0.2 | 0.4 | 0.2 | 0.5 | ||||||||||||||||||||||||||||||
| Firm | $ | 53.8 | $ | 44.2 | * | $ | 51.7 | $ | 40.0 | 17% | $ | 48.7 | $ | 38.1 | 16% | |||||||||||||||||||||
| Nine Months Ended (Billions) | ||||||||||||||||||||||||||||||||||||
| Sept 30, 2010 | ||||||||||||||||||||||||||||||||||||
Average tier 1 capital (1) | Average common equity (1) | Return on average common equity | ||||||||||||||||||||||||||||||||||
| Institutional Securities | $ | 25.8 | $ | 17.3 | 23% | |||||||||||||||||||||||||||||||
| Global Wealth Management Group | 2.8 | 6.8 | 6% | |||||||||||||||||||||||||||||||||
| Asset Management | 2.2 | 1.9 | 1% | |||||||||||||||||||||||||||||||||
| Parent capital | 20.2 | 14.4 | ||||||||||||||||||||||||||||||||||
| Total - continuing operations | 51.0 | 40.4 | 10% | |||||||||||||||||||||||||||||||||
| Discontinued operations | 0.2 | 0.3 | ||||||||||||||||||||||||||||||||||
| Firm | $ | 51.2 | $ | 40.7 | 10% | |||||||||||||||||||||||||||||||
| Notes: | - | Excluding the effect of the discrete tax benefits in the quarters ended June 30, 2010 and March 31, 2010, the return on average common equity for Institutional Securities would have been 22% and 30%, respectively. |
| - | Beginning with the quarter ended June 30, 2010, the Firm's capital estimate is based on the Required Capital framework, an internal capital adequacy measure. The quarter ended March 31, 2010 has been recast to conform to the current framework. Quarterly data for 2009 has not been recast. | |
| - | Refer to End Notes on pages 14-15 and Legal Notice on page 16. |
4
| MORGAN STANLEY | ||||||||||||||||||||||||||||||||
| Quarterly Institutional Securities Income Statement Information | ||||||||||||||||||||||||||||||||
| (unaudited, dollars in millions) | ||||||||||||||||||||||||||||||||
| Quarter Ended | Percentage Change From: | Nine Months Ended | Percentage | |||||||||||||||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Sept 30, 2009 | June 30, 2010 | Sept 30, 2009 | Sept 30, 2010 | Sept 30, 2009 | Change | |||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||
| Investment banking | $ | 1,008 | $ | 885 | $ | 1,038 | 14 | % | (3 | %) | $ | 2,780 | $ | 2,975 | (7 | %) | ||||||||||||||||
| Principal transactions: | ||||||||||||||||||||||||||||||||
| Trading | 1,088 | 3,116 | 3,076 | (65 | %) | (65 | %) | 7,624 | 5,752 | 33 | % | |||||||||||||||||||||
| Investments | 387 | (68 | ) | 41 | * | * | 493 | (933 | ) | * | ||||||||||||||||||||||
| Commissions | 504 | 616 | 533 | (18 | %) | (5 | %) | 1,701 | 1,609 | 6 | % | |||||||||||||||||||||
| Asset management, distribution and admin. fees | 15 | 39 | 29 | (62 | %) | (48 | %) | 80 | 74 | 8 | % | |||||||||||||||||||||
| Other | 69 | 43 | 76 | 60 | % | (9 | %) | 253 | 572 | (56 | %) | |||||||||||||||||||||
| Total non-interest revenues | 3,071 | 4,631 | 4,793 | (34 | %) | (36 | %) | 12,931 | 10,049 | 29 | % | |||||||||||||||||||||
| Interest income | 1,546 | 1,354 | 1,525 | 14 | % | 1 | % | 4,293 | 4,910 | (13 | %) | |||||||||||||||||||||
| Interest expense | 1,723 | 1,480 | 1,300 | 16 | % | 33 | % | 4,486 | 5,339 | (16 | %) | |||||||||||||||||||||
| Net interest | (177 | ) | (126 | ) | 225 | (40 | %) | * | (193 | ) | (429 | ) | 55 | % | ||||||||||||||||||
| Net revenues | 2,894 | 4,505 | 5,018 | (36 | %) | (42 | %) | 12,738 | 9,620 | 32 | % | |||||||||||||||||||||
Compensation and benefits | 1,491 | 1,636 | 2,582 | (9 | %) | (42 | %) | 5,296 | 5,727 | (8 | %) | |||||||||||||||||||||
| Non-compensation expenses | 1,163 | 1,282 | 1,097 | (9 | %) | 6 | % | 3,548 | 3,275 | 8 | % | |||||||||||||||||||||
| Total non-interest expenses | 2,654 | 2,918 | 3,679 | (9 | %) | (28 | %) | 8,844 | 9,002 | (2 | %) | |||||||||||||||||||||
| Income / (loss) from continuing operations before taxes | 240 | 1,587 | 1,339 | (85 | %) | (82 | %) | 3,894 | 618 | * | ||||||||||||||||||||||
| Income tax provision / (benefit) from continuing operations | (131 | ) | 216 | 426 | * | * | 416 | (340 | ) | * | ||||||||||||||||||||||
| Income / (loss) from continuing operations | 371 | 1,371 | 913 | (73 | %) | (59 | %) | 3,478 | 958 | * | ||||||||||||||||||||||
| Gain / (loss) from discontinued operations after tax | (201 | ) | (23 | ) | (41 | ) | * | * | (1,161 | ) | 253 | * | ||||||||||||||||||||
| Net income / (loss) | 170 | 1,348 | 872 | (87 | %) | (81 | %) | 2,317 | 1,211 | 91 | % | |||||||||||||||||||||
| Net income / (loss) applicable to non-controlling interests | 273 | (9 | ) | 15 | * | * | 268 | 5 | * | |||||||||||||||||||||||
| Net income / (loss) applicable to Morgan Stanley | $ | (103 | ) | $ | 1,357 | $ | 857 | * | * | $ | 2,049 | $ | 1,206 | 70 | % | |||||||||||||||||
| Amounts applicable to Morgan Stanley: | ||||||||||||||||||||||||||||||||
| Income / (loss) from continuing operations | 98 | 1,380 | 898 | (93 | %) | (89 | %) | 3,210 | 969 | * | ||||||||||||||||||||||
| Gain / (loss) from discontinued operations after tax | (201 | ) | (23 | ) | (41 | ) | * | * | (1,161 | ) | 237 | * | ||||||||||||||||||||
| Net income / (loss) applicable to Morgan Stanley | $ | (103 | ) | $ | 1,357 | $ | 857 | * | * | $ | 2,049 | $ | 1,206 | 70 | % | |||||||||||||||||
| Return on average common equity | ||||||||||||||||||||||||||||||||
| from continuing operations | * | 30 | % | N/ | A | 23 | % | N/ | A | |||||||||||||||||||||||
| Pre-tax profit margin | 8 | % | 35 | % | 27 | % | 31 | % | 6 | % | ||||||||||||||||||||||
| Compensation and benefits as a % of net revenues | 52 | % | 36 | % | 52 | % | 42 | % | 60 | % | ||||||||||||||||||||||
| Notes: | - | Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance. Percentages represent income from continuing operations before income taxes as a percentage of net revenues. |
| - | For the quarter ended September 30, 2010, discontinued operations included a loss of $229 million due to a write-down and related costs associated with the planned disposition of Revel. | |
| - | Beginning with the quarter ended June 30, 2010, the Firm's estimation of segment capital is based on the Required Capital framework, an internal capital adequacy measure. Segment capital for the quarter ended March 31, 2010 has been recast to conform to this framework. Quarterly segment capital for 2009, however, has not been recast under this framework. As a result, the business segment's return on average common equity from continuing operations for the quarter and nine months ended September 30, 2009 is not available. | |
| - | Refer to Legal Notice on page 16. |
5
| MORGAN STANLEY | ||||||||||||||||||||||||||||||||
| Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||||||||||||
| Institutional Securities | ||||||||||||||||||||||||||||||||
| (unaudited, dollars in millions) | ||||||||||||||||||||||||||||||||
| Quarter Ended | Percentage Change From: | Nine Months Ended | Percentage | |||||||||||||||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Sept 30, 2009 | June 30, 2010 | Sept 30, 2009 | Sept 30, 2010 | Sept 30, 2009 | Change | |||||||||||||||||||||||||
| Investment Banking | ||||||||||||||||||||||||||||||||
| Advisory revenue | $ | 371 | $ | 288 | $ | 279 | 29 | % | 33 | % | $ | 986 | $ | 958 | 3 | % | ||||||||||||||||
| Underwriting revenue | ||||||||||||||||||||||||||||||||
| Equity | 260 | 269 | 457 | (3 | %) | (43 | %) | 793 | 1,068 | (26 | %) | |||||||||||||||||||||
| Fixed income | 377 | 328 | 302 | 15 | % | 25 | % | 1,001 | 949 | 5 | % | |||||||||||||||||||||
| Total underwriting revenue | $ | 637 | $ | 597 | $ | 759 | 7 | % | (16 | %) | $ | 1,794 | $ | 2,017 | (11 | %) | ||||||||||||||||
| Total investment banking revenue | $ | 1,008 | $ | 885 | $ | 1,038 | 14 | % | (3 | %) | $ | 2,780 | $ | 2,975 | (7 | %) | ||||||||||||||||
| Sales & Trading | ||||||||||||||||||||||||||||||||
| Equity | $ | 925 | $ | 1,415 | $ | 1,186 | (35 | %) | (22 | %) | $ | 3,759 | $ | 2,916 | 29 | % | ||||||||||||||||
| Fixed income | 846 | 2,332 | 2,009 | (64 | %) | (58 | %) | 5,896 | 4,190 | 41 | % | |||||||||||||||||||||
| Other | (341 | ) | (102 | ) | 668 | * | * | (443 | ) | (100 | ) | * | ||||||||||||||||||||
| Total sales & trading net revenue | $ | 1,430 | $ | 3,645 | $ | 3,863 | (61 | %) | (63 | %) | $ | 9,212 | $ | 7,006 | 31 | % | ||||||||||||||||
Average Daily 95% / One-Day Value-at-Risk ("VaR") (1) | ||||||||||||||||||||||||||||||||
| Primary Market Risk Category ($ millions, pre-tax) | ||||||||||||||||||||||||||||||||
| Interest rate and credit spread | $ | 137 | $ | 132 | $ | 124 | ||||||||||||||||||||||||||
| Equity price | $ | 28 | $ | 29 | $ | 19 | ||||||||||||||||||||||||||
| Foreign exchange rate | $ | 18 | $ | 26 | $ | 23 | ||||||||||||||||||||||||||
| Commodity price | $ | 32 | $ | 29 | $ | 25 | ||||||||||||||||||||||||||
| Trading VaR | $ | 142 | $ | 139 | $ | 137 | ||||||||||||||||||||||||||
| Note: | Refer to End Notes on pages 14-15 and Legal Notice on page 16. |
6
| MORGAN STANLEY | ||||||||||||||||||||
| Quarterly Financial Information and Statistical Data | ||||||||||||||||||||
| Institutional Securities - Corporate Lending | ||||||||||||||||||||
| (unaudited, dollars in billions) | ||||||||||||||||||||
| Quarter Ended | Percentage Change From: | |||||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Sept 30, 2009 | June 30, 2010 | Sept 30, 2009 | ||||||||||||||||
| Corporate funded loans | ||||||||||||||||||||
| Investment grade | $ | 4.6 | $ | 5.1 | $ | 6.7 | (10 | %) | (31 | %) | ||||||||||
| Non-investment grade | 6.8 | 6.8 | 10.5 | -- | (35 | %) | ||||||||||||||
| Total corporate funded loans | $ | 11.4 | $ | 11.9 | $ | 17.2 | (4 | %) | (34 | %) | ||||||||||
| Corporate lending commitments | ||||||||||||||||||||
| Investment grade | $ | 47.7 | $ | 43.6 | $ | 36.9 | 9 | % | 29 | % | ||||||||||
| Non-investment grade | 12.5 | 11.6 | 8.0 | 8 | % | 56 | % | |||||||||||||
| Total corporate lending commitments | $ | 60.2 | $ | 55.2 | $ | 44.9 | 9 | % | 34 | % | ||||||||||
| Corporate funded loans plus lending commitments | ||||||||||||||||||||
| Investment grade | $ | 52.3 | $ | 48.7 | $ | 43.6 | 7 | % | 20 | % | ||||||||||
| Non-investment grade | $ | 19.3 | $ | 18.4 | $ | 18.5 | 5 | % | 4 | % | ||||||||||
| % investment grade | 73 | % | 73 | % | 70 | % | ||||||||||||||
| % non-investment grade | 27 | % | 27 | % | 30 | % | ||||||||||||||
| Total corporate funded loans and lending commitments | $ | 71.6 | $ | 67.1 | $ | 62.1 | 7 | % | 15 | % | ||||||||||
| Hedges | $ | 21.3 | $ | 20.1 | $ | 29.1 | 6 | % | (27 | %) | ||||||||||
| Notes: | - | In connection with certain of its Institutional Securities business activities, the Firm provides loans or lending commitments to select clients related to its leveraged acquisition finance or relationship lending activities. For a further discussion of this activity, see the Firm's Annual Report on Form 10-K for the year ended December 31, 2009. |
| - | For the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009, the leveraged acquisition finance portfolio of pipeline commitments and closed deals were $4.0 billion, $4.9 billion and $5.1 billion, respectively. | |
| - | The hedge balance reflects the notional amount utilized by the lending business. | |
| - | Refer to Legal Notice on page 16. |
7
| MORGAN STANLEY | ||||||||||||||||||||||||||||||||
| Quarterly Global Wealth Management Group Income Statement Information | ||||||||||||||||||||||||||||||||
| (unaudited, dollars in millions) | ||||||||||||||||||||||||||||||||
| Quarter Ended | Percentage Change From: | Nine Months Ended | Percentage | |||||||||||||||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Sept 30, 2009 | June 30, 2010 | Sept 30, 2009 | Sept 30, 2010 | Sept 30, 2009 | Change | |||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||
| Investment banking | $ | 211 | $ | 201 | $ | 168 | 5 | % | 26 | % | $ | 585 | $ | 394 | 48 | % | ||||||||||||||||
| Principal transactions: | ||||||||||||||||||||||||||||||||
| Trading | 386 | 249 | 346 | 55 | % | 12 | % | 977 | 895 | 9 | % | |||||||||||||||||||||
| Investments | 5 | 0 | 10 | * | (50 | %) | 11 | (3 | ) | * | ||||||||||||||||||||||
| Commissions | 564 | 692 | 709 | (18 | %) | (20 | %) | 1,938 | 1,383 | 40 | % | |||||||||||||||||||||
| Asset management, distribution and admin. fees | 1,529 | 1,572 | 1,574 | (3 | %) | (3 | %) | 4,729 | 2,901 | 63 | % | |||||||||||||||||||||
| Other | 107 | 72 | 54 | 49 | % | 98 | % | 262 | 166 | 58 | % | |||||||||||||||||||||
| Total non-interest revenues | 2,802 | 2,786 | 2,861 | 1 | % | (2 | %) | 8,502 | 5,736 | 48 | % | |||||||||||||||||||||
| Interest income | 311 | 387 | 327 | (20 | %) | (5 | %) | 1,037 | 818 | 27 | % | |||||||||||||||||||||
| Interest expense | 9 | 99 | 159 | (91 | %) | (94 | %) | 256 | 303 | (16 | %) | |||||||||||||||||||||
| Net interest | 302 | 288 | 168 | 5 | % | 80 | % | 781 | 515 | 52 | % | |||||||||||||||||||||
| Net revenues | 3,104 | 3,074 | 3,029 | 1 | % | 2 | % | 9,283 | 6,251 | 49 | % | |||||||||||||||||||||
Compensation and benefits | 1,910 | 1,966 | 1,943 | (3 | %) | (2 | %) | 5,848 | 4,149 | 41 | % | |||||||||||||||||||||
Non-compensation expenses | 913 | 901 | 806 | 1 | % | 13 | % | 2,669 | 1,774 | 50 | % | |||||||||||||||||||||
| Total non-interest expenses | 2,823 | 2,867 | 2,749 | (2 | %) | 3 | % | 8,517 | 5,923 | 44 | % | |||||||||||||||||||||
| Income / (loss) from continuing operations before taxes | 281 | 207 | 280 | 36 | % | -- | 766 | 328 | 134 | % | ||||||||||||||||||||||
| Income tax provision / (benefit) from continuing operations | 93 | 61 | 92 | 52 | % | 1 | % | 218 | 109 | 100 | % | |||||||||||||||||||||
| Income / (loss) from continuing operations | 188 | 146 | 188 | 29 | % | -- | 548 | 219 | 150 | % | ||||||||||||||||||||||
| Gain / (loss) from discontinued operations after tax | 0 | 0 | 0 | -- | -- | 0 | 0 | -- | ||||||||||||||||||||||||
| Net income / (loss) | 188 | 146 | 188 | 29 | % | -- | 548 | 219 | 150 | % | ||||||||||||||||||||||
| Net income / (loss) applicable to non-controlling interests | 44 | 36 | 83 | 22 | % | (47 | %) | 195 | (35 | ) | * | |||||||||||||||||||||
| Net income / (loss) applicable to Morgan Stanley | $ | 144 | $ | 110 | $ | 105 | 31 | % | 37 | % | $ | 353 | $ | 254 | 39 | % | ||||||||||||||||
| Amounts applicable to Morgan Stanley: | ||||||||||||||||||||||||||||||||
| Income / (loss) from continuing operations | 144 | 110 | 105 | 31 | % | 37 | % | 353 | 254 | 39 | % | |||||||||||||||||||||
| Gain / (loss) from discontinued operations after tax | 0 | 0 | 0 | -- | -- | 0 | 0 | -- | ||||||||||||||||||||||||
| Net income / (loss) applicable to Morgan Stanley | $ | 144 | $ | 110 | $ | 105 | 31 | % | 37 | % | $ | 353 | $ | 254 | 39 | % | ||||||||||||||||
| Return on average common equity | ||||||||||||||||||||||||||||||||
| from continuing operations | 8 | % | 6 | % | N/ | A | 6 | % | N/ | A | ||||||||||||||||||||||
| Pre-tax profit margin | 9 | % | 7 | % | 9 | % | 8 | % | 5 | % | ||||||||||||||||||||||
| Compensation and benefits as a % of net revenues | 62 | % | 64 | % | 64 | % | 63 | % | 66 | % | ||||||||||||||||||||||
| Notes: | - | Results include MSSB effective from May 31, 2009. |
| - | The tax provision / (benefit) for all periods includes the Firm's interest in MSSB. | |
| - | Net income / (loss) applicable to non-controlling interests reflects the 49% allocation of MSSB's pre-tax results to Citigroup. | |
| - | Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance. Percentages represent income from continuing operations before income taxes as a percentage of net revenues. | |
| - | Beginning with the quarter ended June 30, 2010, the Firm's estimation of segment capital is based on the Required Capital framework, an internal capital adequacy measure. Segment capital for the quarter ended March 31, 2010 has been recast to conform to this framework. Quarterly segment capital for 2009, however, has not been recast under this framework. As a result, the business segment's return on average common equity from continuing operations for the quarter and nine months ended September 30, 2009 is not available. | |
| - | Refer to Legal Notice on page 16. |
8
| MORGAN STANLEY | |||||||||||||||||||||||
| Quarterly Financial Information and Statistical Data | |||||||||||||||||||||||
| Global Wealth Management Group | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Quarter Ended | Percentage Change From: | ||||||||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Sept 30, 2009 | June 30, 2010 | Sept 30, 2009 | |||||||||||||||||||
| Global representatives | 18,119 | 18,087 | 18,160 | -- | -- | ||||||||||||||||||
| Annualized revenue per global | |||||||||||||||||||||||
| representative (000's) | $ | 686 | $ | 679 | $ | 662 | 1 | % | 4 | % | |||||||||||||
| Assets by client segment (billions) | |||||||||||||||||||||||
| $10m or more | 485 | 440 | 438 | 10 | % | 11 | % | ||||||||||||||||
| $1m - $10m | 678 | 627 | 620 | 8 | % | 9 | % | ||||||||||||||||
| Subtotal - > $1m | 1,163 | 1,067 | 1,058 | 9 | % | 10 | % | ||||||||||||||||
| $100k - $1m | 397 | 389 | 420 | 2 | % | (5 | %) | ||||||||||||||||
| < $100k | 43 | 44 | 54 | (2 | %) | (20 | %) | ||||||||||||||||
| Total client assets (billions) | $ | 1,603 | $ | 1,500 | $ | 1,532 | 7 | % | 5 | % | |||||||||||||
| % of assets by client segment > $1m | 73 | % | 71 | % | 69 | % | |||||||||||||||||
| Fee-based client account assets (billions) | $ | 437 | $ | 396 | $ | 365 | 10 | % | 20 | % | |||||||||||||
| Fee-based assets as a % of client assets | 27 | % | 26 | % | 24 | % | |||||||||||||||||
| Bank deposit program (millions) | $ | 108,701 | $ | 109,518 | $ | 110,420 | (1 | %) | (2 | %) | |||||||||||||
| Client assets per global | |||||||||||||||||||||||
| representative (millions) | $ | 88 | $ | 83 | $ | 84 | 6 | % | 5 | % | |||||||||||||
| Global retail net new assets (billions) | |||||||||||||||||||||||
| Domestic | $ | 2.4 | $ | (7.9 | ) | $ | (11.9 | ) | * | * | |||||||||||||
| International | $ | 2.6 | $ | 2.4 | $ | 0.0 | 8 | % | * | ||||||||||||||
Total retail net new assets (1) | $ | 5.0 | $ | (5.5 | ) | $ | (11.9 | ) | * | * | |||||||||||||
Global retail locations (1) | 867 | 881 | 930 | (2 | %) | (7 | %) | ||||||||||||||||
| Notes: | - | Results include MSSB effective from May 31, 2009. |
| - | Annualized revenue per global representative is defined as annualized revenue divided by average global representative headcount. | |
| - | Fee-based client account assets represents the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets. | |
| - | For each of the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009, approximately $52 billion of the assets in the bank deposit program are attributed to Morgan Stanley. | |
| - | Client assets per global representative represents total client assets divided by period end global representative headcount. | |
| - | Refer to End Notes on pages 14-15 and Legal Notice on page 16. |
9
| MORGAN STANLEY | ||||||||||||||||||||||||||||||||
| Quarterly Asset Management Income Statement Information | ||||||||||||||||||||||||||||||||
| (unaudited, dollars in millions) | ||||||||||||||||||||||||||||||||
| Quarter Ended | Percentage Change From: | Nine Months Ended | Percentage | |||||||||||||||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Sept 30, 2009 | June 30, 2010 | Sept 30, 2009 | Sept 30, 2010 | Sept 30, 2009 | Change | |||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||
| Investment banking | $ | 2 | $ | 7 | $ | 2 | (71 | %) | -- | $ | 9 | $ | 8 | 13 | % | |||||||||||||||||
| Principal transactions: | ||||||||||||||||||||||||||||||||
| Trading | (34 | ) | (10 | ) | (22 | ) | * | (55 | %) | (45 | ) | (109 | ) | 59 | % | |||||||||||||||||
Investments (1) | 427 | 16 | 44 | * | * | 632 | (244 | ) | * | |||||||||||||||||||||||
| Commissions | 0 | 0 | 0 | -- | -- | 0 | 0 | -- | ||||||||||||||||||||||||
| Asset management, distribution and admin. fees | 415 | 383 | 429 | 8 | % | (3 | %) | 1,212 | 1,194 | 2 | % | |||||||||||||||||||||
| Other | 12 | 36 | 10 | (67 | %) | 20 | % | 118 | 38 | * | ||||||||||||||||||||||
| Total non-interest revenues | 822 | 432 | 463 | 90 | % | 78 | % | 1,926 | 887 | 117 | % | |||||||||||||||||||||
| Interest income | 9 | 3 | 6 | 200 | % | 50 | % | 18 | 16 | 13 | % | |||||||||||||||||||||
| Interest expense | 29 | 25 | 22 | 16 | % | 32 | % | 79 | 76 | 4 | % | |||||||||||||||||||||
| Net interest | (20 | ) | (22 | ) | (16 | ) | 9 | % | (25 | %) | (61 | ) | (60 | ) | (2 | %) | ||||||||||||||||
| Net revenues | 802 | 410 | 447 | 96 | % | 79 | % | 1,865 | 827 | 126 | % | |||||||||||||||||||||
Compensation and benefits | 285 | 282 | 370 | 1 | % | (23 | %) | 842 | 794 | 6 | % | |||||||||||||||||||||
Non-compensation expenses | 238 | 214 | 201 | 11 | % | 18 | % | 656 | 649 | 1 | % | |||||||||||||||||||||
| Total non-interest expenses | 523 | 496 | 571 | 5 | % | (8 | %) | 1,498 | 1,443 | 4 | % | |||||||||||||||||||||
| Income / (loss) from continuing operations before taxes | 279 | (86 | ) | (124 | ) | * | * | 367 | (616 | ) | * | |||||||||||||||||||||
| Income tax provision / (benefit) from continuing operations | 15 | (39 | ) | 4 | * | * | 19 | (149 | ) | * | ||||||||||||||||||||||
| Income / (loss) from continuing operations | 264 | (47 | ) | (128 | ) | * | * | 348 | (467 | ) | * | |||||||||||||||||||||
| Gain / (loss) from discontinued operations after tax | 19 | 541 | (140 | ) | (96 | %) | * | 654 | (328 | ) | * | |||||||||||||||||||||
| Net income / (loss) | 283 | 494 | (268 | ) | (43 | %) | * | 1,002 | (795 | ) | * | |||||||||||||||||||||
Net income / (loss) applicable to non-controlling interests (1) | 193 | (3 | ) | (62 | ) | * | * | 306 | (63 | ) | * | |||||||||||||||||||||
| Net income / (loss) applicable to Morgan Stanley | $ | 90 | $ | 497 | $ | (206 | ) | (82 | %) | * | $ | 696 | $ | (732 | ) | * | ||||||||||||||||
| Amounts applicable to Morgan Stanley: | ||||||||||||||||||||||||||||||||
| Income / (loss) from continuing operations | 71 | (44 | ) | (66 | ) | * | * | 42 | (404 | ) | * | |||||||||||||||||||||
| Gain / (loss) from discontinued operations after tax | 19 | 541 | (140 | ) | (96 | %) | * | 654 | (328 | ) | * | |||||||||||||||||||||
| Net income / (loss) applicable to Morgan Stanley | $ | 90 | $ | 497 | $ | (206 | ) | (82 | %) | * | $ | 696 | $ | (732 | ) | * | ||||||||||||||||
| Return on average common equity | ||||||||||||||||||||||||||||||||
| from continuing operations | 13 | % | * | N/A | 1 | % | N/A | |||||||||||||||||||||||||
| Pre-tax profit margin | 35 | % | * | * | 20 | % | * | |||||||||||||||||||||||||
| Compensation and benefits as a % of net revenues | 36 | % | 69 | % | 83 | % | 45 | % | 96 | % | ||||||||||||||||||||||
| Notes: | - | Gain / (loss) from discontinued operations primarily includes the results of substantially all of the retail asset management business, including Van Kampen. The quarter ended June 30, 2010 also included an after-tax gain of approximately $514 million related to the sale of this business. |
| - | Pre-tax profit margin is a non-GAAP financial measure that the Firm considers to be a useful measure that the Firm and investors use to assess operating performance. Percentages represent income from continuing operations before income taxes as a percentage of net revenues. | |
| - | Beginning with the quarter ended June 30, 2010, the Firm's estimation of segment capital is based on the Required Capital framework, an internal capital adequacy measure. Segment capital for the quarter ended March 31, 2010 has been recast to conform to this framework. Quarterly segment capital for 2009, however, has not been recast under this framework. As a result, the business segment's return on average common equity from continuing operations for the quarter and nine months ended September 30, 2009 is not available. | |
| - | Refer to End Notes on pages 14-15 and Legal Notice on page 16. |
10
| MORGAN STANLEY | ||||||||||||||||||||||||||||||||
| Quarterly Financial Information and Statistical Data | ||||||||||||||||||||||||||||||||
| Asset Management | ||||||||||||||||||||||||||||||||
| (unaudited, dollars in billions) | ||||||||||||||||||||||||||||||||
| Quarter Ended | Percentage Change From: | Nine Months Ended | Percentage | |||||||||||||||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Sept 30, 2009 | June 30, 2010 | Sept 30, 2009 | Sept 30, 2010 | Sept 30, 2009 | Change | |||||||||||||||||||||||||
| Assets under management or supervision | ||||||||||||||||||||||||||||||||
| Net flows by asset class | ||||||||||||||||||||||||||||||||
| Core Asset Management | ||||||||||||||||||||||||||||||||
| Equity | $ | 0.9 | $ | (0.8 | ) | $ | (1.4 | ) | * | * | $ | (1.2 | ) | $ | (7.0 | ) | 83 | % | ||||||||||||||
| Fixed income - Long Term | (0.3 | ) | (0.1 | ) | 1.0 | (200 | %) | * | 1.2 | (7.9 | ) | * | ||||||||||||||||||||
| Money Market | 1.5 | 0.1 | (6.6 | ) | * | * | (6.8 | ) | (28.9 | ) | 76 | % | ||||||||||||||||||||
| Alternatives | (0.5 | ) | (0.7 | ) | (0.2 | ) | 29 | % | (150 | %) | (0.7 | ) | (4.8 | ) | 85 | % | ||||||||||||||||
| Total Core Asset Management | 1.6 | (1.5 | ) | (7.2 | ) | * | * | (7.5 | ) | (48.6 | ) | 85 | % | |||||||||||||||||||
| Merchant Banking | ||||||||||||||||||||||||||||||||
| Private Equity | 0.1 | 0.1 | (0.1 | ) | -- | * | 0.5 | (0.4 | ) | * | ||||||||||||||||||||||
| Infrastructure | 0.0 | 0.0 | 0.0 | -- | -- | 0.0 | 0.0 | -- | ||||||||||||||||||||||||
| Real Estate | 1.2 | 0.2 | (0.1 | ) | * | * | 1.9 | (2.4 | ) | * | ||||||||||||||||||||||
| Total Merchant Banking | 1.3 | 0.3 | (0.2 | ) | * | * | 2.4 | (2.8 | ) | * | ||||||||||||||||||||||
| Total net flows | $ | 2.9 | $ | (1.2 | ) | $ | (7.4 | ) | * | * | $ | (5.1 | ) | $ | (51.4 | ) | 90 | % | ||||||||||||||
| Assets under management or supervision by asset class | ||||||||||||||||||||||||||||||||
| Core Asset Management | ||||||||||||||||||||||||||||||||
| Equity | $ | 86 | $ | 73 | $ | 77 | 18 | % | 12 | % | ||||||||||||||||||||||
| Fixed income - Long Term | 61 | 56 | 53 | 9 | % | 15 | % | |||||||||||||||||||||||||
| Money Market | 52 | 50 | 52 | 4 | % | -- | ||||||||||||||||||||||||||
| Alternatives | 43 | 41 | 40 | 5 | % | 8 | % | |||||||||||||||||||||||||
| Total Core Asset Management | 242 | 220 | 222 | 10 | % | 9 | % | |||||||||||||||||||||||||
| Merchant Banking | ||||||||||||||||||||||||||||||||
| Private Equity | 5 | 5 | 4 | -- | 25 | % | ||||||||||||||||||||||||||
| Infrastructure | 4 | 4 | 4 | -- | -- | |||||||||||||||||||||||||||
| Real Estate | 15 | 15 | 14 | -- | 7 | % | ||||||||||||||||||||||||||
| Total Merchant Banking | 24 | 24 | 22 | -- | 9 | % | ||||||||||||||||||||||||||
| Total Assets Under Management or Supervision | $ | 266 | $ | 244 | $ | 244 | 9 | % | 9 | % | ||||||||||||||||||||||
| Share of minority stake assets | 7 | 7 | 6 | -- | 17 | % | ||||||||||||||||||||||||||
| Total | $ | 273 | $ | 251 | $ | 250 | 9 | % | 9 | % | ||||||||||||||||||||||
| Notes: | - | Data excludes substantially all of the retail asset management business, including Van Kampen. |
| - | Alternatives include a range of alternative investment products such as hedge funds, funds of hedge funds and funds of private equity funds. | |
| - | Net Flows by region [inflow / (outflow)] for the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009 are: | |
| U.S.: $(0.5) billion, $(0.7) billion and $(7.5) billion | ||
| Non-U.S.: $3.4 billion, $(0.5) billion and $0.1 billion | ||
| - | Assets under management or supervision by region for the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009 are: | |
| U.S.: $174 billion, $164 billion and $166 billion | ||
| Non-U.S.: $92 billion, $80 billion and $78 billion | ||
| - | The share of minority stake assets represents Asset Management's proportional share of assets managed by entities in which it owns a minority stake. | |
| - | Refer to Legal Notice on page 16. |
11
This page represents an addendum to the 3Q 2010 Financial Supplement, Appendix I
| MORGAN STANLEY |
| Earnings Per Share |
| (unaudited, in millions, except for per share data) |
| Quarter Ended | Nine Months Ended | ||||||||||||||||
| Sept 30, 2010 | June 30, 2010 | Mar 31, 2010 | Sept 30, 2010 | ||||||||||||||
| Basic Earnings Per Share | |||||||||||||||||
| Income from continuing operations applicable to Morgan Stanley | $ | 313 | $ | 1,435 | $ | 1,845 | $ | 3,593 | |||||||||
| Gain / (loss) from discontinued operations applicable to Morgan Stanley after tax | (182 | ) | 525 | (69 | ) | 274 | |||||||||||
| Net income / (loss) applicable to Morgan Stanley | $ | 131 | $ | 1,960 | $ | 1,776 | $ | 3,867 | |||||||||
| Less: Preferred Dividends (Series A) | (11 | ) | (11 | ) | (11 | ) | (33 | ) | |||||||||
| Less: Preferred Dividends (Series B – Mitsubishi) | (196 | ) | (196 | ) | (196 | ) | (588 | ) | |||||||||
| Less: Preferred Dividends (Series C – Mitsubishi) | (13 | ) | (13 | ) | (13 | ) | (39 | ) | |||||||||
| Income applicable to Morgan Stanley, prior to allocation of income to CIC Equity Units and Participating Restricted Stock Units | (89 | ) | 1,740 | 1,556 | 3,207 | ||||||||||||
| Less: Allocation of income / (loss) to CIC Equity Units: | |||||||||||||||||
| From continuing operations | 0 | (67 | ) | (99 | ) | (118 | ) | ||||||||||
| From discontinued operations | 0 | (41 | ) | 6 | (18 | ) | |||||||||||
| Total allocation of income to CIC Equity Units | 0 | (108 | ) | (93 | ) | (136 | ) | ||||||||||
| Less: Allocation of income / (loss) to Participating Restricted Stock Units: | |||||||||||||||||
| From continuing operations | (3 | ) | (38 | ) | (54 | ) | (92 | ) | |||||||||
| From discontinued operations | 1 | (16 | ) | 2 | (8 | ) | |||||||||||
| Total allocation of income to Participating Restricted Stock Units | (2 | ) | (54 | ) | (52 | ) | (100 | ) | |||||||||
| Earnings / (loss) applicable to Morgan Stanley common shareholders | $ | (91 | ) | $ | 1,578 | $ | 1,411 | $ | 2,971 | ||||||||
| Weighted average common shares outstanding | 1,377 | 1,318 | 1,315 | 1,337 | |||||||||||||
| Earnings per basic common share | |||||||||||||||||
| Income / (loss) from continuing operations applicable to Morgan Stanley common shareholders | $ | 0.07 | $ | 0.84 | $ | 1.12 | $ | 2.04 | |||||||||
| Gain / (loss) on discontinued operations applicable to Morgan Stanley common shareholders | $ | (0.14 | ) | $ | 0.36 | $ | (0.05 | ) | $ | 0.18 | |||||||
| Earnings / (loss) per basic common share | $ | (0.07 | ) | $ | 1.20 | $ | 1.07 | $ | 2.22 | ||||||||
| Diluted Earnings Per Share | |||||||||||||||||
| Earnings / (loss) applicable to Morgan Stanley common shareholders | $ | (91 | ) | $ | 1,578 | $ | 1,411 | $ | 2,971 | ||||||||
| Income impact of assumed conversions: | |||||||||||||||||
| Preferred stock dividends (Series B - Mitsubishi) | 0 | 196 | 196 | 588 | |||||||||||||
Assumed Conversion of CIC (1) | |||||||||||||||||
| From continuing operations | (16 | ) | 91 | 0 | 75 | ||||||||||||
| From discontinued operations | 0 | 41 | 0 | 41 | |||||||||||||
| Income / (loss) available to common shareholders plus assumed conversions | $ | (107 | ) | $ | 1,906 | $ | 1,607 | $ | 3,675 | ||||||||
| Weighted average common shares outstanding | 1,377 | 1,318 | 1,315 | 1,337 | |||||||||||||
| Effect of dilutive securities: | |||||||||||||||||
| Stock options, Restricted Stock Units | 7 | 4 | 1 | 4 | |||||||||||||
| Series B Preferred Stock | 0 | 310 | 310 | 310 | |||||||||||||
| CIC Equity Units | 59 | 116 | 0 | 59 | |||||||||||||
| Weighted average common shares outstanding and common stock equivalents | 1,443 | 1,748 | 1,626 | 1,710 | |||||||||||||
| Earnings per diluted common share | |||||||||||||||||
| Income / (loss) from continuing operations applicable to Morgan Stanley common shareholders | $ | 0.05 | $ | 0.80 | $ | 1.03 | $ | 1.98 | |||||||||
| Gain / (loss) on discontinued operations applicable to Morgan Stanley common shareholders | $ | (0.12 | ) | $ | 0.29 | $ | (0.04 | ) | $ | 0.17 | |||||||
| Earnings / (loss) per diluted common share | $ | (0.07 | ) | $ | 1.09 | $ | 0.99 | $ | 2.15 | ||||||||
| Notes: | - | The Firm calculates earnings per share using the two-class method as described under the accounting guidance for earnings per share. For further discussion of the Firm's earnings per share calculations, see Note 2 to the consolidated financial statements in the Firm's Annual Report on Form 10-K for the year ended December 31, 2009. |
| - | Refer to End Notes on pages 14-15 and Legal Notice on page 16. |
12
This page represents an addendum to the 3Q 2010 Financial Supplement, Appendix II
| MORGAN STANLEY | |||||||||
| Earnings Per Share Calculation Under Two-Class Method | |||||||||
| Three Months Ended Sept 30, 2010 | |||||||||
| (unaudited, in millions, except for per share data) | |||||||||
| Allocation of net income from continuing operations | |||||||||
| (A) | (B) | (C) | (D) | (E) | (F) | (G) | (H) | ||
| (D)+(E)+(F) | (G)/(A) | ||||||||
Weighted Average # of Shares | % Allocation (3) | Net income from continuing operations applicable to Morgan Stanley (4) | Distributed Earnings (5) | Undistributed Earnings Not in Excess of Reference Dividend (6) | Undistributed Earnings in Excess of Reference Dividend (6) | Total Earnings Allocated | Basic EPS (10) | ||
| Basic Common Shares | 1,377 | 93% | $68 | $22 | $0 | $90 | (7) | $0.07 | |
Participating Restricted Stock Units (1) | 41 | 3% | $2 | $1 | $0 | $3 | (8) | N/A | |
CIC Equity Units (2) | 59 | 4% | $0 | $0 | $0 | $0 | (9) | N/A | |
| 1,477 | 100% | $93 | $70 | $23 | $0 | $93 | |||
| Allocation of gain from discontinued operations | |||||||||
| (A) | (B) | (C) | (D) | (E) | (F) | (G) | (H) | ||
| (D)+(E)+(F) | (G)/(A) | ||||||||
Weighted Average # of Shares | % Allocation (3) | Gain from Discontinued Operations Applicable to Common Shareholders, after Tax (4) | Distributed Earnings (5) | Undistributed Earnings Not in Excess of Reference Dividend (6) | Undistributed Earnings in Excess of Reference Dividend (6) | Total Earnings Allocated | Basic EPS (10) | ||
| Basic Common Shares | 1,377 | 93% | $0 | ($181) | $0 | ($181) | (7) | ($0.14) | |
Participating Restricted Stock Units (1) | 41 | 3% | $0 | ($1) | $0 | ($1) | (8) | N/A | |
CIC Equity Units (2) | 59 | 4% | $0 | $0 | $0 | $0 | (9) | N/A | |
| 1,477 | 100% | $(182) | $0 | ($182) | $0 | ($182) | |||
| Allocation of net income available to common shareholders | |||||||||
| (A) | (B) | (C) | (D) | (E) | (F) | (G) | (H) | ||
| (D)+(E)+(F) | (G)/(A) | ||||||||
Weighted Average # of Shares | % Allocation (3) | Net income applicable to Morgan Stanley (4) | Distributed Earnings (5) | Undistributed Earnings Not in Excess of Reference Dividend (6) | Undistributed Earnings in Excess of Reference Dividend (6) | Total Earnings Allocated | Basic EPS (10) | ||
| Basic Common Shares | 1,377 | 93% | $68 | ($159) | $0 | ($91) | (7) | ($0.07) | |
Participating Restricted Stock Units (1) | 41 | 3% | $2 | $0 | $0 | $2 | (8) | N/A | |
CIC Equity Units (2) | 59 | 4% | $0 | $0 | $0 | $0 | (9) | N/A | |
| 1,477 | 100% | ($89) | $70 | ($159) | $0 | ($89) | |||
| Note: | Refer to End Notes on pages 14-15 and Legal Notice on page 16. |
13
| MORGAN STANLEY |
| End Notes |
Page 3: | ||
| (1) | Reflects the regional view of the Firm's consolidated net revenues, on a managed basis, based on the following methodology: Institutional Securities: investment banking - client location, equity capital markets - client location, debt capital markets - revenue recording location, sales & trading - trading desk location. Global Wealth Management: financial advisor location. Asset Management: client location except for the merchant banking business which is based on asset location. All periods exclude net revenues related to sub stantially all of the retail asset management business, including Van Kampen. | |
| (2) | Goodwill and intangible balances net of allowable mortgage servicing rights deduction for quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009 of $125 million, $125 million and $130 million, respectively. | |
| (3) | Represents average daily 95% / one-day value-at-risk ("VaR"). Includes non-trading VaR for the quarters ended Sept 30, 2010, June 30, 2010 and Sept 30, 2009 of $103 million, $67 million and $70 million, respectively. Counterparty portfolio VaR which reflects adjustments, net of hedges, related to counterparty credit risk and other market risks is included in trading VaR for all periods. See page 6 for total trading VaR. For further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology, see Part II, Item 7A "Quantitative and Qualitative Disclosures about Market Risk" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2009. | |
| (4) | For the quarter ended September 30, 2010, book value per share included a benefit of $1.40 due to the mandatory conversion of $5.6 billion of equity units into 116 million shares of common stock in August 2010. | |
Page 4: | ||
| (1) | The Firm’s capital management approach includes an estimation of an amount of capital the Firm and its businesses require over a wide range of market environments. Beginning with the quarter ended June 30, 2010, the Firm's capital estimation is based on the Required Capital framework, an internal capital adequacy measure. Tier 1 capital and common equity are designated to segments based on the capital usage calculated by the Required Capital framework which considers a combination of a base amount of capital and a n amount of economic capital reserved to absorb extreme stress events. The Firm defines parent capital as capital not specifically designated to a particular business segment. The Firm generally holds parent capital for prospective regulatory requirements, organic growth, acquisitions and other capital needs. The Firm's Required Capital is met by regulatory Tier 1 capital. The framework will evolve over time in response to changes in the business and regulatory environment and to incorporate enhancements in modeling techniques. | |
Page 6: | ||
| (1) | Represents the loss amount that one would not expect to exceed, on average, more than five times every one hundred trading days in the Firm's trading positions if the portfolio were held constant for a one-day period. Trading VaR for all periods includes counterparty portfolio VaR which reflects adjustments, net of hedges, related to counterparty credit risk and other market risks. For further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology, see Part II, Item 7A "Quantitative and Qualitative Disclosures about Market Risk" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2009. | |
Page 9: | ||
| (1) | Beginning in 2010, the retail net new assets and retail locations metrics have been expanded to include the non-US businesses. The quarter ended September 30, 2010 includes $2.6 billion of net new money inflows and 29 retail locations, respectively related to non-US businesses. The quarter ended June 30, 2010 includes $2.4 billion of net new money inflows and 29 retail locations, respectively related to non-US businesses. Certain legacy Smith Barney middle market activities, which are primarily institutional client focused, are required under the MSSB joint venture agreement to be transitioned from Citigroup to Morgan Stanley. As this transition progresses, commencing with the quarter ended June 30, 2010, these legacy activities have been excluded from the retail net new assets metrics. The quarter ended September 30, 2009 has been recast to exclude $2.3 billion of these legacy net new money inflows. |
14
| MORGAN STANLEY |
| End Notes |
Page 10: | ||
| (1) | The quarter and nine months ended Sept 30, 2010 include investment gains / (losses) for certain funds included in the Firm's consolidated financial statements. The limited partnership interests in these gains were reported in net income / (loss) applicable to non-controlling interests. | |
Page 12: | ||
| (1) | On August 17, 2010, approximately 116 million shares were issued to CIC in settlement of the CIC Equity Units. The shares issued in settlement of the CIC Equity Units are included in basic and diluted shares outstanding on a weighted average basis effective with the issuance. Prior to the quarter ended June 30, 2010, Morgan Stanley included the CIC Equity Units in diluted EPS using the more dilutive of the two-class method or treasury stock method. Beginning in the quarter ended June 30, 2010 and through the issuance date, Morgan Stanley included the CIC Equity Units in diluted EPS on a weighted average basis using the more dilutive of the two-class method or the if-converted method. | |
Page 13: | ||
| (1) | Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of EPS pursuant to the two-class method. Restricted Stock Units ("RSUs") that pay dividend equivalents subject to vesting are not deemed participating securities and are included in diluted shares outstanding (if dilutive) under the treasury stock method. | |
| (2) | For further information on the CIC Equity Units, see Note 13 to the consolidated financial statements in the Firm's Annual Report on Form 10-K for the year ended December 31, 2009. | |
| (3) | The percentage of weighted basic common shares, participating RSUs and weighted CIC Equity Units to the total weighted average of basic common shares, participating RSUs and CIC Equity Units. | |
| (4) | Represents net income from continuing operations, gain / (loss) from discontinued operations (after tax), and net income applicable to Morgan Stanley, respectively, for the quarter ended Sept 30, 2010 prior to allocations to participating RSUs and CIC Equity Units. | |
| (5) | Distributed earnings represent the dividends declared on common shares and participating RSUs, respectively, for the quarter ended Sept 30, 2010. The amount of dividends declared is based upon the number of common shares outstanding as of the dividend record date. During the quarter ended Sept 30, 2010, a $0.05 dividend was declared on common shares outstanding and participating RSUs. Under the terms of the securities purchase agreement for the sale of Equity Units to CIC, if a quarterly dividend is declared above $0.27 (the "reference dividend"), the CIC Equity Units will participate via an increase in the number of shares the Firm will be required to deliver upon settlement of the contract. No cash dividends will be paid to the CIC Equity Units prior to settlement of the contract. Therefore, no distributed earnings will be allocated to the CIC Equity Units in the calculation of earnings per share under the two-class method. | |
| (6) | The two-class method assumes all of the earnings for the reporting period are distributed and allocates to the participating RSUs and CIC Equity Units what they would be entitled to based on the contractual rights and obligations of the participating security. With respect to the CIC Equity Units, the amount allocated is representative of the value of the increase in the number of shares that the Firm would be required to deliver upon settlement of the contract. No actual cash dividends will be paid to the CIC Equity Units. Assumi ng the reference dividend of $0.27 has been paid to the basic common shareholders, CIC Equity Units would receive a pro-rata allocation of the remaining undistributed earnings. | |
| (7) | Total income applicable to common shareholders to be allocated to the common shares in calculating basic and diluted EPS for common shares (see Appendix I). | |
| (8) | Total income applicable to common shareholders to be allocated to the participating RSUs reflected as a deduction to the numerator in determining basic and diluted EPS for common shares (see Appendix I). | |
| (9) | Total income applicable to common shareholders to be allocated to the CIC Equity Units reflected as a deduction to the numerator in determining basic EPS for common shares (see Appendix I). | |
| (10) | Basic and diluted EPS data are required to be presented only for classes of common stock, as described under the accounting guidance for earnings per share. |
15
| 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 Firm's third quarter earnings press release issued October 20, 2010. |
16