Page 1: |
| (a) | Provision for credit losses represents the provision for credit losses on loans held for investment and unfunded lending commitments. |
| (b) | Net income applicable to Morgan Stanley represents net income, less net income applicable to nonredeemable noncontrolling interests. |
| (c) | Earnings applicable to Morgan Stanley common shareholders represents net income applicable to Morgan Stanley, less preferred dividends. |
| | |
Page 2: |
| (a) | The return on average common equity represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity. |
| (b) | Book value per common share represents common equity divided by period end common shares outstanding. |
| (c) | Tangible book value per common share represents tangible common equity divided by period end common shares outstanding. |
| (d) | Pre-tax profit margin percentages represent income before provision for income taxes as percentages of net revenues. |
| (e) | The Firm expense efficiency ratio represents total non‐interest expenses as a percentage of net revenues. |
| | |
Page 3: |
| (a) | Liquidity Resources, which are primarily held within the Parent and its major operating subsidiaries, are comprised of high quality liquid assets (HQLA) and cash deposits with banks ("Liquidity Resources"). The total amount of Liquidity Resources is actively managed by us considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements. Average Liquidity Resources represents the average daily balance for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021. |
| (b) | The Firm's goodwill and intangible balances utilized in the calculation of tangible common equity are net of certain mortgage servicing rights deduction. |
| (c) | U.S. Bank refers to the Firm's U.S. Bank operating subsidiaries Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association, and excludes balances between Bank subsidiaries, as well as deposits from the Parent and affiliates. |
| (d) | Firmwide regional revenues reflect the Firm's consolidated net revenues on a managed basis. Further discussion regarding the geographic methodology for net revenues is disclosed in Note 23 to the consolidated financial statements included in the Firm's Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K). |
| | |
Page 4: |
| (a) | The Firm's attribution of average common equity to the business segments is based on the Required Capital framework, an internal capital adequacy measure. This framework is a risk-based and leverage-based capital measure, which is compared with the Firm's regulatory capital to ensure that the Firm maintains an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time. The Required Capital Framework is based on the Firm's regulatory capital requirements. The Firm defines the difference between its total average common equity and the sum of the average common equity amounts allocated to its business segments as Parent common equity. The amount of capital allocated to the business segments is generally set at the beginning of the year, and will remain fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). The Firm continues to evaluate its required capital framework with respect to the impact of evolving regulatory requirements, as appropriate. For further discussion of the framework, refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s 2021 Form 10‐K. |
| (b) | The Firm's risk‐based capital ratios are computed under each of the (i) standardized approaches for calculating credit risk and market risk risk‐weighted assets (RWAs) (the “Standardized Approach”) and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”). For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s 2021 Form 10‐K. |
| (c) | Supplementary leverage ratio represents Tier 1 capital divided by the total supplementary leverage exposure. |
| | |
Page 5: |
| (a) | Institutional Securities Equity and Fixed income net revenues include trading, net interest income (interest income less interest expense), asset management, commissions and fees, investments and other revenues which are directly attributable to those businesses. |
| (b) | Pre-tax profit margin percentages represent income before provision for income taxes as percentages of net revenues. |
| (c) | VaR represents the unrealized loss in portfolio value that one would not expect to exceed, on average, more than five times every one hundred trading days in the Firm's trading positions if the portfolio were held constant for a one-day period. Further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology, is disclosed in "Quantitative and Qualitative Disclosures about Risk" included in the Firm's 2021 Form 10-K. |
| | |
Page 6: |
| (a) | Transactional revenues for the Wealth Management segment includes investment banking, trading, and commissions and fee revenues. |
| (b) | Net interest income represents interest income less interest expense. |
| (c) | Other revenues for the Wealth Management segment includes investments and other revenues. |
| (d) | Pre-tax profit margin percentages represent income before provision for income taxes as percentages of net revenues. |
Page 7: |
| (a) | Net new assets represent client inflows, including dividends and interest, and asset acquisitions, less client outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions. |
| (b) | Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities. |
| (c) | Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits. |
| (d) | Annualized weighted average cost of deposits reflects deposit balances and costs as of September 30, 2022, June 30, 2022 and September 30, 2021. |
| (e) | Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned. |
| (f) | Fee‐based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets. |
| (g) | Fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets in the 2021 Form 10-K. |
| (h) | Self-directed assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets. |
| (i) | Daily average revenue trades (DARTs) represent the total self-directed trades in a period divided by the number of trading days during that period. |
| (j) | Self-directed households represent the total number of households that include at least one account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels are included in each of the respective channel counts. |
| (k) | The workplace channel assets includes equity compensation solutions for companies, their executives and employees. Stock plan unvested assets represent the market value of public company securities at the end of the period. |
| (l) | Stock plan participants represent total accounts with vested and/or unvested stock plan assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan. |
| | |
Page 8: |
| (a) | Asset management and related fees represents management and administrative fees, distribution fees, and performance-based fees, not in the form of carried interest. Asset management and related fees represents Asset management as reported on the Firm’s consolidated income statement. |
| (b) | Performance-based income and other includes performance-based fees in the form of carried interest, gains and losses from investments, gains and losses from hedges on seed capital and certain employee deferred compensation plans, net interest, and other revenues. Performance-based income and other represents investments, investment banking, trading, net interest and other revenues as reported on the Firm’s consolidated income statement. |
| (c) | Pre-tax profit margin percentages represent income before provision for income taxes as percentages of net revenues. |
| | |
Page 9: |
| (a) | Investment Management Alternatives and Solutions asset class includes products in Fund of Funds, Real Estate, Private Equity and Credit strategies, Multi‐Asset portfolios, as well as Custom Separate Account portfolios. |
| (b) | Investment Management net flows include new commitments, investments or reinvestments, net of client redemptions, returns of capital post-fund investment period and dividends not reinvested and excludes the impact of the transition of funds from their commitment period to the invested capital period. |
| (c) | Overlay Services represents investment strategies that use passive exposure instruments to obtain, offset, or substitute specific portfolio exposures beyond those provided by the underlying holdings of the fund. |
| (d) | Total assets under management or supervision excludes shares of minority stake assets which represent the Investment Management business segment’s proportional share of assets managed by third-party asset managers in which we hold investments accounted for under the equity method. |
| | |
Page 10 and 11: |
| (a) | Corporate loans include relationship and event-driven loans and typically consist of revolving lines of credit, term loans and bridge loans. |
| (b) | Secured lending facilities include loans provided to clients, which are primarily secured by loans, which are, in turn, collateralized by various assets including residential real estate, commercial real estate, corporate and financial assets. |
| (c) | Securities-based lending and other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market. |
| (d) | Institutional Securities Lending Commitments principally include Corporate lending activity. |
