Exhibit 99.1
Morgan Stanley Reports $1.2 Billion In Second Quarter Earnings;
Return on Equity of 18.4%
NEW YORK--(BUSINESS WIRE)--June 22, 2004--Morgan Stanley
(NYSE:MWD) today reported net income of $1,223 million for the quarter
ended May 31, 2004 -- an increase of 104 percent from the second
quarter of 2003 and virtually unchanged from the first quarter of
2004. Diluted earnings per share were $1.10 compared with $0.55 a year
ago and $1.11 in the first quarter. The annualized return on average
common equity was 18.4 percent.
The quarter's results included a $109 million pre-tax asset
impairment charge related to the Company's aircraft financing
business, which reduced net income by $65 million, diluted earnings
per share by $0.06 and the annualized return on average common equity
by 1.0 percent. Second quarter 2003 results included a $287 million
pre-tax aircraft impairment charge that reduced net income by $172
million and diluted earnings per share by $0.16.
Net revenues (total revenues less interest expense and the
provision for loan losses) of $6.7 billion were 32 percent higher than
last year's second quarter and 7 percent ahead of this year's first
quarter. Non-interest expenses of $4.8 billion were 17 percent higher
than a year ago and 12 percent higher than last quarter.
Business Highlights
-- Morgan Stanley generated earnings of $1.2 billion and a return
on equity of 18 percent.
-- Institutional Securities continued to produce impressive
client-driven growth, market share gains and strong trading
performance. Fixed Income achieved record quarterly revenues.
-- Firmwide assets under management were $500 billion.(1) Our
investment management fund performance improved in the Lipper
rankings.
-- In early June, Morgan Stanley completed the acquisition of
Barra, Inc., which expands the firm's capacity to provide
global risk management services to clients.
Philip J. Purcell, chairman and CEO, said, "We had another
excellent quarter, bringing first half earnings to $2.4 billion. All
of our businesses performed well, particularly Institutional
Securities, which achieved near record revenues and continued gains in
market share. We believe the breadth of our revenue streams and our
client focused strategy put us in a very strong position for the long
term."
For the first six months of 2004, net income was $2,449 million, a
63 percent increase over $1,504 million a year ago. Diluted earnings
per share were $2.21, up 61 percent from a year ago. Net revenues rose
23 percent from a year ago to $12.9 billion and non-interest expenses
increased 12 percent to $9.2 billion. The annualized return on average
common equity was 18.8 percent.
INSTITUTIONAL SECURITIES
Institutional Securities posted income before taxes (2) of $1,134
million, up 184 percent over the second quarter of 2003. Net revenues
increased 47 percent to $3.9 billion, driven by record revenues in the
Company's fixed income business and strong results in both its
equities and investment banking businesses.
-- Fixed income sales and trading net revenues were $1.8 billion,
up 43 percent from the second quarter of 2003. Record revenues
in interest rate & currency products, driven by foreign
exchange and interest rate derivatives, reflected favorable
trading conditions and increased customer flow activity.
Commodities had its second best quarter ever, as tight supply
and rising demand in energy markets drove prices and
volatilities higher. Credit products revenues were down
slightly, reflecting lower revenues from high yield and
securitized products, partially offset by an increase in
investment grade products.
-- Equity sales and trading net revenues increased 29 percent
from last year to $1.1 billion, reflecting higher revenues in
the Company's derivative products and cash businesses.
Derivative products benefited from increased customer trading
activity, while the increase in the cash business was driven
by higher global market volumes. Higher revenues in the
Company's Prime Brokerage business also contributed to the
increase in equity sales and trading revenues.
-- Advisory revenues were $324 million, a 130 percent increase
from last year's second quarter, reflecting a near doubling of
the Company's market share in completed M&A transactions.
Industry-wide completed M&A activity rose 3 percent over the
same period.(3)
-- Underwriting revenues were $567 million, an increase of 77
percent from last year's second quarter. Equity underwriting
revenues more than doubled, reflecting the Company's
participation in significantly higher levels of industry-wide
equity underwriting activity. Fixed income underwriting
revenues rose 51 percent, as the Company's global market share
expanded from 7 percent a year ago to 8 percent in the current
quarter.(3)
-- For the calendar year-to-date, the Company ranked first in
global equity and equity-linked issuances with a 14 percent
market share, first in global IPOs with a 16 percent market
share, third in announced global M&A with a 27 percent market
share and third in global debt issuances with a 7 percent
market share.(4)
-- Principal transaction investment revenues were $136 million,
compared with $44 million in last year's second quarter. The
quarter's revenues were primarily associated with the
Company's real estate and principal investment activities, as
well as a gain on the sale of its interest in TradeWeb.
-- Non-interest expenses rose 23 percent to $2.8 billion, on
increased compensation related to higher net revenues and
increased brokerage & clearing and professional services costs
driven by higher levels of business activity. These increases
were partially offset by a lower aircraft impairment charge in
the current quarter as compared with last year's second
quarter.
INDIVIDUAL INVESTOR GROUP
The Individual Investor Group reported pre-tax income of $132
million, more than double the $62 million reported in the second
quarter of 2003.
-- Total net revenues rose 21 percent from a year ago to $1.2
billion. Asset management, distribution and administration
fees increased 38 percent on higher asset levels, and
commissions rose 18 percent on increased individual investor
activity in equity products.
-- Non-interest expenses were up 15 percent to $1.1 billion,
driven by higher compensation expenses and sub- advisory fees
related to higher net revenues, and higher costs associated
with legal and regulatory matters.
-- Total client assets were $579 billion, a 9 percent increase
from last year's second quarter but 3 percent below this
year's first quarter. Client assets in fee- based accounts
rose 28 percent to $145 billion over the past twelve months
and increased as a percentage of total client assets to 25
percent from 21 percent over the same period.
-- At quarter-end, the number of global financial advisors was
10,722 -- a decrease of 110 over the quarter and 922 over the
past year.
INVESTMENT MANAGEMENT
Investment Management pre-tax income rose 71 percent from last
year's second quarter to $209 million. Net revenues rose 24 percent to
$690 million, reflecting an increase in average assets under
management and a more favorable asset mix due to improved equity
markets, as well as higher investment gains. Non-interest expenses
increased 10 percent to $481 million, primarily reflecting higher
compensation levels and higher sub-advisory fees.
-- Assets under management within Investment Management were $384
billion, up $4 billion over the first quarter of this year and
$48 billion above the second quarter of last year. The
increase over the quarter was due to positive net flows,
partially offset by market depreciation. The increase over the
past year resulted from both market appreciation and positive
net flows.
-- Retail assets of $195 billion declined $5 billion from the end
of the first quarter but were $10 billion higher than a year
ago. Institutional assets were $189 billion, an increase of $9
billion for the quarter and $38 billion from last year. The
launch of the Morgan Stanley Institutional Liquidity funds and
the addition of significant mandates contributed to the growth
of the institutional assets.
-- Among full-service brokerage firms, the Company had the
highest number of domestic funds (40) receiving one of
Morningstar's two highest ratings.(5) In addition, the percent
of the Company's fund assets performing in the top half of the
Lipper rankings was 68 percent over one year, 65 percent over
three years and 77 percent over five years.(6)
-- Private Equity contributed $60 million in investment gains
compared with $13 million in the second quarter of last year.
CREDIT SERVICES
Credit Services posted pre-tax income of $298 million compared
with $302 million in last year's second quarter. A lower provision for
loan losses, reflecting improved credit quality, was offset by lower
net interest income and a decline in merchant and cardmember fees.
-- Managed credit card loans of $46.8 billion at quarter end were
8 percent lower than a year ago, mainly due to a decline in
balance transfer volume and an increase in payment rates.
While managed net interest income decreased $69 million, the
interest rate spread widened 28 basis points to 9.06 percent
from a year ago, as a lower cost of funds more than offset a
lower yield.
-- Managed merchant and cardmember fees were $467 million, down
11 percent from a year ago, due to lower late and overlimit
fees, and higher cardmember rewards. The decline in fees
reflected sharply lower credit card delinquencies.
-- Transaction volume increased 2 percent to $24.4 billion,
reflecting increased sales partially offset by lower balance
transfer activity.
-- The managed credit card net charge-off rate for the second
quarter was 6.48 percent, 2 basis points lower than a year ago
but 17 basis points higher than the first quarter. The
decrease in the charge-off rate from a year ago was due to
lower net charge-off dollars, partially offset by a $4.2
billion decline in average credit card managed loans. The
increase in the rate from the first quarter also reflected
lower average managed credit card loans and a seasonal
increase in U.S. personal bankruptcy filings.
-- The managed over-30-day delinquency rate was 4.88 percent, a
decrease of 133 basis points from the second quarter of 2003
and 92 basis points from the first quarter. The over-90-day
delinquency rate was 2.40 percent, 61 basis points lower than
a year ago and 46 basis points below last quarter.
-- During the quarter, Discover enrolled 294,000 new merchants, a
new quarterly record.
As of May 31, 2004, the Company had repurchased approximately 3
million shares of its common stock since the end of fiscal 2003. The
Company also announced that its Board of Directors declared a $0.25
quarterly dividend per common share. The dividend is payable on July
30, 2004, to common shareholders of record on July 9, 2004.
Total capital at May 31, 2004 was $100.1 billion, including $29.9
billion of common shareholders' equity and junior subordinated debt
issued to capital trusts. Book value per common share was $24.59,
based on 1.1 billion shares outstanding.
Morgan Stanley is a global financial services firm and a market
leader in securities, investment management and credit services. With
more than 600 offices in 27 countries, Morgan Stanley connects people,
ideas and capital to help clients achieve their financial aspirations.
Access this press release on-line @www.morganstanley.com
(See Attached Schedules)
This release may contain forward-looking statements. These
statements reflect management's beliefs and expectations, and are
subject to risks and uncertainties that may cause actual results to
differ materially. For a discussion of the risks and uncertainties
that may affect the Company's future results, please see
"Forward-Looking Statements" immediately preceding Part I, Item 1,
"Certain Factors Affecting Results of Operations" in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7 and "Competition" and "Regulation" in
Part I, Item 1 of the Company's 2003 Annual Report on Form 10-K and
"Management's Discussion and Analysis of Financial Conditions and
Results of Operations" in the Company's Quarterly Reports on Form 10-Q
for fiscal 2004.
(1) The $500 billion in assets under management is comprised of:
Investment Management, $384 billion; Individual Investor
Group, $103 billion; and Institutional Securities, $13
billion.
(2) Represents income before losses from unconsolidated investees
and taxes.
(3) Source: Thomson Financial -- for the periods: March 1, 2003 to
May 31, 2003 and March 1, 2004 to May 31, 2004.
(4) Source: Thomson Financial -- for the period January 1, 2004 to
May 31, 2004.
(5) Full service brokerage firms include: Merrill Lynch, Citigroup
and Prudential. As of May 31, 2004.
(6) For the one, three and five year periods ending May 31, 2004.
MORGAN STANLEY
Financial Summary
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Net revenues
Institutional Securities $ 3,948 $ 2,679 47%
Individual Investor Group 1,209 1,002 21%
Investment Management 690 558 24%
Credit Services 879 884 (1%)
Intersegment Eliminations (75) (78) 4%
------------ ------------
Consolidated net revenues $ 6,651 $ 5,045 32%
============ ============
Income before taxes (1)
Institutional Securities $ 1,134 $ 400 *
Individual Investor Group 132 62 113%
Investment Management 209 122 71%
Credit Services 298 302 (1%)
Intersegment Eliminations 29 29 --
------------ ------------
Consolidated income before taxes $ 1,802 $ 915 97%
============ ============
Basic earnings per common share $ 1.13 $ 0.56 102%
Diluted earnings per common share $ 1.10 $ 0.55 100%
Average common shares outstanding
Basic 1,082.2 1,077.4
Diluted 1,110.4 1,097.5
Period end common
shares outstanding 1,098.1 1,086.7
Return on common equity 18.4% 10.6%
- --------------------------
(1) Represents consolidated income before losses from
unconsolidated investees, taxes and dividends on
preferred securities subject to mandatory redemption.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Financial Summary
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Net revenues
Institutional Securities $ 3,948 $ 3,504 13%
Individual Investor Group 1,209 1,211 --
Investment Management 690 642 7%
Credit Services 879 958 (8%)
Intersegment Eliminations (75) (74) (1%)
------------ ------------
Consolidated net revenues $ 6,651 $ 6,241 7%
============ ============
Income before taxes (1)
Institutional Securities $ 1,134 $ 1,186 (4%)
Individual Investor Group 132 166 (20%)
Investment Management 209 170 23%
Credit Services 298 365 (18%)
Intersegment Eliminations 29 29 --
------------ ------------
Consolidated income before taxes $ 1,802 $ 1,916 (6%)
============ ============
Basic earnings per common share $ 1.13 $ 1.14 (1%)
Diluted earnings per common share $ 1.10 $ 1.11 (1%)
Average common shares outstanding
Basic 1,082.2 1,078.7
Diluted 1,110.4 1,106.0
Period end common
shares outstanding 1,098.1 1,097.7
Return on common equity 18.4% 19.2%
- --------------------------
(1) Represents consolidated income before losses from
unconsolidated investees, taxes and dividends on
preferred securities subject to mandatory redemption.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Financial Summary
(unaudited, dollars in millions)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Net revenues
Institutional Securities $ 7,452 $ 5,814 28%
Individual Investor Group 2,420 1,987 22%
Investment Management 1,332 1,083 23%
Credit Services 1,837 1,782 3%
Intersegment Eliminations (149) (147) (1%)
------------ ------------
Consolidated net revenues $ 12,892 $ 10,519 23%
============ ============
Income before taxes (1)
Institutional Securities $ 2,320 $ 1,342 73%
Individual Investor Group 298 123 142%
Investment Management 379 222 71%
Credit Services 663 592 12%
Intersegment Eliminations 58 62 (6%)
------------ ------------
Consolidated income before taxes $ 3,718 $ 2,341 59%
============ ============
Basic earnings per common share $ 2.27 $ 1.40 62%
Diluted earnings per common share $ 2.21 $ 1.37 61%
Average common shares outstanding
Basic 1,080.8 1,077.4
Diluted 1,108.3 1,097.8
Period end common
shares outstanding 1,098.1 1,086.7
Return on common equity 18.8% 13.4%
- --------------------------
(1) Represents consolidated income before losses from
unconsolidated investees, taxes and dividends on
preferred securities subject to mandatory redemption.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-1
- ----------------------------------------------------------------------
MORGAN STANLEY
Consolidated Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ 983 $ 536 83%
Principal transactions:
Trading 2,064 1,670 24%
Investments 191 59 *
Commissions 877 709 24%
Fees:
Asset management, distribution
and administration 1,113 881 26%
Merchant and cardmember 306 338 (9%)
Servicing 485 503 (4%)
Interest and dividends 3,663 3,449 6%
Other 120 113 6%
------------ ------------
Total revenues 9,802 8,258 19%
Interest expense 2,951 2,904 2%
Provision for consumer loan losses 200 309 (35%)
------------ ------------
Net revenues 6,651 5,045 32%
------------ ------------
Compensation and benefits 2,923 2,274 29%
Occupancy and equipment 206 195 6%
Brok., clearing and exchange fees 237 202 17%
Info processing and communications 318 315 1%
Marketing and business development 263 251 5%
Professional services 356 259 37%
Other 546 634 (14%)
------------ ------------
Total non-interest expenses 4,849 4,130 17%
------------ ------------
Income before losses from unconsolidated
investees, taxes and dividends on
preferred securities subject to
mandatory redemption 1,802 915 97%
Losses from unconsolidated investees 81 36 125%
Income tax expense 498 240 108%
Dividends on preferred securities
subject to mandatory redemption (1) - 40 *
------------ ------------
Net income $ 1,223 $ 599 104%
============ ============
Comp & benefits as a % of net rev. 44% 45%
- --------------------------
(1) At February 29, 2004, preferred securities subject to mandatory
redemption were reclassified to junior subordinated debt issued
to capital trusts (a component of long-term debt) pursuant to
the adoption of FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities". Dividends on junior subordinated
debt issued to capital trusts are included in interest expense
from February 29, 2004 forward.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Consolidated Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Investment banking $ 983 $ 829 19%
Principal transactions:
Trading 2,064 1,832 13%
Investments 191 29 *
Commissions 877 901 (3%)
Fees:
Asset management, distribution
and administration 1,113 1,072 4%
Merchant and cardmember 306 337 (9%)
Servicing 485 572 (15%)
Interest and dividends 3,663 3,782 (3%)
Other 120 123 (2%)
------------ ------------
Total revenues 9,802 9,477 3%
Interest expense 2,951 2,974 (1%)
Provision for consumer loan losses 200 262 (24%)
------------ ------------
Net revenues 6,651 6,241 7%
------------ ------------
Compensation and benefits 2,923 2,712 8%
Occupancy and equipment 206 200 3%
Brok., clearing and exchange fees 237 224 6%
Info processing and communications 318 320 (1%)
Marketing and business development 263 254 4%
Professional services 356 318 12%
Other 546 297 84%
------------ ------------
Total non-interest expenses 4,849 4,325 12%
------------ ------------
Income before losses from unconsolidated
investees, taxes and dividends on
preferred securities subject to
mandatory redemption 1,802 1,916 (6%)
Losses from unconsolidated investees 81 93 (13%)
Income tax expense 498 552 (10%)
Dividends on preferred securities
subject to mandatory redemption (1) - 45 *
------------ ------------
Net income $ 1,223 $ 1,226 --
============ ============
Comp & benefits as a % of net rev. 44% 44%
- --------------------------
(1) At February 29, 2004, preferred securities subject to mandatory
redemption were reclassified to junior subordinated debt issued
to capital trusts (a component of long-term debt) pursuant to
the adoption of FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities". Dividends on junior subordinated
debt issued to capital trusts are included in interest expense
from February 29, 2004 forward.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Consolidated Income Statement Information
(unaudited, dollars in millions)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ 1,812 $ 1,125 61%
Principal transactions:
Trading 3,896 3,382 15%
Investments 220 37 *
Commissions 1,778 1,382 29%
Fees:
Asset management, distribution
and administration 2,185 1,777 23%
Merchant and cardmember 643 702 (8%)
Servicing 1,057 1,070 (1%)
Interest and dividends 7,445 7,238 3%
Other 243 199 22%
------------ ------------
Total revenues 19,279 16,912 14%
Interest expense 5,925 5,748 3%
Provision for consumer loan losses 462 645 (28%)
------------ ------------
Net revenues 12,892 10,519 23%
------------ ------------
Compensation and benefits 5,635 4,823 17%
Occupancy and equipment 406 391 4%
Brok., clearing and exchange fees 461 393 17%
Info processing and communications 638 630 1%
Marketing and business development 517 514 1%
Professional services 674 484 39%
Other 843 943 (11%)
------------ ------------
Total non-interest expenses 9,174 8,178 12%
------------ ------------
Income before losses from unconsolidated
investees, taxes and dividends on
preferred securities subject to
mandatory redemption 3,718 2,341 59%
Losses from unconsolidated investees 174 70 149%
Income tax expense 1,050 705 49%
Dividends on preferred securities
subject to mandatory redemption (1) 45 62 (27%)
------------ ------------
Net income $ 2,449 $ 1,504 63%
============ ============
Comp & benefits as a % of net rev. 44% 46%
- --------------------------
(1) At February 29, 2004, preferred securities subject to mandatory
redemption were reclassified to junior subordinated debt issued
to capital trusts (a component of long-term debt) pursuant to
the adoption of FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities". Dividends on junior subordinated
debt issued to capital trusts are included in interest expense
from February 29, 2004 forward.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-2
- ----------------------------------------------------------------------
MORGAN STANLEY
Institutional Securities Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ 891 $ 461 93%
Principal transactions:
Trading 1,923 1,503 28%
Investments 136 44 *
Commissions 527 423 25%
Asset management, distribution
and administration fees 32 22 45%
Interest and dividends 3,151 2,831 11%
Other 59 76 (22%)
------------ ------------
Total revenues 6,719 5,360 25%
Interest expense 2,771 2,681 3%
------------ ------------
Net revenues 3,948 2,679 47%
------------ ------------
Total non-interest expenses 2,814 2,279 23%
------------ ------------
Income before losses from unconsolidated
investees and dividends on preferred
securities subject to mandatory
redemption 1,134 400 *
Losses from unconsolidated investees 81 36 125%
Dividends on preferred securities
subject to mandatory redemption (1) - 40 *
------------ ------------
Income before taxes $ 1,053 $ 324 *
============ ============
Pre-tax profit margin (2) 29% 13%
- --------------------------
(1) At February 29, 2004, preferred securities subject to mandatory
redemption were reclassified to junior subordinated debt issued
to capital trusts (a component of long-term debt) pursuant to
the adoption of FIN 46. Dividends on junior subordinated debt
issued to capital trusts are included in interest expense from
February 29, 2004 forward.
(2) Income before taxes, 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.
MORGAN STANLEY
Institutional Securities Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Investment banking $ 891 $ 739 21%
Principal transactions:
Trading 1,923 1,691 14%
Investments 136 16 *
Commissions 527 505 4%
Asset management, distribution
and administration fees 32 34 (6%)
Interest and dividends 3,151 3,225 (2%)
Other 59 77 (23%)
------------ ------------
Total revenues 6,719 6,287 7%
Interest expense 2,771 2,783 --
------------ ------------
Net revenues 3,948 3,504 13%
------------ ------------
Total non-interest expenses 2,814 2,318 21%
------------ ------------
Income before losses from unconsolidated
investees and dividends on preferred
securities subject to mandatory
redemption 1,134 1,186 (4%)
Losses from unconsolidated investees 81 93 (13%)
Dividends on preferred securities
subject to mandatory redemption (1) - 45 *
------------ ------------
Income before taxes $ 1,053 $ 1,048 --
============ ============
Pre-tax profit margin (2) 29% 33%
- --------------------------
(1) At February 29, 2004, preferred securities subject to mandatory
redemption were reclassified to junior subordinated debt issued
to capital trusts (a component of long-term debt) pursuant to
the adoption of FIN 46. Dividends on junior subordinated debt
issued to capital trusts are included in interest expense from
February 29, 2004 forward.
(2) Income before taxes, 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.
MORGAN STANLEY
Institutional Securities Income Statement Information
(unaudited, dollars in millions)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ 1,630 $ 962 69%
Principal transactions:
Trading 3,614 3,061 18%
Investments 152 34 *
Commissions 1,032 838 23%
Asset management, distribution
and administration fees 66 45 47%
Interest and dividends 6,376 6,025 6%
Other 136 138 (1%)
------------ ------------
Total revenues 13,006 11,103 17%
Interest expense 5,554 5,289 5%
------------ ------------
Net revenues 7,452 5,814 28%
------------ ------------
Total non-interest expenses 5,132 4,472 15%
------------ ------------
Income before losses from unconsolidated
investees and dividends on preferred
securities subject to mandatory
redemption 2,320 1,342 73%
Losses from unconsolidated investees 174 70 149%
Dividends on preferred securities
subject to mandatory redemption (1) 45 62 (27%)
------------ ------------
Income before taxes $ 2,101 $ 1,210 74%
============ ============
Pre-tax profit margin (2) 31% 22%
- --------------------------
(1) At February 29, 2004, preferred securities subject to mandatory
redemption were reclassified to junior subordinated debt issued
to capital trusts (a component of long-term debt) pursuant to
the adoption of FIN 46. Dividends on junior subordinated debt
issued to capital trusts are included in interest expense from
February 29, 2004 forward.
(2) Income before taxes, 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.
F-3
- ----------------------------------------------------------------------
MORGAN STANLEY
Individual Investor Group Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ 82 $ 66 24%
Principal transactions:
Trading 141 167 (16%)
Investments (4) 1 *
Commissions 367 310 18%
Asset management, distribution
and administration fees 511 370 38%
Interest and dividends 95 92 3%
Other 52 35 49%
------------ ------------
Total revenues 1,244 1,041 20%
Interest expense 35 39 (10%)
------------ ------------
Net revenues 1,209 1,002 21%
------------ ------------
Total non-interest expenses 1,077 940 15%
------------ ------------
Income before taxes $ 132 $ 62 113%
============ ============
Pre-tax profit margin (1) 11% 6%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Individual Investor Group Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Investment banking $ 82 $ 77 6%
Principal transactions:
Trading 141 141 --
Investments (4) 4 *
Commissions 367 417 (12%)
Asset management, distribution
and administration fees 511 472 8%
Interest and dividends 95 93 2%
Other 52 40 30%
------------ ------------
Total revenues 1,244 1,244 --
Interest expense 35 33 6%
------------ ------------
Net revenues 1,209 1,211 --
------------ ------------
Total non-interest expenses 1,077 1,045 3%
------------ ------------
Income before taxes $ 132 $ 166 (20%)
============ ============
Pre-tax profit margin (1) 11% 14%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Individual Investor Group Income Statement Information
(unaudited, dollars in millions)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ 159 $ 146 9%
Principal transactions:
Trading 282 321 (12%)
Investments - 7 *
Commissions 784 590 33%
Asset management, distribution
and administration fees 983 756 30%
Interest and dividends 188 181 4%
Other 92 63 46%
------------ ------------
Total revenues 2,488 2,064 21%
Interest expense 68 77 (12%)
------------ ------------
Net revenues 2,420 1,987 22%
------------ ------------
Total non-interest expenses 2,122 1,864 14%
------------ ------------
Income before taxes $ 298 $ 123 142%
============ ============
Pre-tax profit margin (1) 12% 6%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-4
- ----------------------------------------------------------------------
MORGAN STANLEY
Investment Management Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ 10 $ 9 11%
Principal transactions:
Investments 59 14 *
Commissions 8 3 *
Asset management, distribution
and administration fees 607 528 15%
Interest and dividends 1 - *
Other 6 8 (25%)
------------ ------------
Total revenues 691 562 23%
Interest expense 1 4 (75%)
------------ ------------
Net revenues 690 558 24%
------------ ------------
Total non-interest expenses 481 436 10%
------------ ------------
Income before taxes $ 209 $ 122 71%
============ ============
Pre-tax profit margin (1) 30% 22%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Investment Management Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Investment banking $ 10 $ 13 (23%)
Principal transactions:
Investments 59 9 *
Commissions 8 8 --
Asset management, distribution
and administration fees 607 603 1%
Interest and dividends 1 2 (50%)
Other 6 9 (33%)
------------ ------------
Total revenues 691 644 7%
Interest expense 1 2 (50%)
------------ ------------
Net revenues 690 642 7%
------------ ------------
Total non-interest expenses 481 472 2%
------------ ------------
Income before taxes $ 209 $ 170 23%
============ ============
Pre-tax profit margin (1) 30% 27%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Investment Management Income Statement Information
(unaudited, dollars in millions)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ 23 $ 17 35%
Principal transactions:
Investments 68 (4) *
Commissions 16 7 129%
Asset management, distribution
and administration fees 1,210 1,051 15%
Interest and dividends 3 2 50%
Other 15 15 --
------------ ------------
Total revenues 1,335 1,088 23%
Interest expense 3 5 (40%)
------------ ------------
Net revenues 1,332 1,083 23%
------------ ------------
Total non-interest expenses 953 861 11%
------------ ------------
Income before taxes $ 379 $ 222 71%
============ ============
Pre-tax profit margin (1) 29% 21%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-5
- ----------------------------------------------------------------------
MORGAN STANLEY
Credit Services Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Fees:
Merchant and cardmember $ 306 $ 338 (9%)
Servicing 485 503 (4%)
Other 16 6 *
------------ ------------
Total non-interest revenues 807 847 (5%)
Interest revenue 435 543 (20%)
Interest expense 163 197 (17%)
------------ ------------
Net interest income 272 346 (21%)
Provision for consumer loan losses 200 309 (35%)
------------ ------------
Net credit income 72 37 95%
------------ ------------
Net revenues 879 884 (1%)
------------ ------------
Total non-interest expenses 581 582 --
------------ ------------
Income before taxes $ 298 $ 302 (1%)
============ ============
Pre-tax profit margin (1) 34% 34%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Credit Services Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Fees:
Merchant and cardmember $ 306 $ 337 (9%)
Servicing 485 572 (15%)
Other 16 5 *
------------ ------------
Total non-interest revenues 807 914 (12%)
Interest revenue 435 480 (9%)
Interest expense 163 174 (6%)
------------ ------------
Net interest income 272 306 (11%)
Provision for consumer loan losses 200 262 (24%)
------------ ------------
Net credit income 72 44 64%
------------ ------------
Net revenues 879 958 (8%)
------------ ------------
Total non-interest expenses 581 593 (2%)
------------ ------------
Income before taxes $ 298 $ 365 (18%)
============ ============
Pre-tax profit margin (1) 34% 38%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Credit Services Income Statement Information
(unaudited, dollars in millions)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Fees:
Merchant and cardmember $ 643 $ 702 (8%)
Servicing 1,057 1,070 (1%)
Other 21 2 *
------------ ------------
Total non-interest revenues 1,721 1,774 (3%)
Interest revenue 915 1,089 (16%)
Interest expense 337 436 (23%)
------------ ------------
Net interest income 578 653 (11%)
Provision for consumer loan losses 462 645 (28%)
------------ ------------
Net credit income 116 8 *
------------ ------------
Net revenues 1,837 1,782 3%
------------ ------------
Total non-interest expenses 1,174 1,190 (1%)
------------ ------------
Income before taxes $ 663 $ 592 12%
============ ============
Pre-tax profit margin (1) 36% 33%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-6
- ----------------------------------------------------------------------
MORGAN STANLEY
Credit Services Income Statement Information
(unaudited, dollars in millions)
(Managed loan basis)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Fees:
Merchant and cardmember $ 467 $ 523 (11%)
Servicing - - --
Other 16 36 (56%)
------------ ------------
Total non-interest revenues 483 559 (14%)
Interest revenue 1,450 1,592 (9%)
Interest expense 337 410 (18%)
------------ ------------
Net interest income 1,113 1,182 (6%)
Provision for consumer loan losses 717 857 (16%)
------------ ------------
Net credit income 396 325 22%
------------ ------------
Net revenues 879 884 (1%)
------------ ------------
Total non-interest expenses 581 582 --
------------ ------------
Income before taxes $ 298 $ 302 (1%)
============ ============
Pre-tax profit margin (1) 34% 34%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Credit Services Income Statement Information
(unaudited, dollars in millions)
(Managed loan basis)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Fees:
Merchant and cardmember $ 467 $ 519 (10%)
Servicing - - --
Other 16 35 (54%)
------------ ------------
Total non-interest revenues 483 554 (13%)
Interest revenue 1,450 1,524 (5%)
Interest expense 337 350 (4%)
------------ ------------
Net interest income 1,113 1,174 (5%)
Provision for consumer loan losses 717 770 (7%)
------------ ------------
Net credit income 396 404 (2%)
------------ ------------
Net revenues 879 958 (8%)
------------ ------------
Total non-interest expenses 581 593 (2%)
------------ ------------
Income before taxes $ 298 $ 365 (18%)
============ ============
Pre-tax profit margin (1) 34% 38%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Credit Services Income Statement Information
(unaudited, dollars in millions)
(Managed loan basis)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Fees:
Merchant and cardmember $ 986 $ 1,071 (8%)
Servicing - - --
Other 51 89 (43%)
------------ ------------
Total non-interest revenues 1,037 1,160 (11%)
Interest revenue 2,974 3,172 (6%)
Interest expense 687 851 (19%)
------------ ------------
Net interest income 2,287 2,321 (1%)
Provision for consumer loan losses 1,487 1,699 (12%)
------------ ------------
Net credit income 800 622 29%
------------ ------------
Net revenues 1,837 1,782 3%
------------ ------------
Total non-interest expenses 1,174 1,190 (1%)
------------ ------------
Income before taxes $ 663 $ 592 12%
============ ============
Pre-tax profit margin (1) 36% 33%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-7
- ----------------------------------------------------------------------
MORGAN STANLEY
Intersegment Eliminations
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ - $ - --
Principal transactions:
Trading - - --
Investments - - --
Commissions (25) (27) 7%
Asset management, distribution
and administration fees (37) (39) 5%
Interest and dividends (19) (17) (12%)
Other (13) (12) (8%)
------------ ------------
Total revenues (94) (95) 1%
Interest expense (19) (17) (12%)
------------ ------------
Net revenues (75) (78) 4%
------------ ------------
Total non-interest expenses (104) (107) 3%
------------ ------------
Income before taxes $ 29 $ 29 --
============ ============
- --------------------------
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Intersegment Eliminations
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Investment banking $ - $ - --
Principal transactions:
Trading - - --
Investments - - --
Commissions (25) (29) 14%
Asset management, distribution
and administration fees (37) (37) --
Interest and dividends (19) (18) (6%)
Other (13) (8) (63%)
------------ ------------
Total revenues (94) (92) (2%)
Interest expense (19) (18) (6%)
------------ ------------
Net revenues (75) (74) (1%)
------------ ------------
Total non-interest expenses (104) (103) (1%)
------------ ------------
Income before taxes $ 29 $ 29 --
============ ============
- --------------------------
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Intersegment Eliminations
(unaudited, dollars in millions)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ - $ - --
Principal transactions:
Trading - - --
Investments - - --
Commissions (54) (53) (2%)
Asset management, distribution
and administration fees (74) (75) 1%
Interest and dividends (37) (59) 37%
Other (21) (19) (11%)
------------ ------------
Total revenues (186) (206) 10%
Interest expense (37) (59) 37%
------------ ------------
Net revenues (149) (147) (1%)
------------ ------------
Total non-interest expenses (207) (209) 1%
------------ ------------
Income before taxes $ 58 $ 62 (6%)
============ ============
- --------------------------
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-8
- ----------------------------------------------------------------------
MORGAN STANLEY
Financial Information and Statistical Data
(unaudited)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Total assets (millions) $ 729,501 $ 586,881 24%
Adjusted assets (millions) (1) $ 448,144 $ 383,501 17%
Period end common shares
outstanding (millions) 1,098.1 1,086.7 1%
Book value per common share $ 24.59 $ 20.83 18%
Shareholders' equity (millions) (2) $ 29,899 $ 25,341 18%
Total capital (millions) (3) $ 100,127 $ 78,665 27%
Worldwide employees 51,580 53,507 (4%)
Average Daily 99%/One-Day Value-at-Risk ("VaR") (4)
Primary Market Risk Category ($ millions, pre-tax)
Interest rate and credit spread $ 50 $ 41
Equity price 32 23
Foreign exchange rate 12 11
Commodity price 34 27
Aggregate trading VaR $ 72 $ 54
- --------------------------
(1) Adjusted assets exclude certain self-funded assets considered
to have minimal market, credit and/or liquidity risk that are
generally attributable to matched book and securities lending
businesses as measured by aggregate resale agreements and
securities borrowed less non-derivative short positions.
See page F-19 for further information.
(2) At February 29, 2004 and May 31, 2004, shareholders' equity
includes $2,897 million of junior subordinated debt issued
to capital trusts that in prior periods was classified as
preferred securities subject to mandatory redemption. This
amount was reclassified to long-term debt at February 29, 2004
pursuant to the adoption of FIN 46. See Note 12 to the
Consolidated Financial Statements in the Company's Form 10-K
for fiscal 2003. At the prior quarter ends, shareholders'
equity included preferred securities subject to mandatory
redemption. The junior subordinated debt issued to capital
trusts at February 29, 2004 and the preferred securities subject
to mandatory redemption at the prior quarter ends are collectively
referred to hereinafter as junior subordinated debt issued to
capital trusts.
(3) Includes common equity, junior subordinated debt issued to
capital trusts, capital units and the non-current portion
of long-term debt.
(4) 99%/One-Day VaR represents the loss amount that one would not
expect to exceed, on average, more than one time every one hundred
trading days in the Company's trading positions if the
portfolio were held constant for a one day period.
The Company's VaR incorporates substantially all financial
instruments generating market risk that are managed by the
Company's trading businesses. For a further discussion of the
calculation of VaR and the limitations of the Company's
VaR methodology, see Part II, Item 7A "Quantitative
and Qualitative Disclosures about Market Risk" in the
Company's Form 10-K for fiscal 2003.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Financial Information and Statistical Data
(unaudited)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Total assets (millions) $ 729,501 $ 656,898 11%
Adjusted assets (millions) (1) $ 448,144 $ 428,479 5%
Period end common shares
outstanding (millions) 1,098.1 1,097.7 --
Book value per common share $ 24.59 $ 23.75 4%
Shareholders' equity (millions) (2) $ 29,899 $ 28,961 3%
Total capital (millions) (3) $ 100,127 $ 96,359 4%
Worldwide employees 51,580 50,979 1%
Average Daily 99%/One-Day Value-at-Risk ("VaR") (4)
Primary Market Risk Category ($ millions, pre-tax)
Interest rate and credit spread $ 50 $ 42
Equity price 32 30
Foreign exchange rate 12 11
Commodity price 34 27
Aggregate trading VaR $ 72 $ 62
- --------------------------
(1) Adjusted assets exclude certain self-funded assets considered
to have minimal market, credit and/or liquidity risk that are
generally attributable to matched book and securities lending
businesses as measured by aggregate resale agreements and
securities borrowed less non-derivative short positions.
See page F-19 for further information.
(2) At February 29, 2004 and May 31, 2004, shareholders' equity
includes $2,897 million of junior subordinated debt issued
to capital trusts that in prior periods was classified as
preferred securities subject to mandatory redemption. This
amount was reclassified to long-term debt at February 29, 2004
pursuant to the adoption of FIN 46. See Note 12 to the
Consolidated Financial Statements in the Company's Form 10-K
for fiscal 2003. At the prior quarter ends, shareholders'
equity included preferred securities subject to mandatory
redemption. The junior subordinated debt issued to capital
trusts at February 29, 2004 and the preferred securities subject
to mandatory redemption at the prior quarter ends are collectively
referred to hereinafter as junior subordinated debt issued to
capital trusts.
(3) Includes common equity, junior subordinated debt issued to
capital trusts, capital units and the non-current portion
of long-term debt.
(4) 99%/One-Day VaR represents the loss amount that one would not
expect to exceed, on average, more than one time every one hundred
trading days in the Company's trading positions if the
portfolio were held constant for a one day period.
The Company's VaR incorporates substantially all financial
instruments generating market risk that are managed by the
Company's trading businesses. For a further discussion of the
calculation of VaR and the limitations of the Company's
VaR methodology, see Part II, Item 7A "Quantitative
and Qualitative Disclosures about Market Risk" in the
Company's Form 10-K for fiscal 2003.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-9
- ----------------------------------------------------------------------
MORGAN STANLEY
Financial Information and Statistical Data
(unaudited)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Institutional Securities
Advisory revenue (millions) $ 324 $ 141 130%
Underwriting revenue (millions)
Equity $ 314 $ 152 107%
Fixed income $ 253 $ 168 51%
Sales and trading net revenue
(millions) (1)
Equity $ 1,113 $ 865 29%
Fixed income $ 1,828 $ 1,282 43%
Fiscal View
Quarter Ended (2)
--------------------------
May 31, 2004 May 31, 2003
------------ ------------
Mergers and acquisitions announced trans
Morgan Stanley global market
volume (billions) $ 67.9 $ 24.5
Market share 19.9% 8.2%
Rank 4 10
Worldwide equity and related issues
Morgan Stanley global market
volume (billions) $ 16.4 $ 10.1
Market share 13.2% 13.9%
Rank 1 1
Worldwide fixed income
Morgan Stanley global market
volume (billions) $ 100.7 $ 88.5
Market share 7.7% 6.8%
Rank 2 5
- --------------------------
(1) Includes principal trading, commissions and net interest
revenue.
(2) Source: Thomson Financial. Market volume, market share and
rank are on a fiscal quarter basis for each reporting
period: March 1 to May 31, 2004 and March 1 to May 31, 2003.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Financial Information and Statistical Data
(unaudited)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Institutional Securities
Advisory revenue (millions) $ 324 $ 232 40%
Underwriting revenue (millions)
Equity $ 314 $ 314 --
Fixed income $ 253 $ 193 31%
Sales and trading net revenue
(millions) (1)
Equity $ 1,113 $ 1,105 1%
Fixed income $ 1,828 $ 1,651 11%
Fiscal View
Quarter Ended (2)
--------------------------
May 31, 2004 Feb 29, 2004
------------ ------------
Mergers and acquisitions announced trans
Morgan Stanley global market
volume (billions) $ 67.9 $ 122.2
Market share 19.9% 29.5%
Rank 4 3
Worldwide equity and related issues
Morgan Stanley global market
volume (billions) $ 16.4 $ 16.7
Market share 13.2% 11.9%
Rank 1 1
Worldwide fixed income
Morgan Stanley global market
volume (billions) $ 100.7 $ 90.4
Market share 7.7% 7.1%
Rank 2 4
- --------------------------
(1) Includes principal trading, commissions and net interest
revenue.
(2) Source: Thomson Financial. Market volume, market share and
rank are on a fiscal quarter basis for each reporting
period: March 1 to May 31, 2004 and December 1, 2003 to
February 29, 2004.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Financial Information and Statistical Data
(unaudited)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Institutional Securities
Advisory revenue (millions) $ 556 $ 307 81%
Underwriting revenue (millions)
Equity $ 628 $ 279 125%
Fixed income $ 446 $ 376 19%
Sales and trading net revenue
(millions) (1)
Equity $ 2,218 $ 1,842 20%
Fixed income $ 3,479 $ 2,917 19%
Calendar View
Five Months Ended (2)
--------------------------
May 31, 2004 May 31, 2003
------------ ------------
Mergers and acquisitions announced trans
Morgan Stanley global market
volume (billions) $ 180.2 $ 50.7
Market share 26.9% 11.7%
Rank 3 9
Worldwide equity and related issues
Morgan Stanley global market
volume (billions) $ 28.7 $ 14.0
Market share 13.7% 13.5%
Rank 1 2
Worldwide fixed income
Morgan Stanley global market
volume (billions) $ 163.3 $ 153.8
Market share 7.2% 6.9%
Rank 3 2
- --------------------------
(1) Includes principal trading, commissions and net interest
revenue.
(2) Source: Thomson Financial. Market volume, market share and rank
are on a calendar year to date basis for each reporting period:
January 1 to May 31, 2004 and January 1 to May 31, 2003.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-10
- ----------------------------------------------------------------------
MORGAN STANLEY
Statistical Data
(unaudited)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Individual Investor Group
Global financial advisors 10,722 11,644 (8%)
Total client assets (billions) $ 579 $ 532 9%
Fee-based client account
assets (billions) (1) $ 145 $ 113 28%
Fee-based assets as a % of
client assets 25% 21%
Domestic retail locations 526 547 (4%)
Investment Management
Assets under management or supervision ($ billions)
Net flows
Retail $ (0.6) $ 0.3 *
Institutional 5.7 (4.2) *
------------ ------------
Net flows excluding money markets 5.1 (3.9) *
------------ ------------
Money markets 4.2 (2.6) *
Assets under management or supervision by distribution channel
Retail $ 195 $ 185 5%
Institutional 189 151 25%
------------ ------------
Total $ 384 $ 336 14%
============ ============
Assets under management or supervision by asset class
Equity $ 182 $ 142 28%
Fixed income 114 116 (2%)
Money market 66 62 6%
Other (2) 22 16 38%
------------ ------------
Total $ 384 $ 336 14%
============ ============
- --------------------------
(1) Represents the amount of assets in client accounts where
the basis of payment for services is a fee calculated
on those assets.
(2) Includes Alternative Investments.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Statistical Data
(unaudited)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Individual Investor Group
Global financial advisors 10,722 10,832 (1%)
Total client assets (billions) $ 579 $ 595 (3%)
Fee-based client account
assets (billions) (1) $ 145 $ 143 1%
Fee-based assets as a % of
client assets 25% 24%
Domestic retail locations 526 526 --
Investment Management
Assets under management or supervision ($ billions)
Net flows
Retail $ (0.6) $ 0.5 *
Institutional 5.7 1.4 *
------------ ------------
Net flows excluding money markets 5.1 1.9 *
------------ ------------
Money markets 4.2 1.4 *
Assets under management or supervision by distribution channel
Retail $ 195 $ 200 (3%)
Institutional 189 180 5%
------------ ------------
Total $ 384 $ 380 1%
============ ============
Assets under management or supervision by asset class
Equity $ 182 $ 186 (2%)
Fixed income 114 111 3%
Money market 66 62 6%
Other (2) 22 21 5%
------------ ------------
Total $ 384 $ 380 1%
============ ============
- --------------------------
(1) Represents the amount of assets in client accounts where
the basis of payment for services is a fee calculated
on those assets.
(2) Includes Alternative Investments.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Statistical Data
(unaudited)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment Management
Assets under management or supervision ($ billions)
Net flows
Retail $ (0.1) $ (1.1) 91%
Institutional 7.1 (6.7) *
------------ ------------
Net flows excluding money markets 7.0 (7.8) *
------------ ------------
Money markets 5.6 (3.5) *
F-11
- ----------------------------------------------------------------------
MORGAN STANLEY
Statistical Data
(unaudited)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Consolidated assets under management or supervision ($ billions)
Consolidated assets under management or supervision by
distribution channel
Retail $ 290 $ 259 12%
Institutional 210 162 30%
------------ ------------
Total (1) $ 500 $ 421 19%
============ ============
Consolidated assets under management or supervision by asset class
Equity $ 226 $ 174 30%
Fixed income 128 127 1%
Money market 70 65 8%
Other (2) 76 55 38%
------------ ------------
Total (1) $ 500 $ 421 19%
============ ============
- --------------------------
(1) Revenues and expenses associated with customer assets of
$103 billion and $82 billion for fiscal 2Q04 and fiscal
2Q03, respectively, are included in the Company's Individual
Investor Group segment, and $13 billion and $3 billion for
fiscal 2Q04 and fiscal 2Q03, respectively, are included
in the Company's Institutional Securities segment.
(2) Includes Alternative Investments.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Statistical Data
(unaudited)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Consolidated assets under management or supervision ($ billions)
Consolidated assets under management or supervision by
distribution channel
Retail $ 290 $ 294 (1%)
Institutional 210 201 4%
------------ ------------
Total (1) $ 500 $ 495 1%
============ ============
Consolidated assets under management or supervision by asset class
Equity $ 226 $ 231 (2%)
Fixed income 128 124 3%
Money market 70 65 8%
Other (2) 76 75 1%
------------ ------------
Total (1) $ 500 $ 495 1%
============ ============
- --------------------------
(1) Revenues and expenses associated with customer assets of
$103 billion and $101 billion for fiscal 2Q04 and fiscal
1Q04, respectively, are included in the Company's Individual
Investor Group segment, and $13 billion and $14 billion for
fiscal 2Q04 and fiscal 1Q04, respectively, are included
in the Company's Institutional Securities segment.
(2) Includes Alternative Investments.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-12
- ----------------------------------------------------------------------
MORGAN STANLEY
Financial Information and Statistical Data
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Credit Services
Total owned credit card loans
Period end $ 17,506 $ 18,465 (5%)
Average $ 16,202 $ 19,120 (15%)
Total managed credit card loans (1)(2)
Period end $ 46,828 $ 50,880 (8%)
Average $ 46,929 $ 51,174 (8%)
Interest yield 11.88% 11.97% (9 bp)
Interest spread 9.06% 8.78% 28 bp
Transaction volume (billions) $ 24.4 $ 24.0 2%
Accounts (millions) 46.0 46.4 (1%)
Active accounts (millions) 19.9 21.8 (9%)
Average receivables per average
active account (actual $) $ 2,330 $ 2,319 --
Net gain on securitization $ (12) $ 11 *
Credit quality
Net charge-off rate 6.48% 6.50% (2 bp)
Delinquency rate (over 30 days) 4.88% 6.21%(133 bp)
Delinquency rate (over 90 days) 2.40% 3.01% (61 bp)
Allowance for loan losses
at period end $ 940 $ 958 (2%)
International managed credit card loans (2)
Period end $ 2,409 $ 2,332 3%
Average $ 2,411 $ 2,261 7%
Accounts (millions) 1.2 1.0 20%
Mortgages
Mortgage originations $ 1,380 $ 1,368 1%
- --------------------------
(1) Includes domestic and international credit card
businesses.
(2) Includes owned and securitized credit card loans.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Financial Information and Statistical Data
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Credit Services
Total owned credit card loans
Period end $ 17,506 $ 15,850 10%
Average $ 16,202 $ 17,880 (9%)
Total managed credit card loans (1)(2)
Period end $ 46,828 $ 47,336 (1%)
Average $ 46,929 $ 48,667 (4%)
Interest yield 11.88% 12.20% (32 bp)
Interest spread 9.06% 9.35% (29 bp)
Transaction volume (billions) $ 24.4 $ 24.2 1%
Accounts (millions) 46.0 45.9 --
Active accounts (millions) 19.9 20.3 (2%)
Average receivables per average
active account (actual $) $ 2,330 $ 2,360 (1%)
Net gain on securitization $ (12) $ 19 *
Credit quality
Net charge-off rate 6.48% 6.31% 17 bp
Delinquency rate (over 30 days) 4.88% 5.80% (92 bp)
Delinquency rate (over 90 days) 2.40% 2.86% (46 bp)
Allowance for loan losses
at period end $ 940 $ 985 (5%)
International managed credit card loans (2)
Period end $ 2,409 $ 2,463 (2%)
Average $ 2,411 $ 2,302 5%
Accounts (millions) 1.2 1.2 --
Mortgages
Mortgage originations $ 1,380 $ 959 44%
- --------------------------
(1) Includes domestic and international credit card
businesses.
(2) Includes owned and securitized credit card loans.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Financial Information and Statistical Data
(unaudited, dollars in millions)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Credit Services
Total owned credit card loans
Period end $ 17,506 $ 18,465 (5%)
Average $ 17,036 $ 20,695 (18%)
Total managed credit card loans (1)(2)
Period end $ 46,828 $ 50,880 (8%)
Average $ 47,793 $ 51,979 (8%)
Interest yield 12.04% 11.87% 17 bp
Interest spread 9.21% 8.56% 65 bp
Transaction volume (billions) $ 48.5 $ 50.0 (3%)
Accounts (millions) 46.0 46.4 (1%)
Active accounts (millions) 19.9 21.8 (9%)
Average receivables per average
active account (actual $) $ 2,345 $ 2,326 1%
Net gain on securitization $ 7 $ 46 (85%)
Credit quality
Net charge-off rate 6.40% 6.34% 6 bp
Delinquency rate (over 30 days) 4.88% 6.21%(133 bp)
Delinquency rate (over 90 days) 2.40% 3.01% (61 bp)
Allowance for loan losses
at period end $ 940 $ 958 (2%)
International managed credit card loans (2)
Period end $ 2,409 $ 2,332 3%
Average $ 2,357 $ 2,272 4%
Accounts (millions) 1.2 1.0 20%
Mortgages
Mortgage originations $ 2,339 $ 2,687 (13%)
- --------------------------
(1) Includes domestic and international credit card
businesses.
(2) Includes owned and securitized credit card loans.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-13
- ----------------------------------------------------------------------
MORGAN STANLEY
The following page (F-14) presents more detailed financial information
regarding the results of operations for the combined institutional
securities, individual investor group and investment management
businesses. Morgan Stanley believes that a combined presentation is
informative due to certain synergies among these businesses, as well
as to facilitate comparisons of the Company's results with those of
other companies in the financial services industry that have
securities and asset management businesses. Morgan Stanley
provides this type of presentation for its credit services
activities page (F-15) in order to provide helpful comparison to other
credit card issuers.
- ----------------------------------------------------------------------
MORGAN STANLEY
Inst'l Securities, Individual Investor Group and Investment Mgm't (1)
Combined Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ 983 $ 536 83%
Principal transactions:
Trading 2,064 1,670 24%
Investments 191 59 *
Commissions 877 709 24%
Asset management, distribution
and administration fees 1,113 881 26%
Interest and dividends 3,241 2,916 11%
Other 107 113 (5%)
------------ ------------
Total revenues 8,576 6,884 25%
Interest expense 2,801 2,717 3%
------------ ------------
Net revenues 5,775 4,167 39%
------------ ------------
Compensation and benefits 2,725 2,073 31%
Occupancy and equipment 185 176 5%
Brok., clearing and exchange fees 237 202 17%
Info processing and communications 232 234 (1%)
Marketing and business development 137 123 11%
Professional services 291 196 48%
Other 464 550 (16%)
------------ ------------
Total non-interest expenses 4,271 3,554 20%
------------ ------------
Income before losses from unconsolidated
investees and dividends on preferred
securities subject to mandatory
redemption 1,504 613 145%
Losses from unconsolidated investees 81 36 125%
Dividends on preferred securities
subject to mandatory redemption (2) - 40 *
------------ ------------
Income before taxes $ 1,423 $ 537 *
============ ============
Comp & benefits as a % of net rev. 47% 50%
Non-comp exp. as a % of net rev. 27% 36%
Pre-tax profit margin (3) 26% 14%
Number of employees (4) 38,058 38,031 --
- --------------------------
(1) Includes the elimination of intersegment activity.
(2) At February 29, 2004, preferred securities subject to mandatory
redemption were reclassified to junior subordinated debt issued
to capital trusts (a component of long-term debt) pursuant to
the adoption of FIN 46. Dividends on junior subordinated debt
issued to capital trusts are included in interest expense from
February 29, 2004 forward.
(3) Income before taxes, excluding losses from unconsolidated
investees, as a % of net revenues.
(4) Includes Institutional Securities, Individual Investor Group,
Investment Management and Infrastructure/Company areas.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Inst'l Securities, Individual Investor Group and Investment Mgm't (1)
Combined Income Statement Information
(unaudited, dollars in millions)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Investment banking $ 983 $ 829 19%
Principal transactions:
Trading 2,064 1,832 13%
Investments 191 29 *
Commissions 877 901 (3%)
Asset management, distribution
and administration fees 1,113 1,072 4%
Interest and dividends 3,241 3,314 (2%)
Other 107 120 (11%)
------------ ------------
Total revenues 8,576 8,097 6%
Interest expense 2,801 2,812 --
------------ ------------
Net revenues 5,775 5,285 9%
------------ ------------
Compensation and benefits 2,725 2,514 8%
Occupancy and equipment 185 179 3%
Brok., clearing and exchange fees 237 224 6%
Info processing and communications 232 234 (1%)
Marketing and business development 137 111 23%
Professional services 291 253 15%
Other 464 219 112%
------------ ------------
Total non-interest expenses 4,271 3,734 14%
------------ ------------
Income before losses from unconsolidated
investees and dividends on preferred
securities subject to mandatory
redemption 1,504 1,551 (3%)
Losses from unconsolidated investees 81 93 (13%)
Dividends on preferred securities
subject to mandatory redemption (2) - 45 *
------------ ------------
Income before taxes $ 1,423 $ 1,413 1%
============ ============
Comp & benefits as a % of net rev. 47% 48%
Non-comp exp. as a % of net rev. 27% 23%
Pre-tax profit margin (3) 26% 29%
Number of employees (4) 38,058 37,455 2%
- --------------------------
(1) Includes the elimination of intersegment activity.
(2) At February 29, 2004, preferred securities subject to mandatory
redemption were reclassified to junior subordinated debt issued
to capital trusts (a component of long-term debt) pursuant to
the adoption of FIN 46. Dividends on junior subordinated debt
issued to capital trusts are included in interest expense from
February 29, 2004 forward.
(3) Income before taxes, excluding losses from unconsolidated
investees, as a % of net revenues.
(4) Includes Institutional Securities, Individual Investor Group,
Investment Management and Infrastructure/Company areas.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Inst'l Securities, Individual Investor Group and Investment Mgm't (1)
Combined Income Statement Information
(unaudited, dollars in millions)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Investment banking $ 1,812 $ 1,125 61%
Principal transactions:
Trading 3,896 3,382 15%
Investments 220 37 *
Commissions 1,778 1,382 29%
Asset management, distribution
and administration fees 2,185 1,777 23%
Interest and dividends 6,555 6,198 6%
Other 227 203 12%
------------ ------------
Total revenues 16,673 14,104 18%
Interest expense 5,613 5,361 5%
------------ ------------
Net revenues 11,060 8,743 27%
------------ ------------
Compensation and benefits 5,239 4,409 19%
Occupancy and equipment 364 352 3%
Brok., clearing and exchange fees 461 393 17%
Info processing and communications 466 462 1%
Marketing and business development 248 232 7%
Professional services 544 370 47%
Other 683 776 (12%)
------------ ------------
Total non-interest expenses 8,005 6,994 14%
------------ ------------
Income before losses from unconsolidated
investees and dividends on preferred
securities subject to mandatory
redemption 3,055 1,749 75%
Losses from unconsolidated investees 174 70 149%
Dividends on preferred securities
subject to mandatory redemption (2) 45 62 (27%)
------------ ------------
Income before taxes $ 2,836 $ 1,617 75%
============ ============
Comp & benefits as a % of net rev. 47% 50%
Non-comp exp. as a % of net rev. 25% 30%
Pre-tax profit margin (3) 27% 19%
- --------------------------
(1) Includes the elimination of intersegment activity.
(2) At February 29, 2004, preferred securities subject to mandatory
redemption were reclassified to junior subordinated debt issued
to capital trusts (a component of long-term debt) pursuant to
the adoption of FIN 46. Dividends on junior subordinated debt
issued to capital trusts are included in interest expense from
February 29, 2004 forward.
(3) Income before taxes, 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.
F-14
- ----------------------------------------------------------------------
MORGAN STANLEY
Credit Services Income Statement Information
(unaudited, dollars in millions)
(Managed loan basis)
Quarter Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Fees:
Merchant and cardmember $ 467 $ 523 (11%)
Servicing - - --
Other 16 36 (56%)
------------ ------------
Total non-interest revenues 483 559 (14%)
Interest revenue 1,450 1,592 (9%)
Interest expense 337 410 (18%)
------------ ------------
Net interest income 1,113 1,182 (6%)
Provision for consumer loan losses 717 857 (16%)
------------ ------------
Net credit income 396 325 22%
------------ ------------
Net revenues 879 884 (1%)
------------ ------------
Compensation and benefits 198 201 (1%)
Occupancy and equipment 21 19 11%
Info processing and communications 86 81 6%
Marketing and business development 126 128 (2%)
Professional services 65 63 3%
Other 85 90 (6%)
------------ ------------
Total non-interest expenses 581 582 --
------------ ------------
Income before taxes $ 298 $ 302 (1%)
============ ============
Comp & benefits as a % of net rev. 23% 23%
Non-comp expenses as a % of net rev. 44% 43%
Pre-tax profit margin (1) 34% 34%
Number of employees 13,522 15,476 (13%)
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Credit Services Income Statement Information
(unaudited, dollars in millions)
(Managed loan basis)
Quarter Ended
-------------------------- %
May 31, 2004 Feb 29, 2004 Change
------------ ------------ ------
Fees:
Merchant and cardmember $ 467 $ 519 (10%)
Servicing - - --
Other 16 35 (54%)
------------ ------------
Total non-interest revenues 483 554 (13%)
Interest revenue 1,450 1,524 (5%)
Interest expense 337 350 (4%)
------------ ------------
Net interest income 1,113 1,174 (5%)
Provision for consumer loan losses 717 770 (7%)
------------ ------------
Net credit income 396 404 (2%)
------------ ------------
Net revenues 879 958 (8%)
------------ ------------
Compensation and benefits 198 198 --
Occupancy and equipment 21 21 --
Info processing and communications 86 86 --
Marketing and business development 126 143 (12%)
Professional services 65 65 --
Other 85 80 6%
------------ ------------
Total non-interest expenses 581 593 (2%)
------------ ------------
Income before taxes $ 298 $ 365 (18%)
============ ============
Comp & benefits as a % of net rev. 23% 21%
Non-comp expenses as a % of net rev. 44% 41%
Pre-tax profit margin (1) 34% 38%
Number of employees 13,522 13,524 --
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
MORGAN STANLEY
Credit Services Income Statement Information
(unaudited, dollars in millions)
(Managed loan basis)
Six Months Ended
-------------------------- %
May 31, 2004 May 31, 2003 Change
------------ ------------ ------
Fees:
Merchant and cardmember $ 986 $ 1,071 (8%)
Servicing - - --
Other 51 89 (43%)
------------ ------------
Total non-interest revenues 1,037 1,160 (11%)
Interest revenue 2,974 3,172 (6%)
Interest expense 687 851 (19%)
------------ ------------
Net interest income 2,287 2,321 (1%)
Provision for consumer loan losses 1,487 1,699 (12%)
------------ ------------
Net credit income 800 622 29%
------------ ------------
Net revenues 1,837 1,782 3%
------------ ------------
Compensation and benefits 396 414 (4%)
Occupancy and equipment 42 39 8%
Info processing and communications 172 168 2%
Marketing and business development 269 282 (5%)
Professional services 130 114 14%
Other 165 173 (5%)
------------ ------------
Total non-interest expenses 1,174 1,190 (1%)
------------ ------------
Income before taxes $ 663 $ 592 12%
============ ============
Comp & benefits as a % of net rev. 22% 23%
Non-comp expenses as a % of net rev. 42% 44%
Pre-tax profit margin (1) 36% 33%
- --------------------------
(1) Income before taxes as a % of net revenues.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-15
- ----------------------------------------------------------------------
MORGAN STANLEY
The following pages (F-16 - F-18) present a reconciliation for certain
information disclosed on pages F-7, F-13 and F-15.
The data is presented on both a "managed" loan basis and as reported
under generally accepted accounting principles ("owned" loan basis).
Managed loan data assume that the Company's securitized loan
receivables have not been sold and presents the results of securitized
loan receivables in the same manner as the Company's owned loans.
The Company operates its Credit Services business and analyzes its
financial performance on a managed basis. Accordingly, underwriting
and servicing standards are comparable for both owned and securitized
loans. The Company believes that managed loan information is useful
to investors because it provides information regarding the quality of
loan origination and credit performance of the entire managed
portfolio and allows investors to understand the related credit risks
inherent in owned loans and retained interests in securitizations.
In addition, investors often request information on a managed basis,
which provides a more meaningful comparison to industry competitors.
- ----------------------------------------------------------------------
MORGAN STANLEY
Financial Information and Statistical Data (1)
(unaudited, dollars in millions)
Quarter Ended May 31, 2004
---------------------------------------------------------
General Purpose Credit Card Loans: Delinquency
Rate
Net ------------
Period Interest Interest Charge- 30 90
End Avg Yield Spread offs Days Days
-------- -------- -------- -------- -------- ------ -----
Owned $ 17,506 $ 16,202 9.93% 5.67% 6.02% 4.37% 2.15%
Securitized 29,322 30,727 12.91% 10.77% 6.73% 5.18% 2.55%
-------- --------
Managed $ 46,828 $ 46,929 11.88% 9.06% 6.48% 4.88% 2.40%
======== ========
Quarter Ended May 31, 2003
---------------------------------------------------------
General Purpose Credit Card Loans: Delinquency
Rate
Net ------------
Period Interest Interest Charge- 30 90
End Avg Yield Spread offs Days Days
-------- -------- -------- -------- -------- ------ -----
Owned $ 18,465 $ 19,120 10.57% 6.28% 5.92% 5.27% 2.56%
Securitized 32,415 32,054 12.81% 10.23% 6.84% 6.74% 3.27%
-------- --------
Managed $ 50,880 $ 51,174 11.97% 8.78% 6.50% 6.21% 3.01%
======== ========
Quarter Ended Feb 29, 2004
---------------------------------------------------------
General Purpose Credit Card Loans: Delinquency
Rate
Net ------------
Period Interest Interest Charge- 30 90
End Avg Yield Spread offs Days Days
-------- -------- -------- -------- -------- ------ -----
Owned $ 15,850 $ 17,880 10.13% 6.08% 5.81% 5.17% 2.54%
Securitized 31,486 30,787 13.40% 11.20% 6.60% 6.11% 3.01%
-------- --------
Managed $ 47,336 $ 48,667 12.20% 9.35% 6.31% 5.80% 2.86%
======== ========
- --------------------------
(1) The tables provide a reconciliation of certain managed and owned
basis statistical data (period-end and average loan balances,
interest yield, interest spread, net charge-off rates, and
30- and 90-day delinquency rates) for the periods indicated.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-16
- ----------------------------------------------------------------------
MORGAN STANLEY
Financial Information and Statistical Data (1)
(unaudited, dollars in millions)
Six Months Ended May 31, 2004
---------------------------------------------------------
General Purpose Credit Card Loans: Delinquency
Rate
Net ------------
Period Interest Interest Charge- 30 90
End Avg Yield Spread offs Days Days
-------- -------- -------- -------- -------- ------ -----
Owned $ 17,506 $ 17,036 10.03% 5.88% 5.91% 4.37% 2.15%
Securitized 29,322 30,757 13.15% 10.98% 6.67% 5.18% 2.55%
-------- --------
Managed $ 46,828 $ 47,793 12.04% 9.21% 6.40% 4.88% 2.40%
======== ========
Six Months Ended May 31, 2003
---------------------------------------------------------
General Purpose Credit Card Loans: Delinquency
Rate
Net ------------
Period Interest Interest Charge- 30 90
End Avg Yield Spread offs Days Days
-------- -------- -------- -------- -------- ------ -----
Owned $ 18,465 $ 20,695 9.87% 5.45% 5.73% 5.27% 2.56%
Securitized 32,415 31,284 13.20% 10.59% 6.74% 6.74% 3.27%
-------- --------
Managed $ 50,880 $ 51,979 11.87% 8.56% 6.34% 6.21% 3.01%
======== ========
- --------------------------
(1) The tables provide a reconciliation of certain managed and owned
basis statistical data (period-end and average loan balances,
interest yield, interest spread, net charge-off rates, and
30- and 90-day delinquency rates) for the periods indicated.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-17
- ----------------------------------------------------------------------
MORGAN STANLEY
Reconciliation of Managed Income Statement Data (1)
(unaudited, dollars in millions)
Quarter Ended Six Months Ended
--------------------------- --------------------
May 31, May 31, Feb 29, May 31, May 31,
2004 2003 2004 2004 2003
-------- -------- -------- ---------- ---------
Merchant and
cardmember fees:
Owned $ 306 $ 338 $ 337 $ 643 $ 702
Securitization adj. 161 185 182 343 369
-------- -------- -------- ---------- ---------
Managed $ 467 $ 523 $ 519 $ 986 $ 1,071
======== ======== ======== ========== =========
Servicing fees:
Owned $ 485 $ 503 $ 572 $ 1,057 $ 1,070
Securitization adj. (485) (503) (572) (1,057) (1,070)
-------- -------- -------- ---------- ---------
Managed $ - $ - $ - $ - $ -
======== ======== ======== ========== =========
Other:
Owned $ 16 $ 6 $ 5 $ 21 $ 2
Securitization adj. - 30 30 30 87
-------- -------- -------- ---------- ---------
Managed $ 16 $ 36 $ 35 $ 51 $ 89
======== ======== ======== ========== =========
Interest revenue:
Owned $ 435 $ 543 $ 480 $ 915 $ 1,089
Securitization adj. 1,015 1,049 1,044 2,059 2,083
-------- -------- -------- ---------- ---------
Managed $1,450 $1,592 $1,524 $ 2,974 $ 3,172
======== ======== ======== ========== =========
Interest expense:
Owned $ 163 $ 197 $ 174 $ 337 $ 436
Securitization adj. 174 213 176 350 415
-------- -------- -------- ---------- ---------
Managed $ 337 $ 410 $ 350 $ 687 $ 851
======== ======== ======== ========== =========
Provision for consumer
loan losses:
Owned $ 200 $ 309 $ 262 $ 462 $ 645
Securitization adj. 517 548 508 1,025 1,054
-------- -------- -------- ---------- ---------
Managed $ 717 $ 857 $ 770 $ 1,487 $ 1,699
======== ======== ======== ========== =========
- --------------------------
(1) The tables provide a reconciliation of certain managed and owned
basis income statement data (merchant and cardmember fees,
servicing fees, other revenue, interest revenue, interest
expense and provision for consumer loan losses) for the periods
indicated.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-18
- ----------------------------------------------------------------------
MORGAN STANLEY
The following page (F-19) presents a reconciliation of 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, as the Company does not view
this amount of equity as available to support its risk capital needs.
- ----------------------------------------------------------------------
MORGAN STANLEY
Reconciliation of Adjusted Assets
(unaudited, dollars in millions, except ratios)
Quarter Ended
-------------------------------------
May 31, May 31, Feb 29,
2004 2003 2004
----------- ----------- -----------
Total assets $ 729,501 $ 586,881 $ 656,898
Less:
Securities purchased under
agreements to resell (96,042) (71,374) (76,755)
Securities borrowed (202,412) (153,639) (179,288)
Add:
Financial instruments sold,
not yet purchased 130,440 123,211 129,711
Less:
Derivative contracts sold,
not yet purchased (41,615) (48,436) (43,857)
----------- ----------- -----------
Subtotal 519,872 436,643 486,709
Less:
Segregated customer cash and
securities balances (29,918) (26,829) (16,935)
Assets recorded under certain
provisions of SFAS No. 140
and FIN 46 (40,279) (24,837) (39,756)
Goodwill (1,531) (1,476) (1,539)
----------- ----------- -----------
Adjusted assets $ 448,144 $ 383,501 $ 428,479
=========== =========== ===========
Shareholders' equity $ 27,002 $ 22,631 $ 26,064
Junior subordinated debt issued
to capital trusts (1) 2,897 2,710 2,897
----------- ----------- -----------
Subtotal 29,899 25,341 28,961
Less: Goodwill (1,531) (1,476) (1,539)
----------- ----------- -----------
Tangible shareholders' equity $ 28,368 $ 23,865 $ 27,422
=========== =========== ===========
Leverage ratio (2) 25.7x 24.6x 24.0x
=========== =========== ===========
Adjusted leverage ratio (3) 15.8x 16.1x 15.6x
=========== =========== ===========
- --------------------------
(1) The Company views the junior subordinated debt issued to capital
trusts as a component of its equity capital base given the
inherent characteristics of the securities. These
characteristics include the long dated nature (final maturity
at issuance of thirty years extendable at the Company's option
by a further nineteen years), the Company's ability to defer
coupon interest for up to 20 consecutive quarters, and the
subordinated nature of the obligations in the capital structure.
The Company also receives rating agency equity credit for these
securities.
(2) Leverage ratio equals total assets divided by tangible
shareholders' equity.
(3) Adjusted leverage ratio equals adjusted total assets divided
by tangible shareholders' equity.
Note: Certain reclassifications have been made to prior period
amounts to conform to the current presentation.
F-19
CONTACT: Morgan Stanley
Investor Relations:
William Pike, 212-761-0008
or
Media Relations:
Raymond O'Rourke, 212-761-4262