MORGAN STANLEY - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - July 20, 2016

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Exhibit 99.2
 
 
 
Quarterly Financial Supplement - 2Q 2016
 
 
     
   
Page #
     
 
Consolidated Financial Summary 
1
 
Consolidated Income Statement Information 
2
 
Consolidated Financial Information and Statistical Data 
3
 
Consolidated Loans and Lending Commitments 
4
 
Institutional Securities Income Statement Information 
5
 
Institutional Securities Financial Information and Statistical Data 
6
 
Wealth Management Income Statement Information 
7
 
Wealth Management Financial Information and Statistical Data 
8
 
Investment Management Income Statement Information 
9
 
Investment Management Financial Information and Statistical Data 
10
 
U.S. Bank Supplemental Financial Information 
11
 
Consolidated Return on Average Common Equity Financial Information 
12
 
Earnings Per Share Summary  
13
 
End Notes 
14
 
Definition of GAAP to Non-GAAP Measures and Performance Metrics 
15 - 16
 
Legal Notice 
17
 
 
Consolidated Financial Summary
(unaudited, dollars in millions, except for per share data)
 
     
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
    
June 30, 2016
    
June 30, 2015
    
Change
  
Net revenues
                                                
Institutional Securities
  
$
4,578
    
$
3,714
    
$
5,172
      
23
%
    
(11
%)
  
$
8,292
    
$
10,630
      
(22
%)
Wealth Management
    
3,811
      
3,668
      
3,875
      
4
%
    
(2
%)
    
7,479
      
7,709
      
(3
%)
Investment Management
    
583
      
477
      
751
      
22
%
    
(22
%)
    
1,060
      
1,420
      
(25
%)
Intersegment Eliminations
    
(63
)
    
(67
)
    
(55
)
    
6
%
    
(15
%)
    
(130
)
    
(109
)
    
(19
%)
Net revenues
  
$
8,909
    
$
7,792
    
$
9,743
      
14
%
    
(9
%)
  
$
16,701
    
$
19,650
      
(15
%)
                                                                 
Income (loss) from continuing operations before tax
                                                                
Institutional Securities
  
$
1,506
    
$
908
    
$
1,622
      
66
%
    
(7
%)
  
$
2,414
    
$
3,435
      
(30
%)
Wealth Management
    
859
      
786
      
885
      
9
%
    
(3
%)
    
1,645
      
1,740
      
(5
%)
Investment Management
    
118
      
44
      
220
      
168
%
    
(46
%)
    
162
      
407
      
(60
%)
Income (loss) from continuing operations before tax
  
$
2,483
    
$
1,738
    
$
2,727
      
43
%
    
(9
%)
  
$
4,221
    
$
5,582
      
(24
%)
                                                                 
Net Income (loss) applicable to Morgan Stanley
                                                               
Institutional Securities
  
$
988
    
$
591
    
$
1,087
      
67
%
    
(9
%)
  
$
1,579
    
$
2,837
      
(44
%)
Wealth Management
    
516
      
493
      
561
      
5
%
    
(8
%)
    
1,009
      
1,096
      
(8
%)
Investment Management
    
78
      
50
      
159
      
56
%
    
(51
%)
    
128
      
268
      
(52
%)
Net Income (loss) applicable to Morgan Stanley
  
$
1,582
    
$
1,134
    
$
1,807
      
40
%
    
(12
%)
  
$
2,716
    
$
4,201
      
(35
%)
                                                                 
Financial Metrics:
                                                                
                                                                 
Earnings per diluted share
  
$
0.75
    
$
0.55
    
$
0.85
      
36
%
    
(12
%)
  
$
1.30
    
$
2.03
      
(36
%)
Earnings per diluted share excluding DVA
  
$
0.75
    
$
0.55
    
$
0.79
      
36
%
    
(5
%)
  
$
1.30
    
$
1.93
      
(33
%)
                                                                 
Return on average common equity
    
8.3
%
    
6.2
%
    
9.9
%
                    
7.2
%
    
12.0
%
        
Return on average common equity excluding DVA
    
8.3
%
    
6.2
%
    
9.1
%
                    
7.2
%
    
11.3
%
        
 
       
       
Notes:
 - 
Effective January 1, 2016, the Firm early adopted the provision of new accounting guidance that requires unrealized gains and losses from Morgan Stanley’s debt-related credit spreads and other credit factors (Debt Valuation Adjustments, or DVA) to be presented in other comprehensive income as opposed to net revenues and net income. This change is reflected in the consolidated results and the Institutional Securities segment for 2016. Results for 2015 were not restated pursuant to this guidance.
  - 
Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
1
 
Consolidated Income Statement Information
(unaudited, dollars in millions)
 
     
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
    
June 30, 2016
    
June 30, 2015
    
Change
  
Revenues:
                                                
Investment banking
  
$
1,224
    
$
1,107
    
$
1,614
      
11
%
    
(24
%)
  
$
2,331
    
$
2,971
      
(22
%)
Trading
    
2,746
      
2,065
      
2,973
      
33
%
    
(8
%)
    
4,811
      
6,623
      
(27
%)
Investments
    
126
      
(34
)
    
261
      
*
      
(52
%)
    
92
      
527
      
(83
%)
Commissions and fees
    
1,020
      
1,055
      
1,158
      
(3
%)
    
(12
%)
    
2,075
      
2,344
      
(11
%)
Asset management, distribution and admin. fees
    
2,637
      
2,620
      
2,742
      
1
%
    
(4
%)
    
5,257
      
5,423
      
(3
%)
Other 
    
243
      
80
      
297
      
*
      
(18
%)
    
323
      
468
      
(31
%)
Total non-interest revenues
    
7,996
      
6,893
      
9,045
      
16
%
    
(12
%)
    
14,889
      
18,356
      
(19
%)
                                                                 
Interest income
    
1,667
      
1,747
      
1,386
      
(5
%)
    
20
%
    
3,414
      
2,870
      
19
%
Interest expense
    
754
      
848
      
688
      
(11
%)
    
10
%
    
1,602
      
1,576
      
2
%
Net interest
    
913
      
899
      
698
      
2
%
    
31
%
    
1,812
      
1,294
      
40
%
Net revenues 
    
8,909
      
7,792
      
9,743
      
14
%
    
(9
%)
    
16,701
      
19,650
      
(15
%)
Non-interest expenses:
                                                                
Compensation and benefits
    
4,015
      
3,683
      
4,405
      
9
%
    
(9
%)
    
7,698
      
8,929
      
(14
%)
                                                                 
Non-compensation expenses:
                                                                
Occupancy and equipment
    
329
      
329
      
351
      
--
      
(6
%)
    
658
      
693
      
(5
%)
Brokerage, clearing and exchange fees
    
484
      
465
      
487
      
4
%
    
(1
%)
    
949
      
950
      
--
  
Information processing and communications
    
429
      
442
      
438
      
(3
%)
    
(2
%)
    
871
      
853
      
2
%
Marketing and business development
    
154
      
134
      
179
      
15
%
    
(14
%)
    
288
      
329
      
(12
%)
Professional services
    
547
      
514
      
598
      
6
%
    
(9
%)
    
1,061
      
1,084
      
(2
%)
Other 
    
468
      
487
      
558
      
(4
%)
    
(16
%)
    
955
      
1,230
      
(22
%)
Total non-compensation expenses 
    
2,411
      
2,371
      
2,611
      
2
%
    
(8
%)
    
4,782
      
5,139
      
(7
%)
                                                                 
Total non-interest expenses
    
6,426
      
6,054
      
7,016
      
6
%
    
(8
%)
    
12,480
      
14,068
      
(11
%)
                                                                 
Income (loss) from continuing operations before taxes
    
2,483
      
1,738
      
2,727
      
43
%
    
(9
%)
    
4,221
      
5,582
      
(24
%)
Income tax provision / (benefit) from continuing operations
    
833
      
578
      
894
      
44
%
    
(7
%)
    
1,411
      
1,281
      
10
%
Income (loss) from continuing operations
    
1,650
      
1,160
      
1,833
      
42
%
    
(10
%)
    
2,810
      
4,301
      
(35
%)
Gain (loss) from discontinued operations after tax
    
(4
)
    
(3
)
    
(2
)
    
(33
%)
    
(100
%)
    
(7
)
    
(7
)
    
--
  
Net income (loss)
  
$
1,646
    
$
1,157
    
$
1,831
      
42
%
    
(10
%)
  
$
2,803
    
$
4,294
      
(35
%)
Net income applicable to nonredeemable noncontrolling interests
    
64
      
23
      
24
      
178
%
    
167
%
    
87
      
93
      
(6
%)
Net income (loss) applicable to Morgan Stanley
    
1,582
      
1,134
      
1,807
      
40
%
    
(12
%)
    
2,716
      
4,201
      
(35
%)
Preferred stock dividend / Other
    
157
      
79
      
142
      
99
%
    
11
%
    
235
      
222
      
6
%
Earnings (loss) applicable to Morgan Stanley common shareholders
  
$
1,425
    
$
1,055
    
$
1,665
      
35
%
    
(14
%)
  
$
2,481
    
$
3,979
      
(38
%)
                                                                 
Pre-tax profit margin
    
28
%
    
22
%
    
28
%
                    
25
%
    
28
%
        
Compensation and benefits as a % of net revenues
    
45
%
    
47
%
    
45
%
                    
46
%
    
45
%
        
Non-compensation expenses as a % of net revenues
    
27
%
    
30
%
    
27
%
                    
29
%
    
26
%
        
Effective tax rate from continuing operations
    
33.5
%
    
33.3
%
    
32.8
%
                    
33.4
%
    
22.9
%
        
 
Notes:
- Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
2
 
Consolidated Financial Information and Statistical Data
(unaudited, dollars in millions)
 
     
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
    
June 30, 2016
    
June 30, 2015
    
Change
  
                                                 
                                                 
Regional revenues
                                                
Americas
  
$
6,538
    
$
5,752
    
$
6,777
      
14
%
    
(4
%)
  
$
12,290
    
$
13,707
      
(10
%)
EMEA (Europe, Middle East, Africa)
    
1,312
      
1,129
      
1,436
      
16
%
    
(9
%)
    
2,441
      
3,198
      
(24
%)
Asia 
    
1,059
      
911
      
1,530
      
16
%
    
(31
%)
    
1,970
      
2,745
      
(28
%)
Consolidated net revenues
  
$
8,909
    
$
7,792
    
$
9,743
      
14
%
    
(9
%)
  
$
16,701
    
$
19,650
      
(15
%)
                                                                 
Worldwide employees
    
54,529
      
54,779
      
55,795
      
--
      
(2
%)
                        
                                                                 
Deposits
  
$
152,693
    
$
157,591
    
$
139,203
      
(3
%)
    
10
%
                        
Assets
  
$
828,873
    
$
807,497
    
$
825,755
      
3
%
    
--
                          
Risk-weighted assets
  
$
354,390
    
$
373,925
    
$
417,707
      
(5
%)
    
(15
%)
                        
Global liquidity reserve
  
$
207,455
    
$
211,069
    
$
188,214
      
(2
%)
    
10
%
                        
Long-term debt outstanding
  
$
163,492
    
$
162,804
    
$
158,089
      
--
      
3
%
                        
Maturities of long-term debt outstanding (next 12 months)
  
$
24,244
    
$
26,071
    
$
27,221
      
(7
%)
    
(11
%)
                        
                                                                 
Common equity
  
$
69,596
    
$
68,490
    
$
67,518
      
2
%
    
3
%
                        
Less: Goodwill and intangible assets
    
(9,411
)
    
(9,491
)
    
(9,740
)
    
1
%
    
3
%
                        
Tangible common equity
  
$
60,185
    
$
58,999
    
$
57,778
      
2
%
    
4
%
                        
                                                                 
Preferred equity
  
$
7,520
    
$
7,520
    
$
7,520
      
--
      
--
                          
Junior subordinated debt issued to capital trusts
  
$
2,853
    
$
2,849
    
$
2,863
      
--
      
--
                          
                                                                 
Period end common shares outstanding (millions)
    
1,918
      
1,938
      
1,956
      
(1
%)
    
(2
%)
                        
Book value per common share
  
$
36.29
    
$
35.34
    
$
34.52
                                          
Tangible book value per common share
  
$
31.39
    
$
30.44
    
$
29.54
                                          
                                                                 
Common Equity Tier 1 capital Advanced (Transitional)
  
$
59,785
    
$
58,514
    
$
58,666
      
2
%
    
2
%
                        
Tier 1 capital Advanced (Transitional)
  
$
66,756
    
$
65,198
    
$
65,770
      
2
%
    
1
%
                        
                                                                 
Common Equity Tier 1 capital ratio Advanced (Transitional)
    
16.9
%
    
15.6
%
    
14.0
%
                                        
Pro-forma Common Equity Tier 1 capital ratio Advanced (Fully Phased-in)
    
15.8
%
    
14.6
%
    
12.5
%
                                        
Tier 1 capital ratio Advanced (Transitional)
    
18.8
%
    
17.4
%
    
15.7
%
                                        
Tier 1 leverage ratio (Transitional)
    
8.3
%
    
8.2
%
    
7.9
%
                                        
Supplementary Leverage Ratio (Transitional)
    
6.2
%
    
6.1
%
    
5.6
%
                                        
Pro-forma Supplementary Leverage Ratio (Fully Phased-in)
    
6.1
%
    
6.0
%
    
5.3
%
                                        
 
Notes:
- Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
3
 
Consolidated Loans and Lending Commitments
(unaudited, dollars in billions)
 
   
Quarter Ended
    
Percentage Change From:
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
  
                               
Institutional Securities
                              
                               
Corporate loans (1)
  
$
19.9
    
$
16.6
    
$
15.7
      
20
%
    
27
%
                                         
Corporate lending commitments (2)
  
$
83.8
    
$
89.3
    
$
85.8
      
(6
%)
    
(2
%)
                                         
Corporate Loans and Lending Commitments (3)
  
$
103.7
    
$
105.9
    
$
101.5
      
(2
%)
    
2
%
                                         
Other loans
  
$
28.3
    
$
30.2
    
$
28.5
      
(6
%)
    
(1
%)
                                         
Other lending commitments
  
$
4.2
    
$
4.0
    
$
6.7
      
5
%
    
(37
%)
                                         
Other Loans and Lending Commitments (4)
  
$
32.5
    
$
34.2
    
$
35.2
      
(5
%)
    
(8
%)
                                         
Institutional Securities Loans and Lending Commitments (5)
  
$
136.2
    
$
140.1
    
$
136.7
      
(3
%)
    
--
  
                                         
                                         
Wealth Management
                                        
                                         
Loans
  
$
54.3
    
$
51.8
    
$
43.8
      
5
%
    
24
%
                                         
Lending commitments
  
$
7.0
    
$
6.4
    
$
5.6
      
9
%
    
25
%
                                         
Wealth Management Loans and Lending Commitments (6)
  
$
61.3
    
$
58.2
    
$
49.4
      
5
%
    
24
%
                                         
Consolidated Loans and Lending Commitments
  
$
197.5
    
$
198.3
    
$
186.1
      
--
      
6
%
 
Notes:
- Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
4
 
Institutional Securities
Income Statement Information
(unaudited, dollars in millions)
 
   
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
    
June 30, 2016
    
June 30, 2015
    
Change
  
Revenues:
                                                
Investment banking
  
$
1,108
    
$
990
    
$
1,440
      
12
%
    
(23
%)
  
$
2,098
    
$
2,613
      
(20
%)
Trading
    
2,498
      
1,891
      
2,785
      
32
%
    
(10
%)
    
4,389
      
6,207
      
(29
%)
Investments
    
76
      
32
      
16
      
138
%
    
*
      
108
      
128
      
(16
%)
Commissions and fees
    
607
      
655
      
683
      
(7
%)
    
(11
%)
    
1,262
      
1,356
      
(7
%)
Asset management, distribution and admin. fees
    
69
      
73
      
69
      
(5
%)
    
--
      
142
      
145
      
(2
%)
Other
    
138
      
4
      
212
      
*
      
(35
%)
    
142
      
302
      
(53
%)
Total non-interest revenues
    
4,496
      
3,645
      
5,205
      
23
%
    
(14
%)
    
8,141
      
10,751
      
(24
%)
                                                                 
Interest income
    
966
      
1,053
      
723
      
(8
%)
    
34
%
    
2,019
      
1,593
      
27
%
Interest expense
    
884
      
984
      
756
      
(10
%)
    
17
%
    
1,868
      
1,714
      
9
%
Net interest
    
82
      
69
      
(33
)
    
19
%
    
*
      
151
      
(121
)
    
*
  
Net revenues
    
4,578
      
3,714
      
5,172
      
23
%
    
(11
%)
    
8,292
      
10,630
      
(22
%)
                                                                 
Compensation and benefits
    
1,625
      
1,382
      
1,897
      
18
%
    
(14
%)
    
3,007
      
3,923
      
(23
%)
Non-compensation expenses
    
1,447
      
1,424
      
1,653
      
2
%
    
(12
%)
    
2,871
      
3,272
      
(12
%)
Total non-interest expenses
    
3,072
      
2,806
      
3,550
      
9
%
    
(13
%)
    
5,878
      
7,195
      
(18
%)
                                                                 
                                                                 
Income (loss) from continuing operations before taxes
    
1,506
      
908
      
1,622
      
66
%
    
(7
%)
    
2,414
      
3,435
      
(30
%)
Income tax provision / (benefit) from continuing operations
    
453
      
275
      
511
      
65
%
    
(11
%)
    
728
      
517
      
41
%
Income (loss) from continuing operations
    
1,053
      
633
      
1,111
      
66
%
    
(5
%)
    
1,686
      
2,918
      
(42
%)
Gain (loss) from discontinued operations after tax
   
(4
)
    
(3
)
    
(2
)
    
(33
%)
    
(100
%)
    
(7
)
    
(7
)
    
--
  
Net income (loss)
    
1,049
      
630
      
1,109
      
67
%
    
(5
%)
    
1,679
      
2,911
      
(42
%)
Net income applicable to nonredeemable noncontrolling interests
    
61
      
39
      
22
      
56
%
    
177
%
    
100
      
74
      
35
%
Net income (loss) applicable to Morgan Stanley
  
$
988
    
$
591
    
$
1,087
      
67
%
    
(9
%)
  
$
1,579
    
$
2,837
      
(44
%)
                                                                 
                                                                 
Pre-tax profit margin
    
33
%
    
24
%
    
31
%
                    
29
%
    
32
%
        
Compensation and benefits as a % of net revenues      35
%
      37
%
      37
%
                      36
%
     37
%
        
 
Notes:
- Effective January 1, 2016, the Firm early adopted the provision of new accounting guidance that requires unrealized gains and losses from Morgan Stanley’s debt-related credit spreads and other credit factors
 
   DVA to be presented in other comprehensive income as opposed to net revenues and net income.  Results for 2015 were not restated pursuant to this guidance.
 
- Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
5
 
Institutional Securities
Financial Information and Statistical Data
(unaudited, dollars in millions)
 
   
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
    
June 30, 2016
    
June 30, 2015
    
Change
  
Investment Banking
                                                
Advisory revenues
  
$
497
    
$
591
    
$
423
      
(16
%)
    
17
%
  
$
1,088
    
$
894
      
22
%
Underwriting revenues
                                                                
Equity
    
266
      
160
      
489
      
66
%
    
(46
%)
    
426
      
796
      
(46
%)
Fixed income
    
345
      
239
      
528
      
44
%
    
(35
%)
    
584
      
923
      
(37
%)
Total underwriting revenues
    
611
      
399
      
1,017
      
53
%
    
(40
%)
    
1,010
      
1,719
      
(41
%)
                                                                 
Total investment banking revenues
  
$
1,108
    
$
990
    
$
1,440
      
12
%
    
(23
%)
  
$
2,098
    
$
2,613
      
(20
%)
                                                                 
Sales & Trading
                                                                
Equity
  
$
2,145
    
$
2,056
    
$
2,342
      
4
%
    
(8
%)
  
$
4,201
    
$
4,635
      
(9
%)
Fixed Income & Commodities
    
1,297
      
873
      
1,377
      
49
%
    
(6
%)
    
2,170
      
3,380
      
(36
%)
Other
    
(186
)
    
(241
)
    
(215
)
    
23
%
    
13
%
    
(427
)
    
(428
)
    
--
  
Total sales & trading net revenues
  
$
3,256
    
$
2,688
    
$
3,504
      
21
%
    
(7
%)
  
$
5,944
    
$
7,587
      
(22
%)
                                                                 
Investments & Other
                                                                
Investments
  
$
76
    
$
32
    
$
16
      
138
%
    
*
    
$
108
    
$
128
      
(16
%)
Other
    
138
      
4
      
212
      
*
      
(35
%)
    
142
      
302
      
(53
%)
Total investments & other revenues
  
$
214
    
$
36
    
$
228
      
*
      
(6
%)
  
$
250
    
$
430
      
(42
%)
                                                                 
Institutional Securities net revenues
  
$
4,578
    
$
3,714
    
$
5,172
      
23
%
    
(11
%)
  
$
8,292
    
$
10,630
      
(22
%)
                                                                 
Average Daily 95% / One-Day Value-at-Risk ("VaR")
                                                                
Primary Market Risk Category ($ millions, pre-tax)
                                                                
Interest rate and credit spread
  
$
32
    
$
33
    
$
35
                                          
Equity price
  
$
17
    
$
18
    
$
23
                                          
Foreign exchange rate
  
$
7
    
$
7
    
$
12
                                          
Commodity price
  
$
10
    
$
11
    
$
16
                                          
                                                                 
Aggregation of Primary Risk Categories
  
$
38
    
$
42
    
$
50
                                          
                                                                 
Credit Portfolio VaR
  
$
20
    
$
16
    
$
12
                                          
                                                                 
Trading VaR
   $ 46     $ 46     $ 54                                          
 
Notes:
 -
Effective January 1, 2016, the Firm early adopted the provision of new accounting guidance that requires unrealized gains and losses from DVA to be presented in other comprehensive income as opposed to net revenues and net income. Results for 2015 were not restated pursuant to this guidance. Sales and trading net revenues included positive / (negative) revenue related to DVA as follows:
   
June 30, 2015: Total QTD: $182 million; Fixed Income & Commodities: $110 million; Equity: $72 million
   
June 30, 2015: Total YTD: $307 million; Fixed Income & Commodities: $210 million; Equity: $97 million
  - 
Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
6
 
Wealth Management
Income Statement Information
(unaudited, dollars in millions)
 
   
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
    
June 30, 2016
    
June 30, 2015
    
Change
  
Revenues:
                                                
Investment banking
  
$
123
    
$
121
    
$
186
      
2
%
    
(34
%)
  
$
244
    
$
378
      
(35
%)
Trading
    
252
      
194
      
196
      
30
%
    
29
%
    
446
      
428
      
4
%
Investments
    
0
      
(2
)
    
13
      
*
      
*
      
(2
)
    
15
      
*
  
Commissions and fees
    
423
      
412
      
490
      
3
%
    
(14
%)
    
835
      
1,016
      
(18
%)
Asset management, distribution and admin. fees
    
2,082
      
2,054
      
2,174
      
1
%
    
(4
%)
    
4,136
      
4,289
      
(4
%)
Other
    
102
      
58
      
79
      
76
%
    
29
%
    
160
      
157
      
2
%
Total non-interest revenues
    
2,982
      
2,837
      
3,138
      
5
%
    
(5
%)
    
5,819
      
6,283
      
(7
%)
                                                                 
Interest income
    
920
      
914
      
782
      
1
%
    
18
%
    
1,834
      
1,519
      
21
%
Interest expense
    
91
      
83
      
45
      
10
%
    
102
%
    
174
      
93
      
87
%
Net interest
    
829
      
831
      
737
      
--
      
12
%
    
1,660
      
1,426
      
16
%
Net revenues
    
3,811
      
3,668
      
3,875
      
4
%
    
(2
%)
    
7,479
      
7,709
      
(3
%)
                                                                 
Compensation and benefits
    
2,152
      
2,088
      
2,200
      
3
%
    
(2
%)
    
4,240
      
4,425
      
(4
%)
Non-compensation expenses 
    
800
      
794
      
790
      
1
%
    
1
%
    
1,594
      
1,544
      
3
%
Total non-interest expenses
    
2,952
      
2,882
      
2,990
      
2
%
    
(1
%)
    
5,834
      
5,969
      
(2
%)
                                                                 
Income (loss) from continuing operations before taxes
    
859
      
786
      
885
      
9
%
    
(3
%)
    
1,645
      
1,740
      
(5
%)
Income tax provision / (benefit) from continuing operations
    
343
      
293
      
324
      
17
%
    
6
%
    
636
      
644
      
(1
%)
Income (loss) from continuing operations
    
516
      
493
      
561
      
5
%
    
(8
%)
    
1,009
      
1,096
      
(8
%)
Gain (loss) from discontinued operations after tax
    
0
      
0
      
0
      
--
      
--
      
0
      
0
      
--
  
Net income (loss)
    
516
      
493
      
561
      
5
%
    
(8
%)
    
1,009
      
1,096
      
(8
%)
Net income applicable to nonredeemable noncontrolling interests
    
-
      
-
      
-
      
--
      
--
      
-
      
-
      
--
  
Net income (loss) applicable to Morgan Stanley
  
$
516
    
$
493
    
$
561
      
5
%
    
(8
%)
  
$
1,009
    
$
1,096
      
(8
%)
                                                                 
Pre-tax profit margin
    
23
%
    
21
%
    
23
%
                    
22
%
    
23
%
        
Compensation and benefits as a % of net revenues    
56
%
    
57
%
    
57
%
                    
57
%
    
57
%
        
 
Notes:
- Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
7
 
Wealth Management
Financial Information and Statistical Data
(unaudited)
 
   
Quarter Ended
    
Percentage Change From:
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
  
                               
                               
Bank deposit program (billions)
  
$
150
    
$
152
    
$
132
      
(1
%)
    
14
%
                                         
Wealth Management Metrics
                                        
                                         
Wealth Management representatives
    
15,909
      
15,888
      
15,771
      
--
      
1
%
                                         
Annualized revenue per representative (000's)
  
$
959
    
$
923
    
$
978
      
4
%
    
(2
%)
                                         
Client assets (billions)
  
$
2,034
    
$
1,999
    
$
2,034
      
2
%
    
--
  
Client assets per representative (millions)
  
$
128
    
$
126
    
$
129
      
2
%
    
(1
%)
Client liabilities (billions)
  
$
69
    
$
66
    
$
58
      
5
%
    
19
%
                                         
Fee based asset flows (billions)
  
$
12.0
    
$
5.9
    
$
13.9
      
103
%
    
(14
%)
Fee based client account assets (billions)
  
$
820
    
$
798
    
$
813
      
3
%
    
1
%
Fee based assets as a % of client assets
    
40
%
    
40
%
    
40
%
                
                                         
Retail locations
    
609
      
604
      
618
      
1
%
    
(1
%)
 
Notes:
- Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
8
 
Investment Management
Income Statement Information
(unaudited, dollars in millions)
 
   
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
    
June 30, 2016
    
June 30, 2015
    
Change
  
Revenues:
                                                
Investment banking
  
$
-
    
$
1
    
$
-
      
*
      
--
    
$
1
    
$
-
      
*
  
Trading
    
5
      
(10
)
    
(6
)
    
*
      
*
      
(5
)
    
(3
)
    
(67
%)
Investments (1)
    
50
      
(64
)
    
232
      
*
      
(78
%)
    
(14
)
    
384
      
*
  
Commissions and fees
    
0
      
3
      
0
      
*
      
--
      
3
      
0
      
*
  
Asset management, distribution and admin. fees
    
517
      
526
      
522
      
(2
%)
    
(1
%)
    
1,043
      
1,036
      
1
%
Other
    
9
      
22
      
9
      
(59
%)
    
--
      
31
      
14
      
121
%
Total non-interest revenues
    
581
      
478
      
757
      
22
%
    
(23
%)
    
1,059
      
1,431
      
(26
%)
                                                                 
Interest income
    
3
      
1
      
0
      
200
%
    
*
      
4
      
1
      
*
  
Interest expense
    
1
      
2
      
6
      
(50
%)
    
(83
%)
    
3
      
12
      
(75
%)
Net interest
    
2
      
(1
)
    
(6
)
    
*
      
*
      
1
      
(11
)
    
*
  
Net revenues
    
583
      
477
      
751
      
22
%
    
(22
%)
    
1,060
      
1,420
      
(25
%)
                                                                 
Compensation and benefits
    
238
      
213
      
308
      
12
%
    
(23
%)
    
451
      
581
      
(22
%)
Non-compensation expenses 
    
227
      
220
      
223
      
3
%
    
2
%
    
447
      
432
      
3
%
Total non-interest expenses
    
465
      
433
      
531
      
7
%
    
(12
%)
    
898
      
1,013
      
(11
%)
                                                                 
Income (loss) from continuing operations before taxes
    
118
      
44
      
220
      
168
%
    
(46
%)
    
162
      
407
      
(60
%)
Income tax provision / (benefit) from continuing operations
    
37
      
10
      
59
      
*
      
(37
%)
    
47
      
120
      
(61
%)
Income (loss) from continuing operations
    
81
      
34
      
161
      
138
%
    
(50
%)
    
115
      
287
      
(60
%)
Gain (loss) from discontinued operations after tax
    
0
      
0
      
0
      
--
      
--
      
0
      
0
      
--
  
Net income (loss)
    
81
      
34
      
161
      
138
%
    
(50
%)
    
115
      
287
      
(60
%)
Net income applicable to nonredeemable noncontrolling interests
    
3
      
(16
)
    
2
      
*
      
50
%
    
(13
)
    
19
      
*
  
Net income (loss) applicable to Morgan Stanley
  
$
78
    
$
50
    
$
159
      
56
%
    
(51
%)
  
$
128
    
$
268
      
(52
%)
                                                                 
Pre-tax profit margin
    
20
%
    
9
%
    
29
%
                    
15
%
    
29
%
        
Compensation and benefits as a % of net revenues    
41
%
    
45
%
    
41
%
                    
43
%
    
41
%
        
 
Notes:
- Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
9
 
Investment Management
Financial Information and Statistical Data
(unaudited)
 
   
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
    
June 30, 2016
    
June 30, 2015
    
Change
  
                                                 
Assets under management or supervision (billions)
                                                
                                                 
Net flows by asset class (1)
                                                
Equity
  
$
(1.4
)
  
$
(0.7
)
  
$
(4.1
)
    
(100
%)
    
66
%
  
$
(2.1
)
  
$
(7.2
)
    
71
%
Fixed Income
    
(1.2
)
    
(0.8
)
    
(0.3
)
    
(50
%)
    
*
      
(2.0
)
    
0.8
      
*
  
Liquidity
    
2.4
      
(2.4
)
    
0.7
      
*
      
*
      
0.0
      
3.5
      
*
  
Alternative / Other products
    
(1.5
)
    
0.3
      
(0.3
)
    
*
      
*
      
(1.2
)
    
0.2
      
*
  
                                                                 
Total net flows
  
$
(1.7
)
  
$
(3.6
)
  
$
(4.0
)
    
53
%
    
58
%
  
$
(5.3
)
  
$
(2.7
)
    
(96
%)
                                                                 
Assets under management or supervision by asset class (2)
                                                                
Equity
  
$
81
    
$
81
    
$
96
      
--
      
(16
%)
                        
Fixed Income
    
61
      
62
      
64
      
(2
%)
    
(5
%)
                        
Liquidity
    
149
      
146
      
132
      
2
%
    
13
%
                        
Alternative / Other products
    
115
      
116
      
111
      
(1
%)
    
4
%
                        
                                                                 
Total Assets Under Management or Supervision
  
$
406
    
$
405
    
$
403
      
--
      
1
%
                        
Share of minority stake assets
   $
8
     $
8
     $
7
      
--
      
14
 %                        
 
Effective in the second quarter of 2016, the Investment Management segment revised the presentation of assets under management or supervision to better align asset classes with its present organizational structure. With this change, the Alternative/Other products asset class now includes products in Fund of Funds, Real Estate, Private Equity and Credit Strategies, as well as Multi-Asset portfolios. All prior period information has been recasted in the new format.
 
 
Notes:
- Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
10
 
U.S. Bank Supplemental Financial Information
(unaudited, dollars in billions)
 
   
Quarter Ended
    
Percentage Change From:
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
  
                               
                               
U.S. Bank assets
  
$
175.1
    
$
177.0
    
$
156.2
      
(1
%)
    
12
%
                                         
U.S. Bank investment securities portfolio (1)
  
$
64.6
    
$
61.8
    
$
52.9
      
5
%
    
22
%
                                         
                                         
Wealth Management U.S. Bank Data
                                        
Securities-based lending and other loans
  
$
31.4
    
$
29.9
    
$
25.3
      
5
%
    
24
%
Residential real estate loans
    
22.7
      
21.8
      
18.4
      
4
%
    
23
%
Total Securities-based and residential loans
  
$
54.1
    
$
51.7
    
$
43.7
      
5
%
    
24
%
                                         
                                         
Institutional Securities U.S. Bank Data
                                        
Corporate Lending
  
$
8.9
    
$
9.8
    
$
10.5
      
(9
%)
    
(15
%)
Other Lending:
                                        
Corporate loans
    
12.3
      
14.1
      
10.8
      
(13
%)
    
14
%
Wholesale real estate and other loans
    
8.9
      
8.3
      
9.6
      
7
%
    
(7
%)
Total other loans
  
$
21.2
    
$
22.4
    
$
20.4
      
(5
%)
    
4
%
Total corporate and other loans
  
$
30.1
    
$
32.2
    
$
30.9
      
(7
%)
    
(3
%)
 
Notes:
- Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
11
 
Consolidated Return on Average Common Equity Financial Information
(unaudited, dollars in billions)
 
   
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
    
June 30, 2016
    
June 30, 2015
    
Change
  
Average Common Equity
                                                
Institutional Securities
  
$
43.2
    
$
43.2
    
$
35.3
      
--
      
22
%
  
$
43.2
    
$
36.1
      
20
%
Wealth Management
    
15.3
      
15.3
      
11.3
      
--
      
35
%
    
15.3
      
10.9
      
40
%
Investment Management
    
2.8
      
2.8
      
2.3
      
--
      
22
%
    
2.8
      
2.3
      
22
%
Parent
    
7.7
      
6.9
      
18.3
      
12
%
    
(58
%)
    
7.3
      
17.0
      
(57
%)
Firm
  
$
69.0
    
$
68.2
    
$
67.2
      
1
%
    
3
%
  
$
68.6
    
$
66.3
      
3
%
                                                                 
                                                                 
Return on average Common Equity
                                                                
Institutional Securities
    
8
%
    
5
%
    
11
%
                    
6
%
    
15
%
        
Wealth Management
    
13
%
    
13
%
    
18
%
                    
13
%
    
18
%
        
Investment Management
    
11
%
    
7
%
    
28
%
                    
9
%
    
23
%
        
Firm    
8
 %    
6
 %    
10
 %                    
7
 %    
12
  %        
 
 
Notes:
- Beginning in 2016, the amount of capital allocated to the business segments was set at the beginning of the year, and will remain fixed throughout the
 
   year until the next annual reset.  Differences between Available and Required Capital will be reflected in Parent equity during the year.  Periods prior to
 
   2016 have not been recasted under the new methodology.
 
- Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
12
 
Earnings Per Share Summary
(unaudited, dollars in millions, except for per share data)
 
   
Quarter Ended
    
Percentage Change From:
    
Six Months Ended
    
Percentage
  
   
June 30, 2016
    
Mar 31, 2016
    
June 30, 2015
    
Mar 31, 2016
    
June 30, 2015
    
June 30, 2016
    
June 30, 2015
    
Change
  
                                                 
                                                 
Income (loss) from continuing operations
  
$
1,650
    
$
1,160
    
$
1,833
      
42
%
    
(10
%)
  
$
2,810
    
$
4,301
      
(35
%)
Net income applicable to nonredeemable noncontrolling interests
    
64
      
23
      
24
      
178
%
    
167
%
    
87
      
93
      
(6
%)
Income (loss) from continuing operations applicable to Morgan Stanley
    
1,586
      
1,137
      
1,809
      
39
%
    
(12
%)
    
2,723
      
4,208
      
(35
%)
Less: Preferred Dividends and allocation of earnings to Participating Restricted Stock Units
    
157
      
79
      
142
      
99
%
    
11
%
    
235
      
222
      
6
%
Income (loss) from continuing operations applicable to Morgan Stanley
    
1,429
      
1,058
      
1,667
      
35
%
    
(14
%)
    
2,488
      
3,986
      
(38
%)
                                                                 
Gain (loss) from discontinued operations after tax
    
(4
)
    
(3
)
    
(2
)
    
(33
%)
    
(100
%)
    
(7
)
    
(7
)
    
--
  
Less: Gain (loss) from discontinued operations after tax applicable to noncontrolling interests
    
0
      
0
      
0
      
--
      
--
      
0
      
0
      
--
  
Less: Allocation of earnings to Participating Restricted Stock Units
    
0
      
0
      
0
      
--
      
--
      
0
      
0
      
--
  
Earnings (loss) from discontinued operations applicable to Morgan Stanley common shareholders
    
(4
)
    
(3
)
    
(2
)
    
(33
%)
    
(100
%)
    
(7
)
    
(7
)
    
--
  
                                                                 
Earnings (loss) applicable to Morgan Stanley common shareholders
  
$
1,425
    
$
1,055
    
$
1,665
      
35
%
    
(14
%)
  
$
2,481
    
$
3,979
      
(38
%)
                                                                 
Average basic common shares outstanding (millions)
    
1,866
      
1,883
      
1,919
      
(1
%)
    
(3
%)
    
1,875
      
1,922
      
(2
%)
                                                                 
Earnings per basic share:
                                                                
Income from continuing operations
  
$
0.77
    
$
0.56
    
$
0.87
      
38
%
    
(11
%)
  
$
1.33
    
$
2.07
      
(36
%)
Discontinued operations
  
$
(0.01
)
  
$
-
    
$
-
      
*
      
*
    
$
(0.01
)
  
$
-
      
*
  
Earnings per basic share
  
$
0.76
    
$
0.56
    
$
0.87
      
36
%
    
(13
%)
  
$
1.32
    
$
2.07
      
(36
%)
                                                                 
Average diluted common shares outstanding and common stock equivalents (millions)
    
1,899
      
1,915
      
1,960
      
(1
%)
    
(3
%)
    
1,907
      
1,962
      
(3
%)
                                                                 
Earnings per diluted share:
                                                                
Income from continuing operations
  
$
0.75
    
$
0.55
    
$
0.85
      
36
%
    
(12
%)
  
$
1.30
    
$
2.03
      
(36
%)
Discontinued operations
  
$
-
    
$
-
    
$
-
      
--
      
--
    
$
-
    
$
-
      
--
  
Earnings per diluted share
  
$
0.75
    
$
0.55
    
$
0.85
      
36
%
    
(12
%)
  
$
1.30
    
$
2.03
      
(36
%)
 
 Notes:    - Refer to End Notes, GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
13
 
End Notes
 
Page 4:
(1)
For the quarters ended June 30, 2016, March 31, 2016 and June 30, 2015, the percentage of Institutional Securities corporate loans by credit rating was as follows:
 
- % investment grade: 30%, 36% and 45%
 
- % non-investment grade: 70%, 64% and 55%
(2)
For the quarters ended June 30, 2016, March 31, 2016 and June 30, 2015, the percentage of Institutional Securities corporate lending commitments by credit rating was as follows:
 
- % investment grade: 76%, 76% and 70%
 
- % non-investment grade: 24%, 24% and 30%
(3)
At June 30, 2016, March 31, 2016 and June 30, 2015, the "event-driven" portfolio of loans and lending commitments to non-investment grade borrowers were $13.0 billion, $10.6 billion and $11.8 billion, respectively.
(4)
The Institutional Securities business segment engages in other lending activity.  These activities include commercial and residential mortgage lending, asset-backed lending, corporate loans purchased in the secondary market, financing extended to equities and commodities customers, and loans to municipalities.
(5)
For the quarters ended June 30, 2016, March 31, 2016 and June 30, 2015, Institutional Securities recorded a provision (release) for credit losses of $17.2 million, $108.7 million and $2.2 million, respectively, related to loans and $(13.6) million, $15.2 million and $(28.7) million, respectively, related to lending commitments.
(6)
For the quarters ended June 30, 2016, March 31, 2016 and June 30, 2015, Wealth Management recorded a provision (release) for credit losses of $(0.8) million, $3.0 million and $1.6 million, respectively, related to loans. For the quarters ended June 30, 2016 and March 31, 2016, a provision of $0.2 million and $0.4 million was recorded, respectively, related to lending commitments, and there was no material provision for June 30, 2015.
   
Page 9:
(1)
The quarters ended June 30, 2016, March 31, 2016 and June 30, 2015 include investment gains or losses for certain funds included in the Firm's consolidated financial statements for which the limited partnership interests in these gains or losses were reported in net income (loss) applicable to noncontrolling interests.
   
Page 10:
(1)
Net Flows by region [inflow / (outflow)] for the quarters ended June 30, 2016, March 31, 2016 and June 30, 2015 were:
 
North America: $(1.7) billion, $0 billion and $(1.1) billion
 
International: $0 billion, $(3.6) billion and $(2.9) billion
(2)
Assets under management or supervision by region for the quarters ended June 30, 2016, March 31, 2016 and June 30, 2015 were:
 
North America: $264 billion, $264 billion and $252 billion
 
International: $142 billion, $141 billion and $151 billion
   
Page 11:
(1)
For the quarters ended June 30, 2016, March 31, 2016 and June 30, 2015, the U.S. Bank investment securities portfolio included held to maturity investment securities of $10.4 billion, $7.7 billion and $2.4 billion, respectively.
 
14
 
Definition of GAAP to Non-GAAP Measures
 
(a)
The Firm prepares its Consolidated Financial Statements using accounting principles generally accepted in the United States ("U.S. GAAP" or "GAAP").  From time to time, Morgan Stanley may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings conference calls, financial presentations and otherwise.  The Securities and Exchange Commission (SEC) defines a “non-GAAP financial measure” as a numerical measure of historical or future financial performance, financial positions, or cash flows that is subject to adjustments that effectively exclude, or include amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP.  Non-GAAP financial measures disclosed by Morgan Stanley are provided as additional information to investors and analysts in order to provide them with greater transparency about, or an alternative method for assessing, our financial condition, operating results, or prospective regulatory capital requirements. These measures are not in accordance with, or a substitute for U.S. GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies.  Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable GAAP financial measure.  In addition to the following notes, please also refer to the Firm's second quarter earnings release footnotes for such definitions and reconciliations.
(b)
The following are considered non-GAAP financial measures: earnings (losses) per diluted share excluding DVA, return on average common equity metrics, return on average common equity excluding DVA metrics, Tangible Common Equity, Tangible book value per common share and pre-tax margin.  These measures are calculated as follows:
      - The earnings (losses) per diluted share amounts, excluding DVA for periods prior to January 1, 2016 represent net income (loss) applicable to Morgan Stanley,
         adjusted for the positive / (negative) impact of DVA, less preferred dividends divided by the average number of diluted shares outstanding.
      - The return on average common equity equals net income applicable to Morgan Stanley less preferred dividends as a percentage of average common equity.
      - The return on average common equity excluding DVA for the periods prior to January 1, 2016 is adjusted for DVA in the numerator and denominator.
      -  Effective January 1, 2016, the Firm early adopted the provision of new accounting guidance that requires unrealized gains and losses from Morgan Stanley’s
         debt-related credit spreads and other credit factors (Debt Valuation Adjustments, or DVA) to be presented in other comprehensive income as opposed to net
         revenues and net income.  As a result of this adoption, the Firm has redefined the calculation of return on average common equity excluding DVA to adjust for
         DVA only in the denominator.
      - Tangible common equity equals common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.
      - Tangible book value per common share equals tangible common equity divided by period end common shares outstanding.
      - Pre-tax profit margin percentages represent income from continuing operations before income taxes as percentages of net revenues.
(c)
The fully phased-in Common Equity Tier 1 risk-based capital ratio and fully phased-in Supplementary Leverage Ratio are pro-forma estimates which represent non-GAAP financial measures that the Firm considers to be useful measures for evaluating compliance with new regulatory capital requirements that have not yet become effective.  Supplementary leverage ratio equals Tier 1 capital (calculated under U.S. Basel III transitional rules) divided by the total supplementary leverage exposure.  For information on the calculation of regulatory capital and ratios for prior periods, please refer to Part II, Item 7 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's 2015 Form 10-K and Part I, Item 2 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's 10-Q for the quarter ended March 31, 2016.
 
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Definition of Performance Metrics
 
(a)
Book value per common share equals common equity divided by period end common shares outstanding.
(b)
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 21 to the consolidated financial statements included in the Firm's Annual Report on Form 10-K for the year ended December 31, 2015 (2015 Form 10-K).
(c)
The Firm’s binding risk-based capital ratios for regulatory purposes under U.S. Basel III are the lower of the capital ratios computed under the (i) standardized approaches for calculating credit risk RWAs and market risk RWAs (the “Standardized Approach”); and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”). At June 30, 2016, the binding ratio is based on the Advanced Approach transitional rules. For information on the calculation of regulatory capital and ratios for prior periods, please refer to Part II, Item 7 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's 2015 Form 10-K and Part I, Item 2 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's 10-Q for the quarter ended March 31, 2016.
(d)
The global liquidity reserve, which is held within the bank and non-bank operating subsidiaries, is comprised of highly liquid and diversified cash and cash equivalents and unencumbered securities. Eligible unencumbered securities include U.S. government securities, U.S. agency securities, U.S. agency mortgage-backed securities, non-U.S. government securities and other highly liquid investment grade securities.
(e)
The Firm's goodwill and intangible balances are net of allowable mortgage servicing rights deduction.
(f)
Institutional Securities net income applicable to noncontrolling interests primarily represents the allocation to Mitsubishi UFJ Financial Group, Inc. of Morgan Stanley MUFG Securities Co., Ltd, which the Firm consolidates.
(g)
VaR represents the loss amount that one would not expect to exceed, on average, more than five times every one hundred trading days in the 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 Part II, Item 7A "Quantitative and Qualitative Disclosures about Market Risk" included in the Firm's 2015 Form 10-K.
(h)
Annualized revenue per Wealth Management representative is defined as annualized revenue divided by average representative headcount.
(i)
Client assets per Wealth Management representative represents total client assets divided by period end representative headcount.
(j)
Wealth Management client liabilities reflect U.S. Bank lending and broker dealer margin activity.
(k)
Wealth Management fee based client account assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
(l)
Wealth Management fee based asset flows include net new fee-based assets, net account transfers, dividends, interest, and client fees and exclude cash management related activity.
(m)
Investment Management Alternative/Other asset class includes products in Fund of Funds, Real Estate, Private Equity and Credit strategies, as well as Multi-Asset portfolios.
(n)
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.
(o)
The share of minority stake assets represents Investment Management's proportional share of assets managed by entities in which it owns a minority stake.
(p)
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 transactions with affiliated entities.
(q)
The Institutional Securities U.S. Bank other lending data includes activities related to commercial and residential mortgage lending, asset-backed lending, corporate loans purchased in the secondary market, financing extended to equities and commodities customers, and loans to municipalities.
(r)
The Firm’s capital estimation and attribution to the business segments are based on the Required Capital framework, an internal capital adequacy measure. This framework is a risk-based and leverage use-of-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 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 equity.  Effective January 1, 2016 the common equity estimation and attribution to the business segments is based on the Firm’s fully phased-in regulatory capital, including supplementary leverage and stress losses (which results in more capital being attributed to the business segments), whereas prior periods were attributed based on transitional regulatory capital provisions.  Also beginning in 2016, the amount of capital allocated to the business segments was set at the beginning of the year, and will remain fixed throughout the year until the next annual reset. The Required Capital framework will evolve over time in response to changes in the business and regulatory environment and to incorporate enhancements in modeling techniques.  For further discussion of the framework, refer to Part II, Item 7 “Liquidity and Capital Resources—Regulatory Requirements” in Morgan Stanley’s Annual Report on Form 10-K for the year ended December 31, 2015 and Part I, Item 2 "Liquidity and Capital Resources—Regulatory Requirements" in Morgan Stanley's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016.
(s)
Preferred stock dividend / other includes allocation of earnings to Participating Restricted Stock Units (RSUs).
(t)
The Firm calculates earnings per share using the two-class method as described under the accounting guidance for earnings per share.  For further discussion of the Firm's earnings per share calculations, see page 13 of the Financial Supplement and Note 15 to the consolidated financial statements in the Firm's 10-Q for the quarter ended March 31, 2016.
 
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Legal Notice
 
 
 
 
This Financial Supplement contains financial, statistical and business-related information, as well as business and segment trends.
The information should be read in conjunction with the Firm's second quarter earnings press release issued July 20, 2016.
 
 
 
 
 
 
 
 
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