MORGAN STANLEY - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - January 17, 2017

Attached files

file filename
EX-99.3 - EXHIBIT 99.3 - MORGAN STANLEYa51494060ex99_3.htm
EX-99.1 - EXHIBIT 99.1 - MORGAN STANLEYa51494060ex99_1.htm
8-K - MORGAN STANLEY 8-K - MORGAN STANLEYa51494060.htm
Exhibit 99.2
 
 
Quarterly Financial Supplement - 4Q 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 U.S. 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:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
    
Dec 31, 2016
    
Dec 31, 2015
    
Change
  
Net revenues
                                                
Institutional Securities
  
$
4,614
    
$
4,553
    
$
3,419
      
1
%
    
35
%
  
$
17,459
    
$
17,953
      
(3
%)
Wealth Management
    
3,990
      
3,881
      
3,751
      
3
%
    
6
%
    
15,350
      
15,100
      
2
%
Investment Management
    
500
      
552
      
621
      
(9
%)
    
(19
%)
    
2,112
      
2,315
      
(9
%)
Intersegment Eliminations
    
(83
)
    
(77
)
    
(53
)
    
(8
%)
    
(57
%)
    
(290
)
    
(213
)
    
(36
%)
Net revenues
  
$
9,021
    
$
8,909
    
$
7,738
      
1
%
    
17
%
  
$
34,631
    
$
35,155
      
(1
%)
                                                                 
Income (loss) from continuing operations before tax
                                                                
Institutional Securities
  
$
1,326
    
$
1,383
    
$
548
      
(4
%)
    
142
%
  
$
5,123
    
$
4,671
      
10
%
Wealth Management
    
891
      
901
      
768
      
(1
%)
    
16
%
    
3,437
      
3,332
      
3
%
Investment Management
    
28
      
97
      
123
      
(71
%)
    
(77
%)
    
287
      
492
      
(42
%)
Intersegment Eliminations
    
1
      
0
      
0
      
*
      
*
      
1
      
0
      
*
  
Income (loss) from continuing operations before tax
  
$
2,246
    
$
2,381
    
$
1,439
      
(6
%)
    
56
%
  
$
8,848
    
$
8,495
      
4
%
                                                                 
Net Income (loss) applicable to Morgan Stanley
                                                               
Institutional Securities
  
$
1,104
    
$
966
    
$
341
      
14
%
    
*
    
$
3,649
    
$
3,696
      
(1
%)
Wealth Management
    
531
      
564
      
480
      
(6
%)
    
11
%
    
2,104
      
2,085
      
1
%
Investment Management
    
30
      
67
      
87
      
(55
%)
    
(66
%)
    
225
      
346
      
(35
%)
Intersegment Eliminations
    
1
      
0
      
0
      
*
      
*
      
1
      
0
      
*
  
Net Income (loss) applicable to Morgan Stanley
  
$
1,666
    
$
1,597
    
$
908
      
4
%
    
83
%
  
$
5,979
    
$
6,127
      
(2
%)
                                                                 
Financial Metrics:
                                                                
                                                                 
Earnings per diluted share
  
$
0.81
    
$
0.81
    
$
0.39
      
--
      
108
%
  
$
2.92
    
$
2.90
      
1
%
Earnings per diluted share excluding DVA
  
$
0.81
    
$
0.81
    
$
0.43
      
--
      
88
%
  
$
2.92
    
$
2.70
      
8
%
                                                                 
Return on average common equity
    
8.7
%
    
8.7
%
    
4.4
%
                    
8.0
%
    
8.5
%
        
Return on average common equity excluding DVA
    
8.7
%
    
8.7
%
    
4.9
%
                    
8.0
%
    
7.8
%
        
 
 
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, U.S. 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:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
    
Dec 31, 2016
    
Dec 31, 2015
    
Change
  
Revenues:
                                                
Investment banking
  
$
1,377
    
$
1,225
    
$
1,310
      
12
%
    
5
%
  
$
4,933
    
$
5,594
      
(12
%)
Trading
    
2,789
      
2,609
      
1,465
      
7
%
    
90
%
    
10,209
      
10,114
      
1
%
Investments
    
(19
)
    
87
      
133
      
*
      
*
      
160
      
541
      
(70
%)
Commissions and fees
    
1,043
      
991
      
1,095
      
5
%
    
(5
%)
    
4,109
      
4,554
      
(10
%)
Asset management, distribution and admin. fees
    
2,754
      
2,686
      
2,611
      
3
%
    
5
%
    
10,697
      
10,766
      
(1
%)
Other
    
194
      
308
      
87
      
(37
%)
    
123
%
    
825
      
493
      
67
%
Total non-interest revenues
    
8,138
      
7,906
      
6,701
      
3
%
    
21
%
    
30,933
      
32,062
      
(4
%)
                                                                 
Interest income
    
1,868
      
1,734
      
1,514
      
8
%
    
23
%
    
7,016
      
5,835
      
20
%
Interest expense
    
985
      
731
      
477
      
35
%
    
106
%
    
3,318
      
2,742
      
21
%
Net interest
    
883
      
1,003
      
1,037
      
(12
%)
    
(15
%)
    
3,698
      
3,093
      
20
%
Net revenues
    
9,021
      
8,909
      
7,738
      
1
%
    
17
%
    
34,631
      
35,155
      
(1
%)
Non-interest expenses:
                                                                
Compensation and benefits
    
4,083
      
4,097
      
3,650
      
--
      
12
%
    
15,878
      
16,016
      
(1
%)
                                                                 
Non-compensation expenses:
                                                                
Occupancy and equipment
    
311
      
339
      
348
      
(8
%)
    
(11
%)
    
1,308
      
1,382
      
(5
%)
Brokerage, clearing and exchange fees
    
480
      
491
      
457
      
(2
%)
    
5
%
    
1,920
      
1,892
      
1
%
Information processing and communications
    
460
      
456
      
467
      
1
%
    
(1
%)
    
1,787
      
1,767
      
1
%
Marketing and business development
    
169
      
130
      
194
      
30
%
    
(13
%)
    
587
      
681
      
(14
%)
Professional services
    
578
      
489
      
638
      
18
%
    
(9
%)
    
2,128
      
2,298
      
(7
%)
Other
    
694
      
526
      
545
      
32
%
    
27
%
    
2,175
      
2,624
      
(17
%)
Total non-compensation expenses 
    
2,692
      
2,431
      
2,649
      
11
%
    
2
%
    
9,905
      
10,644
      
(7
%)
                                                                 
Total non-interest expenses
    
6,775
      
6,528
      
6,299
      
4
%
    
8
%
    
25,783
      
26,660
      
(3
%)
                                                                 
Income (loss) from continuing operations before taxes
    
2,246
      
2,381
      
1,439
      
(6
%)
    
56
%
    
8,848
      
8,495
      
4
%
Income tax provision / (benefit) from continuing operations (1)
    
566
      
749
      
496
      
(24
%)
    
14
%
    
2,726
      
2,200
      
24
%
Income (loss) from continuing operations
    
1,680
      
1,632
      
943
      
3
%
    
78
%
    
6,122
      
6,295
      
(3
%)
Gain (loss) from discontinued operations after tax
    
0
      
8
      
(7
)
    
*
      
*
      
1
      
(16
)
    
*
  
Net income (loss)
  
$
1,680
    
$
1,640
    
$
936
      
2
%
    
79
%
  
$
6,123
    
$
6,279
      
(2
%)
Net income applicable to nonredeemable noncontrolling interests
    
14
      
43
      
28
      
(67
%)
    
(50
%)
    
144
      
152
      
(5
%)
Net income (loss) applicable to Morgan Stanley
    
1,666
      
1,597
      
908
      
4
%
    
83
%
    
5,979
      
6,127
      
(2
%)
Preferred stock dividend / Other
    
157
      
79
      
155
      
99
%
    
1
%
    
471
      
456
      
3
%
Earnings (loss) applicable to Morgan Stanley common shareholders
  
$
1,509
    
$
1,518
    
$
753
      
(1
%)
    
100
%
  
$
5,508
    
$
5,671
      
(3
%)
                                                                 
Pre-tax profit margin
    
25
%
    
27
%
    
19
%
                    
26
%
    
24
%
        
Compensation and benefits as a % of net revenues
    
45
%
    
46
%
    
47
%
                    
46
%
    
46
%
        
Non-compensation expenses as a % of net revenues
    
30
%
    
27
%
    
34
%
                    
29
%
    
30
%
        
Effective tax rate from continuing operations (1)
    
25.2
%
    
31.5
%
    
34.5
%
                    
30.8
%
    
25.9
%
        

 
Notes:
 -
Refer to End Notes, U.S. 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:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
    
Dec 31, 2016
    
Dec 31, 2015
    
Change
  
                                                 
                                                 
Regional revenues
                                                
Americas
  
$
6,573
    
$
6,624
    
$
5,721
      
(1
%)
    
15
%
  
$
25,487
    
$
25,080
      
2
%
EMEA (Europe, Middle East, Africa)
    
1,317
      
1,236
      
957
      
7
%
    
38
%
    
4,994
      
5,353
      
(7
%)
Asia
    
1,131
      
1,049
      
1,060
      
8
%
    
7
%
    
4,150
      
4,722
      
(12
%)
Consolidated net revenues
  
$
9,021
    
$
8,909
    
$
7,738
      
1
%
    
17
%
  
$
34,631
    
$
35,155
      
(1
%)
                                                                 
Worldwide employees
    
55,311
      
55,256
      
56,218
      
--
      
(2
%)
                        
                                                                 
Deposits
  
$
155,863
    
$
151,843
    
$
156,034
      
3
%
    
--
                          
Assets
  
$
811,180
    
$
813,891
    
$
787,465
      
--
      
3
%
                        
Risk-weighted assets
  
$
359,405
    
$
358,486
    
$
384,162
      
--
      
(6
%)
                        
Global liquidity reserve
  
$
202,297
    
$
197,094
    
$
203,264
      
3
%
    
--
                          
Long-term debt outstanding
  
$
164,775
    
$
163,927
    
$
153,768
      
1
%
    
7
%
                        
Maturities of long-term debt outstanding (next 12 months)
  
$
26,126
    
$
27,255
    
$
22,396
      
(4
%)
    
17
%
                        
                                                                 
Common equity
  
$
68,530
    
$
69,629
    
$
67,662
      
(2
%)
    
1
%
                        
Less: Goodwill and intangible assets
    
(9,296
)
    
(9,329
)
    
(9,564
)
    
--
      
(3
%)
                        
Tangible common equity
  
$
59,234
    
$
60,300
    
$
58,098
      
(2
%)
    
2
%
                        
                                                                 
Preferred equity
  
$
7,520
    
$
7,520
    
$
7,520
      
--
      
--
                          
Junior subordinated debt issued to capital trusts (1)
  
$
-
    
$
-
    
$
2,870
      
--
      
*
                          
                                                                 
Period end common shares outstanding (millions)
    
1,852
      
1,876
      
1,920
      
(1
%)
    
(4
%)
                        
Book value per common share
  
$
36.99
    
$
37.11
    
$
35.24
                                          
Tangible book value per common share
  
$
31.98
    
$
32.13
    
$
30.26
                                          
                                                                 
Common Equity Tier 1 capital Advanced (Transitional)
  
$
60,480
    
$
60,340
    
$
59,409
      
--
      
2
%
                        
Tier 1 capital Advanced (Transitional)
  
$
68,219
    
$
67,603
    
$
66,722
      
1
%
    
2
%
                        
                                                                 
Common Equity Tier 1 capital ratio Advanced (Transitional)
    
16.8
%
    
16.8
%
    
15.5
%
                                        
Pro-forma Common Equity Tier 1 capital ratio Advanced (Fully Phased-in)
    
15.8
%
    
15.8
%
    
14.0
%
                                        
Tier 1 capital ratio Advanced (Transitional)
    
19.0
%
    
18.9
%
    
17.4
%
                                        
Tier 1 leverage ratio (Transitional)
    
8.4
%
    
8.3
%
    
8.3
%
                                        
Supplementary Leverage Ratio (Transitional)
    
6.4
%
    
6.3
%
    
6.1
%
                                        
Pro-forma Supplementary Leverage Ratio (Fully Phased-in)
    
6.3
%
    
6.2
%
    
5.8
%
                                        
 
 
Notes:
 -
Refer to End Notes, U.S. 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:
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
  
                               
Institutional Securities
                              
                               
Corporate loans (1)
  
$
13.6
    
$
14.5
    
$
16.2
      
(6
%)
    
(16
%)
                                         
Corporate lending commitments (2)
  
$
86.0
    
$
80.5
    
$
91.6
      
7
%
    
(6
%)
                                         
Corporate Loans and Lending Commitments (3)
  
$
99.6
    
$
95.0
    
$
107.8
      
5
%
    
(8
%)
                                         
Other loans
  
$
28.9
    
$
29.4
    
$
30.7
      
(2
%)
    
(6
%)
                                         
Other lending commitments
  
$
4.2
    
$
5.0
    
$
4.0
      
(16
%)
    
5
%
                                         
Other Loans and Lending Commitments (4)
  
$
33.1
    
$
34.4
    
$
34.7
      
(4
%)
    
(5
%)
                                         
Institutional Securities Loans and Lending Commitments (5)
  
$
132.7
    
$
129.4
    
$
142.5
      
3
%
    
(7
%)
                                         
                                         
Wealth Management
                                        
                                         
Loans
  
$
60.4
    
$
57.8
    
$
49.5
      
4
%
    
22
%
                                         
Lending commitments
  
$
8.3
    
$
8.1
    
$
5.8
      
2
%
    
43
%
                                         
Wealth Management Loans and Lending Commitments (6)
  
$
68.7
    
$
65.9
    
$
55.3
      
4
%
    
24
%
                                         
Consolidated Loans and Lending Commitments
  
$
201.4
    
$
195.3
    
$
197.8
      
3
%
    
2
%
 
 
Notes:
 -
Refer to End Notes, U.S. 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:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
    
Dec 31, 2016
    
Dec 31, 2015
    
Change
  
Revenues:
                                                
Investment banking
  
$
1,274
    
$
1,104
    
$
1,214
      
15
%
    
5
%
  
$
4,476
    
$
5,008
      
(11
%)
Trading
    
2,605
      
2,393
      
1,209
      
9
%
    
115
%
    
9,387
      
9,400
      
--
  
Investments
    
3
      
36
      
33
      
(92
%)
    
(91
%)
    
147
      
274
      
(46
%)
Commissions and fees
    
602
      
592
      
603
      
2
%
    
--
      
2,456
      
2,616
      
(6
%)
Asset management, distribution and admin. fees
    
83
      
68
      
70
      
22
%
    
19
%
    
293
      
281
      
4
%
Other
    
150
      
243
      
31
      
(38
%)
    
*
      
535
      
221
      
142
%
Total non-interest revenues
    
4,717
      
4,436
      
3,160
      
6
%
    
49
%
    
17,294
      
17,800
      
(3
%)
                                                                 
Interest income
    
1,006
      
980
      
772
      
3
%
    
30
%
    
4,005
      
3,190
      
26
%
Interest expense
    
1,109
      
863
      
513
      
29
%
    
116
%
    
3,840
      
3,037
      
26
%
Net interest
    
(103
)
    
117
      
259
      
*
      
*
      
165
      
153
      
8
%
Net revenues
    
4,614
      
4,553
      
3,419
      
1
%
    
35
%
    
17,459
      
17,953
      
(3
%)
                                                                 
Compensation and benefits
    
1,611
      
1,657
      
1,226
      
(3
%)
    
31
%
    
6,275
      
6,467
      
(3
%)
Non-compensation expenses
    
1,677
      
1,513
      
1,645
      
11
%
    
2
%
    
6,061
      
6,815
      
(11
%)
Total non-interest expenses
    
3,288
      
3,170
      
2,871
      
4
%
    
15
%
    
12,336
      
13,282
      
(7
%)
                                                                 
                                                                 
Income (loss) from continuing operations before taxes
    
1,326
      
1,383
      
548
      
(4
%)
    
142
%
    
5,123
      
4,671
      
10
%
Income tax provision / (benefit) from continuing operations (1)
    
209
      
381
      
167
      
(45
%)
    
25
%
    
1,318
      
825
      
60
%
Income (loss) from continuing operations
    
1,117
      
1,002
      
381
      
11
%
    
193
%
    
3,805
      
3,846
      
(1
%)
Gain (loss) from discontinued operations after tax
   
(2
)
    
8
      
(7
)
    
*
      
71
%
    
(1
)
    
(17
)
    
94
%
Net income (loss)
    
1,115
      
1,010
      
374
      
10
%
    
198
%
    
3,804
      
3,829
      
(1
%)
Net income applicable to nonredeemable noncontrolling interests
    
11
      
44
      
33
      
(75
%)
    
(67
%)
    
155
      
133
      
17
%
Net income (loss) applicable to Morgan Stanley
  
$
1,104
    
$
966
    
$
341
      
14
%
    
*
    
$
3,649
    
$
3,696
      
(1
%)
                                                                 
                                                                 
Pre-tax profit margin
    
29
%
    
30
%
    
16
%
                    
29
%
    
26
%
        
Compensation and benefits as a % of net revenues
    
35
%
    
36
%
    
36
%
                    
36
%
    
36
%
        
 
 
Notes:
 -
Effective July 1, 2016, the Wealth Management and Institutional Securities segments entered into an agreement whereby Institutional Securities assumed management of Wealth Management’s fixed income client-driven trading activities and related employees in an effort to build synergies across the businesses and more efficiently risk manage the Firm’s trading activities.  Accordingly, Institutional Securities began to pay fees to Wealth Management based on distribution activity which are reflected as Commissions and fees revenues for Wealth Management and as Brokerage, clearing and exchange fees expense for Institutional Securities.  Institutional Securities results also reflect the ongoing revenues and compensation and benefits expenses related to these fixed income trading activities. Prior periods have not been recast for this new inter-segment agreement.
  -
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, U.S. 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:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
    
Dec 31, 2016
    
Dec 31, 2015
    
Change
  
Investment Banking
                                                
Advisory revenues
  
$
628
    
$
504
    
$
516
      
25
%
    
22
%
  
$
2,220
    
$
1,967
      
13
%
Underwriting revenues
                                                                
Equity
    
225
      
236
      
352
      
(5
%)
    
(36
%)
    
887
      
1,398
      
(37
%)
Fixed income
    
421
      
364
      
346
      
16
%
    
22
%
    
1,369
      
1,643
      
(17
%)
Total underwriting revenues
    
646
      
600
      
698
      
8
%
    
(7
%)
    
2,256
      
3,041
      
(26
%)
                                                                 
Total investment banking revenues
  
$
1,274
    
$
1,104
    
$
1,214
      
15
%
    
5
%
  
$
4,476
    
$
5,008
      
(11
%)
                                                                 
Sales & Trading
                                                                
Equity
  
$
1,953
    
$
1,883
    
$
1,784
      
4
%
    
9
%
  
$
8,037
    
$
8,288
      
(3
%)
Fixed Income
    
1,468
      
1,479
      
460
      
(1
%)
    
*
      
5,117
      
4,758
      
8
%
Other
    
(234
)
    
(192
)
    
(103
)
    
(22
%)
    
(127
%)
    
(853
)
    
(596
)
    
(43
%)
Total sales & trading net revenues
  
$
3,187
    
$
3,170
    
$
2,141
      
1
%
    
49
%
  
$
12,301
    
$
12,450
      
(1
%)
                                                                 
Investments & Other
                                                                
Investments
  
$
3
    
$
36
    
$
33
      
(92
%)
    
(91
%)
  
$
147
    
$
274
      
(46
%)
Other
    
150
      
243
      
31
      
(38
%)
    
*
      
535
      
221
      
142
%
Total investments & other revenues
  
$
153
    
$
279
    
$
64
      
(45
%)
    
139
%
  
$
682
    
$
495
      
38
%
                                                                 
Institutional Securities net revenues
  
$
4,614
    
$
4,553
    
$
3,419
      
1
%
    
35
%
  
$
17,459
    
$
17,953
      
(3
%)
                                                                 
Average Daily 95% / One-Day Value-at-Risk ("VaR")
                                                                
Primary Market Risk Category ($ millions, pre-tax)
                                                                
Interest rate and credit spread
  
$
25
    
$
26
    
$
31
                                          
Equity price
  
$
14
    
$
15
    
$
18
                                          
Foreign exchange rate
  
$
9
    
$
7
    
$
11
                                          
Commodity price
  
$
8
    
$
9
    
$
12
                                          
                                                                 
Aggregation of Primary Risk Categories
  
$
32
    
$
32
    
$
43
                                          
                                                                 
Credit Portfolio VaR
  
$
17
    
$
22
    
$
13
                                          
                                                                 
Trading VaR
  
$
39
    
$
42
    
$
46
                                          
 
 
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:
   
   December 31, 2015: Total QTD: $(124) million; Fixed Income: $(90) million; Equity: $(34) million
   
   December 31, 2015: Total YTD: $618 million; Fixed Income: $455 million; Equity: $163 million
  -
Refer to End Notes, U.S. 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:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
    
Dec 31, 2016
    
Dec 31, 2015
    
Change
  
Revenues:
                                                
Investment banking
  
$
111
    
$
129
    
$
105
      
(14
%)
    
6
%
  
$
484
    
$
623
      
(22
%)
Trading
    
186
      
229
      
256
      
(19
%)
    
(27
%)
    
861
      
731
      
18
%
Investments
    
2
      
0
      
0
      
*
      
*
      
0
      
18
      
*
  
Commissions and fees
    
477
      
433
      
500
      
10
%
    
(5
%)
    
1,745
      
1,981
      
(12
%)
Asset management, distribution and admin. fees
    
2,185
      
2,133
      
2,065
      
2
%
    
6
%
    
8,454
      
8,536
      
(1
%)
Other
    
45
      
72
      
46
      
(38
%)
    
(2
%)
    
277
      
255
      
9
%
Total non-interest revenues
    
3,006
      
2,996
      
2,972
      
--
      
1
%
    
11,821
      
12,144
      
(3
%)
                                                                 
Interest income
    
1,075
      
979
      
809
      
10
%
    
33
%
    
3,888
      
3,105
      
25
%
Interest expense
    
91
      
94
      
30
      
(3
%)
    
*
      
359
      
149
      
141
%
Net interest
    
984
      
885
      
779
      
11
%
    
26
%
    
3,529
      
2,956
      
19
%
Net revenues
    
3,990
      
3,881
      
3,751
      
3
%
    
6
%
    
15,350
      
15,100
      
2
%
                                                                 
Compensation and benefits
    
2,223
      
2,203
      
2,146
      
1
%
    
4
%
    
8,666
      
8,595
      
1
%
Non-compensation expenses 
    
876
      
777
      
837
      
13
%
    
5
%
    
3,247
      
3,173
      
2
%
Total non-interest expenses
    
3,099
      
2,980
      
2,983
      
4
%
    
4
%
    
11,913
      
11,768
      
1
%
                                                                 
Income (loss) from continuing operations before taxes
    
891
      
901
      
768
      
(1
%)
    
16
%
    
3,437
      
3,332
      
3
%
Income tax provision / (benefit) from continuing operations
    
360
      
337
      
288
      
7
%
    
25
%
    
1,333
      
1,247
      
7
%
Income (loss) from continuing operations
    
531
      
564
      
480
      
(6
%)
    
11
%
    
2,104
      
2,085
      
1
%
Gain (loss) from discontinued operations after tax
    
0
      
0
      
0
      
--
      
--
      
0
      
0
      
--
  
Net income (loss)
    
531
      
564
      
480
      
(6
%)
    
11
%
    
2,104
      
2,085
      
1
%
Net income applicable to nonredeemable noncontrolling interests
    
-
      
-
      
-
      
--
      
--
      
-
      
-
      
--
  
Net income (loss) applicable to Morgan Stanley
  
$
531
    
$
564
    
$
480
      
(6
%)
    
11
%
  
$
2,104
    
$
2,085
      
1
%
                                                                 
Pre-tax profit margin
    
22
%
    
23
%
    
20
%
                    
22
%
    
22
%
        
Compensation and benefits as a % of net revenues
    
56
%
    
57
%
    
57
%
                    
56
%
    
57
%
        
 
 
Notes:
 -
Effective July 1, 2016, the Wealth Management and Institutional Securities segments entered into an agreement whereby Institutional Securities assumed management of Wealth Management’s fixed income client-driven trading activities and related employees in an effort to build synergies across the businesses and more efficiently risk manage the Firm’s trading activities.  Accordingly, Institutional Securities began to pay fees to Wealth Management based on distribution activity which are reflected as Commissions and fees revenues for Wealth Management and as Brokerage, clearing and exchange fees expense for Institutional Securities.  Institutional Securities results also reflect the ongoing revenues and compensation and benefits expenses related to these fixed income trading activities. Prior periods have not been recast for this new inter-segment agreement.
  -
Refer to End Notes, U.S. 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:
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
  
                               
                               
Bank deposit program (billions)
  
$
153
    
$
149
    
$
149
      
3
%
    
3
%
                                         
Wealth Management Metrics
                                        
                                         
Wealth Management representatives
    
15,763
      
15,856
      
15,889
      
(1
%)
    
(1
%)
                                         
Annualized revenue per representative (000's)
  
$
1,010
    
$
977
    
$
947
      
3
%
    
7
%
                                         
Client assets (billions)
  
$
2,103
    
$
2,090
    
$
1,985
      
1
%
    
6
%
Client assets per representative (millions)
  
$
133
    
$
132
    
$
125
      
1
%
    
6
%
Client liabilities (billions)
  
$
73
    
$
70
    
$
64
      
4
%
    
14
%
                                         
Fee-based asset flows (billions)
  
$
17.1
    
$
13.5
    
$
11.4
      
27
%
    
50
%
Fee-based client account assets (billions)
  
$
877
    
$
855
    
$
795
      
3
%
    
10
%
Fee-based assets as a % of client assets
    
42
%
    
41
%
    
40
%
                
                                         
Retail locations
    
601
      
608
      
608
      
(1
%)
    
(1
%)
 
 
Notes:
 -
Refer to End Notes, U.S. 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:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
    
Dec 31, 2016
    
Dec 31, 2015
    
Change
  
Revenues:
                                                
Investment banking
  
$
1
    
$
(2
)
  
$
-
      
*
      
*
    
$
-
    
$
1
      
*
  
Trading
    
6
      
(3
)
    
2
      
*
      
200
%
    
(2
)
    
(1
)
    
(100
%)
Investments (1)
    
(24
)
    
51
      
100
      
*
      
*
      
13
      
249
      
(95
%)
Commissions and fees
    
0
      
0
      
1
      
--
      
*
      
3
      
1
      
200
%
Asset management, distribution and admin. fees
    
512
      
508
      
502
      
1
%
    
2
%
    
2,063
      
2,049
      
1
%
Other
    
3
      
(3
)
    
17
      
*
      
(82
%)
    
31
      
32
      
(3
%)
Total non-interest revenues
    
498
      
551
      
622
      
(10
%)
    
(20
%)
    
2,108
      
2,331
      
(10
%)
                                                                 
Interest income
    
0
      
1
      
1
      
*
      
*
      
5
      
2
      
150
%
Interest expense
    
(2
)
    
0
      
2
      
*
      
*
      
1
      
18
      
(94
%)
Net interest
    
2
      
1
      
(1
)
    
100
%
    
*
      
4
      
(16
)
    
*
  
Net revenues
    
500
      
552
      
621
      
(9
%)
    
(19
%)
    
2,112
      
2,315
      
(9
%)
                                                                 
Compensation and benefits
    
249
      
237
      
278
      
5
%
    
(10
%)
    
937
      
954
      
(2
%)
Non-compensation expenses 
    
223
      
218
      
220
      
2
%
    
1
%
    
888
      
869
      
2
%
Total non-interest expenses
    
472
      
455
      
498
      
4
%
    
(5
%)
    
1,825
      
1,823
      
--
  
                                                                 
Income (loss) from continuing operations before taxes
    
28
      
97
      
123
      
(71
%)
    
(77
%)
    
287
      
492
      
(42
%)
Income tax provision / (benefit) from continuing operations
    
(3
)
    
31
      
41
      
*
      
*
      
75
      
128
      
(41
%)
Income (loss) from continuing operations
    
31
      
66
      
82
      
(53
%)
    
(62
%)
    
212
      
364
      
(42
%)
Gain (loss) from discontinued operations after tax
    
2
      
0
      
0
      
*
      
*
      
2
      
1
      
100
%
Net income (loss)
    
33
      
66
      
82
      
(50
%)
    
(60
%)
    
214
      
365
      
(41
%)
Net income applicable to nonredeemable noncontrolling interests
    
3
      
(1
)
    
(5
)
    
*
      
*
      
(11
)
    
19
      
*
  
Net income (loss) applicable to Morgan Stanley
  
$
30
    
$
67
    
$
87
      
(55
%)
    
(66
%)
  
$
225
    
$
346
      
(35
%)
                                                                 
Pre-tax profit margin
    
6
%
    
18
%
    
20
%
                    
14
%
    
21
%
        
Compensation and benefits as a % of net revenues
    
50
%
    
43
%
    
45
%
                    
44
%
    
41
%
        
 
 
Notes:
 -
Refer to End Notes, U.S. 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:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
    
Dec 31, 2016
    
Dec 31, 2015
    
Change
  
                                                 
Assets under management or supervision (billions)
                                                
                                                 
Net flows by asset class (1)
                                                
Equity
  
$
(1.0
)
  
$
(1.9
)
  
$
(1.9
)
    
47
%
    
47
%
  
$
(5.0
)
  
$
(14.8
)
    
66
%
Fixed Income
    
0.3
      
0.9
      
-
      
(67
%)
    
*
      
(0.8
)
    
(2.2
)
    
64
%
Liquidity
    
9.2
      
5.4
      
1.4
      
70
%
    
*
      
14.6
      
20.7
      
(29
%)
Alternative / Other products (2)
    
(0.5
)
    
(0.5
)
    
(0.5
)
    
--
      
--
      
(2.2
)
    
3.6
      
*
  
                                                                 
Total net flows
  
$
8.0
    
$
3.9
    
$
(1.0
)
    
105
%
    
*
    
$
6.6
    
$
7.3
      
(10
%)
                                                                 
Assets under management or supervision by asset class (3)
                                                          
Equity
  
$
79
    
$
83
    
$
83
      
(5
%)
    
(5
%)
                        
Fixed Income
    
60
      
63
      
60
      
(5
%)
    
--
                          
Liquidity
    
163
      
154
      
149
      
6
%
    
9
%
                        
Alternative / Other products
    
115
      
117
      
114
      
(2
%)
    
1
%
                        
                                                                 
Total Assets Under Management or Supervision
  
$
417
    
$
417
    
$
406
      
--
      
3
%
                        
Share of minority stake assets
  
$
8
    
$
7
    
$
8
      
14
%
    
--
                          
 
 
Notes:
 -
Refer to End Notes, U.S. 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:
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
  
                               
                               
U.S. Bank assets
  
$
180.7
    
$
173.9
    
$
174.2
      
4
%
    
4
%
                                         
U.S. Bank investment securities portfolio (1)
  
$
63.9
    
$
64.7
    
$
57.9
      
(1
%)
    
10
%
                                         
                                         
Wealth Management U.S. Bank Data
                                        
Securities-based lending and other loans
  
$
36.0
    
$
34.1
    
$
28.6
      
6
%
    
26
%
Residential real estate loans
    
24.4
      
23.6
      
20.9
      
3
%
    
17
%
Total Securities-based and residential loans
  
$
60.4
    
$
57.7
    
$
49.5
      
5
%
    
22
%
                                         
                                         
Institutional Securities U.S. Bank Data
                                        
Corporate Lending
  
$
6.4
    
$
8.3
    
$
10.0
      
(23
%)
    
(36
%)
Other Lending:
                                        
Corporate loans
    
13.9
      
12.7
      
12.9
      
9
%
    
8
%
Wholesale real estate and other loans
    
9.9
      
9.9
      
8.9
      
--
      
11
%
Total other loans
  
$
23.8
    
$
22.6
    
$
21.8
      
5
%
    
9
%
Total corporate and other loans
  
$
30.2
    
$
30.9
    
$
31.8
      
(2
%)
    
(5
%)
 
 
Notes:
 -
Refer to End Notes, U.S. 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:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
    
Dec 31, 2016
    
Dec 31, 2015
    
Change
  
Average Common Equity
                                                
Institutional Securities
  
$
43.2
    
$
43.2
    
$
32.3
      
--
      
34
%
  
$
43.2
    
$
34.6
      
25
%
Wealth Management
    
15.3
      
15.3
      
12.0
      
--
      
28
%
    
15.3
      
11.2
      
37
%
Investment Management
    
2.8
      
2.8
      
2.0
      
--
      
40
%
    
2.8
      
2.2
      
27
%
Parent
    
7.8
      
8.2
      
21.4
      
(5
%)
    
(64
%)
    
7.6
      
18.9
      
(60
%)
Firm
  
$
69.1
    
$
69.5
    
$
67.7
      
(1
%)
    
2
%
  
$
68.9
    
$
66.9
      
3
%
                                                                 
                                                                 
Return on average Common Equity
                                                                
Institutional Securities
    
9
%
    
8
%
    
3
%
                    
8
%
    
10
%
        
Wealth Management
    
13
%
    
14
%
    
14
%
                    
13
%
    
17
%
        
Investment Management
    
4
%
    
9
%
    
17
%
                    
8
%
    
16
%
        
Firm
    
9
%
    
9
%
    
4
%
                    
8
%
    
8
%
        
 
 
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 recast under the new methodology.
  -
Refer to End Notes, U.S. 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:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2016
    
Sept 30, 2016
    
Dec 31, 2015
    
Sept 30, 2016
    
Dec 31, 2015
    
Dec 31, 2016
    
Dec 31, 2015
    
Change
  
                                                 
                                                 
Income (loss) from continuing operations
  
$
1,680
    
$
1,632
    
$
943
      
3
%
    
78
%
  
$
6,122
    
$
6,295
      
(3
%)
Net income applicable to nonredeemable noncontrolling interests
    
14
      
43
      
28
      
(67
%)
    
(50
%)
    
144
      
152
      
(5
%)
Income (loss) from continuing operations applicable to Morgan Stanley
    
1,666
      
1,589
      
915
      
5
%
    
82
%
    
5,978
      
6,143
      
(3
%)
Less: Preferred Dividends and allocation of earnings to Participating
   Restricted Stock Units
    
157
      
79
      
155
      
99
%
    
1
%
    
471
      
456
      
3
%
Income (loss) from continuing operations applicable to Morgan Stanley
   common shareholders
    
1,509
      
1,510
      
760
      
--
      
99
%
    
5,507
      
5,687
      
(3
%)
                                                                 
Gain (loss) from discontinued operations after tax
    
0
      
8
      
(7
)
    
*
      
*
      
1
      
(16
)
    
*
  
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
    
0
      
8
      
(7
)
    
*
      
*
      
1
      
(16
)
    
*
  
                                                                 
Earnings (loss) applicable to Morgan Stanley common shareholders
  
$
1,509
    
$
1,518
    
$
753
      
(1
%)
    
100
%
  
$
5,508
    
$
5,671
      
(3
%)
                                                                 
Average basic common shares outstanding (millions)
    
1,806
      
1,838
      
1,889
      
(2
%)
    
(4
%)
    
1,849
      
1,909
      
(3
%)
                                                                 
Earnings per basic share:
                                                                
Income from continuing operations
  
$
0.84
    
$
0.82
    
$
0.40
      
2
%
    
110
%
  
$
2.98
    
$
2.98
      
--
  
Discontinued operations
  
$
-
    
$
0.01
    
$
-
      
*
      
--
    
$
-
    
$
(0.01
)
    
*
  
Earnings per basic share
  
$
0.84
    
$
0.83
    
$
0.40
      
1
%
    
110
%
  
$
2.98
    
$
2.97
      
--
  
                                                                 
Average diluted common shares outstanding and common stock
   equivalents (millions)
    
1,853
      
1,879
      
1,939
      
(1
%)
    
(4
%)
    
1,887
      
1,953
      
(3
%)
                                                                 
Earnings per diluted share:
                                                                
Income from continuing operations
  
$
0.81
    
$
0.80
    
$
0.39
      
1
%
    
108
%
  
$
2.92
    
$
2.91
      
--
  
Discontinued operations
  
$
-
    
$
0.01
    
$
-
      
*
      
--
    
$
-
    
$
(0.01
)
    
*
  
Earnings per diluted share
  
$
0.81
    
$
0.81
    
$
0.39
      
--
      
108
%
  
$
2.92
    
$
2.90
      
1
%
 
 
Notes:
- Refer to End Notes, U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 14 - 17.
 
13
 
End Notes
 
Page 2:
(1)
For the quarter ended December 31, 2016, income tax provision / (benefit) from continuing operations included a net discrete tax benefit of $135 million primarily related to the remeasurement of reserves and related interest due to new information regarding the status of a multi-year tax authority examination.  For the year ended December 31, 2015, income tax provision / (benefit) from continuing operations included a net discrete tax benefit of approximately $564 million primarily associated with the repatriation of non-U.S. earnings at a cost lower than originally estimated due to an internal restructuring to simplify the Firm's legal entity organization in the U.K.
   
Page 3:
(1)
During the quarter ended September 30, 2016, Morgan Stanley redeemed all of its issued and outstanding Capital Securities pursuant to the optional redemption provisions provided in the respective governing documents.
   
Page 4:
(1)
For the quarters ended December 31, 2016, September 30, 2016, and December 31, 2015, the percentage of Institutional Securities corporate loans by credit rating was as follows:
 
- % investment grade: 32%, 38% and 36%
 
- % non-investment grade: 68%, 62% and 64%
(2)
For the quarters ended December 31, 2016, September 30, 2016, and December 31, 2015, the percentage of Institutional Securities corporate lending commitments by credit rating was as follows:
 
- % investment grade: 69%, 75% and 73%
 
- % non-investment grade: 31%, 25% and 27%
(3)
At December 31, 2016, September 30, 2016 and December 31, 2015, the event-driven portfolio of loans and lending commitments to non-investment grade borrowers were $15.3 billion, $7.9 billion and $13.5 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 December 31, 2016, and December 31, 2015, Institutional Securities recorded a provision (release) for credit losses of $(2.1) million and $37.3 million, respectively, related to loans. For the quarter ended September 30, 2016, there was no material provision recorded by Institutional Securities related to loans. For the quarters ended December 31, 2016, September 30, 2016, and December 31, 2015, a provision for credit losses of $3.4 million, $6.4 million and $22.8 million was recorded, respectively, related to lending commitments.   
(6)
For the quarters ended December 31, 2016, September 30, 2016, and December 31, 2015, Wealth Management recorded a provision for credit losses of $3.3 million, $1.6 million and $14.9 million, respectively, related to loans. For the quarters ended December 31, 2016, September 30, 2016, and December 31, 2015, a provision (release) of $0.2 million, $(0.5) million and $1.4 million, respectively, related to lending commitments.
   
Page 5:
(1)
For the quarter ended December 31, 2016, income tax provision / (benefit) from continuing operations included a net discrete tax benefit of $137 million primarily related to the remeasurement of reserves and related interest due to new information regarding the status of a multi-year tax authority examination.  For the year ended December 31, 2015, income tax provision / (benefit) from continuing operations included a net discrete tax benefit of approximately $564 million primarily associated with the repatriation of non-U.S. earnings at a cost lower than originally estimated due to an internal restructuring to simplify the Firm's legal entity organization in the U.K.
   
Page 9:
(1)
The quarters ended December 31, 2016, September 30, 2016 and December 31, 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 for the quarters ended December 31, 2016, September 30, 2016 and December 31, 2015 were:
 
North America: $2.5 billion, $1.8 billion and $(4.5) billion
 
International: $5.5 billion, $2.1 billion and $3.5 billion
(2)
For the full year ended December 31, 2015, Alternative / Other products net flows include $4.6 billion of inflows related to the transfer of certain portfolio managers, and their portfolios, from Wealth Management to Investment Management.
(3)
Assets under management or supervision by region for the quarters ended December 31, 2016, September 30, 2016 and December 31, 2015 were:
 
North America: $269 billion, $270 billion and $263 billion
 
International: $148 billion, $147 billion and $143 billion
   
Page 11:
(1)
For the quarters ended December 31, 2016, September 30, 2016 and December 31, 2015, the U.S. Bank investment securities portfolio included held to maturity investment securities of $13.5 billion, $11.2 billion and $4.9 billion, respectively.
 
14
 
Definition of U.S. 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).  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 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 U.S. GAAP financial measure.  In addition to the following notes, please also refer to the Firm's fourth 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 annualized net income for the quarter of full year 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 fully phased-in Tier 1 capital divided by the fully phased-in 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 September 30, 2016.
 
15
 
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 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 December 31, 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 September 30, 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 utilized in the calculation of tangible common equity 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 institutional 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 balances between Bank subsidiaries.
(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 is expected to 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 September 30, 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 September 30, 2016.
 
16
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 fourth quarter earnings press release issued January 17, 2017.
 
 
 
 
 
 
 
 
17

Stock widget

Investing forum