Investment Banking revenues up 16% from a year ago:

•	Advisory revenues increased from a year ago on higher M&A completed transactions.

•	Equity underwriting increased from a year ago driven by higher volumes in traditional IPOs partially offset by lower revenues from convertible issuance and follow-on offerings.

•	Fixed income underwriting revenues decreased from a year ago primarily due to lower investment grade and non-investment grade bond issuances partially offset by strength in non-investment grade loans.

Equity net revenues up 8% from a year ago:

•	Equity net revenues increased from a year ago driven by high levels of client activity with particular strength in Asia. Results reflect higher revenues in prime brokerage partially offset by declines in cash equities and derivatives driven by lower volatility and volumes compared to a year ago.

Fixed Income net revenues down 45% from a year ago:

•	Fixed Income net revenues declined versus the prior year due to lower bid-offer spreads and volatility as well as tighter credit spreads.

Other:

•	Non-compensation expenses were essentially unchanged from a year ago.

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($ millions)		2Q 2021				2Q 2020
Net Revenues		$	6,095			$	4,704
Asset management		$	3,447			$	2,507
Transactional15		$	1,172			$	1,075
Net interest income		$	1,255			$	1,030
Other		$	221			$	92
Provision for credit losses		$	3			$	22
Total Expenses		$	4,456			$	3,540
Compensation		$	3,275			$	2,729
Non-compensation		$	1,181			$	811

($ millions)		2Q 2021				2Q 2020
Net Revenues		$	1,702			$	886
Asset management and related fees		$	1,418			$	684
Performance-based income and other		$	284			$	202
Total Expenses		$	1,272			$	670
Compensation		$	715			$	354
Non-compensation		$	557			$	316

•	Compensation expense increased from a year ago primarily driven by incremental compensation expenses as a result of the Eaton Vance acquisition,6 carried interest and higher asset management revenues.

•	The Common Equity Tier 1 capital standardized ratio was 16.7%, 350 basis points above the aggregate standardized approach CET1 requirement.

•	The Firm announced a repurchase authorization of up to $12 billion of outstanding common stock through June 30, 2022. The Firm repurchased $2.9 billion of its outstanding common stock during the quarter as part of its Share Repurchase Program.

•	The Board of Directors declared a $0.70 quarterly dividend per share, payable on August 13, 2021 to common shareholders of record on July 30, 2021, a 100 percent increase from the current $0.35 per share dividend.

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¹ Includes preferred dividends related to the calculation of earnings per share of $103 million and $149 million for the second quarter of 2021 and 2020, respectively.

 

² 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 position, 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 analysts, investors and other stakeholders in order to provide them with greater transparency about, or an alternative method for assessing our financial condition, operating results, or capital adequacy. 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.

³ Our earnings releases, earnings conference calls, financial presentations and other communications may also include certain metrics which we believe to be useful to us, analysts, investors, and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.

 

⁴ The provision for credit losses for loans and lending commitments is now presented as a separate line in the consolidated income statements.

 

⁵ Return on average tangible common equity and return on average tangible common equity excluding integration-related expenses are non-GAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance and capital adequacy.  The calculation of return on average tangible common equity represents full year or annualized net income applicable to Morgan Stanley less preferred dividends as a percentage of average tangible common equity.  Tangible common equity, also a non-GAAP financial measure, represents common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.  The calculation of return on average tangible common equity excluding integration-related expenses is adjusted in both the numerator and the denominator to exclude the integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance.

 

⁶ The Firm’s second quarter results include $90 million of integration-related expenses on a pre-tax basis ($69 million after-tax) as a result of the E*TRADE and Eaton Vance acquisitions.  The integration-related expenses include $25 million in compensation expense and $65 million in non-compensation expense.  Wealth Management and Investment Management integration-related expenses include $9 million and $16 million in compensation expense, respectively, and $51 million and $14 million in non-compensation expense, respectively.

 

⁷ The Firm expense efficiency ratio of 68.6% represents total non-interest expenses as a percentage of net revenues.  The Firm expense efficiency ratio excluding integration-related expenses of 68.0% represents total non-interest expenses adjusted for integration-related expenses as a percentage of net revenues. The Firm expense efficiency ratio excluding integration-related expenses is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance.

 

⁸ Pre-tax margin represents income before taxes divided by net revenues.  Wealth Management pre-tax margin excluding the integration-related expenses represents income before taxes less those expenses divided by net revenues.  Wealth Management pre-tax margin excluding integration-related expenses is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance.

 

⁹ Pre-tax income represents income before taxes.

 

¹⁰ Wealth Management fee-based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.

 

¹¹ Wealth Management fee-based asset flows include net new fee-based assets, net account transfers, dividends, interest, and client fees, and excludes institutional cash management related activity.

 

¹² Wealth Management net new assets represent client inflows, including dividend and interest, less client outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions.

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