MORGAN STANLEY - FORM 8-K - EX-99.2 - EXHIBIT 99.2

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8-K - MORGAN STANLEY 8-K - MORGAN STANLEY	a52459468.htm
EX-99.1 - EXHIBIT 99.1 - MORGAN STANLEY	a52459468ex99_1.htm

Exhibit 99.2

Second Quarter 2021 Earnings Results


Quarterly Financial Supplement	Page

Consolidated Financial Summary	1
Consolidated Financial Metrics, Ratios and Statistical Data	2
Consolidated and U.S. Bank Supplemental Financial Information	3
Consolidated Average Common Equity and Regulatory Capital Information	4
Institutional Securities Income Statement Information, Financial Metrics and Ratios	5
Wealth Management Income Statement Information, Financial Metrics and Ratios	6
Wealth Management Financial Information and Statistical Data	7
Investment Management Income Statement Information, Financial Metrics and Ratios	8
Investment Management Financial Information and Statistical Data	9
Consolidated Loans and Lending Commitments	10
Consolidated Loans and Lending Commitments Allowance for Credit Losses	11
Definition of U.S. GAAP to Non-GAAP Measures	12
Definitions of Performance Metrics and Terms	13 - 14
Supplemental Quantitative Details and Calculations	15 - 16
Legal Notice	17

Comparisons to current and certain prior periods are impacted by the financial results of ETRADE Financial Corporation (ETRADE) and Eaton Vance Corp. (Eaton Vance) reported in the Wealth Management segment and Investment Management segment, respectively. The Firm's 2021 earnings results reflect the completed acquisitions of E*TRADE, which closed on October 2, 2020 and Eaton Vance, which closed on March 1, 2021.


Consolidated Financial Summary
(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Six Months Ended						Percentage
	Jun 30, 2021			Mar 31, 2021			Jun 30, 2020			Mar 31, 2021			Jun 30, 2020			Jun 30, 2021			Jun 30, 2020			Change
Net revenues
Institutional Securities	$	7,092		$	8,577		$	8,199			(17	%)		(14	%)	$	15,669		$	13,377			17	%
Wealth Management		6,095			5,959			4,704			2	%		30	%		12,054			8,760			38	%
Investment Management		1,702			1,314			886			30	%		92	%		3,016			1,578			91	%
Intersegment Eliminations		(130	)		(131	)		(129	)		1	%		(1	%)		(261	)		(276	)		5	%
Net revenues	$	14,759		$	15,719		$	13,660			(6	%)		8	%	$	30,478		$	23,439			30	%

Provision for credit losses	$	73		$	(98	)	$	239			*			(69	%)	$	(25	)	$	646			*

Non-interest expenses
Institutional Securities	$	4,524		$	5,299		$	4,989			(15	%)		(9	%)	$	9,823		$	8,829			11	%
Wealth Management		4,456			4,364			3,540			2	%		26	%		8,820			6,522			35	%
Investment Management		1,272			944			670			35	%		90	%		2,216			1,219			82	%
Intersegment Eliminations		(132	)		(134	)		(133	)		1	%		1	%		(266	)		(278	)		4	%
Non-interest expenses ⁽¹⁾	$	10,120		$	10,473		$	9,066			(3	%)		12	%	$	20,593		$	16,292			26	%

Income before taxes
Institutional Securities	$	2,498		$	3,371		$	2,993			(26	%)		(17	%)	$	5,869		$	3,943			49	%
Wealth Management		1,636			1,600			1,142			2	%		43	%		3,236			2,197			47	%
Investment Management		430			370			216			16	%		99	%		800			359			123	%
Intersegment Eliminations		2			3			4			(33	%)		(50	%)		5			2			150	%
Income before taxes	$	4,566		$	5,344		$	4,355			(15	%)		5	%	$	9,910		$	6,501			52	%

Net Income applicable to Morgan Stanley
Institutional Securities	$	1,904		$	2,601		$	2,186			(27	%)		(13	%)	$	4,505		$	2,943			53	%
Wealth Management		1,264			1,242			853			2	%		48	%		2,506			1,717			46	%
Investment Management		341			275			154			24	%		121	%		616			232			166	%
Intersegment Eliminations		2			2			3			--			(33	%)		4			2			100	%
Net Income applicable to Morgan Stanley	$	3,511		$	4,120		$	3,196			(15	%)		10	%	$	7,631		$	4,894			56	%
Earnings applicable to Morgan Stanley common shareholders	$	3,408		$	3,982		$	3,047			(14	%)		12	%	$	7,390		$	4,637			59	%

The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.


Consolidated Financial Metrics, Ratios and Statistical Data
(unaudited)

	Quarter Ended									Percentage Change From:						Six Months Ended						Percentage
	Jun 30, 2021			Mar 31, 2021			Jun 30, 2020			Mar 31, 2021			Jun 30, 2020			Jun 30, 2021			Jun 30, 2020			Change

Financial Metrics:

Earnings per basic share	$	1.88		$	2.22		$	1.98			(15	%)		(5	%)	$	4.10		$	3.00			37	%
Earnings per diluted share	$	1.85		$	2.19		$	1.96			(16	%)		(6	%)	$	4.04		$	2.96			36	%

Return on average common equity		13.8	%		16.9	%		15.7	%								15.3	%		12.2	%
Return on average tangible common equity		18.6	%		21.1	%		17.8	%								19.8	%		13.9	%

Book value per common share	$	54.04		$	52.71		$	49.57								$	54.04		$	49.57
Tangible book value per common share	$	40.12		$	38.97		$	43.68								$	40.12		$	43.68

Excluding integration-related expenses ⁽¹⁾
Adjusted earnings per diluted share	$	1.89		$	2.22		$	1.96			(15	%)		(4	%)	$	4.11		$	2.96			39	%
Adjusted return on average common equity		14.1	%		17.1	%		15.7	%								15.6	%		12.2	%
Adjusted return on average tangible common equity		19.0	%		21.4	%		17.8	%								20.1	%		13.9	%


Financial Ratios:

Pre-tax profit margin		31	%		34	%		32	%								33	%		28	%
Compensation and benefits as a % of net revenues		44	%		43	%		44	%								43	%		44	%
Non-compensation expenses as a % of net revenues		25	%		23	%		22	%								24	%		25	%
Firm expense efficiency ratio		69	%		67	%		66	%								68	%		70	%
Firm expense efficiency ratio excluding integration-related expenses ⁽¹⁾		68	%		66	%		66	%								67	%		70	%
Effective tax rate		23.1	%		22.0	%		25.7	%								22.5	%		22.8	%


Statistical Data:

Period end common shares outstanding (millions)		1,834			1,869			1,576			(2	%)		16	%
Average common shares outstanding (millions)
Basic		1,814			1,795			1,541			1	%		18	%		1,804			1,548			17	%
Diluted		1,841			1,818			1,557			1	%		18	%		1,829			1,565			17	%

Worldwide employees		71,826			70,975			61,596			1	%		17	%

Notes:
-	For the quarters ended June 30, 2021 and March 31, 2021, Firm results include pre-tax integration-related expenses of $90 million and $75 million ($69 million and $58 million after‐tax) respectively, reported in the Wealth Management and Investment Management business segments. The six months ended June 30, 2021 results include pre-tax integration-related expenses of $165 million ($127 million after‐tax).
-	The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.

Consolidated and U.S. Bank Supplemental Financial Information

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Six Months Ended				Percentage
	Jun 30, 2021			Mar 31, 2021			Jun 30, 2020			Mar 31, 2021			Jun 30, 2020			Jun 30, 2021		Jun 30, 2020		Change

Consolidated Balance sheet

Total assets	$	1,161,805		$	1,158,772		$	975,363			--			19	%
Loans ⁽¹⁾	$	181,204		$	171,812		$	150,723			5	%		20	%
Deposits	$	320,358		$	323,138		$	236,849			(1	%)		35	%
Liquidity resources	$	343,776		$	353,304		$	301,407			(3	%)		14	%
Long-term debt outstanding	$	218,604		$	208,267		$	202,238			5	%		8	%
Maturities of long-term debt outstanding (next 12 months)	$	16,891		$	18,976		$	20,076			(11	%)		(16	%)

Common equity	$	99,120		$	98,509		$	78,125			1	%		27	%
Less: Goodwill and intangible assets		(25,527	)		(25,681	)		(9,286	)		(1	%)		175	%
Tangible common equity	$	73,593		$	72,828		$	68,839			1	%		7	%

Preferred equity	$	7,750		$	7,750		$	8,520			--			(9	%)

U.S. Bank Supplemental Financial Information
Total assets	$	357,488		$	357,217		$	263,934			--			35	%
Loans	$	167,628		$	157,354		$	136,613			7	%		23	%
Investment securities portfolio ⁽²⁾	$	136,218		$	149,423		$	92,270			(9	%)		48	%
Deposits	$	318,689		$	321,630		$	235,959			(1	%)		35	%

Regional revenues
Americas	$	10,885		$	11,191		$	9,950			(3	%)		9	%	$	22,076	$	16,838		31	%
EMEA (Europe, Middle East, Africa)		2,093			2,159			2,109			(3	%)		(1	%)		4,252		3,306		29	%
Asia		1,781			2,369			1,601			(25	%)		11	%		4,150		3,295		26	%
Consolidated net revenues	$	14,759		$	15,719		$	13,660			(6	%)		8	%	$	30,478	$	23,439		30	%

Consolidated Average Common Equity and Regulatory Capital Information

(unaudited, dollars in billions)

	Quarter Ended									Percentage Change From:						Six Months Ended				Percentage
	Jun 30, 2021			Mar 31, 2021			Jun 30, 2020			Mar 31, 2021			Jun 30, 2020			Jun 30, 2021		Jun 30, 2020		Change

Average Common Equity
Institutional Securities	$	43.5		$	43.5		$	42.8			--			2	%	$	43.5	$	42.8		2	%
Wealth Management		28.6			28.5			18.2			--			57	%		28.6		18.2		57	%
Investment Management		10.7			4.4			2.6			143	%		*			7.1		2.6		173	%
Parent		16.0			17.9			14.0			(11	%)		14	%		17.1		12.4		38	%
Firm	$	98.8		$	94.3		$	77.6			5	%		27	%	$	96.3	$	76.0		27	%



Regulatory Capital

Common Equity Tier 1 capital	$	76.8		$	76.2		$	68.7			1	%		12	%
Tier 1 capital	$	84.6		$	84.1		$	77.4			1	%		9	%

Standardized Approach
Risk-weighted assets	$	461.1		$	455.1		$	415.5			1	%		11	%
Common Equity Tier 1 capital ratio		16.7	%		16.7	%		16.5	%
Tier 1 capital ratio		18.4	%		18.5	%		18.6	%

Advanced Approach
Risk-weighted assets	$	434.0		$	438.8		$	427.0			(1	%)		2	%
Common Equity Tier 1 capital ratio		17.7	%		17.4	%		16.1	%
Tier 1 capital ratio		19.5	%		19.2	%		18.1	%

Leverage-based capital
Tier 1 leverage ratio		7.4	%		7.5	%		8.1	%
Supplementary Leverage Ratio⁽¹⁾		5.9	%		6.7	%		7.3	%

Institutional Securities

Income Statement Information, Financial Metrics and Ratios

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Six Months Ended						Percentage
	Jun 30, 2021			Mar 31, 2021			Jun 30, 2020			Mar 31, 2021			Jun 30, 2020			Jun 30, 2021			Jun 30, 2020			Change
Revenues:

Advisory	$	664		$	480		$	462			38	%		44	%	$	1,144		$	824			39	%
Equity		1,072			1,502			882			(29	%)		22	%		2,574			1,218			111	%
Fixed income		640			631			707			1	%		(9	%)		1,271			1,153			10	%
Underwriting		1,712			2,133			1,589			(20	%)		8	%		3,845			2,371			62	%
Investment banking		2,376			2,613			2,051			(9	%)		16	%		4,989			3,195			56	%

Equity		2,827			2,875			2,627			(2	%)		8	%		5,702			5,076			12	%
Fixed income		1,682			2,966			3,041			(43	%)		(45	%)		4,648			5,103			(9	%)
Other		207			123			480			68	%		(57	%)		330			3			*

Net revenues		7,092			8,577			8,199			(17	%)		(14	%)		15,669			13,377			17	%

Provision for credit losses		70			(93	)		217			*			(68	%)		(23	)		605			*

Compensation and benefits		2,433			3,114			2,952			(22	%)		(18	%)		5,547			4,766			16	%
Non-compensation expenses		2,091			2,185			2,037			(4	%)		3	%		4,276			4,063			5	%
Total non-interest expenses		4,524			5,299			4,989			(15	%)		(9	%)		9,823			8,829			11	%


Income before taxes		2,498			3,371			2,993			(26	%)		(17	%)		5,869			3,943			49	%
Net income applicable to Morgan Stanley	$	1,904		$	2,601		$	2,186			(27	%)		(13	%)	$	4,505		$	2,943			53	%


Pre-tax profit margin		35	%		39	%		37	%								37	%		29	%
Compensation and benefits as a % of net revenues		34	%		36	%		36	%								35	%		36	%
Non-compensation expenses as a % of net revenues		29	%		25	%		25	%								27	%		30	%

Return on Average Common Equity		17	%		23	%		19	%								20	%		13	%
Return on Average Tangible Common Equity ⁽¹⁾		17	%		23	%		20	%								20	%		13	%

Trading VaR (Average Daily 95% / One-Day VaR)	$	48		$	69		$	60

Wealth Management

Income Statement Information, Financial Metrics and Ratios

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Six Months Ended						Percentage
	Jun 30, 2021			Mar 31, 2021			Jun 30, 2020			Mar 31, 2021			Jun 30, 2020			Jun 30, 2021			Jun 30, 2020			Change
Revenues:
Asset management	$	3,447		$	3,191		$	2,507			8	%		37	%	$	6,638		$	5,187			28	%
Transactional		1,172			1,228			1,075			(5	%)		9	%		2,400			1,474			63	%
Net interest income		1,255			1,385			1,030			(9	%)		22	%		2,640			1,926			37	%
Other		221			155			92			43	%		140	%		376			173			117	%
Net revenues		6,095			5,959			4,704			2	%		30	%		12,054			8,760			38	%

Provision for credit losses		3			(5	)		22			*			(86	%)		(2	)		41			*

Compensation and benefits		3,275			3,170			2,729			3	%		20	%		6,445			4,941			30	%
Non-compensation expenses		1,181			1,194			811			(1	%)		46	%		2,375			1,581			50	%
Total non-interest expenses ⁽¹⁾		4,456			4,364			3,540			2	%		26	%		8,820			6,522			35	%

Income before taxes		1,636			1,600			1,142			2	%		43	%		3,236			2,197			47	%
Net income applicable to Morgan Stanley	$	1,264		$	1,242		$	853			2	%		48	%	$	2,506		$	1,717			46	%

Pre-tax profit margin		27	%		27	%		24	%								27	%		25	%
Pre-tax profit margin excluding integration-related expenses		28	%		28	%		24	%								28	%		25	%
Compensation and benefits as a % of net revenues		54	%		53	%		58	%								53	%		56	%
Non-compensation expenses as a % of net revenues		19	%		20	%		17	%								20	%		18	%

Return on Average Common Equity		17	%		17	%		18	%								17	%		18	%
Return on Average Tangible Common Equity ⁽²⁾		37	%		36	%		32	%								36	%		32	%

Notes:
-	For the quarters ended June 30, 2021 and March 31, 2021, Wealth Management's results include pre-tax integration-related expenses of $60 million and $64 million ($46million and $49 million after-tax), respectively. The six months ended June 30, 2021 results include pre-tax integration-related expenses of $124 million ($95 million after-tax).
-	The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details Calculations, and Legal Notice.


Wealth Management
Financial Information and Statistical Data
(unaudited, dollars in billions)

	Quarter Ended									Percentage Change From:
	Jun 30, 2021			Mar 31, 2021			Jun 30, 2020			Mar 31, 2021			Jun 30, 2020


Wealth Management Metrics

Total client assets	$	4,546		$	4,231		$	2,661			7	%		71	%
Net new assets	$	71.2		$	104.9		$	20.4			(32	%)		*
U.S. Bank loans	$	114.7		$	104.9		$	85.2			9	%		35	%
Margin and other lending⁽¹⁾	$	27.0		$	26.6		$	8.9			2	%		*
Deposits ⁽²⁾	$	319		$	322		$	236			(1	%)		35	%
Weighted average cost of deposits		0.16	%		0.18	%		0.44	%

Advisor-led channel

Advisor-led client assets	$	3,553		$	3,349		$	2,575			6	%		38	%

Fee-based client assets	$	1,680		$	1,574		$	1,236			7	%		36	%
Fee-based asset flows	$	33.7		$	37.2		$	11.1			(9	%)		*
Fee-based assets as a % of advisor-led client assets		47	%		47	%		48	%

Self-directed channel

Self-directed assets	$	993		$	882		$	86			13	%		*
Daily average revenue trades (000's)		1,042			1,619			6			(36	%)		*
Self-directed households (millions)		7.4			7.2			1.5			3	%		*

Workplace channel

Workplace unvested assets	$	480		$	461		$	135			4	%		*
Number of participants (millions)		5.2			5.1			2.7			2	%		93	%

Investment Management

Income Statement Information, Financial Metrics and Ratios

(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Six Months Ended						Percentage
	Jun 30, 2021			Mar 31, 2021			Jun 30, 2020			Mar 31, 2021			Jun 30, 2020			Jun 30, 2021			Jun 30, 2020			Change
Revenues:
Asset management and related fees	$	1,418		$	1,103		$	684			29	%		107	%	$	2,521		$	1,349			87	%
Performance-based income and other		284			211			202			35	%		41	%		495			229			116	%
Net revenues		1,702			1,314			886			30	%		92	%		3,016			1,578			91	%

Compensation and benefits		715			514			354			39	%		102	%		1,229			611			101	%
Non-compensation expenses		557			430			316			30	%		76	%		987			608			62	%
Total non-interest expenses ⁽¹⁾		1,272			944			670			35	%		90	%		2,216			1,219			82	%

Income before taxes		430			370			216			16	%		99	%		800			359			123	%
Net income applicable to Morgan Stanley	$	341		$	275		$	154			24	%		121	%	$	616		$	232			166	%

Pre-tax profit margin		25	%		28	%		24	%								27	%		23	%
Pre-tax profit margin excluding integration-related expenses		27	%		29	%		24	%								28	%		23	%
Compensation and benefits as a % of net revenues		42	%		39	%		40	%								41	%		39	%
Non-compensation expenses as a % of net revenues		33	%		33	%		36	%								33	%		39	%

Return on Average Common Equity		13	%		25	%		23	%								17	%		18	%
Return on Average Tangible Common Equity ⁽²⁾		172	%		88	%		36	%								117	%		27	%

Notes:
-	For the quarters ended June 30, 2021 and March 31, 2021, Investment Management's results include pre-tax integration-related expenses of $30 million and $11 million ($23 million and $9 million after-tax), respectively. The six months ended June 30, 2021 results include pre-tax integration-related expenses of $41 million ($32 million after-tax).
-	The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.


Investment Management
Financial Information and Statistical Data
(unaudited, dollars in billions)

	Quarter Ended						Percentage Change From:						Six Months Ended				Percentage
	Jun 30, 2021		Mar 31, 2021		Jun 30, 2020		Mar 31, 2021			Jun 30, 2020			Jun 30, 2021		Jun 30, 2020		Change

Assets under management or supervision (AUM)

Net flows by asset class ⁽¹⁾
Equity	$	2.7	$	7.8	$	9.0		(65	%)		(70	%)	$	10.5	$	10.6		(1	%)
Fixed Income		3.0		3.9		4.4		(23	%)		(32	%)		6.9		5.7		21	%
Alternatives and Solutions		7.8		4.6		2.0		70	%		*			12.4		5.8		114	%
Long-Term Net Flows		13.5		16.3		15.4		(17	%)		(12	%)		29.8		22.1		35	%

Liquidity and Overlay Services		35.0		25.9		20.7		35	%		69	%		60.9		71.3		(15	%)

Total net flows	$	48.5	$	42.2	$	36.1		15	%		34	%	$	90.7	$	93.4		(3	%)


Assets under management or supervision by asset class⁽²⁾
Equity	$	404	$	371	$	168		9	%		140	%
Fixed Income		207		201		84		3	%		146	%
Alternatives and Solutions		445		418		145		6	%		*
Long‐Term Assets Under Management or Supervision		1,056		990		397		7	%		166	%

Liquidity and Overlay Services		468		429		268		9	%		75	%

Total Assets Under Management or Supervision	$	1,524	$	1,419	$	665		7	%		129	%


Consolidated Loans and Lending Commitments
(unaudited, dollars in billions)

	Quarter Ended						Percentage Change From:
	Jun 30, 2021		Mar 31, 2021		Jun 30, 2020		Mar 31, 2021			Jun 30, 2020

Institutional Securities

Loans:
Corporate	$	11.6	$	16.8	$	19.0		(31	%)		(39	%)
Secured lending facilities		32.7		29.6		28.9		10	%		13	%
Commercial and residential real estate		11.4		10.5		10.2		9	%		12	%
Securities-based lending and other		9.9		8.8		6.9		13	%		43	%

Total Loans		65.6		65.7		65.0		--			1	%

Lending Commitments		124.9		118.8		98.5		5	%		27	%

Institutional Securities Loans and Lending Commitments	$	190.5	$	184.5	$	163.5		3	%		17	%


Wealth Management

Loans:
Securities-based lending and other	$	75.8	$	68.1	$	53.1		11	%		43	%
Residential real estate		38.9		36.8		32.1		6	%		21	%

Total Loans		114.7		104.9		85.2		9	%		35	%

Lending Commitments		14.4		14.0		14.4		3	%		--

Wealth Management Loans and Lending Commitments	$	129.1	$	118.9	$	99.6		9	%		30	%

Consolidated Loans and Lending Commitments ⁽¹⁾	$	319.6	$	303.4	$	263.1		5	%		21	%

Consolidated Loans and Lending Commitments

Allowance for Credit Losses (ACL) as of June 30, 2021

(unaudited, dollars in millions)

	Loans and Lending Commitments		ACL⁽¹⁾		ACL %			Q2 Provision
	(Gross)
Loans:
Held For Investment (HFI)

Corporate	$	4,724	$	199		4.2	%	$	(39	)
Secured lending facilities		28,217		177		0.6	%		51
Commercial and residential real estate		6,707		194		2.9	%		0
Other		586		9		1.5	%		0
Institutional Securities - HFI	$	40,234	$	579		1.4	%	$	12

Wealth Management - HFI		114,794		108		0.1	%		4

Held For Investment	$	155,028	$	687		0.4	%	$	16

Held For Sale		11,696

Fair Value		14,302

Total Loans		181,026		687					16

Lending Commitments		139,257		412		0.3	%		57

Consolidated Loans and Lending Commitments	$	320,283	$	1,099				$	73

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 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 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 Annual Report on Form 10-K for the year ended December 31, 2020.

(b)	The following are considered non-GAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of operating performance and capital adequacy. These measures are calculated as follows:
	-	Earnings per diluted share excluding integration-related expenses represents net income applicable to Morgan Stanley, adjusted for the impact of the integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance, less preferred dividends divided by the average number of diluted shares outstanding.
	-	The return on average tangible common equity represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average tangible common equity.
	-	The return on average common equity and the return on average tangible common equity excluding integration-related expenses are adjusted in both the numerator and the denominator to exclude the integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance.
	-	Segment return on average common equity and return on average tangible common equity represent full year net income or annualized net income for the quarter applicable to Morgan Stanley for each segment, less preferred dividend segment allocation, divided by average common equity and average tangible common equity for each respective segment. The segment adjustments to common equity to derive segment average tangible common equity are generally set at the beginning of the year, and will remain fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition).
	-	Tangible common equity represents common equity less goodwill and intangible assets net of certain mortgage servicing rights deduction.
	-	Tangible book value per common share represents tangible common equity divided by period end common shares outstanding.
	-	Pre-tax profit margin excluding integration-related expenses represents income before income taxes less integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance as percentages of net revenues.
	-	The Firm expense efficiency ratio excluding integration-related expenses represents total non‐interest expenses less integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance as a percentage of net revenues.


Definitions of Performance Metrics and Terms

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.

Page 1:
(a)	Provision for credit losses represents the provision for credit losses on loans held for investment and unfunded lending commitments.
(b)	Net income applicable to Morgan Stanley represents net income, less net income applicable to nonredeemable noncontrolling interests.
(c)	Earnings applicable to Morgan Stanley common shareholders represents net income applicable to Morgan Stanley, less preferred dividends.

Page 2:
(a)	The return on average common equity represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity.
(b)	Book value per common share represents common equity divided by period end common shares outstanding.
(c)	Tangible book value per common share represents tangible common equity divided by period end common shares outstanding.
(d)	Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
(e)	The Firm expense efficiency ratio represents total non‐interest expenses as a percentage of net revenues.

Page 3:
(a)	Liquidity Resources, which are held within the bank and non-bank operating subsidiaries, are comprised of high quality liquid assets (HQLA) and cash deposits with banks ("Liquidity Resources"). The total amount of Liquidity Resources is actively managed by us considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements.
(b)	The Firm's goodwill and intangible balances utilized in the calculation of tangible common equity are net of certain mortgage servicing rights deduction.
(c)	U.S. Bank refers to the Firm's U.S. Bank operating subsidiaries Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association, ETRADE Bank, and ETRADE Savings Bank, and excludes balances between Bank subsidiaries, as well as deposits from the Parent and affiliates.
(d)	Firmwide regional revenues reflect the Firm's consolidated net revenues on a managed basis. Further discussion regarding the geographic methodology for net revenues is disclosed in Note 23 to the consolidated financial statements included in the Firm's Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K).

Page 4:
(a)	The Firm's attribution of average common equity to the business segments is based on the Required Capital framework, an internal capital adequacy measure. This framework is a risk-based and leverage-based capital measure, which is compared with the Firm's regulatory capital to ensure that the Firm maintains an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time. The Required Capital Framework is based on the Firm's regulatory capital requirements. The Firm defines the difference between its total average common equity and the sum of the average common equity amounts allocated to its business segments as Parent common equity. The amount of capital allocated to the business segments is generally set at the beginning of the year, and will remain fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). The Firm has made updates to its required capital framework for 2021 and continues to evaluate with respect to the impact of evolving regulatory requirements, as appropriate. For further discussion of the framework, refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s 2020 Form 10‐K.
(b)	The Firm's risk‐based capital ratios are computed under each of the (i) standardized approaches for calculating credit risk and market risk risk‐weighted assets (RWAs) (the “Standardized Approach”) and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”). For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s 2020 Form 10‐K.
(c)	Supplementary leverage ratio represents Tier 1 capital divided by the total supplementary leverage exposure.

Page 5:
(a)	Institutional Securities Equity and Fixed income net revenues include trading, net interest income (interest income less interest expense), asset management, commissions and fees, investments and other revenues which are directly attributable to those businesses.
(b)	Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
(c)	VaR represents the unrealized loss in portfolio value that one would not expect to exceed, on average, more than five times every one hundred trading days in the Firm's trading positions if the portfolio were held constant for a one-day period. Further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology, is disclosed in "Quantitative and Qualitative Disclosures about Risk" included in the Firm's 2020 Form 10-K.


Definitions of Performance Metrics and Terms

Page 6:
(a)	Transactional revenues for the Wealth Management segment includes investment banking, trading, and commissions and fee revenues.
(b)	Net interest income represents interest income less interest expense.
(c)	Other revenues for the Wealth Management segment includes investments and other revenues.
(d)	Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.

Page 7:
(a)	Net new assets represent client inflows, including dividends and interest, less client outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions.
(b)	Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities.
(c)	Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits.
(d)	Weighted average cost of deposits represents the annualized weighted average cost of deposits as of periods ended June 30, 2021, March 31, 2021 and June 30, 2020.
(e)	Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned.
(f)	Fee‐based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
(g)	Fee-based asset flows include net new fee-based assets, net account transfers, dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets in the 2020 Form 10-K.
(h)	Self-directed assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets.
(i)	Daily average revenue trades (DARTs) represent the total self-directed trades in a period divided by the number of trading days during that period.
(j)	Self-directed households represent the total number of households that include at least one account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels will be included in each of the respective channel counts.
(k)	The workplace channel assets includes equity compensation solutions for companies, their executives and employees. Workplace unvested assets represent the market value of public company securities at the end of the period.
(l)	Workplace participants represent total accounts with vested and/or unvested assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.

Page 8:
(a)	Asset management and related fees represents management and administrative fees, distribution fees, and performance-based fees, not in the form of carried interest. Asset management and related fees represents Asset management as reported on the Firm’s consolidated income statement.
(b)	Performance-based income and other includes performance-based fees in the form of carried interest, gains and losses from investments, gains and losses from hedges on seed capital and certain employee deferred compensation plans, net interest, and other revenues. Performance-based income and other represents investments, investment banking, trading, net interest and other revenues as reported on the Firm’s consolidated income statement.
(c)	Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.

Page 9:
(a)	Investment Management Alternatives and Solutions asset class includes products in Fund of Funds, Real Estate, Private Equity and Credit strategies, Multi‐Asset portfolios, as well as Custom Separate Account portfolios.
(b)	Investment Management net flows include new commitments, investments or reinvestments, net of client redemptions, returns of capital post-fund investment period and dividends not reinvested and excludes the impact of the transition of funds from their commitment period to the invested capital period.
(c)	Overlay Services represents investment strategies that use passive exposure instruments to obtain, offset, or substitute specific portfolio exposures beyond those provided by the underlying holdings of the fund.
(d)	Total assets under management or supervision excludes shares of minority stake assets which represent the Investment Management business segment’s proportional share of assets managed by third-party asset managers in which we hold investments accounted for under the equity method.

Page 10 and 11:
(a)	Corporate loans include relationship and event-driven loans and typically consist of revolving lines of credit, term loans and bridge loans.
(b)	Secured lending facilities include loans provided to clients, which are primarily secured by loans, which are, in turn, collateralized by various assets including residential real estate, commercial real estate, corporate and financial assets.
(c)	Securities-based lending and other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market.
(d)	Institutional Securities Lending Commitments principally include Corporate lending activity.


Supplemental Quantitative Details and Calculations

Page 1:
(1)	The Firm non-interest expenses by category are as follows:

		2Q21		1Q21		2Q20	2Q21 YTD		2Q20 YTD
Compensation and benefits	$	6,423	$	6,798	$	6,035	$	13,221	$	10,318

Non-compensation expenses:
Brokerage, clearing and exchange fees		795		910		716		1,705		1,456
Information processing and communications		765		733		589		1,498		1,152
Professional services		746		624		535		1,370		984
Occupancy and equipment		414		405		365		819		730
Marketing and business development		146		146		63		292		195
Other		831		857		763		1,688		1,457
Total non-compensation expenses		3,697		3,675		3,031		7,372		5,974

Total non-interest expenses	$	10,120	$	10,473	$	9,066	$	20,593	$	16,292

Page 2:

(1)

For the quarters ended June 30, 2021 and March 31, 2021, Firm results include pre-tax integration-related expenses of $90 million and $75 million ($69 million and $58 million after-tax) respectively, reported in the Wealth Management and Investment Management business segments. The six months ended June 30, 2021 results include pre-tax integration-related expenses of $165 million ($127 million after-tax). The following sets forth the impact of the integration-related expenses to earnings per diluted share, return on average common equity and return on average tangible common equity (which are excluded):

		2Q21			1Q21		2Q21 YTD
Earnings per diluted share - GAAP	$	1.85		$	2.19		$	4.04
Impact of adjustments		0.04			0.03			0.07
Earnings per diluted share excluding integration-related expenses - Non-GAAP	$	1.89		$	2.22		$	4.11

Return on average common equity - GAAP		13.8	%		16.9	%		15.3	%
Impact of adjustments		0.3	%		0.2	%		0.3	%
Return on average common equity excluding integration-related expenses - Non-GAAP		14.1	%		17.1	%		15.6	%

Return on average tangible common equity - GAAP		18.6	%		21.1	%		19.8	%
Impact of adjustments		0.4	%		0.3	%		0.3	%
Return on average tangible common equity excluding integration-related expenses - Non-GAAP		19.0	%		21.4	%		20.1	%

Firm expense efficiency ratio - GAAP		68.6	%		66.6	%		67.6	%
Impact of adjustments		(0.6	)%		(0.5	)%		(0.6	)%
Firm expense efficiency ratio excluding integration-related expenses - Non-GAAP		68.0	%		66.1	%		67.0	%

Page 3:
(1)	Includes loans held for investment (net of allowance), loans held for sale and also includes loans at fair value which are included in Trading assets on the balance sheet.
(2)	As of June 30, 2021, March 31, 2021 and June 30, 2020, the U.S. Bank investment securities portfolio included held to maturity investment securities of $62.8 billion, $64.6 billion and $28.5 billion, respectively.

Page 4:
(1)	Based on a Federal Reserve interim final rule that was in effect until March 31, 2021, our SLR and supplementary leverage exposure as of March 31, 2021 and June 30, 2020 reflects the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. The exclusion of these assets had the effect of increasing our SLR by 0.7% and 0.9% as of March 31, 2021 and June 30, 2020, respectively.

Page 5:
(1)	Institutional Securities average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 2Q21: $603mm; 1Q21: $603mm; 2Q20: $484mm; 2Q21 YTD: $603mm; 2Q20 YTD: $484mm

Page 6:
(1)	For the quarters ended June 30, 2021 and March 31, 2021 and six months ended June 30, 2021, integration-related compensation and non-compensation expenses associated with the acquisition of E*TRADE are as follows:

		2Q21		1Q21	2Q21 YTD
Compensation expenses	$	9	$	30	$	39
Non-compensation expenses		51		34		85
Total non-interest expenses	$	60	$	64	$	124
Income tax provision		14		15		29
Total non-interest expenses (after-tax)	$	46	$	49	$	95

(2)	Wealth Management average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 2Q21: $15,270mm; 1Q21: $15,101mm; 2Q20: $7,802mm; 2Q21 YTD: $15,173mm; 2Q20 YTD: $7,802mm

Page 7:
(1)	Wealth Management other lending includes $3 billion of non-purpose securities based lending on non-bank entities in each period ended June 30, 2021, March 31, 2021 and June 30, 2020.
(2)	For the quarters ended June 30, 2021 and March 31, 2021, Wealth Management deposits of $319 billion and $322 billion, respectively, exclude off-balance sheet deposits of $8 billion in each period, respectively, held by third parties outside of Morgan Stanley. Total deposits details are as follows:

		2Q21		1Q21
Brokerage sweep deposits	$	257	$	253
Other deposits		62		68
Total balance sheet deposits		319		322
Off-balance sheet deposits		8		8
Total deposits	$	327	$	330


Supplemental Quantitative Details and Calculations

Page 8:
(1)	For the quarters ended June 30, 2021 and March 31, 2021 and six months ended June 30, 2021, integration-related compensation and non-compensation expenses associated with the acquisition of Eaton Vance are as follows:

		2Q21		1Q21	2Q21 YTD
Compensation expenses	$	16	$	3	$	19
Non-compensation expenses		14		8		22
Total non-interest expenses	$	30	$	11	$	41
Income tax provision		7		2		9
Total non-interest expenses (after-tax)	$	23	$	9	$	32

(2)	Investment Management average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 2Q21: $9,924mm; 1Q21: $3,174mm; 2Q20: $932mm; 2Q21 YTD: $6,067mm; 2Q20 YTD: $932mm

Page 9:
(1)	Net Flows by region for the quarters ended June 30, 2021, March 31, 2021 and June 30, 2020 were: North America: $40.5 billion, $35.0 billion and $17.7 billion International: $8.0 billion, $7.2 billion and $18.4 billion
(2)	Assets under management or supervision by region for the quarters ended June 30, 2021, March 31, 2021 and June 30, 2020 were: North America: $1,142 billion, $1,058 billion and $397 billion International: $382 billion, $361 billion and $268 billion

Page 10:
(1)	For the quarters ended June 30, 2021, March 31, 2021 and June 30, 2020, Investment Management reflected loan balances of $865 million, $1,132 million and $522 million, respectively.

Page 11:
(1)	For the quarter ended June 30, 2021, the Allowance Rollforward for Loans and Lending Commitments is as follows:

	Institutional Securities			Wealth Management			Total
Loans

Allowance for Credit Losses (ACL)
Beginning Balance - March 31, 2021	$	671		$	91		$	762
Net Charge Offs		(92	)		-			(92	)
Provision		12			4			16
Other ⁽¹⁾		(12	)		13			1
Ending Balance - June 30, 2021	$	579		$	108		$	687


Lending Commitments

Allowance for Credit Losses (ACL)
Beginning Balance - March 31, 2021	$	350		$	4		$	354
Net Charge Offs		-			-			-
Provision		58			(1	)		57
Other⁽¹⁾		(11	)		12			1
Ending Balance - June 30, 2021	$	397		$	15		$	412


Loans and Lending Commitments

Allowance for Credit Losses (ACL)
Beginning Balance - March 31, 2021	$	1,021		$	95		$	1,116
Net Charge Offs		(92	)		-			(92	)
Provision		70			3			73
Other ⁽¹⁾		(23	)		25			2
Ending Balance - June 30, 2021	$	976		$	123		$	1,099

1) Other primarily reflects the allowance for credit losses associated with the Community Development Fund loans portfolio that was transferred to the Wealth Management business segment from the Institutional Securities business segment.


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 15, 2021.

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