Morgan Stanley Second Quarter 2019 Earnings Results
Morgan Stanley Reports Net Revenues of $10.2 Billion and EPS of $1.23
NEW YORK, July 18, 2019 – Morgan Stanley (NYSE: MS) today reported net revenues of $10.2 billion for thesecond quarter ended June 30, 2019 compared with $10.6 billion a year ago. Net income applicable to Morgan1
Stanley was $2.2 billion, or $1.23 per diluted share, compared with net income of $2.4 billion, or $1.30 per diluted
1
share, for the same period a year ago.

James P. Gorman, Chairman and Chief Executive Officer, said, “We reported solid quarterly results across all ourbusinesses. Firmwide revenues were over $10 billion and we produced an ROE within our target range,demonstrating the stability of our franchise. We remain focused on serving our clients and pursuing growth
opportunities while diligently managing expenses.”Financial Summary2Highlights($ millions, except per share data)

Firm

2Q 2019

2Q 2018

Net revenues$10,244$10,610Compensation expense$4,531$4,621

Non-compensation expenses
Pre-tax income6$2,810$2,880$2,903$3,109Net income app. to MS$2,201$2,437

Expense efficiency ratio 8

72%

71%

Earnings per diluted share

$1.23

$1.30

Book value per share 9$44.13$40.34

Tangible book value per share 10$38.44$35.19Return on equity4

11.2%

13.0%

Return on tangible equity4

12.8%

14.9%

Net revenues$5,113$5,714

Investment Banking$1,472$1,699

Sales & Trading$3,304$3,758$4,408$4,325• Strong net revenues, exceeding $10 billion for four out of3
the last six quarters.
• Firm expenses decreased on continued disciplined
expense management and the impact of lower revenues.
44• ROE of 12.1% and ROTCE of 13.8% for the first half of2019 remain in line with our target ranges.
5• Quarterly dividend increased to $0.35 per share;announced share repurchase of up to $6.0 billion throughthe second quarter of 2020, an increase of approximately
5$1.3 billion.

Institutional Securities• Institutional Securities reflects solid performance despite amixed market backdrop.

Wealth Management
Net revenues
Fee-based client assets ($ billions)11$1,159$1,084Fee-based asset flows ($ billions) 12

$9.8

$15.3

Loans ($ billions)

$74.1

$70.0

$839

$691

$497

$474

$4.9

$3.5

• Wealth Management delivered record pre-tax income of6
7$1.2 billion with a pre-tax margin of 28.2% reflecting
record quarterly net revenues and tightly managed noncompensation costs.

Investment Management
Net revenues
AUM ($ billions)13

Long-term net flows ($ billions)

14Media Relations: Wesley McDade 212-761-2430• Investment Management net revenues increased 21% onstrong principal investment gains. The quarter reflects
higher AUM and positive long-term net flows across all
asset classes.

Investor Relations: Sharon Yeshaya 212-761-1632

Institutional Securities
Institutional Securities reported net revenues for the current quarter of $5.1 billion compared with $5.7 billion a year
6
ago. Pre-tax income was $1.5 billion compared with $1.8 billion a year ago.
Investment Banking revenues down 13% from a yearago:
• Advisory revenues decreased driven by lower market
volumes compared with a year ago.
• Equity underwriting revenues were essentially unchanged
from a year ago. The current quarter’s results reflect
strength in IPOs and follow-on offerings.
• Fixed income underwriting revenues decreased from ayear ago driven by declines in loan issuances on lower
market volumes.
Sales and Trading net revenues down 12% from a yearago:
• Equity sales and trading net revenues decreased 14%
from a year ago principally driven by lower revenues in
the financing business reflecting lower client balancesand realized spreads.
• Fixed Income sales and trading net revenues decreased
18% from a year ago reflecting the effects of a decline ininterest rates and lower volatility, as well as a subdued
level of structured transactions. The net revenues decline
was partially offset by increases in credit products onstrong client activity.
• Other sales and trading net revenues increased from ayear ago reflecting lower costs due to a shift in funding
mix and balance sheet composition.
Investments and Other:• Investment revenues increased from a year ago driven byrealized gains associated with an investment’s initialpublic offering and subsequent mark-to-market gains onremaining holdings subject to sales restrictions.
• Other revenues decreased from a year ago primarilyreflecting lower mark-to-market gains on corporate
lending activity.

($ millions)

2Q 2019

2Q 2018

Net Revenues$5,113$5,714

Investment Banking$1,472$1,699Advisory

$506

$618

Equity underwriting

$546

$541

Fixed income underwriting

$420

$540

Sales and Trading$3,304$3,758Equity$2,130$2,470

Fixed Income$1,133$1,389Other$41$(101)

Investments and Other

$337

$257

Investments

$194

$89

Other

$143

$168

Total Expenses$3,650$3,902Compensation$1,789$1,993

Non-compensation$1,861$1,909Total Expenses:• Compensation expense decreased on lower revenues.
• Non-compensation expenses decreased from a year ago on lower professional services and litigation costs.

2

Wealth Management
Wealth Management reported net revenues for the current quarter of $4.4 billion compared with $4.3 billion a year ago.
6
7
Pre-tax income of $1.2 billion in the quarter resulted in a pre-tax margin of 28.2%.
Net revenues up 2% from a year ago:
• Asset management revenues increased from a year ago
reflecting higher asset levels.

2Q 2019

2Q 2018

Net Revenues$4,408$4,325

Asset management$2,544$2,514

Transactional

$728

$691

Net interest$1,016$1,043$120$77

Total Expenses$3,165$3,168Compensation$2,382$2,356$783$812($ millions)15• Transactional revenues increased from a year ago
reflecting gains on investments associated with certain
employee deferred compensation plans.
• Net interest income declined 3% compared with a year ago
primarily driven by an increase in mortgage securities
prepayment amortization expense and higher cost of funds,
partially offset by the impact of growth in bank lending.
16
Wealth Management client liabilities were $84 billion atquarter end compared with $82 billion a year ago.
• Other revenues increased from a year ago driven by higher
realized gains on available for sale securities.
Total Expenses:• Compensation expenses increased from a year ago
primarily driven by an increase in the fair value of deferredcompensation plan referenced investments.

Other

Non-compensation• Non-compensation expenses decreased from a year ago reflecting continued focus on management of controllable
costs.

Investment Management
Investment Management reported net revenues of $839 million compared with $691 million a year ago. Pre-tax
6
income was $199 million compared with $140 million a year ago.
Net revenues up 21% from a year ago:
• Asset management revenues were essentially unchanged
from a year ago.
• Investment revenues increased from a year ago reflecting
higher investment gains and carried interest in Asia private
equity.
• Other revenues decreased from a year ago primarily driven
by higher funding costs and lower revenues from equity
method investments.
Total Expenses:• Compensation expense increased from a year ago principally
due to an increase in deferred compensation associated withcarried interest.
• Non-compensation expenses were essentially unchanged
from a year ago.

2Q 2019

2Q 2018

Net Revenues

$839

$691

Asset management

$612

$610

Investments

$247

$55

Other

$(20)

$26

Total Expenses

$640

$551

Compensation

$360

$272

Non-compensation

$280

$279

($ millions)3Other Matters

17

2Q 2018

16.3%

15.8%

18.5%

18.1%

8.4%

8.2%

6.5%

6.4%

$1,180$1,250

26

24

Average Price$44.53$52.43

Common Shares Outstanding period end (millions)

1,659

1,750

Tax Rate

22.6%

20.6%

2Q 2019• The Firm repurchased $1.2 billion of its outstanding
common stock during the quarter as part of its Share
Repurchase Program. The Board of Directors
authorized a share repurchase of up to $6.0 billion ofcommon stock beginning in the third quarter of 20195
through the end of the second quarter of 2020.

Capital• The Board of Directors declared a $0.35 quarterly
dividend per share (an increase from $0.30 per share),payable on August 15, 2019 to common shareholders of
5
record on July 31, 2019.

Tier 1 leverage• The effective tax rate for the second quarter of 2018
included the impact of intermittent net discrete tax
benefits of $88 million primarily associated with new
information pertaining to the resolution of multijurisdiction tax examinations and other matters.

Common Equity Tier 1 capital
Tier 1 capital

18

18

19

Supplementary leverage ratio

20

Common Stock Repurchases
Repurchases ($ millions)
Number of Shares (millions)4Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities,
wealth management and investment management services. With offices in more than 41 countries, the Firm’s
employees serve clients worldwide including corporations, governments, institutions and individuals. For further
information about Morgan Stanley, please visit www.morganstanley.com.
A financial summary follows. Financial, statistical and business-related information, as well as information regarding
business and segment trends, is included in the Financial Supplement. Both the earnings release and the Financial
Supplement are available online in the Investor Relations section at www.morganstanley.com.

NOTICE:The information provided herein and in the financial supplement may include certain non-GAAP financial
measures. The definition of such measures or reconciliation of such metrics to the comparable U.S. GAAP figures areincluded in this earnings release and the Financial Supplement, both of which are available on
www.morganstanley.com.
This earnings release may contain forward-looking statements, including the attainment of certain financial and othertargets, objectives and goals. Readers are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date on which they are made, which reflect management’s current estimates, projections,
expectations, assumptions, interpretations or beliefs and which are subject to risks and uncertainties that may cause
actual results to differ materially. The Firm does not undertake to update the forward-looking statements to reflect the
impact of circumstances or events that may arise after the date such forward-looking statements were made. For a
discussion of risks and uncertainties that may affect the future results of the Firm, please see “Forward-Looking
Statements” immediately preceding Part I, Item 1, “Competition” and “Supervision and Regulation” in Part I, Item 1,“Risk Factors” in Part I, Item 1A, “Legal Proceedings” in Part I, Item 3, “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” in Part II, Item 7 and “Quantitative and Qualitative Disclosures about
Risk” in Part II, Item 7A in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2018 and otheritems throughout the Form 10-K, the Firm’s Quarterly Reports on Form 10-Q and the Firm’s Current Reports on Form
8-K, including any amendments thereto.

5

1Includes preferred dividends related to the calculation of earnings per share of $170 million for the second quarter of2019 and 2018.

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 futurefinancial 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 forassessing 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 accordancewith 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

Net revenues of $10.2 billion represents the fourth quarter that the Firm has exceeded net revenues of $10 billion fora reported quarterly period after excluding the impact of debt valuation adjustments (DVA), which were previously
reflected in net revenues in prior periods (reported periods prior to March 31, 2016), and reflecting the current reporting
structure of the Firm (i.e. exclusive of discontinued operations). Net revenues excluding the impact of DVA, were nonGAAP financial measures in those prior periods that were reconciled to the comparable GAAP financial measures in
the respective quarterly reports filed on Form 10-Q.
4Annualized return on average common equity and annualized return on average tangible common equity are nonGAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders to allow better
comparability of period-to-period operating performance and capital adequacy. The calculation of return on averagecommon equity and return on average tangible common equity represents annualized net income applicable to Morgan
Stanley less preferred dividends as a percentage of average common equity and average tangible common equity,
respectively.
5

On June 27, 2019, the Firm announced that the Board of Governors of the Federal Reserve System did not object to
the Firm’s 2019 Capital Plan (“Capital Plan”). The Capital Plan includes the repurchase of up to $6.0 billion ofoutstanding common stock for the four quarters, beginning in the third quarter of 2019 through the end of the second
quarter of 2020, an increase from $4.7 billion for the comparable four quarter period in the 2018 Capital Plan, as wellas an increase in the Firm’s quarterly common stock dividend to $0.35 per share from the current $0.30 per share,
beginning with the common dividend declared in the third quarter of 2019.
6

Pre-tax income is a non-GAAP financial measure that the Firm considers useful for analysts, investors and otherstakeholders to assess operating performance. Pre-tax income represents income (loss) before taxes.
7

Pre-tax margin is a non-GAAP financial measure that the Firm considers useful for analysts, investors and otherstakeholders to assess operating performance. Pre-tax margin represents income (loss) before taxes divided by net
revenues.
8

The Firm expense efficiency ratio represents total non-interest expenses as a percentage of net revenues.

9Book value per common share represents common equity divided by period end common shares outstanding.

6

10

Tangible book value per common share is a non-GAAP financial measure that the Firm considers to be a usefulmeasure of capital adequacy for analysts, investors and other stakeholders. Tangible book value per common sharerepresents tangible common equity divided by period end common shares outstanding. Tangible common equity, also
a non-GAAP financial measure, represents common equity less goodwill and intangible assets net of allowable
mortgage servicing rights deduction.
11

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.
12

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.
13

AUM is defined as assets under management.

14Long-term net flows include the Equity, Fixed Income and Alternative/Other asset classes and exclude the Liquidity
asset class.
15

Transactional revenues include investment banking, trading, and commissions and fee revenues.

16

Wealth Management client liabilities reflect U.S. Bank Subsidiaries’ lending and broker-dealer margin activity. 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.
17

Capital ratios are estimates as of the press release date, July 18, 2019.

18

The Firm’s risk-based capital ratios for purposes of determining regulatory compliance are the lower of the capitalratios computed under 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”). At June 30, 2019 and June 30, 2018, the Firm’s ratios are
based on the Standardized Approach. For information on the calculation of regulatory capital and ratios for priorperiods, please refer to Part II, Item 7 “Liquidity and Capital Resources – Regulatory Requirements” in the Firm’s 2018
Form 10-K.
19

The Tier 1 leverage ratio is a non-risk based capital requirement that measures the Firm’s leverage. Tier 1 leverage
ratio utilizes Tier 1 capital as the numerator and average adjusted assets as the denominator.
20

The Firm must maintain a Tier 1 supplementary leverage capital buffer of at least 2% in addition to the 3% minimum
supplementary leverage ratio (for a total of at least 5%), in order to avoid limitations on capital distributions, including
dividends and stock repurchases, and discretionary bonus payments to executive officers. The Firm’s Supplementary
Leverage Ratio utilizes a Tier 1 capital numerator of approximately $72.7 billion and $70.0 billion, and supplementary
leverage exposure denominator of approximately $1.12 trillion and $1.10 trillion, for the second quarter of 2019 and2018, respectively.

7

Consolidated Income Statement Information(unaudited, dollars in millions)

Revenues:
Investment banking
Trading
Investments
Commissions and fees
Asset management
Other
Total non‐interest revenues

Jun 30, 2019

Quarter Ended
Mar 31, 2019

Jun 30, 2018

$

$

$

1,590
2,732
441
979
3,220
253
9,215

1,242
3,441
273
966
3,049
301
9,272

Percentage Change From:Mar 31, 2019 Jun 30, 2018

1,793
3,293
147
1,039
3,189
243
9,704

28%
(21%)
62%
1%
6%
(16%)
(1%)

(11%)
(17%)
200%
(6%)
1%
4%
(5%)

Six Months Ended
Jun 30, 2019
Jun 30, 2018
$

2,832
6,173
714
1,945
6,269
554
18,487$

Percentage
Change

3,427
7,063
273
2,212
6,381
450
19,806

(17%)
(13%)
162%
(12%)
(2%)
23%
(7%)

Interest income
Interest expense
Net interest
Net revenues

4,506
3,477
1,029
10,244

4,290
3,276
1,014
10,286

3,294
2,388
906
10,610

5%
6%
1%
‐‐

37%
46%
14%
(3%)

8,796
6,753
2,043
20,530

6,154
4,273
1,881
21,687

43%
58%
9%
(5%)

Non‐interest expenses:
Compensation and benefits

4,531

4,651

4,621

(3%)

(2%)

9,182

9,535

(4%)

Non‐compensation expenses:
Occupancy and equipment
Brokerage, clearing and exchange fees
Information processing and communications
Marketing and business development
Professional services
Other
Total non‐compensation expenses

353
630
538
162
537
590
2,810

347
593
532
141
514
553
2,680

346
609
496
179
580
670
2,880

2%
6%
1%
15%
4%
7%
5%

2%
3%
8%
(9%)
(7%)
(12%)
(2%)

700
1,223
1,070
303
1,051
1,143
5,490

682
1,236
974
319
1,090
1,322
5,623

3%
(1%)
10%
(5%)
(4%)
(14%)
(2%)

7,341

7,331

7,501

‐‐

(2%)

14,67215,158

(3%)

2,903
657
2,246
0
2,246
45
2,201
170
2,031

2,955
487
2,468
0
2,468
39
2,429
93
2,336

3,109
640
2,469
(2)
2,467
30
2,437
170
2,267

(2%)
35%
(9%)
‐‐
(9%)
15%
(9%)
83%
(13%)

(7%)
3%
(9%)
*
(9%)
50%
(10%)
‐‐
(10%)

5,858
1,144
4,714
0
4,714
84
4,630
263
4,367

6,529
1,354
5,175
(4)
5,171
66
5,105
263
4,842

(10%)
(16%)
(9%)
*
(9%)
27%
(9%)
‐‐
(10%)

Total non‐interest expenses
Income (loss) from continuing operations before taxes
Income tax provision / (benefit) from continuing operations
Income (loss) from continuing operations
Gain (loss) from discontinued operations after tax
Net income (loss)
Net income applicable to nonredeemable noncontrolling interests
Net income (loss) applicable to Morgan Stanley
Preferred stock dividend / Other
Earnings (loss) applicable to Morgan Stanley common shareholders

$

$

$

$

$

$

$

$

$

$

The End Notes are an integral part of this presentation. Refer to the Financial Supplement on pages 12 ‐ 17 for Definition of U.S. GAAP to Non‐GAAP Measures, Definition of Performance Metrics and Terms,
Supplemental Quantitative Details and Calculations and Legal Notice for additional information.

8

Consolidated Financial Metrics and Ratios and Statistical Data
(unaudited)Jun 30, 2019

Quarter Ended
Mar 31, 2019

Jun 30, 2018

$
$

$
$

$
$

Percentage Change From:Mar 31, 2019 Jun 30, 2018

Six Months Ended
Jun 30, 2019 Jun 30, 2018

Percentage
ChangeFinancial Metrics:
Earnings per basic share
Earnings per diluted share
Return on average common equity
Return on average tangible common equity
Book value per common share
Tangible book value per common share
Excluding intermittent net discrete tax provision / benefit
Adjusted earnings per diluted share
Adjusted return on average common equity
Adjusted return on average tangible common equity

1.24
1.23
11.2%
12.8%

1.41
1.39
13.1%
14.9%

1.32
1.30

(12%)
(12%)

(6%)
(5%)

$
$

13.0%
14.9%

$
$

44.13
38.44

$
$

42.83
37.62

$
$

40.34
35.19

$

1.23
11.2%
12.8%

$

1.33
12.5%
14.2%

$

1.25
12.5%
14.3%

2.65
2.62

$
$

12.1%
13.8%

(8%)

(2%)

2.80
2.75

(5%)
(5%)

13.9%
16.0%

$
$

44.13
38.44

$
$

40.34
35.19

$

2.56
11.8%
13.5%

$

2.70
13.7%
15.7%

(5%)

Financial Ratios:
Pre‐tax profit margin
Compensation and benefits as a % of net revenues
Non‐compensation expenses as a % of net revenues
Firm expense efficiency ratio
Effective tax rate from continuing operations

28%
44%
27%
72%
22.6%

29%
45%
26%
71%
16.5%

29%
44%
27%
71%
20.6%

Period end common shares outstanding (millions)Average common shares outstanding (millions)
Basic
Diluted

1,659

1,686

1,750

(2%)

(5%)

1,634
1,655

1,658
1,677

1,720
1,748

(1%)
(1%)

(5%)
(5%)

Worldwide employees

59,51360,46958,010

(2%)

3%

29%
45%
27%
71%
19.5%

30%
44%
26%
70%
20.7%

1,646
1,666

1,730
1,760

Statistical Data:

The End Notes are an integral part of this presentation. Refer to the Financial Supplement on pages 12 ‐ 17 for Definition of U.S. GAAP to Non‐GAAP Measures, Definition of Performance Metrics and Terms,
Supplemental Quantitative Details and Calculations and Legal Notice for additional information.

9

(5%)
(5%)