Morgan Stanley First Quarter 2019 Earnings Results
Morgan Stanley Reports Net Revenues of $10.3 Billion and EPS of $1.39
NEW YORK, April 17, 2019 – Morgan Stanley (NYSE: MS) today reported net revenues of $10.3 billion for the firstquarter ended March 31, 2019 compared with $11.1 billion a year ago. Net income applicable to Morgan Stanley was1
1$2.4 billion, or $1.39 per diluted share, compared with net income of $2.7 billion, or $1.45 per diluted share, for thesame period a year ago. The current quarter included intermittent net discrete tax benefits of $101 million, or $0.06
per diluted share.

James P. Gorman, Chairman and Chief Executive Officer, said, “We delivered solid earnings despite a slow start tothe year following the turbulent markets in the fourth quarter. With an ROE of 13.1% and ROTCE of 14.9%, ourresults demonstrated the stability and breadth of our global franchise. Even though risks to the global environment
remain, markets have recovered and we are well positioned to serve our clients and invest in our businesses.”Financial Summary2Highlights($ millions, except per share data)

Firm

1Q 2019

1Q 2018

Net revenues$10,286$11,077

Compensation expense$4,651$4,914Non-compensation expenses
Pre-tax income3$2,680$2,743$2,955$3,420Net income app. to MS$2,429$2,668

Expense efficiency ratio

5

71%

69%

Earnings per diluted share

$1.39

$1.45

Book value per share 6$42.83$39.19Tangible book value per share 7$37.62$34.04Return on equity 8

13.1%

14.9%

14.9%

17.2%

8

Return on tangible equity
Institutional Securities
Net revenues$5,196$6,100Investment Banking$1,151$1,513

Sales & Trading$3,742$4,402

Wealth Management
Net revenues$4,389$4,374Fee-based client assets ($ billions) 9$1,116$1,058

10

$14.8

$18.2

$71.5

$68.3

Fee-based asset flows ($ billions)
Loans ($ billions)
Investment Management
Net revenues

$804

$718

AUM ($ billions) 11

$480

$469

Long-term net flows ($ billions) 12$(0.4)$1.5

Media Relations: Wesley McDade 212-761-2430• Firm net revenues declined 7% compared with a record
quarter a year ago.
• Firm compensation of $4.7 billion and non-compensation
expenses of $2.7 billion reflect our continued focus anddiscipline on controllable expenses.
• Firm ROE and ROTCE were at the high end of our target
range and our capital ratios remain strong.

• Institutional Securities net revenues reflected solid results
despite a less favorable market environment characterized
by lower volumes and volatility compared with a year ago.

• Wealth Management delivered pre-tax income of $1.2
34
billion and a pre-tax margin of 27.1% reflecting strong
expense management while continuing to invest in thebusiness.

• Investment Management net revenues increased 12% onstrong principal investment gains and solid asset
management fees.

Investor Relations: Sharon Yeshaya 212-761-1632

Institutional Securities
Institutional Securities reported net revenues for the current quarter of $5.2 billion compared with $6.1 billion a year
3
ago. Pre-tax income was $1.6 billion compared with $2.1 billion a year ago.
Investment Banking revenues down 24% from a yearago:
• Advisory revenues decreased from a year ago reflecting
the impact of lower M&A fee realizations.
• Equity underwriting revenues decreased from a year ago
on lower IPOs and follow-on offerings due to lower market
volumes.
• Fixed income underwriting revenues decreased from ayear ago driven by lower non-investment grade loan
issuances.
Sales and Trading net revenues down 15% from a yearago:
• Equity sales and trading net revenues decreased 21%
reflecting declines in prime brokerage driven by lower
client balances and decreases in derivatives and cash
equities on lower client activity compared with a year ago.
• Fixed Income sales and trading net revenues decreased
9% from a year ago primarily driven by lower results inrates and foreign exchange. The decline was partially
offset by gains in client structuring activity within credit risk
management and higher results in credit products.
• Other sales and trading net revenues increased from ayear ago primarily driven by gains on investments
associated with certain employee deferred compensationplans, partially offset by losses on hedges associated withcorporate lending activity.
Investments and Other:• Investment revenues increased from a year ago driven by
a fund distribution and gains on real estate limited
partnerships.
• Other revenues increased from a year ago reflecting
higher mark-to-market gains associated with corporate
lending activity.

($ millions)

1Q 2019

1Q 2018

Net Revenues$5,196$6,100Investment Banking$1,151$1,513Advisory

$406

$574

Equity underwriting

$339

$421

Fixed income underwriting

$406

$518

Sales and Trading$3,742$4,402Equity$2,015$2,558Fixed Income$1,710$1,873

Other

$17

$(29)

Investments and Other

$303

$185

Investments

$81

$49

Other

$222

$136

Total Expenses$3,601$3,988Compensation$1,819$2,160Non-compensation$1,782$1,828

Total Expenses:• Compensation expense decreased on lower revenues resulting in a compensation ratio of 35.0%.
• Non-compensation expenses decreased from a year ago on lower litigation costs and volume driven expenses,
partially offset by higher information processing and professional services expenses.

2

Wealth Management
Wealth Management reported net revenues for the current quarter of $4.4 billion and pre-tax income of $1.2 billion,
4
both were essentially unchanged from a year ago. The current quarter’s pre-tax margin was 27.1%.
Net revenues were essentially unchanged from a year ago:3

1Q 2019

1Q 2018

Net Revenues$4,389$4,374• Transactional revenues increased from a year ago
reflecting gains on investments associated with certain
employee deferred compensation plans, partially offset bylower commissions and fees.

Asset management$2,361$2,495

Transactional

$817

$747

• Net interest income increased 6% compared with a year ago
primarily driven by growth in bank lending and higher interest
14
rates. Wealth Management client liabilities were $82 billion
at quarter end compared with $80 billion a year ago.

Net interest$1,130$1,069$81$63

Total Expenses$3,201$3,214Compensation$2,462$2,450$739$764• Asset management revenues decreased from a year ago
reflecting lower asset level pricing, the result of fourth
quarter market declines.
13

Total Expenses:• Compensation expenses were essentially unchanged from ayear ago. Results in the current quarter reflected anincrease in the fair value of deferred compensation planreferenced investments offset by decreases in compensable
revenues and retention note expense.

($ millions)

Other

Non-compensation• Non-compensation decreased 3% from a year ago reflecting
the continued focus on expense discipline across the business.

Investment Management
Investment Management reported net revenues of $804 million compared with $718 million a year ago. Pre-tax
3income was $174 million compared with $148 million a year ago.
Net revenues up 12% from a year ago:
• Asset management revenues were essentially unchanged
from a year ago.
• Investment revenues increased from a year ago primarily
driven by higher investment gains and carried interest in Asia
private equity and infrastructure funds.
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.

1Q 2019

1Q 2018

Net Revenues

$804

$718

Asset management

$617

$626

Investments

$191

$77

Other

$(4)

$15

Total Expenses

$630

$570

Compensation

$370

$304

Non-compensation

$260

$266

($ millions)3Other Matters• At March 31, 2019, the Firm’s capital ratios are based on
16
the Standardized Approach.
• 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 declared a $0.30 quarterly
dividend per share, payable on May 15, 2019 tocommon shareholders of record on April 30, 2019.
• The effective tax rate from continuing operations for thequarter was 16.5%, which reflected a recurring-type of
discrete tax benefit of $107 million associated with
19
employee share-based payments. The current quarter
also included intermittent net discrete tax benefits of$101 million, primarily associated with theremeasurement of reserves and related interest due to
new information related to multi-jurisdiction tax
examinations.

15

1Q 2018

16.5%

15.5%

18.8%

17.7%

8.4%

8.2%

6.5%

6.3%

$1,180$1,25028

22

Average Price$42.19$55.98

Common Shares Outstanding period end (millions)

1,686

1,774

Tax Rate

16.5%

20.9%

1Q 2019
CapitalCommon Equity Tier 1 capital
Tier 1 capital

16

16

Tier 1 leverage

17

Supplementary leverage ratio

18

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. For a discussion of risks and uncertainties that may affect the future results of theFirm, 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 of Financial Condition and Results of Operations” in Part II, Item 7 and “Quantitative andQualitative 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 other items throughout the Form 10-K 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 $93 million for the first quarter of 2019and 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

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.
4Pre-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.
5

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

6Book value per common share represents common equity divided by period end common shares outstanding.

7

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.
8

Annualized 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.
9

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.
10

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.
11

AUM is defined as assets under management.

12Long-term net flows include the Equity, Fixed Income and Alternative/Other asset classes and exclude the Liquidity
asset class.

6

13

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

14

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.
15

Capital ratios are estimates as of the press release date, April 17, 2019.

16

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 March 31, 2019 and March 31, 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.
17

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.
18

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 $71.8 billion and $69.2 billion, and supplementary
leverage exposure denominator of approximately $1.10 trillion and $1.09 trillion, for the first quarter of 2019 and 2018,
respectively.
19

The income tax consequences related to employee share-based payments are recognized in Provision for income
taxes in the consolidated income statement, and may be either a benefit or a provision. Conversion of employee
share-based awards to Firm shares will primarily occur in the first quarter of each year. The impact of recognizing
excess tax benefits upon conversion of awards in the first quarter of 2019 was a benefit of $107 million to Provision forincome taxes. We consider these employee share-based award related provisions or benefits to be recurring-type(“Recurring”) discrete tax items, as we anticipate conversion activity each year. Accordingly, these Recurring discrete
tax provisions or benefits are excluded from the intermittent net discrete tax provisions or benefits disclosures.

7

Consolidated Income Statement Information(unaudited, dollars in millions)

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

Mar 31, 2019

Quarter Ended
Dec 31, 2018

Mar 31, 2018

$

$

$

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

1,488
1,736
28
1,046
3,266
(5)
7,559

Percentage Change From:
Dec 31, 2018
Mar 31, 2018

1,634
3,770
126
1,173
3,192
207
10,102

(17%)
98%
*
(8%)
(7%)
*
23%

(24%)
(9%)
117%
(18%)
(4%)
45%
(8%)

Interest income
Interest expense
Net interest
Net revenues

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

4,111
3,122
989
8,548

2,860
1,885
975
11,077

4%
5%
3%
20%

50%
74%
4%
(7%)

Non‐interest expenses:
Compensation and benefits

4,651

3,787

4,914

23%

(5%)

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

347
593
532
141
514
553
2,680

358
598
529
220
605
594
2,904

336
627
478
140
510
652
2,743

(3%)
(1%)
1%
(36%)
(15%)
(7%)
(8%)

3%
(5%)
11%
1%
1%
(15%)
(2%)

7,331

6,691

7,657

10%

(4%)

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

1,857
300
1,557
1
1,558
27
1,531
170
1,361

3,420
714
2,706
(2)
2,704
36
2,668
93
2,575

59%
62%
59%
*
58%
44%
59%
(45%)
72%

(14%)
(32%)
(9%)
*
(9%)
8%
(9%)
‐‐
(9%)

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)
Quarter Ended
Dec 31, 2018

Mar 31, 2019

Mar 31, 2018

Financial Metrics:
Earnings per basic share
Earnings per diluted share$$

Return on average common equity
Return on average tangible common equity

1.41
1.39

$
$

13.1%
14.9%

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

0.81
0.80

$
$

7.7%
8.8%

1.48
1.45
14.9%
17.2%

$
$

42.83
37.62

$
$

42.20
36.99

$
$

39.19
34.04

$

1.33
12.5%
14.2%

$

0.73
7.1%
8.1%

$

1.45
14.9%
17.2%

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

29%
45%
26%
71%
16.5%

22%
44%
34%
78%
16.2%

31%
44%
25%
69%
20.9%

Statistical Data:
Period end common shares outstanding (millions)Average common shares outstanding (millions)
Basic
Diluted

1,686

1,700

1,774

1,658
1,677

1,674
1,705

1,740
1,771

Worldwide employees

60,46960,34857,810The 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