Morgan Stanley Reports First Quarter 2017•

Net Revenues of $9.7 Billion and Earnings
per Diluted Share of $1.00•

Strong Performance in Sales & Trading andInvestment Banking•

Wealth Management Revenues of $4.1
Billion and Pre-Tax Margin of 24%1, 2•

Maintained Expense Discipline with Firm
Efficiency Ratio of 71%3

James P. Gorman, Chairman and Chief
Executive Officer, said, “We reported one of ourstrongest quarters in recent years. All ourbusinesses performed well in improved market
conditions. We are confident in our businessmodel and the opportunities ahead, while
recognizing that the environment remains
uncertain.”

Financial Overview
NEW YORK, April 19, 2017 – Morgan Stanley (NYSE: MS) today reported net revenues of $9.7 billion for the firstquarter ended March 31, 2017 compared with $7.8 billion a year ago. For the current quarter, net income applicableto Morgan Stanley was $1.9 billion, or $1.00 per diluted share,4 compared with net income of $1.1 billion, or $0.55
per diluted share,4 for the same period a year ago.
Compensation expense of $4.5 billion increased from $3.7 billion a year ago driven by higher revenues. Noncompensation expenses of $2.5 billion compared with $2.4 billion a year ago.
The effective tax rate for the current quarter was 29.0%, which reflected a recurring-type of discrete tax benefit of$112 million associated with new accounting guidance related to employee share-based payments.5
The annualized return on average common equity was 10.7 percent in the current quarter.6

Business Highlights

Summary of Segment Results(dollars in millions)
Net Revenues

Pre-Tax Income•

Institutional Securities net revenues were $5.2
billion reflecting strength in our sales and trading
franchise and improved underwriting results.

•

Wealth Management net revenues were $4.1 billion
and pre-tax margin was 24%.2 Fee-based asset
flows for the quarter were $18.8 billion.

•

Investment Management net revenues were $609
million with assets under management of $421
billion.

7

1Q 2017 1Q 2016 1Q 2017 1Q 2016
Institutional Securities$5,152$3,714$1,730$908

Wealth Management$4,058$3,668

$973

$786

$609

$477

$103

$44

$9,745$7,792$2,808$1,738Investment Management
Firm

Media Relations: Michele Davis 212-761-9621

Investor Relations: Sharon Yeshaya 212-761-1632

Institutional Securities
Institutional Securities reported pre-tax income from continuing operations of $1.7 billion compared with pretax income of $908 million a year ago. Net revenues for the current quarter were $5.2 billion compared with
$3.7 billion a year ago.
••

Investment Banking revenues of $1.4 billion increased from $990 million a year ago:

Advisory revenues of $496 million decreased from $591 million a year ago on lower levels ofcompleted M&A activity.



Equity underwriting revenues of $390 million increased from $160 million in the prior year quarter onhigher global market volumes.



Fixed income underwriting revenues of $531 million increased from $239 million in the prior year
quarter reflecting higher bond and non-investment grade loan fees.

Sales and Trading net revenues of $3.5 billion increased from $2.7 billion a year ago:

Equity sales and trading net revenues of $2.0 billion decreased from $2.1 billion a year ago reflecting
lower results in our financing business driven by higher funding costs, partly offset by strong results in
our execution services businesses.



Fixed Income sales and trading net revenues of $1.7 billion increased from $873 million a year ago
reflecting strong performance across all products and regions on improved market conditions
compared with the prior year period.



Other sales and trading net losses of $234 million were relatively consistent with the period a year
ago.

•

Other revenues of $173 million increased from $4 million a year ago reflecting mark-to-market gains onheld for sale loans and commitments and a smaller increase in the allowance for credit losses.

•

Compensation expense of $1.9 billion increased from $1.4 billion a year ago driven by higher revenues.
Non-compensation expenses of $1.6 billion for the current quarter increased by $128 million from the prioryear, primarily reflecting higher litigation costs and volume driven expenses.

Morgan Stanley’s average trading Value-at-Risk (VaR) measured at the 95% confidence level was $44 million
compared with $39 million from the fourth quarter of 2016 and $46 million in the first quarter of the prior year.8

Wealth Management
Wealth Management reported pre-tax income from continuing operations of $973 million compared with $786
million in the first quarter of last year. The quarter’s pre-tax margin was 24%.2 Net revenues for the current
quarter were $4.1 billion compared with $3.7 billion a year ago.
•

Asset management fee revenues of $2.2 billion increased from $2.1 billion a year ago reflecting market
appreciation and positive flows.

•

Transactional revenues9 of $823 million increased from $727 million a year ago primarily reflecting gains
on investments associated with certain employee deferred compensation plans.

•

Net interest income of $994 million increased from $831 million a year ago on loan growth and higher
interest rates. Wealth Management client liabilities were $74 billion at quarter end, an increase of $8
billion compared with the prior year quarter.10•

Compensation expense for the current quarter of $2.3 billion increased from $2.1 billion a year ago driven
by higher revenues and an increase in the fair value of deferred compensation plan referenced
investments. Non-compensation expenses of $768 million decreased from $794 million a year ago on
lower professional services costs.
2

Total client assets for the quarter were $2.2 trillion and client assets in fee-based accounts were $927 billion atquarter end. Fee-based asset flows for the quarter were $18.8 billion.
Wealth Management representatives of 15,777 produced average annualized revenue per representative of$1.0 million in the current quarter.

Investment Management
Investment Management reported pre-tax income from continuing operations of $103 million compared with$44 million in the first quarter of last year.
•

Net revenues of $609 million increased from $477 million in the prior year primarily driven by investment
gains in certain private equity and real estate funds compared with losses in the prior year period. Assetmanagement fees were essentially unchanged from a year ago.

•

Compensation expense for the current quarter of $279 million increased from $213 million a year ago
principally due to an increase in deferred compensation associated with carried interest. Noncompensation expenses of $227 million were relatively unchanged from a year ago.

•

Assets under management or supervision at March 31, 2017 were $421 billion.

Capital
As of March 31, 2017, the Firm’s Common Equity Tier 1 and Tier 1 risk-based capital ratios under Advanced
Approach transitional provisions were approximately 17.4% and 19.9%, respectively.11
As of March 31, 2017, the Firm estimates its pro forma fully phased-in Common Equity Tier 1 risk-based
capital ratio under the Advanced Approach and pro forma fully phased-in Supplementary Leverage Ratio to beapproximately 16.6% and 6.4%, respectively.11,12,13
At March 31, 2017, book value and tangible book value per common share were $37.48 and $32.49,14
respectively, based on approximately 1.9 billion shares outstanding.

Other Matters
During the quarter ended March 31, 2017, the Firm repurchased approximately $750 million of its common
stock or approximately 17 million shares.
The Board of Directors declared a $0.20 quarterly dividend per share, payable on May 15, 2017 to commonshareholders of record on May 1, 2017.

3

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 42 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 releaseand the Financial Supplement are available online in the Investor Relations section atwww.morganstanley.com.

###(See Attached Schedules)
NOTICE:The information provided herein may include certain non-GAAP financial measures. The definition of suchmeasures or reconciliation of such metrics to the comparable U.S. GAAP figures are included in this earnings
release and the Financial Supplement, both of which are available on www.morganstanley.com.

This earnings release contains forward-looking statements. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date on which they are made and whichreflect management’s current estimates, projections, expectations or beliefs and which are subject to risks anduncertainties that may cause actual results to differ materially. For a discussion of additional risks anduncertainties 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 Disclosuresabout Market Risk” in Part II, Item 7A in the Firm’s Annual Report on Form 10-K for the year ended December
31, 2016 and other items throughout the Form 10-K and the Firm’s Current Reports on Form 8-K, including
any amendments thereto.

4

1

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 andotherwise. The Securities and Exchange Commission defines a “non-GAAP financial measure” as a numericalmeasure of historical or future financial performance, financial positions, or cash flows that is subject toadjustments that effectively exclude, or include amounts from the most directly comparable measurecalculated and presented in accordance with U.S. GAAP. Non-GAAP financial measures disclosed by Morgan
Stanley are provided as additional information to investors and analysts in order to provide them with greatertransparency about, or an alternative method for assessing, our financial condition, operating results, orprospective 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 othercompanies. 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 suchcomparable U.S. GAAP financial measure.

2

Pre-tax margin is a non-GAAP financial measure that the Firm considers useful for investors and analysts toassess operating performance. Pre-tax margin represents income (loss) from continuing operations before
taxes divided by net revenues.
3

The Firm Expense Efficiency Ratio represents total non-interest expenses as a percentage of net revenues.

4

Includes preferred dividends and other adjustments related to the calculation of earnings per share for the
first quarter of 2017 and 2016 of approximately $90 million and $79 million, respectively.

5

Effective January 1, 2017, the Firm adopted new accounting guidance related to employee share-based
payments, the transition impact of which was not significant. Beginning in 2017, the income tax consequences
related to share-based payments are required to be recognized in Provision for income taxes in the
consolidated income statement instead of additional paid-in capital. The impact of the income tax
consequences may be either a benefit or a provision. Conversion of employee share-based awards to Firmshares 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 2017 was a benefit of $112 million to Provision for income taxes.
Results for 2016 have not been restated pursuant to the guidance.
6

Annualized return on average common equity is a non-GAAP financial measure that the Firm considers
useful for investors and analysts to allow better comparability of period-to-period operating performance. The
calculation of return on average common equity uses annualized net income applicable to Morgan Stanleyless preferred dividends as a percentage of average common equity.
7

Pre-tax income represents income (loss) from continuing operations before taxes.

8

VaR represents the loss amount that one would not expect to exceed, on average, more than five times
every one hundred trading days in the Firm’s trading positions if the portfolio were held constant for a one-day
period. Further discussion of the calculation of VaR and the limitations of the Firm’s VaR methodology isdisclosed in Part II, Item 7A “Quantitative and Qualitative Disclosures about Market Risk” included in the
Annual Report on Form 10-K for the year ended December 31, 2016 (2016 Form 10-K). Refer to page 7 ofMorgan Stanley’s Financial Supplement accompanying this release for the VaR disclosure.

9

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

5

10

Wealth Management client liabilities reflect U.S. Bank Subsidiaries’ lending and broker dealer margin
activity.
11

The Firm’s binding risk-based capital ratios for regulatory purposes are the lower of the capital ratios
computed under the (i) standardized approaches for calculating credit risk risk-weighted assets (RWAs) andmarket risk 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, 2017, the binding
ratio is based on the Advanced Approach transitional rules. For information on the calculation of regulatory
capital and ratios for prior periods, please refer to Part II, Item 7 “Liquidity and Capital Resources - Regulatory
Requirements” in the Firm’s 2016 10-K.
12The pro forma fully phased-in Common Equity Tier 1 risk-based capital ratio and pro forma fully phased-in
Supplementary Leverage Ratio are non-GAAP financial measures that the Firm considers to be usefulmeasures for investors and analysts to evaluate compliance with new regulatory capital requirements thathave not yet become effective.
13

The Firm is required to disclose information related to its supplementary leverage ratio, which through theend of 2017 will include the effects of transitional provisions. The supplementary leverage ratio will become
effective as a capital standard on January 1, 2018. Specifically, beginning on January 1, 2018, 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 pro forma Supplementary Leverage Ratio estimate utilizes a fully phased-in Tier 1 capital numerator of
approximately $68.3 billion and a fully phased-in supplementary leverage exposure denominator of
approximately $1.07 trillion. The Firm’s estimates are subject to risks and uncertainties that may cause actual
results to differ materially from estimates based on these regulations. Further, these expectations should not
be taken as projections of what the Firm’s supplementary leverage ratios or earnings, assets or exposures will
actually be at future dates. See “Risk Factors” in Part I, Item 1A in the 2016 Form 10-K for a discussion ofrisks and uncertainties that may affect the future results of the Firm.

14

Tangible common equity and tangible book value per common share are non-GAAP financial measures that
the Firm considers to be useful measures of capital adequacy for investors and analysts. Tangible common
equity equals common equity less goodwill and intangible assets net of allowable mortgage servicing rights
deduction. Tangible book value per common share equals tangible common equity divided by period end
common shares outstanding.

6

Consolidated Financial Summary(unaudited, dollars in millions, except for per share data)

Net revenues
Institutional Securities
Wealth Management
Investment Management
Intersegment Eliminations
Net revenues
Income (loss) from continuing operations before tax
Institutional Securities
Wealth Management
Investment Management
Intersegment Eliminations
Income (loss) from continuing operations before tax
Net Income (loss) applicable to Morgan Stanley
Institutional Securities
Wealth Management
Investment Management
Intersegment Eliminations
Net Income (loss) applicable to Morgan Stanley
Earnings (loss) applicable to Morgan Stanley common shareholders

Mar 31, 2017

Quarter Ended
Dec 31, 2016

Mar 31, 2016

$

$

$

5,152
4,058
609
(74)
9,745

$

$

1,730
973
103
2
2,808

$

$

$

1,214
647
67
2
1,930

$

$
$

$

$

$

$

4,614
3,990
500
(83)
9,021

1,326
891
28
1
2,246

$

$

$

$

Percentage Change From:
Dec 31, 2016
Mar 31, 2016

3,714
3,668
477
(67)
7,792

12%
2%
22%
11%
8%

39%
11%
28%
(10%)
25%

908
786
44
0
1,738

30%
9%
*
100%
25%

91%
24%
134%
*
62%

10%
22%
123%
100%
16%

105%
31%
34%
*
70%

$

1,104
531
30
1
1,666

$

591
493
50
0
1,134

1,840

$

1,509

$

1,055

22%

74%

1.02
1.00

$
$

0.84
0.81

$
$

0.56
0.55

21%
23%

82%
82%

Financial Metrics:
Earnings per basic share
Earnings per diluted share
Return on average common equity
Return on average common equity excluding DVA
Book value per common share
Tangible book value per common share

10.7%
10.6%
$
$

37.48
32.49

8.7%
8.7%
$
$

36.99
31.98

6.2%
6.2%
$
$

35.34
30.44

Notes: - Refer to End Notes, U.S. GAAP to Non-GAAP Measures and Definition of Performance Metrics on pages 13 - 15 from the Financial Supplement for additional
information related to the calculation of the financial metrics.
7

Consolidated Income Statement Information(unaudited, dollars in millions)
Mar 31, 2017
Revenues:
Investment banking
Trading
Investments
Commissions and fees
Asset management, distribution and admin. fees
Other
Total non-interest revenues

$

1,545
3,235
165
1,033
2,767
229
8,974

Quarter Ended
Dec 31, 2016
$

1,377
2,789
(19)
1,043
2,754
194
8,138

Mar 31, 2016$

Percentage Change From:
Dec 31, 2016
Mar 31, 2016

1,107
2,065
(34)
1,055
2,620
80
6,893

12%
16%
*
(1%)
-18%
10%

40%
57%
*
(2%)
6%
186%
30%

Interest income
Interest expense
Net interest
Net revenues

1,965
1,194
771
9,745

1,868
985
883
9,021

1,747
848
899
7,792

5%
21%
(13%)
8%

12%
41%
(14%)
25%

Non-interest expenses:
Compensation and benefits

4,466

4,083

3,683

9%

21%

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

327
509
428
136
527
544
2,471

311
480
460
169
578
694
2,692

329
465
442
134
514
487
2,371

5%
6%
(7%)
(20%)
(9%)
(22%)
(8%)

(1%)
9%
(3%)
1%
3%
12%
4%

6,937

6,775

6,054

2%

15%

2,808
815
1,993
(22)
1,971
41
1,930
90
1,840

2,246
566
1,680
0
1,680
14
1,666
157
1,509

1,738
578
1,160
(3)
1,157
23
1,134
79
1,055

25%
44%
19%
*
17%
193%
16%
(43%)
22%

62%
41%
72%
*
70%
78%
70%
14%
74%

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$$

Pre-tax profit margin
Compensation and benefits as a % of net revenues
Non-compensation expenses as a % of net revenues
Effective tax rate from continuing operations

$

$

$

$

29%
46%
25%

25%
45%
30%

22%
47%
30%

29.0%

25.2%

33.3%

Notes: - Refer to End Notes, U.S. GAAP to Non-GAAP Measures and Definition of Performance Metrics on pages 13 - 15 from the Financial Supplement for additional information.
8