Morgan Stanley Reports First Quarter 2018•

Record Net Revenues of $11.1 Billion and Record
Net Income of $2.7 Billion1,2,3

James P. Gorman, Chairman and Chief Executive•

Earnings per Diluted Share of $1.45•

Strong Performance across all Business Segments
and Geographies•

Results Reflect Significant Operating Leverage
Achieved Through Strong Expense Discipline

Officer, said, “We delivered very strong results thisquarter, with record revenues and net income - andan ROE above our target range. Each of ourbusinesses performed well, with significant client
engagement across our global franchise, and Sales
and Trading a particular highlight in a more active
environment.”

Financial Overview
NEW YORK, April 18, 2018 – Morgan Stanley (NYSE: MS) today reported net revenues of $11.1 billion for the firstquarter ended March 31, 2018 compared with $9.7 billion a year ago. For the current quarter, net income applicableto Morgan Stanley was $2.7 billion, or $1.45 per diluted share,4 compared with net income of $1.9 billion, or $1.00 per
diluted share, for the same period a year ago.4
Compensation expense of $4.9 billion increased from $4.5 billion a year ago on higher revenues. Non-compensation
expenses of $2.7 billion increased from $2.5 billion a year ago principally on higher volume driven expenses. The
Firm’s expense efficiency ratio for the current quarter was 69%.5
The annualized return on average common equity was 14.9% and return on average tangible common equity was
17.2% in the current quarter.6

Business Highlights

Summary of Segment Results(dollars in millions)
Net Revenues

Pre-Tax Income•

Institutional Securities net revenues were $6.1
billion reflecting strength across our sales andtrading franchise; Investment Banking Ranked #1 in
Global Announced and Completed M&A and Global
Equity.8•

Wealth Management reported net revenues of $4.4
billion, record pre-tax income of $1.2 billion and a
pre-tax margin of 26.5%;9 Strong fee-based asset
flows of $18.2 billion for the quarter.

•

Investment Management net revenues were $718
million reflecting higher management fees;
Continued positive long-term net flows in thequarter.10

7

1Q 2018 1Q 2017 1Q 2018 1Q 2017
Institutional Securities$6,100$5,152$2,112$1,730Wealth Management$4,374$4,058$1,160

$973

$718

$609

$148

$103

$11,077$9,745$3,420$2,808Investment 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 $2.1 billion compared with pretax income of $1.7 billion a year ago. Net revenues for the current quarter were $6.1 billion compared with
$5.2 billion a year ago.3••

Investment Banking revenues of $1.5 billion compared with $1.4 billion a year ago:

Advisory revenues of $574 million increased from $496 million a year ago reflecting the impact ofhigher M&A fee realizations.



Equity underwriting revenues of $421 million increased from $390 million in the prior year quarter
primarily reflecting higher market volumes.



Fixed income underwriting revenues of $518 million decreased from $531 million in the prior year
quarter primarily reflecting lower debt issuance volumes.

Sales and Trading net revenues of $4.4 billion increased from $3.5 billion a year ago:

Equity sales and trading net revenues of $2.6 billion increased from $2.0 billion a year ago reflecting
strong performance across products and regions on higher levels of client activity.



Fixed Income sales and trading net revenues of $1.9 billion increased from $1.7 billion a year ago
reflecting higher results in foreign exchange and commodities, partially offset by lower results in credit
products and rates.



Other sales and trading net losses of $29 million compared with net losses of $234 million in the prioryear period reflecting higher revenues on economic hedges related to the Firm’s long-term debt andlower losses associated with corporate loan hedging activity.

•

Other revenues of $136 million decreased from $173 million a year ago primarily reflecting lower gains
associated with held-for-sale corporate loans.

•

Compensation expense of $2.2 billion increased from $1.9 billion a year ago driven by higher revenues.
Non-compensation expenses of $1.8 billion for the current quarter increased from $1.6 billion a year ago
principally on higher volume driven expenses.3

Morgan Stanley’s average trading Value-at-Risk (VaR) measured at the 95% confidence level was $46 million
compared with $38 million from the fourth quarter of 2017 and $44 million in the first quarter of the prior year.11

Wealth Management
Wealth Management reported pre-tax income from continuing operations of $1.2 billion compared with $973
million in the first quarter of last year. The quarter’s pre-tax margin was 26.5%.9 Net revenues for the current
quarter were $4.4 billion compared with $4.1 billion a year ago.
•

Asset management revenues of $2.5 billion increased from $2.2 billion a year ago reflecting higher asset
levels and positive flows.

•

Transactional revenues12 of $747 million decreased from $823 million a year ago primarily driven bylosses related to investments associated with certain employee deferred compensation plans comparedwith gains in the prior year quarter.

•

Net interest income of $1.1 billion increased from $994 million a year ago driven by higher interest rates
and growth in bank lending. Wealth Management client liabilities were $80 billion at quarter end comparedwith $74 billion in the prior year quarter.13•

Compensation expense for the current quarter of $2.5 billion increased from $2.3 billion a year ago on
higher revenues. Non-compensation expenses of $764 million were essentially unchanged from a yearago.

2Total client assets were $2.4 trillion and client assets in fee-based accounts were $1.1 trillion at the end of thequarter. Fee-based asset flows for the quarter were $18.2 billion.
Wealth Management representatives of 15,682 produced average annualized revenue per representative of$1.1 million in the current quarter.14

Investment Management
Investment Management reported pre-tax income from continuing operations of $148 million compared with$103 million in the first quarter of last year. Net revenues of $718 million increased from $609 million in theprior year.3•

Asset management revenues of $626 million increased from $517 million in the prior year quarter driven
by higher levels of assets under management.

•

Investment revenues of $77 million decreased from $98 million in the prior year quarter primarily driven bylower investment gains in certain private equity funds compared with the quarter a year ago.

•

Compensation expense for the current quarter of $304 million increased from $279 million a year ago on
higher revenues. Non-compensation expenses of $266 million increased from $227 million a year ago
driven by higher brokerage and clearing expenses.3•

Total assets under management or supervision at March 31, 2018 were $469 billion compared with $421
billion a year ago.

Capital
As of March 31, 2018, the Firm’s Common Equity Tier 1 and Tier 1 risk-based capital ratios under the fully
phased-in Standardized Approach were approximately 15.6% and 17.8%, respectively; the fully phased-in
Supplementary Leverage Ratio was approximately 6.3%.15,16
At March 31, 2018, book value and tangible book value per common share were $39.19 and $34.04,17
respectively, based on approximately 1.8 billion shares outstanding.

Other Matters
The effective tax rate from continuing operations for the quarter was 20.9%, which reflected a recurring-type of
discrete tax benefit of $147 million associated with employee share-based payments.18
During the quarter ended March 31, 2018, the Firm repurchased approximately $1.25 billion of its common
stock or approximately 22 million shares.
The Board of Directors declared a $0.25 quarterly dividend per share, payable on May 15, 2018 to commonshareholders of record on April 30, 2018.

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

###(See Attached Schedules)

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 are included 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 andother targets, 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 anduncertainties that may cause actual results to differ materially. 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 of Financial Condition and
Results of Operations” in Part II, Item 7 and “Quantitative and Qualitative Disclosures about Market Risk” inPart II, Item 7A in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2017 and otheritems 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

Net revenues of $11.1 billion and net income applicable to Morgan Stanley of $2.7 billion represent records
for a reported quarterly period after excluding the impact of debt valuation adjustments (DVA), which werepreviously reflected in net revenues in prior periods, and reflecting the current reporting structure of the Firm
(i.e. exclusive of discontinued operations). Net revenues and net income applicable to Morgan Stanley,excluding the impact of DVA, were non-GAAP financial measures in those prior periods that were reconciled tothe comparable GAAP financial measures in the respective quarterly reports filed on Form 10-Q.
3

Effective January 1, 2018, the Firm adopted new accounting guidance related to Revenue from Contracts
with Customers, which among other things, requires a gross presentation of certain costs that were previously
netted against net revenues. As a result, the Firm recorded an increase to net revenues and noncompensation expenses of $79 million, of which $72 million was reported in the Institutional Securities
segment and $23 million in the Investment Management segment. In addition, the Firm included anintersegment elimination of $(16) million related to intercompany activity. This change in presentation did nothave an impact on net income. Prior periods have not been restated pursuant to this guidance.
4

Includes preferred dividends and other adjustments related to the calculation of earnings per share for the
first quarter of 2018 and 2017 of approximately $93 million and $90 million, respectively.

5

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

6

Annualized return on average common equity, annualized return on average tangible common equity andtangible common equity are non-GAAP financial measures that the Firm considers useful for investors andanalysts to allow better comparability of period-to-period operating performance and capital adequacy. The
calculation of return on average common equity and return on average tangible common equity uses
annualized net income applicable to Morgan Stanley less preferred dividends as a percentage of averagecommon equity and average tangible common equity, respectively. Tangible common equity equals common
equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.
7

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

8

Source: Thomson Reuters – for the period of January 1, 2018 to March 31, 2018 as of April 2, 2018.

9

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.

510Long-term net flows include the equity, fixed income and alternative/other asset classes and exclude theliquidity asset class.

11

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, 2017 (“2017 Form 10-K”). Refer to page 7 ofMorgan Stanley’s Financial Supplement accompanying this release for the VaR disclosure.

12

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

13

Wealth Management client liabilities reflect U.S. Bank Subsidiaries’ lending and broker dealer margin
activity.
14

Annualized revenue per Wealth Management representative is defined as annualized revenue divided byaverage representative headcount.
15

The Firm’s risk-based capital ratios for purposes of determining regulatory compliance are the lower of thecapital ratios computed under the (i) standardized approaches for calculating credit risk and market risk riskweighted assets (RWAs) (the “Standardized Approach”); and (ii) applicable advanced approaches forcalculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”). At March 31, 2018,
the Firm’s ratio is based on the Standardized Approach fully phased-in rules. Regulatory compliance wasdetermined based on capital ratios calculated under transitional rules until December 31, 2017. 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 2017 10-K.
16

The Supplementary Leverage Ratio became effective as a capital standard on January 1, 2018. As such,
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 fully phased-in Tier 1 capital numerator of
approximately $69.2 billion and a fully phased-in supplementary leverage exposure denominator of
approximately $1.09 trillion.

17

Tangible book value per common share is a non-GAAP financial measure that the Firm considers to be auseful measure of capital adequacy for investors and analysts. Tangible book value per common shareequals tangible common equity divided by period end common shares outstanding.

18

The income tax consequences related to 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 impactof recognizing excess tax benefits upon conversion of awards in the first quarter 2018 was a benefit of $147
million to Provision for income taxes.

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

Mar 31, 2018

Quarter Ended
Dec 31, 2017

Mar 31, 2017

$

6,100
4,374
718
(115)
11,077

$

4,523
4,407
637
(67)
9,500

$

2,112
1,160
148
0
3,420

$

1,235
1,150
80
6
2,471

$

$

$

$

357
315
(35)
6
643

$

Income (loss) from continuing operations before tax
Institutional Securities
Wealth Management
Investment Management
Intersegment Eliminations
Income (loss) from continuing operations before tax

$

$

$

$

Percentage Change From:
Dec 31, 2017
Mar 31, 2017

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

35%
(1%)
13%
(72%)
17%

18%
8%
18%
(55%)
14%

1,730
973
103
2
2,808

71%
1%
85%
*
38%

22%
19%
44%
*
22%

$

1,214
647
67
2
1,930

*
190%
*
*
*

34%
41%
90%
*
38%

$

$

Net Income (loss) applicable to Morgan Stanley
Institutional Securities
Wealth Management
Investment Management
Intersegment Eliminations
Net Income (loss) applicable to Morgan Stanley

$

1,627
914
127
0
2,668

Earnings (loss) applicable to Morgan Stanley common shareholders

$

2,575

$

473

$

1,840

*

40%

$
$
$

1.48
1.45
1.45

$
$
$

0.27
0.26
0.84

$
$
$

1.02
1.00
1.01

*
*
73%

45%
45%
44%

$

Financial Metrics:
Earnings per basic share
Earnings per diluted share
Earnings per diluted share excluding intermittent net discrete tax provision / benefit
Return on average common equity
Return on average common equity excluding intermittent net discrete tax provision / benefit

14.9%
14.9%

2.7%
8.6%

10.7%
10.7%

Return on average tangible common equity
Return on average tangible common equity excluding intermittent net discrete tax provision / benefit

17.2%
17.2%

3.1%
9.8%

12.3%
12.4%

Book value per common share
Tangible book value per common share

$
$

39.19
34.04

$
$

38.52
33.46

$
$

37.48
32.49

Notes: ‐ Refer to End Notes, Definition of U.S. GAAP to Non‐GAAP Measures and Definition of Performance Metrics on pages 13 ‐ 16 from the Financial Supplement for additional information
related to the calculation of the financial metrics.
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, 2018

Quarter Ended
Dec 31, 2017

Mar 31, 2017

$

$

$

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

1,548
2,246
325
1,064
3,102
220
8,505

Percentage Change From:
Dec 31, 2017
Mar 31, 2017

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

6%
68%
(61%)
10%
3%
(6%)
19%

6%
17%
(24%)
14%
15%
(10%)
13%

Interest income
Interest expense
Net interest
Net revenues

2,860
1,885
975
11,077

2,586
1,591
995
9,500

1,965
1,194
771
9,745

11%
18%
(2%)
17%

46%
58%
26%
14%

Non‐interest expenses:
Compensation and benefits

4,914

4,279

4,466

15%

10%

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

336
627
478
140
510
652
2,743

339
537
471
190
547
666
2,750

327
509
428
136
527
544
2,471

(1%)
17%
1%
(26%)
(7%)
(2%)
‐‐

3%
23%
12%
3%
(3%)
20%
11%

7,657

7,029

6,937

9%

10%

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

2,471
1,810
661
2
663
20
643
170
473

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

38%
(61%)
*
*
*
80%
*
(45%)
*

22%
(12%)
36%
91%
37%
(12%)
38%
3%
40%

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
Firm expense efficiency ratio
Effective tax rate from continuing operations

$

$

$

$

31%
44%
25%
69%

26%
45%
29%
74%

29%
46%
25%
71%

20.9%

73.2%

29.0%

Notes: ‐ Refer to End Notes, Definition of U.S. GAAP to Non‐GAAP Measures and Definition of Performance Metrics on pages 13 ‐ 16 from the Financial Supplement for additional information.
8