Morgan Stanley Third Quarter 2019 Earnings Results
Morgan Stanley Reports Net Revenues of $10.0 Billion and EPS of $1.27
NEW YORK, October 17, 2019 – Morgan Stanley (NYSE: MS) today reported net revenues of $10.0 billion for thethird quarter ended September 30, 2019 compared with $9.9 billion a year ago. Net income applicable to Morgan1
Stanley was $2.2 billion, or $1.27 per diluted share, compared with net income of $2.1 billion, or $1.17 per diluted
1
share, for the same period a year ago.

James P. Gorman, Chairman and Chief Executive Officer, said, “We delivered strong quarterly earnings despite thetypical summer slowdown and volatile markets. Firmwide revenues were over $10 billion for the third consecutive
quarter, and we produced an ROE within our target range. Our consistent performance shows the stability of ourbusiness model. We remain committed to controlling our expenses and are well positioned to pursue our growth
initiatives.”

Financial Summary2Highlights($ millions, except per share data)

Firm

3Q 2019

3Q 2018

Net revenues$10,032$9,872Compensation expense$4,427$4,310Non-compensation expenses
8
Pre-tax income$2,895$2,711$2,710$2,851

Net income app. to MS$2,173$2,112

Expense efficiency ratio 9

73%

71%

Earnings per diluted share

$1.27

$1.17

Book value per share$45.49$40.67

Tangible book value per share$39.73$35.50Return on equity

11.2%

11.5%

12.9%

13.2%

Net revenues$5,023$4,929Investment Banking$1,535$1,459

Sales & Trading$3,455$3,130$4,358$4,399$1,186$1,120Fee-based asset flows ($ billions) 11

$15.5

$16.2

Loans ($ billions)

$76.6

$71.1

$764

$653

$507

$471

$4.2

$3.0

4

5

6

6

Return on tangible equity
Institutional Securities• Firm net revenues reflect strong performance across all
our business segments; the highest third quarter in thelast decade. 3

4

5• Book value and Tangible book value increased 12%
year-over-year.

6

6• ROE of 11.2% and ROTCE of 12.9% remain strong
and in line with our expectations.
• Institutional Securities net revenues at $5.0 billion
reflects strength across products, characterized bystrong client engagement despite seasonality andvolatile markets.

Wealth Management
Net revenues
Fee-based client assets ($ billions)

10

Investment Management
Net revenues
AUM ($ billions) 12
Long-term net flows ($ billions)

13

Media Relations: Wesley McDade 212-761-2430• Wealth Management delivered a pre-tax margin of7
28.4% on continued expense discipline.

• Investment Management net revenues increased 17%
reflecting strong carried interest and higher fee
revenues. AUM exceeded $500 billion.

Investor Relations: Sharon Yeshaya 212-761-1632

Institutional Securities
Institutional Securities reported net revenues for the current quarter of $5.0 billion compared with $4.9 billion a year
8
ago. Pre-tax income was $1.3 billion compared with $1.6 billion a year ago.

Investment Banking revenues up 5% from a year ago:
• Advisory revenues increased reflecting the impact ofhigher M&A fees on an increase in the volume oftransactions.
• Equity underwriting revenues decreased from a year ago
driven by lower volumes in IPOs and follow-on offerings,
partially offset by an increase in convertible issuances.
• Fixed income underwriting revenues increased from ayear ago on higher bond and loan issuance volumes.

Sales and Trading net revenues up 10% from a year ago:
• Equity sales and trading net revenues were essentiallyunchanged from a year ago with lower revenues in thederivatives business being offset by solid performanceacross all other businesses.
• Fixed Income sales and trading net revenues increased
21% from a year ago reflecting strong client activity in thecredit and rates businesses, partially offset by a decline inforeign exchange.
• Other sales and trading net revenues increased from ayear ago driven by lower costs from changes in funding
mix and gains on economic hedges associated withcorporate lending activity and certain of the Firm’s
borrowings.

Investments and Other:• Investment revenues decreased from a year ago driven bymark-to-market losses on remaining holdings subsequentto certain investments’ initial public offerings.
• Other revenues decreased from a year ago primarilyreflecting lower revenues from corporate lending activities.

($ millions)

3Q 2019

3Q 2018

Net Revenues$5,023$4,929Investment Banking$1,535$1,459Advisory

$550

$510

Equity underwriting

$401

$441

Fixed income underwriting

$584

$508

Sales and Trading$3,455$3,130Equity$1,991$2,019Fixed Income$1,430$1,179

Other

$34

$(68)

Investments and Other

$33

$340

Investments

$(18)

$96

Other

$51

$244

Total Expenses$3,716$3,373Compensation$1,768$1,626

Non-compensation$1,948$1,747

Total Expenses:• Compensation expense increased on higher revenues and salaries, resulting in a compensation ratio of 35.2%.
• Non-compensation expenses increased from a year ago on higher volume-related expenses and litigation costs.

2

Wealth Management
Wealth Management net revenues for the current quarter of $4.4 billion were essentially unchanged from a year ago.
8
7
Pre-tax income of $1.2 billion in the current quarter resulted in a pre-tax margin of 28.4%.
Net revenues relatively unchanged from a year ago:
• Asset management revenues increased from a year ago
reflecting higher asset levels with continued positive flows.
14• Transactional revenues decreased from a year ago
reflecting losses on investments associated with certain
employee deferred compensations plans.
• Net interest income decreased 3% compared with a year
ago primarily driven by higher costs due to changes infunding mix, partially offset by growth in bank lending.
15
Wealth Management client liabilities were $86 billion atquarter end compared with $83 billion a year ago.
• Other revenues increased from a year ago driven byhigher realized gains on available for sale securities.
Total Expenses:• Compensation expense decreased from a year ago
primarily driven by decreases in the fair value of deferredcompensation plan referenced investments and retention
note expense, partially offset by increases incompensable revenues.

3Q 2019

3Q 2018

Net Revenues$4,358$4,399Asset management$2,639$2,573$595$698$1,043$1,070$81$58

Total Expenses$3,120$3,205Compensation$2,340$2,415$780$790($ millions)

Transactional

14

Net interest
Other

Non-compensation

Investment Management
Investment Management reported net revenues of $764 million compared with $653 million a year ago. Pre-tax
8income was $165 million compared with $102 million a year ago.
Net revenues up 17% from a year ago:
• Asset management revenues increased from a year ago
driven by higher levels of assets under management and a
non-recurring realized performance fee.
• Investment revenues increased from a year ago reflecting
gains on carried interest primarily from the private equity
businesses.

3Q 2019

3Q 2018

Net Revenues

$764

$653

Asset management

$664

$604

Investments

$105

$40

Other

$(5)

$9

Total Expenses

$599

$551

Compensation

$319

$269

Non-compensation

$280

$282

($ millions)

Total Expenses:• Compensation expense increased from a year ago
principally due to an increase in deferred compensation
associated with carried interest.

3

Other Matters• The Firm repurchased $1.5 billion of its outstanding
common stock during the quarter as part of its Share
Repurchase Program.
• The Board of Directors declared a $0.35 quarterly
dividend per share, payable on November 15, 2019 tocommon shareholders of record on October 31, 2019.
• The effective tax rate for the quarter was 18.2% which
includes an intermittent net discrete tax benefit of $89
million associated with the filing of the 2018 federal tax
return and the remeasurement of reserves.

3Q 2019

3Q 2018

16.2%

16.7%

18.4%

19.0%

8.2%

8.2%

6.3%

6.4%

$1,500$1,180

36

24

Average Price$41.92$49.33

Common Shares Outstanding period end (millions)

1,624

1,726

Tax Rate

18.2%

24.4%

Capital16

Common Equity Tier 1 capital
Tier 1 capital

17

17

Tier 1 leverage

18

Supplementary leverage ratio

19

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 for the third quarter of 2019 and 2018 of
approximately $113 million and $93 million, respectively.
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 $10.0 billion represents the highest third quarter in a decade for a reported quarterly period after
excluding the impact of debt valuation adjustments (DVA), which were previously reflected in net revenues in 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, are non-GAAP financial measures in those prior periods thatwere reconciled to the comparable GAAP financial measures in the respective quarterly reports filed on Form 10-Q.
4Book value per common share represents common equity divided by period end common shares outstanding.

5

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.
6

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. Tangible common equity, also a non-GAAP financial measure, represents common equity less goodwill
and intangible assets net of allowable servicing rights deduction.
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

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.
9

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

10

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.

6

11

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.
12

AUM is defined as assets under management.

13

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

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

15

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.
16

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

17

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 September 30, 2019 and September 30, 2018, theFirm’s ratios are based on the Standardized Approach. For information on the calculation of regulatory capital andratios for prior periods, please refer to Part II, Item 7 “Liquidity and Capital Resources – Regulatory Requirements” in
the Firm’s 2018 Form 10-K.
18

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.
19

The Firm must maintain a Tier 1 supplementary leverage ratio of 5% inclusive of a capital buffer of at least 2% inorder 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 $73.1 billion and $70.3 billion, and supplementary leverage exposure denominator of approximately$1.16 trillion and $1.10 trillion, for the third quarter of 2019 and 2018, 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

Sep 30, 2019

Quarter Ended
Jun 30, 2019

Sep 30, 2018

$

$

$

1,635
2,608
87
990
3,363
131
8,814

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

Percentage Change From:Jun 30, 2019
Sep 30, 2018

1,567
2,752
136
932
3,251
298
8,936

3%
(5%)
(80%)
1%
4%
(48%)
(4%)

4%
(5%)
(36%)
6%
3%
(56%)
(1%)

Nine Months Ended
Sep 30, 2019 Sep 30, 2018
$

4,467
8,781
801
2,935
9,632
685
27,301$

Percentage
Change

4,994
9,815
409
3,144
9,632
748
28,742

(11%)
(11%)
96%
(7%)
‐‐
(8%)
(5%)

Interest income
Interest expense
Net interest
Net revenues

4,350
3,132
1,218
10,032

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

3,627
2,691
936
9,872

(3%)
(10%)
18%
(2%)

20%
16%
30%
2%

13,1469,885
3,261
30,562

9,781
6,964
2,817
31,559

34%
42%
16%
(3%)

Non‐interest expenses:
Compensation and benefits

4,427

4,531

4,310

(2%)

3%

13,60913,845(2%)

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
637
557
157
531
660
2,895

353
630
538
162
537
590
2,810

351
559
513
152
570
566
2,711

‐‐
1%
4%
(3%)
(1%)
12%
3%

1%
14%
9%
3%
(7%)
17%
7%

1,053
1,860
1,627
460
1,582
1,803
8,385

1,033
1,795
1,487
471
1,660
1,888
8,334

2%
4%
9%
(2%)
(5%)
(5%)
1%

7,322

7,341

7,021

‐‐

4%

21,994

22,179

(1%)

2,710
492
2,218
0
2,218
45
2,173
113
2,060

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

2,851
696
2,155
(1)
2,154
42
2,112
93
2,019

(7%)
(25%)
(1%)
‐‐
(1%)
‐‐
(1%)
(34%)
1%

(5%)
(29%)
3%
*
3%
7%
3%
22%
2%

8,568
1,636
6,932
0
6,932
129
6,803
376
6,427

9,380
2,050
7,330
(5)
7,325
108
7,217
356
6,861

(9%)
(20%)
(5%)
*
(5%)
19%
(6%)
6%
(6%)

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, Ratios and Statistical Data
(unaudited)
Sep 30, 2019

Quarter Ended
Jun 30, 2019 Sep 30, 2018

$
$

$
$

Percentage Change From:Jun 30, 2019 Sep 30, 2018

Nine Months Ended
Sep 30, 2019 Sep 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

1.28
1.27
11.2%
12.9%

1.24
1.23

$
$

11.2%
12.8%

1.19
1.17

3%
3%

8%
9%

$
$

11.5%
13.2%

$
$

45.49
39.73

$
$

44.13
38.44

$
$

40.67
35.50

$

1.21
10.7%
12.3%

$

1.23
11.2%
12.8%

$

1.17
11.5%
13.2%

3.94
3.89

$
$

11.8%
13.5%

(2%)

3%

3.99
3.92

(1%)
(1%)

13.1%
15.1%

$
$

45.49
39.73

$
$

40.67
35.50

$

3.77
11.5%
13.1%

$

3.87
13.0%
14.9%

(3%)

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

27%
44%
29%
73%
18.2%

28%
44%
27%
72%
22.6%

29%
44%
27%
71%
24.4%

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

1,624

1,659

1,726

(2%)

(6%)

1,604
1,627

1,634
1,655

1,697
1,727

(2%)
(2%)

(5%)
(6%)

Worldwide employees

60,53259,513

59,835

2%

1%

28%
45%
27%
72%
19.1%

30%
44%
26%
70%
21.9%

1,632
1,653

1,719
1,749

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%)