Enhanced Investments - Financial Portal

Published: 2021-10-14 00:00:00 ET

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Exhibit 99.2

Third Quarter 2021 Earnings Results


Quarterly Financial Supplement	Page

Consolidated Financial Summary	1
Consolidated Financial Metrics, Ratios and Statistical Data	2
Consolidated and U.S. Bank Supplemental Financial Information	3
Consolidated Average Common Equity and Regulatory Capital Information	4
Institutional Securities Income Statement Information, Financial Metrics and Ratios	5
Wealth Management Income Statement Information, Financial Metrics and Ratios	6
Wealth Management Financial Information and Statistical Data	7
Investment Management Income Statement Information, Financial Metrics and Ratios	8
Investment Management Financial Information and Statistical Data	9
Consolidated Loans and Lending Commitments	10
Consolidated Loans and Lending Commitments Allowance for Credit Losses	11
Definition of U.S. GAAP to Non-GAAP Measures	12
Definitions of Performance Metrics and Terms	13 - 14
Supplemental Quantitative Details and Calculations	15 - 16
Legal Notice	17

The Firm's 2021 earnings results reflect the completed acquisitions of E*TRADE Financial Corporation ("E*TRADE") and Eaton Vance Corp. ("Eaton Vance") prospectively from the dates, October 2, 2020 and March 1, 2021, respectively. Comparisons between current year periods and prior year periods are impacted by the financial results of E*TRADE and Eaton Vance reported in the Wealth Management segment and Investment Management segment, respectively.

Consolidated Financial Summary
(unaudited, dollars in millions)



	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2021			Jun 30, 2021			Sep 30, 2020			Jun 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			Change
Net revenues
Institutional Securities	$	7,495		$	7,092		$	6,129			6	%		22	%	$	23,164		$	19,506			19	%
Wealth Management		5,935			6,095			4,654			(3	%)		28	%		17,989			13,414			34	%
Investment Management		1,453			1,702			1,056			(15	%)		38	%		4,469			2,634			70	%
Intersegment Eliminations		(130	)		(130	)		(118	)		--			(10	%)		(391	)		(394	)		1	%
Net revenues	$	14,753		$	14,759		$	11,721			--			26	%	$	45,231		$	35,160			29	%

Provision for credit losses	$	24		$	73		$	111			(67	%)		(78	%)	$	(1	)	$	757			*

Non-interest expenses
Institutional Securities	$	4,498		$	4,524		$	3,968			(1	%)		13	%	$	14,321		$	12,797			12	%
Wealth Management		4,405			4,456			3,536			(1	%)		25	%		13,225			10,058			31	%
Investment Management		1,083			1,272			741			(15	%)		46	%		3,299			1,960			68	%
Intersegment Eliminations		(131	)		(132	)		(122	)		1	%		(7	%)		(397	)		(400	)		1	%
Non-interest expenses ⁽¹⁾	$	9,855		$	10,120		$	8,123			(3	%)		21	%	$	30,448		$	24,415			25	%

Income before taxes
Institutional Securities	$	2,973		$	2,498		$	2,048			19	%		45	%	$	8,842		$	5,991			48	%
Wealth Management		1,530			1,636			1,120			(6	%)		37	%		4,766			3,317			44	%
Investment Management		370			430			315			(14	%)		17	%		1,170			674			74	%
Intersegment Eliminations		1			2			4			(50	%)		(75	%)		6			6			--
Income before taxes	$	4,874		$	4,566		$	3,487			7	%		40	%	$	14,784		$	9,988			48	%

Net Income applicable to Morgan Stanley
Institutional Securities	$	2,229		$	1,904		$	1,647			17	%		35	%	$	6,734		$	4,590			47	%
Wealth Management		1,157			1,264			842			(8	%)		37	%		3,663			2,559			43	%
Investment Management		320			341			225			(6	%)		42	%		936			457			105	%
Intersegment Eliminations		1			2			3			(50	%)		(67	%)		5			5			--
Net Income applicable to Morgan Stanley	$	3,707		$	3,511		$	2,717			6	%		36	%	$	11,338		$	7,611			49	%
Earnings applicable to Morgan Stanley common shareholders	$	3,584		$	3,408		$	2,597			5	%		38	%	$	10,974		$	7,234			52	%

The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.

Consolidated Financial Metrics, Ratios and Statistical Data
(unaudited)


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2021			Jun 30, 2021			Sep 30, 2020			Jun 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			Change

Financial Metrics:

Earnings per basic share	$	2.01		$	1.88		$	1.68			7	%		20	%	$	6.11		$	4.68			31	%
Earnings per diluted share	$	1.98		$	1.85		$	1.66			7	%		19	%	$	6.02		$	4.62			30	%

Return on average common equity		14.5	%		13.8	%		13.2	%								15.1	%		12.6	%
Return on average tangible common equity		19.6	%		18.6	%		15.0	%								19.7	%		14.3	%

Book value per common share	$	54.56		$	54.04		$	50.67								$	54.56		$	50.67
Tangible book value per common share	$	40.47		$	40.12		$	44.81								$	40.47		$	44.81

Excluding integration-related expenses ⁽¹⁾
Adjusted earnings per diluted share	$	2.04		$	1.89		$	1.66			8	%		23	%	$	6.15		$	4.62			33	%
Adjusted return on average common equity		15.0	%		14.1	%		13.2	%								15.4	%		12.6	%
Adjusted return on average tangible common equity		20.2	%		19.0	%		15.0	%								20.2	%		14.3	%


Financial Ratios:

Pre-tax profit margin		33	%		31	%		30	%								33	%		28	%
Compensation and benefits as a % of net revenues		40	%		44	%		43	%								42	%		44	%
Non-compensation expenses as a % of net revenues		27	%		25	%		26	%								25	%		26	%
Firm expense efficiency ratio		67	%		69	%		69	%								67	%		69	%
Firm expense efficiency ratio excluding integration-related expenses ⁽¹⁾		66	%		68	%		69	%								67	%		69	%
Effective tax rate		23.6	%		23.1	%		21.1	%								22.9	%		22.2	%


Statistical Data:

Period end common shares outstanding (millions)		1,799			1,834			1,576			(2	%)		14	%
Average common shares outstanding (millions)
Basic		1,781			1,814			1,542			(2	%)		15	%		1,797			1,546			16	%
Diluted		1,812			1,841			1,566			(2	%)		16	%		1,824			1,565			17	%

Worldwide employees		73,620			71,826			63,051			2	%		17	%

Notes:

Consolidated and U.S. Bank Supplemental Financial Information
(unaudited, dollars in millions)



	Quarter Ended									Percentage Change From:							Nine Months Ended			Percentage
	Sep 30, 2021			Jun 30, 2021			Sep 30, 2020			Jun 30, 2021			Sep 30, 2020				Sep 30, 2021		Sep 30, 2020	Change

Consolidated Balance sheet

Total assets	$	1,190,476		$	1,161,805		$	955,940			2	%		25	%
Loans ⁽¹⁾	$	188,274		$	181,204		$	154,570			4	%		22	%
Deposits	$	329,041		$	320,358		$	239,253			3	%		38	%
Liquidity resources	$	346,289		$	343,776		$	267,292			1	%		30	%
Long-term debt outstanding	$	224,937		$	218,604		$	198,891			3	%		13	%
Maturities of long-term debt outstanding (next 12 months)	$	13,899		$	16,891		$	20,247			(18	%)		(31	%)

Common equity	$	98,153		$	99,120		$	79,874			(1	%)		23	%
Less: Goodwill and intangible assets		(25,345	)		(25,527	)		(9,228	)		(1	%)		175	%
Tangible common equity	$	72,808		$	73,593		$	70,646			(1	%)		3	%

Preferred equity	$	7,750		$	7,750		$	8,520			--			(9	%)

U.S. Bank Supplemental Financial Information
Total assets	$	367,111		$	357,488		$	266,221			3	%		38	%
Loans	$	174,552		$	167,628		$	140,639			4	%		24	%
Investment securities portfolio ⁽²⁾	$	144,056		$	136,218		$	91,096			6	%		58	%
Deposits	$	326,941		$	318,689		$	238,025			3	%		37	%

Regional revenues
Americas	$	11,255		$	10,885		$	8,455			3	%		33	%	$	33,331	$	25,293	32	%
EMEA (Europe, Middle East, Africa)		1,752			2,093			1,472			(16	%)		19	%		6,004		4,778	26	%
Asia		1,746			1,781			1,794			(2	%)		(3	%)		5,896		5,089	16	%
Consolidated net revenues	$	14,753		$	14,759		$	11,721			--			26	%	$	45,231	$	35,160	29	%

Consolidated Average Common Equity and Regulatory Capital Information
(unaudited, dollars in billions)



	Quarter Ended									Percentage Change From:						Nine Months Ended				Percentage
	Sep 30, 2021			Jun 30, 2021			Sep 30, 2020			Jun 30, 2021			Sep 30, 2020			Sep 30, 2021		Sep 30, 2020		Change

Average Common Equity
Institutional Securities	$	43.5		$	43.5		$	42.8			--			2	%	$	43.5	$	42.8		2	%
Wealth Management		28.6			28.6			18.2			--			57	%		28.6		18.2		57	%
Investment Management		10.7			10.7			2.6			--			*			8.2		2.6		*
Parent		15.8			16.0			15.1			(1	%)		5	%		16.6		13.3		25	%
Firm	$	98.6		$	98.8		$	78.7			--			25	%	$	96.9	$	76.9		26	%



Regulatory Capital ⁽¹⁾

Common Equity Tier 1 capital	$	75.8		$	76.8		$	71.2			(1	%)		6	%
Tier 1 capital	$	83.5		$	84.6		$	79.9			(1	%)		5	%

Standardized Approach
Risk-weighted assets	$	474.3		$	462.8		$	408.9			2	%		16	%
Common Equity Tier 1 capital ratio		16.0	%		16.6	%		17.4	%
Tier 1 capital ratio		17.6	%		18.3	%		19.5	%

Advanced Approach
Risk-weighted assets	$	442.5		$	434.7		$	420.1			2	%		5	%
Common Equity Tier 1 capital ratio		17.1	%		17.7	%		16.9	%
Tier 1 capital ratio		18.9	%		19.5	%		19.0	%

Leverage-based capital
Tier 1 leverage ratio		7.3	%		7.5	%		8.3	%
Supplementary Leverage Ratio⁽²⁾		5.7	%		5.9	%		7.4	%

Institutional Securities
Income Statement Information, Financial Metrics and Ratios
(unaudited, dollars in millions)


	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2021			Jun 30, 2021			Sep 30, 2020			Jun 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			Change
Revenues:

Advisory	$	1,272		$	664		$	357			92	%		*		$	2,416		$	1,181			105	%
Equity		1,010			1,072			874			(6	%)		16	%		3,584			2,092			71	%
Fixed income		567			640			476			(11	%)		19	%		1,838			1,629			13	%
Underwriting		1,577			1,712			1,350			(8	%)		17	%		5,422			3,721			46	%
Investment banking		2,849			2,376			1,707			20	%		67	%		7,838			4,902			60	%

Equity		2,876			2,827			2,311			2	%		24	%		8,578			7,387			16	%
Fixed income		1,640			1,682			1,954			(2	%)		(16	%)		6,288			7,057			(11	%)
Other		130			207			157			(37	%)		(17	%)		460			160			188	%

Net revenues		7,495			7,092			6,129			6	%		22	%		23,164			19,506			19	%

Provision for credit losses		24			70			113			(66	%)		(79	%)		1			718			(100	%)

Compensation and benefits		2,248			2,433			2,001			(8	%)		12	%		7,795			6,767			15	%
Non-compensation expenses		2,250			2,091			1,967			8	%		14	%		6,526			6,030			8	%
Total non-interest expenses		4,498			4,524			3,968			(1	%)		13	%		14,321			12,797			12	%


Income before taxes		2,973			2,498			2,048			19	%		45	%		8,842			5,991			48	%
Net income applicable to Morgan Stanley	$	2,229		$	1,904		$	1,647			17	%		35	%	$	6,734		$	4,590			47	%


Pre-tax profit margin		40	%		35	%		33	%								38	%		31	%
Compensation and benefits as a % of net revenues		30	%		34	%		33	%								34	%		35	%
Non-compensation expenses as a % of net revenues		30	%		29	%		32	%								28	%		31	%

Return on Average Common Equity		20	%		17	%		15	%								20	%		13	%
Return on Average Tangible Common Equity ⁽¹⁾		20	%		17	%		15	%								20	%		14	%

Trading VaR (Average Daily 95% / One-Day VaR)	$	45		$	48		$	58

Wealth Management
Income Statement Information, Financial Metrics and Ratios
(unaudited, dollars in millions)

	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2021			Jun 30, 2021			Sep 30, 2020			Jun 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			Change
Revenues:
Asset management	$	3,628		$	3,447		$	2,793			5	%		30	%	$	10,266		$	7,980			29	%
Transactional		832			1,172			880			(29	%)		(5	%)		3,232			2,354			37	%
Net interest income		1,348			1,255			889			7	%		52	%		3,988			2,815			42	%
Other		127			221			92			(43	%)		38	%		503			265			90	%
Net revenues		5,935			6,095			4,654			(3	%)		28	%		17,989			13,414			34	%

Provision for credit losses		-			3			(2	)		*			*			(2	)		39			*

Compensation and benefits		3,159			3,275			2,684			(4	%)		18	%		9,604			7,625			26	%
Non-compensation expenses		1,246			1,181			852			6	%		46	%		3,621			2,433			49	%
Total non-interest expenses ⁽¹⁾		4,405			4,456			3,536			(1	%)		25	%		13,225			10,058			31	%

Income before taxes		1,530			1,636			1,120			(6	%)		37	%		4,766			3,317			44	%
Net income applicable to Morgan Stanley	$	1,157		$	1,264		$	842			(8	%)		37	%	$	3,663		$	2,559			43	%

Pre-tax profit margin		26	%		27	%		24	%								26	%		25	%
Pre-tax profit margin excluding integration-related expenses		28	%		28	%		24	%								28	%		25	%
Compensation and benefits as a % of net revenues		53	%		54	%		58	%								53	%		57	%
Non-compensation expenses as a % of net revenues		21	%		19	%		18	%								20	%		18	%

Return on Average Common Equity		16	%		17	%		18	%								17	%		18	%
Return on Average Tangible Common Equity ⁽²⁾		34	%		37	%		31	%								35	%		32	%

Notes:

-	For the quarters ended September 30, 2021 and June 30, 2021, Wealth Management's results include pre-tax integration-related expenses of $113 million and $60 million ($87 million and $46 million after-tax), respectively. The nine months ended September 30, 2021 results include pre-tax integration-related expenses of $237 million ($182 million after-tax).
-	The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details Calculations, and Legal Notice.

Wealth Management
Financial Information and Statistical Data
(unaudited, dollars in billions)


	Quarter Ended									Percentage Change From:
	Sep 30, 2021			Jun 30, 2021			Sep 30, 2020			Jun 30, 2021			Sep 30, 2020


Wealth Management Metrics

Total client assets	$	4,629		$	4,546		$	2,852			2	%		62	%
Net new assets ⁽¹⁾	$	134.5		$	71.2		$	51.8			89	%		160	%
U.S. Bank loans	$	121.2		$	114.7		$	91.3			6	%		33	%
Margin and other lending⁽²⁾	$	28.6		$	27.0		$	9.1			6	%		*
Deposits ⁽³⁾	$	327		$	319		$	234			3	%		40	%
Annualized weighted average cost of deposits		0.13	%		0.16	%		0.38	%

Advisor-led channel

Advisor-led client assets	$	3,647		$	3,553		$	2,759			3	%		32	%

Fee-based client assets	$	1,752		$	1,680		$	1,333			4	%		31	%
Fee-based asset flows ⁽¹⁾	$	70.6		$	33.7		$	23.8			109	%		197	%
Fee-based assets as a % of advisor-led client assets		48	%		47	%		48	%

Self-directed channel

Self-directed assets	$	982		$	993		$	93			(1	%)		*
Daily average revenue trades (000's)		959			1,042			6			(8	%)		*
Self-directed households (millions)		7.4			7.4			1.7			--			*

Workplace channel

Workplace unvested assets	$	495		$	480		$	157			3	%		*
Number of participants (millions)		5.3			5.2			2.7			2	%		96	%

Investment Management
Income Statement Information, Financial Metrics and Ratios
(unaudited, dollars in millions)

Report dated:10/11/21 21:51
	Quarter Ended									Percentage Change From:						Nine Months Ended						Percentage
	Sep 30, 2021			Jun 30, 2021			Sep 30, 2020			Jun 30, 2021			Sep 30, 2020			Sep 30, 2021			Sep 30, 2020			Change
Revenues:
Asset management and related fees	$	1,470		$	1,418		$	795			4	%		85	%	$	3,991		$	2,144			86	%
Performance-based income and other		(17	)		284			261			*			*			478			490			(2	%)
Net revenues		1,453			1,702			1,056			(15	%)		38	%		4,469			2,634			70	%

Compensation and benefits		513			715			401			(28	%)		28	%		1,742			1,012			72	%
Non-compensation expenses		570			557			340			2	%		68	%		1,557			948			64	%
Total non-interest expenses ⁽¹⁾		1,083			1,272			741			(15	%)		46	%		3,299			1,960			68	%

Income before taxes		370			430			315			(14	%)		17	%		1,170			674			74	%
Net income applicable to Morgan Stanley	$	320		$	341		$	225			(6	%)		42	%	$	936		$	457			105	%

Pre-tax profit margin		25	%		25	%		30	%								26	%		26	%
Pre-tax profit margin excluding integration-related expenses		28	%		27	%		30	%								28	%		26	%
Compensation and benefits as a % of net revenues		35	%		42	%		38	%								39	%		38	%
Non-compensation expenses as a % of net revenues		39	%		33	%		32	%								35	%		36	%

Return on Average Common Equity		12	%		13	%		34	%								15	%		23	%
Return on Average Tangible Common Equity ⁽²⁾		161	%		172	%		53	%								128	%		36	%

Notes:

-	For the quarters ended September 30, 2021 and June 30, 2021, Investment Management's results include pre-tax integration-related expenses of $32 million and $30 million ($24 million and $23 million after-tax), respectively. The nine months ended September 30, 2021 results include pre-tax integration-related expenses of $73 million ($56 million after-tax).
-	The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.

Investment Management
Financial Information and Statistical Data
(unaudited, dollars in billions)



	Quarter Ended								Percentage Change From:						Nine Months Ended				Percentage
	Sep 30, 2021			Jun 30, 2021		Sep 30, 2020			Jun 30, 2021			Sep 30, 2020			Sep 30, 2021		Sep 30, 2020		Change

Assets under management or supervision (AUM)

Net flows by asset class ⁽¹⁾
Equity	$	(0.9	)	$	2.7	$	10.0			*			*		$	9.6	$	20.6		(53	%)
Fixed Income		(0.3	)		3.0		3.1			*			*			6.6		8.8		(25	%)
Alternatives and Solutions		(1.1	)		7.8		(2.7	)		*			59	%		11.3		3.1		*
Long-Term Net Flows		(2.3	)		13.5		10.4			*			*			27.5		32.5		(15	%)

Liquidity and Overlay Services		14.6			35.0		2.1			(58	%)		*			75.5		73.4		3	%

Total net flows	$	12.3		$	48.5	$	12.5			(75	%)		(2	%)	$	103.0	$	105.9		(3	%)


Assets under management or supervision by asset class⁽²⁾
Equity	$	391		$	404	$	202			(3	%)		94	%
Fixed Income		206			207		92			--			124	%
Alternatives and Solutions		443			445		150			--			195	%
Long‐Term Assets Under Management or Supervision		1,040			1,056		444			(2	%)		134	%

Liquidity and Overlay Services		482			468		271			3	%		78	%

Total Assets Under Management or Supervision	$	1,522		$	1,524	$	715			--			113	%

Consolidated Loans and Lending Commitments
(unaudited, dollars in billions)


	Quarter Ended						Percentage Change From:
	Sep 30, 2021		Jun 30, 2021		Sep 30, 2020		Jun 30, 2021			Sep 30, 2020

Institutional Securities

Loans:
Corporate	$	13.6	$	11.6	$	15.8		17	%		(14	%)
Secured lending facilities		31.2		32.7		30.3		(5	%)		3	%
Commercial and residential real estate		12.7		11.4		9.6		11	%		32	%
Securities-based lending and other		9.4		9.9		7.0		(5	%)		34	%

Total Loans		66.9		65.6		62.7		2	%		7	%

Lending Commitments		122.2		124.9		105.5		(2	%)		16	%

Institutional Securities Loans and Lending Commitments	$	189.1	$	190.5	$	168.2		(1	%)		12	%


Wealth Management

Loans:
Securities-based lending and other	$	79.8	$	75.8	$	57.7		5	%		38	%
Residential real estate		41.4		38.9		33.6		6	%		23	%

Total Loans		121.2		114.7		91.3		6	%		33	%

Lending Commitments		15.0		14.4		14.6		4	%		3	%

Wealth Management Loans and Lending Commitments	$	136.2	$	129.1	$	105.9		5	%		29	%

Consolidated Loans and Lending Commitments ⁽¹⁾	$	325.3	$	319.6	$	274.1		2	%		19	%

Consolidated Loans and Lending Commitments
Allowance for Credit Losses (ACL) as of September 30, 2021
(unaudited, dollars in millions)


	Loans and Lending Commitments		ACL⁽¹⁾		ACL %			Q3 Provision
	(Gross)
Loans:
Held For Investment (HFI)

Corporate	$	4,774	$	197		4.1	%	$	4
Secured lending facilities		27,345		175		0.6	%		(2	)
Commercial and residential real estate		6,915		193		2.8	%		-
Other		520		10		1.9	%		1
Institutional Securities - HFI	$	39,554	$	575		1.5	%	$	3

Wealth Management - HFI		121,316		109		0.1	%		2

Held For Investment	$	160,870	$	684		0.4	%	$	5

Held For Sale		13,168

Fair Value		14,788

Total Loans		188,826		684					5

Lending Commitments		137,116		429		0.3	%		19

Consolidated Loans and Lending Commitments	$	325,942	$	1,113				$	24

Definition of U.S. GAAP to Non-GAAP Measures


(a)	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 future financial 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 for assessing, 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 accordance with 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. In addition to the following notes, please also refer to the Firm's Annual Report on Form 10-K for the year ended December 31, 2020.
(b)	The following are considered non-GAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of operating performance and capital adequacy. These measures are calculated as follows:
	-	Earnings per diluted share excluding integration-related expenses represents net income applicable to Morgan Stanley, adjusted for the impact of the integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance, less preferred dividends divided by the average number of diluted shares outstanding.
	-	The return on average tangible common equity represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average tangible common equity.
	-	The return on average common equity and the return on average tangible common equity excluding integration-related expenses are adjusted in both the numerator and the denominator to exclude the integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance.
	-	Segment return on average common equity and return on average tangible common equity represent full year net income or annualized net income for the quarter applicable to Morgan Stanley for each segment, less preferred dividend segment allocation, divided by average common equity and average tangible common equity for each respective segment. The segment adjustments to common equity to derive segment average tangible common equity are generally set at the beginning of the year, and will remain fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition).
	-	Tangible common equity represents common equity less goodwill and intangible assets net of certain mortgage servicing rights deduction.
	-	Tangible book value per common share represents tangible common equity divided by period end common shares outstanding.
	-	Pre-tax profit margin excluding integration-related expenses represents income before income taxes less integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance as percentages of net revenues.
	-	The Firm expense efficiency ratio excluding integration-related expenses represents total non‐interest expenses less integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance as a percentage of net revenues.

Definitions of Performance Metrics and Terms

Our earnings releases, earnings conference calls, financial presentations and other communications may also include certain metrics which we believe to be useful to us, analysts, investors and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.

Page 1:
(a)	Provision for credit losses represents the provision for credit losses on loans held for investment and unfunded lending commitments.
(b)	Net income applicable to Morgan Stanley represents net income, less net income applicable to nonredeemable noncontrolling interests.
(c)	Earnings applicable to Morgan Stanley common shareholders represents net income applicable to Morgan Stanley, less preferred dividends.

Page 2:
(a)	The return on average common equity represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity.
(b)	Book value per common share represents common equity divided by period end common shares outstanding.
(c)	Tangible book value per common share represents tangible common equity divided by period end common shares outstanding.
(d)	Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
(e)	The Firm expense efficiency ratio represents total non‐interest expenses as a percentage of net revenues.

Page 3:
(a)	Liquidity Resources, which are held within the bank and non-bank operating subsidiaries, are comprised of high quality liquid assets (HQLA) and cash deposits with banks ("Liquidity Resources"). The total amount of Liquidity Resources is actively managed by us considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements.
(b)	The Firm's goodwill and intangible balances utilized in the calculation of tangible common equity are net of certain mortgage servicing rights deduction.
(c)	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, ETRADE Bank, and ETRADE Savings Bank, and excludes balances between Bank subsidiaries, as well as deposits from the Parent and affiliates.
(d)	Firmwide regional revenues reflect the Firm's consolidated net revenues on a managed basis. Further discussion regarding the geographic methodology for net revenues is disclosed in Note 23 to the consolidated financial statements included in the Firm's Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K).

Page 4:
(a)	The Firm's attribution of average common equity to the business segments is based on the Required Capital framework, an internal capital adequacy measure. This framework is a risk-based and leverage-based capital measure, which is compared with the Firm's regulatory capital to ensure that the Firm maintains an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time. The Required Capital Framework is based on the Firm's regulatory capital requirements. The Firm defines the difference between its total average common equity and the sum of the average common equity amounts allocated to its business segments as Parent common equity. The amount of capital allocated to the business segments is generally set at the beginning of the year, and will remain fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). The Firm has made updates to its required capital framework for 2021 and continues to evaluate with respect to the impact of evolving regulatory requirements, as appropriate. For further discussion of the framework, refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s 2020 Form 10‐K.
(b)	The Firm's risk‐based capital ratios are computed under each of 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”). For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s 2020 Form 10‐K.
(c)	Supplementary leverage ratio represents Tier 1 capital divided by the total supplementary leverage exposure.

Page 5:
(a)	Institutional Securities Equity and Fixed income net revenues include trading, net interest income (interest income less interest expense), asset management, commissions and fees, investments and other revenues which are directly attributable to those businesses.
(b)	Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
(c)	VaR represents the unrealized loss in portfolio value 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, is disclosed in "Quantitative and Qualitative Disclosures about Risk" included in the Firm's 2020 Form 10-K.

Definitions of Performance Metrics and Terms

Our earnings releases, earnings conference calls, financial presentations and other communications may also include certain metrics which we believe to be useful to us, analysts, investors and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.

Page 6:
(a)	Transactional revenues for the Wealth Management segment includes investment banking, trading, and commissions and fee revenues.
(b)	Net interest income represents interest income less interest expense.
(c)	Other revenues for the Wealth Management segment includes investments and other revenues.
(d)	Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.

Page 7:
(a)	Net new assets represent client inflows, including dividends and interest, and asset acquisitions, less client outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions.
(b)	Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities.
(c)	Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits.
(d)	Annualized weighted average cost of deposits reflects deposit balances and costs as of September 30, 2021, June 30, 2021 and September 30, 2020.
(e)	Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned.
(f)	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.
(g)	Fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest and client fees, and exclude institutional cash management related activity. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets in the 2020 Form 10-K.
(h)	Self-directed assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets.
(i)	Daily average revenue trades (DARTs) represent the total self-directed trades in a period divided by the number of trading days during that period.
(j)	Self-directed households represent the total number of households that include at least one account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels will be included in each of the respective channel counts.
(k)	The workplace channel assets includes equity compensation solutions for companies, their executives and employees. Workplace unvested assets represent the market value of public company securities at the end of the period.
(l)	Workplace participants represent total accounts with vested and/or unvested assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.

Page 8:
(a)	Asset management and related fees represents management and administrative fees, distribution fees, and performance-based fees, not in the form of carried interest. Asset management and related fees represents Asset management as reported on the Firm’s consolidated income statement.
(b)	Performance-based income and other includes performance-based fees in the form of carried interest, gains and losses from investments, gains and losses from hedges on seed capital and certain employee deferred compensation plans, net interest, and other revenues. Performance-based income and other represents investments, investment banking, trading, net interest and other revenues as reported on the Firm’s consolidated income statement.
(c)	Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.

Page 9:
(a)	Investment Management Alternatives and Solutions asset class includes products in Fund of Funds, Real Estate, Private Equity and Credit strategies, Multi‐Asset portfolios, as well as Custom Separate Account portfolios.
(b)	Investment Management net flows include new commitments, investments or reinvestments, net of client redemptions, returns of capital post-fund investment period and dividends not reinvested and excludes the impact of the transition of funds from their commitment period to the invested capital period.
(c)	Overlay Services represents investment strategies that use passive exposure instruments to obtain, offset, or substitute specific portfolio exposures beyond those provided by the underlying holdings of the fund.
(d)	Total assets under management or supervision excludes shares of minority stake assets which represent the Investment Management business segment’s proportional share of assets managed by third-party asset managers in which we hold investments accounted for under the equity method.

Page 10 and 11:
(a)	Corporate loans include relationship and event-driven loans and typically consist of revolving lines of credit, term loans and bridge loans.
(b)	Secured lending facilities include loans provided to clients, which are primarily secured by loans, which are, in turn, collateralized by various assets including residential real estate, commercial real estate, corporate and financial assets.
(c)	Securities-based lending and other includes financing extended to sales and trading customers and corporate loans purchased in the secondary market.
(d)	Institutional Securities Lending Commitments principally include Corporate lending activity.

Supplemental Quantitative Details and Calculations

Page 1:
(1)	The Firm non-interest expenses by category are as follows:

		3Q21		2Q21		3Q20	3Q21 YTD		3Q20 YTD
Compensation and benefits	$	5,920	$	6,423	$	5,086	$	19,141	$	15,404

Non-compensation expenses:
Brokerage, clearing and exchange fees		825		795		697		2,530		2,153
Information processing and communications		788		765		616		2,286		1,768
Professional services		734		746		542		2,104		1,526
Occupancy and equipment		427		414		373		1,246		1,103
Marketing and business development		146		146		78		438		273
Other		1,015		831		731		2,703		2,188
Total non-compensation expenses		3,935		3,697		3,037		11,307		9,011

Total non-interest expenses	$	9,855	$	10,120	$	8,123	$	30,448	$	24,415

Page 2:

(1)

For the quarters ended September 30, 2021 and June 30, 2021, Firm results include pre-tax integration-related expenses of $145 million and $90 million ($111 million and $69 million after-tax) respectively, reported in the Wealth Management and Investment Management business segments. The nine months ended September 30, 2021 results include pre-tax integration-related expenses of $310 million ($238 million after-tax). The following sets forth the impact of the integration-related expenses to earnings per diluted share, return on average common equity and return on average tangible common equity (which are excluded):

		3Q21			2Q21		3Q21 YTD
Earnings per diluted share - GAAP	$	1.98		$	1.85		$	6.02
Impact of adjustments		0.06			0.04			0.13
Earnings per diluted share excluding integration-related expenses - Non-GAAP	$	2.04		$	1.89		$	6.15

Return on average common equity - GAAP		14.5	%		13.8	%		15.1	%
Impact of adjustments		0.5	%		0.3	%		0.3	%
Return on average common equity excluding integration-related expenses - Non-GAAP		15.0	%		14.1	%		15.4	%

Return on average tangible common equity - GAAP		19.6	%		18.6	%		19.7	%
Impact of adjustments		0.6	%		0.4	%		0.5	%
Return on average tangible common equity excluding integration-related expenses - Non-GAAP		20.2	%		19.0	%		20.2	%

Firm expense efficiency ratio - GAAP		66.8	%		68.6	%		67.3	%
Impact of adjustments		(1.0	)%		(0.6	)%		(0.7	)%
Firm expense efficiency ratio excluding integration-related expenses - Non-GAAP		65.8	%		68.0	%		66.6	%

Page 3:
(1)	Includes loans held for investment (net of allowance), loans held for sale and also includes loans at fair value which are included in Trading assets on the balance sheet.
(2)	As of September 30, 2021, June 30, 2021 and September 30, 2020, the U.S. Bank investment securities portfolio included held to maturity investment securities of $63.0 billion, $62.8 billion and $28.2 billion, respectively.

Page 4:
(1)	The Firm intends to early adopt the standardized approach for counterparty credit risk (SA-CCR) under Basel III in the fourth quarter. SA-CCR replaces the current exposure method used to measure derivatives counterparty exposure on the Standardized Approach risk-weighted assets (RWAs) and Supplementary Leverage Ratio exposure calculations in the regulatory capital framework. In the absence of further mitigation, our RWAs under the Standardized Approach could increase by $35 - $45 billion and decrease our Standardized CET1 capital ratio by approximately 120 basis points. This preliminary impact is subject to risks and uncertainties as well as the portfolio composition as of the adoption date that may cause the actual impact to differ materially and should not be taken as a projection of what our capital ratios and RWAs will be in future periods.
(2)	Based on a Federal Reserve interim final rule that was in effect until March 31, 2021, our SLR and supplementary leverage exposure as of September 30, 2020 reflects the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. The exclusion of these assets had the effect of increasing our SLR by 0.9% as of September 30, 2020.

Page 5:
(1)	Institutional Securities average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 3Q21: $603mm; 2Q21: $603mm; 3Q20: $484mm; 3Q21 YTD: $603mm; 3Q20 YTD: $484mm

Page 6:
(1)	For the quarters ended September 30, 2021 and June 30, 2021 and nine months ended September 30, 2021, integration-related compensation and non-compensation expenses associated with the acquisition of E*TRADE are as follows:

		3Q21		2Q21	3Q21 YTD
Compensation expenses	$	9	$	9	$	48
Non-compensation expenses		104		51		189
Total non-interest expenses	$	113	$	60	$	237
Income tax provision		26		14		55
Total non-interest expenses (after-tax)	$	87	$	46	$	182

(2)

Wealth Management average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 3Q21: $15,270mm; 2Q21: $15,270mm; 3Q20: $7,802mm; 3Q21 YTD: $15,202mm; 3Q20 YTD: $7,802mm

Supplemental Quantitative Details and Calculations

Page 7:
(1)	Includes $43 billion of fee-based assets acquired in an asset acquisition in the current quarter ended September 30, 2021.
(2)	Wealth Management other lending includes $3 billion of non-purpose securities based lending on non-bank entities in each period ended September 30, 2021, June 30, 2021 and September 30, 2020.
(3)	For the quarters ended September 30, 2021 and June 30, 2021, Wealth Management deposits of $327 billion and $319 billion, respectively, exclude off-balance sheet deposits of $9 billion and $8 billion, respectively, held by third parties outside of Morgan Stanley. Total deposits details are as follows:

		3Q21		2Q21
Brokerage sweep deposits	$	273	$	257
Other deposits		54		62
Total balance sheet deposits		327		319
Off-balance sheet deposits		9		8
Total deposits	$	336	$	327

Page 8:
(1)	For the quarters ended September 30, 2021 and June 30, 2021 and nine months ended September 30, 2021, integration-related compensation and non-compensation expenses associated with the acquisition of Eaton Vance are as follows:

		3Q21		2Q21	3Q21 YTD
Compensation expenses	$	10	$	16	$	29
Non-compensation expenses		22		14		44
Total non-interest expenses	$	32	$	30	$	73
Income tax provision		8		7		17
Total non-interest expenses (after-tax)	$	24	$	23	$	56

(2)

Investment Management average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 3Q21: $9,924mm; 2Q21: $9,924mm; 3Q20: $932mm; 3Q21 YTD: $7,224mm; 3Q20 YTD: $932mm

Page 9:
(1)	Net Flows by region for the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020 were: North America: $12.6 billion, $40.5 billion and $(3.5) billion International: $(0.3) billion, $8.0 billion and $16.0 billion
(2)	Assets under management or supervision by region for the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020 were: North America: $1,148 billion, $1,142 billion and $409 billion International: $374 billion, $382 billion and $306 billion

Page 10:
(1)	For the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020, Investment Management reflected loan balances of $132 million, $865 million and $569 million, respectively.

Page 11:
(1)	For the quarter ended September 30, 2021, the Allowance Rollforward for Loans and Lending Commitments is as follows:

	Institutional Securities			Wealth Management			Total
Loans

Allowance for Credit Losses (ACL)
Beginning Balance - June 30, 2021	$	579		$	108		$	687
Net Charge Offs		(5	)		-			(5	)
Provision		3			2			5
Other		(2	)		(1	)		(3	)
Ending Balance - September 30, 2021	$	575		$	109		$	684


Lending Commitments

Allowance for Credit Losses (ACL)
Beginning Balance - June 30, 2021	$	397		$	15		$	412
Net Charge Offs		-			-			-
Provision		21			(2	)		19
Other		(2	)		-			(2	)
Ending Balance - September 30, 2021	$	416		$	13		$	429


Loans and Lending Commitments

Allowance for Credit Losses (ACL)
Beginning Balance - June 30, 2021	$	976		$	123		$	1,099
Net Charge Offs		(5	)		-			(5	)
Provision		24			-			24
Other		(4	)		(1	)		(5	)
Ending Balance - September 30, 2021	$	991		$	122		$	1,113

Legal Notice

This Financial Supplement contains financial, statistical and business-related information, as well as business and segment trends.

The information should be read in conjunction with the Firm's third quarter earnings press release issued October 14, 2021.