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Published: 2021-04-16 00:00:00 ET
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EX-99.2 3 a52411712ex99_2.htm EXHIBIT 99.2
Exhibit 99.2


First 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
Firm and Segment Historical Income Statement Information - Addendum I
12 - 13
Definition of U.S. GAAP to Non-GAAP Measures
14
Definitions of Performance Metrics and Terms
15 - 16
Supplemental Quantitative Details and Calculations
17 - 18
Legal Notice
19

As part of the Firm’s effort to continually improve the transparency and comparability of our external financial reporting, several updates to our financial presentation are being implemented in the first quarter of 2021 and as a result certain prior period amounts have been reclassified to conform to the current period presentation. In addition, comparisons of current and prior periods are impacted by the financial results of Eaton Vance Corp. (Eaton Vance) and E*TRADE Financial Corporation (E*TRADE) reported in the Investment Management segment and Wealth Management segment, respectively. The Firm's first quarter 2021 earnings results reflect the completed acquisition of Eaton Vance, which closed on March 1, 2021. The Firm's first quarter 2021 and fourth quarter 2020 earnings results reflect the completed acquisition of E*TRADE.

Consolidated Financial Summary
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
Net revenues
                              
Institutional Securities
  
$
8,577
    
$
6,970
    
$
5,178
      
23
%
    
66
%
Wealth Management
    
5,959
      
5,672
      
4,056
      
5
%
    
47
%
Investment Management
    
1,314
      
1,100
      
692
      
19
%
    
90
%
Intersegment Eliminations
    
(131
)
    
(145
)
    
(147
)
    
10
%
    
11
%
Net revenues
  
$
15,719
    
$
13,597
    
$
9,779
      
16
%
    
61
%
                                         
Provision for credit losses
  
$
(98
)
  
$
4
    
$
407
      
*
      
*
  
                                         
Non-interest expenses
                                        
Institutional Securities
  
$
5,299
    
$
3,797
    
$
3,840
      
40
%
    
38
%
Wealth Management
    
4,364
      
4,611
      
2,982
      
(5
%)
    
46
%
Investment Management
    
944
      
904
      
549
      
4
%
    
72
%
Intersegment Eliminations
    
(134
)
    
(149
)
    
(145
)
    
10
%
    
8
%
Non-interest expenses (1)
  
$
10,473
    
$
9,163
    
$
7,226
      
14
%
    
45
%
                                         
Income before taxes
                                        
Institutional Securities
  
$
3,371
    
$
3,160
    
$
950
      
7
%
    
*
  
Wealth Management
    
1,600
      
1,070
      
1,055
      
50
%
    
52
%
Investment Management
    
370
      
196
      
143
      
89
%
    
159
%
Intersegment Eliminations
    
3
      
4
      
(2
)
    
(25
%)
    
*
  
Income before taxes
  
$
5,344
    
$
4,430
    
$
2,146
      
21
%
    
149
%
                                         
Net Income applicable to Morgan Stanley
                                       
Institutional Securities
  
$
2,601
    
$
2,422
    
$
757
      
7
%
    
*
  
Wealth Management
    
1,242
      
802
      
864
      
55
%
    
44
%
Investment Management
    
275
      
158
      
78
      
74
%
    
*
  
Intersegment Eliminations
    
2
      
3
      
(1
)
    
(33
%)
    
*
  
Net Income applicable to Morgan Stanley
  
$
4,120
    
$
3,385
    
$
1,698
      
22
%
    
143
%
Earnings applicable to Morgan Stanley common shareholders
  
$
3,982
    
$
3,266
    
$
1,590
      
22
%
    
150
%
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

1

Consolidated Financial Metrics, Ratios and Statistical Data
(unaudited)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
Financial Metrics:
                              
                               
Earnings per basic share
  
$
2.22
    
$
1.84
    
$
1.02
      
21
%
    
118
%
Earnings per diluted share
  
$
2.19
    
$
1.81
    
$
1.01
      
21
%
    
117
%
 
                                        
Return on average common equity
    
16.9
%
    
14.7
%
    
8.5
%
                
Return on average tangible common equity
    
21.1
%
    
17.7
%
    
9.7
%
                
 
                                        
Book value per common share
  
$
52.71
    
$
51.13
    
$
49.09
                  
Tangible book value per common share
  
$
38.97
    
$
41.95
    
$
43.28
                  
 
                                        
Excluding integration-related expenses (1)
                                        
Adjusted earnings per diluted share
  
$
2.22
    
$
1.92
    
$
1.01
      
16
%
    
120
%
Adjusted return on average common equity
    
17.1
%
    
15.6
%
    
8.5
%
                
Adjusted return on average tangible common equity
    
21.4
%
    
18.7
%
    
9.7
%
                
                                         
                                         
Financial Ratios:
                                        
                                         
Pre-tax profit margin
    
34
%
    
33
%
    
22
%
                
Compensation and benefits as a % of net revenues
    
43
%
    
40
%
    
44
%
                
Non-compensation expenses as a % of net revenues
    
23
%
    
27
%
    
30
%
                
Firm expense efficiency ratio
    
67
%
    
67
%
    
74
%
                
Firm expense efficiency ratio excluding integration-related expenses (1)
    
66
%
    
66
%
    
74
%
                
Effective tax rate (2)
    
22.0
%
    
23.0
%
    
17.1
%
                
                                         
                                         
Statistical Data:
                                        
                                         
Period end common shares outstanding (millions)
    
1,869
      
1,810
      
1,576
      
3
%
    
19
%
Average common shares outstanding (millions)
                                        
Basic
    
1,795
      
1,774
      
1,555
      
1
%
    
15
%
Diluted
    
1,818
      
1,802
      
1,573
      
1
%
    
16
%
                                         
Worldwide employees
    
70,975
      
68,097
      
60,670
      
4
%
    
17
%
                                         
                                         
Notes:
                                        
‐ The Firm’s first quarter 2021 results include pre-tax integration-related expenses of $75 million ($58 million after‐tax) reported in the Wealth Management and Investment Management business segments. The Firm's fourth quarter 2020 results include pre-tax integration-related expenses of $231 million ($189 million after‐tax) reported in the Wealth Management business segment.
  
- The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

2
Consolidated and U.S. Bank Supplemental Financial Information
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
Consolidated Balance sheet
                              
                               
Total assets
  
$
1,158,772
    
$
1,115,862
    
$
947,795
      
4
%
    
22
%
Loans (1)
  
$
171,812
    
$
161,745
    
$
158,759
      
6
%
    
8
%
Deposits
  
$
323,138
    
$
310,782
    
$
235,239
      
4
%
    
37
%
Liquidity resources
  
$
353,304
    
$
338,623
    
$
255,134
      
4
%
    
38
%
Long-term debt outstanding
  
$
208,267
    
$
213,388
    
$
192,645
      
(2
%)
    
8
%
Maturities of long-term debt outstanding (next 12 months)
  
$
18,976
    
$
24,241
    
$
17,153
      
(22
%)
    
11
%
 
                                        
Common equity
  
$
98,509
    
$
92,531
    
$
77,340
      
6
%
    
27
%
Less: Goodwill and intangible assets
    
(25,681
)
    
(16,615
)
    
(9,146
)
    
55
%
    
181
%
Tangible common equity
  
$
72,828
    
$
75,916
    
$
68,194
      
(4
%)
    
7
%
 
                                        
Preferred equity
  
$
7,750
    
$
9,250
    
$
8,520
      
(16
%)
    
(9
%)
                                         
U.S. Bank Supplemental Financial Information
                                        
Total assets
  
$
357,217
    
$
346,515
    
$
265,383
      
3
%
    
35
%
Loans
  
$
157,354
    
$
148,885
    
$
141,712
      
6
%
    
11
%
Investment securities portfolio (2)
  
$
149,423
    
$
142,929
    
$
77,747
      
5
%
    
92
%
Deposits
  
$
321,630
    
$
309,712
    
$
234,055
      
4
%
    
37
%
                                         
Regional revenues
                                        
Americas
  
$
11,191
    
$
10,166
    
$
6,888
      
10
%
    
62
%
EMEA (Europe, Middle East, Africa)
    
2,159
      
1,771
      
1,197
      
22
%
    
80
%
Asia
    
2,369
      
1,660
      
1,694
      
43
%
    
40
%
Consolidated net revenues
  
$
15,719
    
$
13,597
    
$
9,779
      
16
%
    
61
%

                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

3
Consolidated Average Common Equity and Regulatory Capital Information
(unaudited, dollars in billions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
Average Common Equity
                              
Institutional Securities
  
$
43.5
    
$
42.8
    
$
42.8
      
2
%
    
2
%
Wealth Management
    
28.5
      
26.5
      
18.2
      
8
%
    
57
%
Investment Management
    
4.4
      
2.6
      
2.6
      
69
%
    
69
%
Parent
    
17.9
      
16.7
      
11.1
      
7
%
    
61
%
Firm
  
$
94.3
    
$
88.6
    
$
74.7
      
6
%
    
26
%
                                         
                                         
                                         
Regulatory Capital
                                        
                                         
Common Equity Tier 1 capital
  
$
76.2
    
$
78.7
    
$
65.2
      
(3
%)
    
17
%
Tier 1 capital
  
$
84.1
    
$
88.1
    
$
73.9
      
(5
%)
    
14
%
 
                                        
Standardized Approach
                                        
Risk-weighted assets
  
$
453.7
    
$
453.1
    
$
415.0
      
--
      
9
%
Common Equity Tier 1 capital ratio
    
16.8
%
    
17.4
%
    
15.7
%
                
Tier 1 capital ratio
    
18.5
%
    
19.4
%
    
17.8
%
                
 
                                        
Advanced Approach
                                        
Risk-weighted assets
  
$
441.3
    
$
445.2
    
$
427.8
      
(1
%)
    
3
%
Common Equity Tier 1 capital ratio
    
17.3
%
    
17.7
%
    
15.2
%
                
Tier 1 capital ratio
    
19.1
%
    
19.8
%
    
17.3
%
                
 
                                        
Leverage-based capital
                                        
Tier 1 leverage ratio
    
7.5
%
    
8.4
%
    
8.1
%
                
Supplementary Leverage Ratio (1)
    
6.7
%
    
7.4
%
    
6.2
%
                
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

4
Institutional Securities
Income Statement Information, Financial Metrics and Ratios
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
Revenues:
                              
                               
Advisory
  
$
480
    
$
827
    
$
362
      
(42
%)
    
33
%
Equity
    
1,502
      
1,000
      
336
      
50
%
    
*
  
Fixed income
    
631
      
475
      
446
      
33
%
    
41
%
Underwriting
    
2,133
      
1,475
      
782
      
45
%
    
173
%
Investment banking
    
2,613
      
2,302
      
1,144
      
14
%
    
128
%
                                         
Equity
    
2,875
      
2,534
      
2,449
      
13
%
    
17
%
Fixed income
    
2,966
      
1,790
      
2,062
      
66
%
    
44
%
Other
    
123
      
344
      
(477
)
    
(64
%)
    
*
  
                                         
Net revenues
    
8,577
      
6,970
      
5,178
      
23
%
    
66
%
                                         
Provision for credit losses
    
(93
)
    
13
      
388
      
*
      
*
  
                                         
Compensation and benefits
    
3,114
      
1,575
      
1,814
      
98
%
    
72
%
Non-compensation expenses
    
2,185
      
2,222
      
2,026
      
(2
%)
    
8
%
Total non-interest expenses
    
5,299
      
3,797
      
3,840
      
40
%
    
38
%
                                         
                                         
Income before taxes
    
3,371
      
3,160
      
950
      
7
%
    
*
  
Net income applicable to Morgan Stanley
  
$
2,601
    
$
2,422
    
$
757
      
7
%
    
*
  
                                         
                                         
Pre-tax profit margin
    
39
%
    
45
%
    
18
%
                
Compensation and benefits as a % of net revenues
    
36
%
    
23
%
    
35
%
                
Non-compensation expenses as a % of net revenues
    
25
%
    
32
%
    
39
%
                
                                         
Return on Average Common Equity
    
23
%
    
22
%
    
6
%
                
Return on Average Tangible Common Equity (1)
    
23
%
    
22
%
    
6
%
                
                                         
Trading VaR (Average Daily 95% / One-Day VaR)
  
$
69
    
$
55
    
$
40
                  
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

5
Wealth Management
Income Statement Information, Financial Metrics and Ratios
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
Revenues:
                              
Asset management
  
$
3,191
    
$
2,975
    
$
2,680
      
7
%
    
19
%
Transactional
    
1,228
      
1,340
      
399
      
(8
%)
    
*
  
Net interest income
    
1,385
      
1,207
      
896
      
15
%
    
55
%
Other
    
155
      
150
      
81
      
3
%
    
91
%
Net revenues
    
5,959
      
5,672
      
4,056
      
5
%
    
47
%
                                         
Provision for credit losses
    
(5
)
    
(9
)
    
19
      
*
      
*
  
                                         
Compensation and benefits
    
3,170
      
3,345
      
2,212
      
(5
%)
    
43
%
Non-compensation expenses
    
1,194
      
1,266
      
770
      
(6
%)
    
55
%
Total non-interest expenses (1)
    
4,364
      
4,611
      
2,982
      
(5
%)
    
46
%
                                         
Income before taxes
    
1,600
      
1,070
      
1,055
      
50
%
    
52
%
Net income applicable to Morgan Stanley
  
$
1,242
    
$
802
    
$
864
      
55
%
    
44
%
                                         
Pre-tax profit margin
    
27
%
    
19
%
    
26
%
                
Pre-tax profit margin excluding integration-related expenses
    
28
%
    
23
%
    
26
%
                
Compensation and benefits as a % of net revenues
    
53
%
    
59
%
    
55
%
                
Non-compensation expenses as a % of net revenues
    
20
%
    
22
%
    
19
%
                
                                         
Return on Average Common Equity
    
17
%
    
12
%
    
18
%
                
Return on Average Tangible Common Equity (2)
    
36
%
    
23
%
    
32
%
                
                                         
                                         
Notes:
                                        
- For the quarters ended March 31, 2021 and December 31, 2020, Wealth Management's results include pre-tax integration-related expenses of $64 million and $231 million ($49 million and $189 million after-tax), respectively.
  
- The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice. 
 

6
Wealth Management
Financial Information and Statistical Data
(unaudited, dollars in billions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
                               
Wealth Management Metrics
                              
                               
Total client assets
  
$
4,231
    
$
3,999
    
$
2,397
      
6
%
    
77
%
Net new assets
  
$
104.9
    
$
73.4
    
$
37.1
      
43
%
    
183
%
U.S. Bank loans
  
$
104.9
    
$
98.1
    
$
82.5
      
7
%
    
27
%
Margin and other lending (1)
  
$
26.6
    
$
23.1
    
$
9.5
      
15
%
    
180
%
Deposits (2)
  
$
322
    
$
306
    
$
234
      
5
%
    
38
%
Weighted average cost of deposits
    
0.18
%
    
0.24
%
    
0.57
%
                
                                         
Advisor-led channel
                                        
                                         
Advisor-led client assets
  
$
3,349
    
$
3,167
    
$
2,331
      
6
%
    
44
%
                                         
Fee-based client assets
  
$
1,574
    
$
1,472
    
$
1,134
      
7
%
    
39
%
Fee-based asset flows
  
$
37.2
    
$
24.1
    
$
18.4
      
54
%
    
102
%
Fee-based assets as a % of advisor-led client assets
    
47
%
    
46
%
    
49
%
                
                                         
Self-directed channel
                                        
                                         
Self-directed assets
  
$
882
    
$
832
    
$
66
      
6
%
    
*
  
Daily average revenue trades (000's)
    
1,619
      
1,106
      
5
      
46
%
    
*
  
Self-directed households (millions)
    
7.2
      
6.7
      
1.3
      
7
%
    
*
  
                                         
Workplace channel
                                        
                                         
Workplace unvested assets
  
$
461
    
$
435
    
$
155
      
6
%
    
197
 %
Number of participants (millions)
    
5.1
      
4.9
      
2.7
      
4
%
    
89
%
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

7
Investment Management
Income Statement Information, Financial Metrics and Ratios
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
Revenues:
                              
Asset management and related fees
  
$
1,103
    
$
869
    
$
665
      
27
%
    
66
%
Performance-based income and other
    
211
      
231
      
27
      
(9
%)
    
*
  
Net revenues
    
1,314
      
1,100
      
692
      
19
%
    
90
%
                                         
Compensation and benefits
    
514
      
530
      
257
      
(3
%)
    
100
%
Non-compensation expenses
    
430
      
374
      
292
      
15
%
    
47
%
Total non-interest expenses (1)
    
944
      
904
      
549
      
4
%
    
72
%
                                         
Income before taxes
    
370
      
196
      
143
      
89
%
    
159
%
Net income applicable to Morgan Stanley
  
$
275
    
$
158
    
$
78
      
74
%
    
*
  
                                         
Pre-tax profit margin
    
28
%
    
18
%
    
21
%
                
Pre-tax profit margin excluding integration-related expenses
    
29
%
    
18
%
    
21
%
                
Compensation and benefits as a % of net revenues
    
39
%
    
48
%
    
37
%
                
Non-compensation expenses as a % of net revenues
    
33
%
    
34
%
    
42
%
                
                                         
Return on Average Common Equity
    
25
%
    
24
%
    
12
%
                
Return on Average Tangible Common Equity (2)
    
88
%
    
37
%
    
18
%
                
                                         
                                         
Notes:
                                        
- For the quarter ended March 31, 2021, Investment Management's results include pre-tax integration-related expenses of $11 million ($9 million after-tax).
  
- The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

8
Investment Management
Financial Information and Statistical Data
(unaudited, dollars in billions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
Assets under management or supervision (AUM)
                          
                               
Net flows by asset class (1)
                              
Equity
  
$
7.8
    
$
12.2
    
$
1.6
      
(36
%)
    
*
  
Fixed Income
    
3.9
      
(1.3
)
    
1.3
      
*
      
200
%
Alternatives and Solutions
    
4.6
      
(2.4
)
    
3.8
      
*
      
21
%
Long-Term Net Flows
    
16.3
      
8.5
      
6.7
      
92
%
    
143
%
                                         
Liquidity and Overlay Services
    
25.9
      
16.5
      
50.6
      
57
%
    
(49
%)
                                         
Total net flows
  
$
42.2
    
$
25.0
    
$
57.3
      
69
%
    
(26
%)
                                         
                                         
Assets under management or supervision by asset class (2)
                                  
Equity
  
$
371
    
$
242
    
$
121
      
53
%
    
*
  
Fixed Income
    
201
      
98
      
75
      
105
%
    
168
%
Alternatives and Solutions
    
418
      
153
      
141
      
173
%
    
196
%
Long‐Term Assets Under Management or Supervision
    
990
      
493
      
337
      
101
%
    
194
%
                                         
Liquidity and Overlay Services
    
429
      
288
      
247
      
49
%
    
74
%
                                         
Total Assets Under Management or Supervision
  
$
1,419
    
$
781
    
$
584
      
82
%
    
143
%
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

9
Consolidated Loans and Lending Commitments
(unaudited, dollars in billions)

   
Quarter Ended
    
Percentage Change From:
  
   
Mar 31, 2021
    
Dec 31, 2020
    
Mar 31, 2020
    
Dec 31, 2020
    
Mar 31, 2020
  
                               
Institutional Securities
                              
                               
Loans:
                              
Corporate
  
$
16.8
    
$
14.3
    
$
26.8
      
17
%
    
(37
%)
Secured lending facilities
    
29.6
      
29.5
      
30.4
      
--
      
(3
%)
Commercial and residential real estate
    
10.5
      
11.1
      
11.4
      
(5
%)
    
(8
%)
Securities-based lending and other
    
8.8
      
8.3
      
7.1
      
6
%
    
24
%
                                         
Total Loans
    
65.7
      
63.2
      
75.7
      
4
%
    
(13
%)
                                         
Lending Commitments
    
118.8
      
113.5
      
92.9
      
5
%
    
28
%
                                         
Institutional Securities Loans and Lending Commitments
  
$
184.5
    
$
176.7
    
$
168.6
      
4
%
    
9
%
                                         
                                         
Wealth Management
                                        
                                         
Loans:
                                        
Securities-based lending and other
  
$
68.1
    
$
62.9
    
$
51.4
      
8
%
    
32
%
Residential real estate
    
36.8
      
35.2
      
31.1
      
5
%
    
18
%
                                         
Total Loans
    
104.9
      
98.1
      
82.5
      
7
%
    
27
%
                                         
Lending Commitments
    
14.0
      
14.4
      
13.4
      
(3
%)
    
4
%
                                         
Wealth Management Loans and Lending Commitments
  
$
118.9
    
$
112.5
    
$
95.9
      
6
%
    
24
%
                                         
Consolidated Loans and Lending Commitments (1)
  
$
303.4
    
$
289.2
    
$
264.5
      
5
%
    
15
%
                                         
                                         
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

10
Consolidated Loans and Lending Commitments
Allowance for Credit Losses (ACL) as of March 31, 2021
(unaudited, dollars in millions)

                         
   
Loans and Lending Commitments
    
ACL (1)
    
ACL %
    
Q1 Provision
  
   
(Gross)
                    
Loans:
                        
Held For Investment (HFI)
                        
                         
Corporate
  
$
5,185
    
$
250
      
4.8
%
  
$
(56
)
Secured lending facilities
    
25,886
      
193
      
0.7
%
    
(3
)
Commercial and residential real estate
    
7,277
      
206
      
2.8
%
    
5
  
Other
    
1,034
      
22
      
2.1
%
    
1
  
Institutional Securities - HFI
  
$
39,382
    
$
671
      
1.7
%
  
$
(53
)
 
                                
Wealth Management - HFI
    
105,010
      
91
      
0.1
%
    
(5
)
                                 
Held For Investment
  
$
144,392
    
$
762
      
0.5
%
  
$
(58
)
                                 
Held For Sale
    
15,466
                          
                                 
Fair Value
    
11,584
                          
                                 
Total Loans
    
171,442
      
762
              
(58
)
                                 
Lending Commitments
    
132,717
      
354
      
0.3
%
    
(40
)
                                 
Consolidated Loans and Lending Commitments
  
$
304,159
    
$
1,116
            
$
(98
)
                                 
                                 
The End Notes are an integral part of this presentation. See pages 14 - 19 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.
  

11
This page represents an addendum to the 1Q 2021 Financial Supplement, Addendum I

Firm and segment historical income statement information which reflect reclassifications to certain prior period amounts to conform to the presentation changes made in the first quarter of 2021.

(unaudited, dollars in millions)

Consolidated Firm
                                                                        
     
4Q20
      
3Q20
      
2Q20
      
1Q20
      
4Q19
      
3Q19
      
2Q19
      
1Q19
      
4Q18
      
3Q18
      
2Q18
      
1Q18
  
Investment banking
  
$
2,435
    
$
1,826
    
$
2,142
    
$
1,271
    
$
1,696
    
$
1,635
    
$
1,590
    
$
1,242
    
$
1,488
    
$
1,567
    
$
1,793
    
$
1,634
  
Trading
    
3,229
      
3,150
      
4,803
      
2,801
      
2,363
      
2,615
      
2,765
      
3,531
      
1,661
      
2,818
      
3,308
      
3,787
  
Investments
    
327
      
346
      
275
      
38
      
739
      
87
      
441
      
273
      
28
      
136
      
147
      
126
  
Commissions and fees
    
1,352
      
1,037
      
1,102
      
1,360
      
984
      
990
      
979
      
966
      
1,046
      
932
      
1,039
      
1,173
  
Asset management
    
3,926
      
3,664
      
3,265
      
3,417
      
3,451
      
3,363
      
3,220
      
3,049
      
3,266
      
3,251
      
3,189
      
3,192
  
Other
    
457
      
212
      
473
      
(464
)
    
241
      
159
      
227
      
238
      
79
      
234
      
175
      
209
  
Total non-interest revenues
    
11,726
      
10,235
      
12,060
      
8,423
      
9,474
      
8,849
      
9,222
      
9,299
      
7,568
      
8,938
      
9,651
      
10,121
  
                                                                                                 
Interest income
    
2,245
      
2,056
      
2,358
      
3,503
      
3,952
      
4,350
      
4,506
      
4,290
      
4,111
      
3,627
      
3,294
      
2,860
  
Interest expense
    
374
      
570
      
758
      
2,147
      
2,519
      
3,132
      
3,477
      
3,276
      
3,122
      
2,691
      
2,388
      
1,885
  
Net interest
    
1,871
      
1,486
      
1,600
      
1,356
      
1,433
      
1,218
      
1,029
      
1,014
      
989
      
936
      
906
      
975
  
                                                                                                 
Net revenues
  
$
13,597
    
$
11,721
    
$
13,660
    
$
9,779
    
$
10,907
    
$
10,067
    
$
10,251
    
$
10,313
    
$
8,557
    
$
9,874
    
$
10,557
    
$
11,096
  
 
                                                                                                
Provision for credit losses
    
4
      
111
      
239
      
407
      
57
      
51
      
17
      
36
      
11
      
3
      
(55
)
    
26
  
                                                                                                 
Compensation and benefits
    
5,450
      
5,086
      
6,035
      
4,283
      
5,228
      
4,427
      
4,531
      
4,651
      
3,787
      
4,310
      
4,621
      
4,914
  
Non-compensation expenses
    
3,713
      
3,037
      
3,031
      
2,943
      
2,889
      
2,879
      
2,800
      
2,671
      
2,902
      
2,710
      
2,882
      
2,736
  
Total non-interest expenses
    
9,163
      
8,123
      
9,066
      
7,226
      
8,117
      
7,306
      
7,331
      
7,322
      
6,689
      
7,020
      
7,503
      
7,650
  
Income before taxes
  
$
4,430
    
$
3,487
    
$
4,355
    
$
2,146
    
$
2,733
    
$
2,710
    
$
2,903
    
$
2,955
    
$
1,857
    
$
2,851
    
$
3,109
    
$
3,420
  

Institutional Securities
                                                                                                
     
4Q20
      
3Q20
      
2Q20
      
1Q20
      
4Q19
      
3Q19
      
2Q19
      
1Q19
      
4Q18
      
3Q18
      
2Q18
      
1Q18
  
Advisory
  
$
827
    
$
357
    
$
462
    
$
362
    
$
654
    
$
550
    
$
506
    
$
406
    
$
734
    
$
510
    
$
618
    
$
574
  
Equity
    
1,000
      
874
      
882
      
336
      
422
      
401
      
546
      
339
      
323
      
441
      
541
      
421
  
Fixed income
    
475
      
476
      
707
      
446
      
500
      
584
      
420
      
406
      
360
      
508
      
540
      
518
  
Underwriting
    
1,475
      
1,350
      
1,589
      
782
      
922
      
985
      
966
      
745
      
683
      
949
      
1,081
      
939
  
Investment banking
    
2,302
      
1,707
      
2,051
      
1,144
      
1,576
      
1,535
      
1,472
      
1,151
      
1,417
      
1,459
      
1,699
      
1,513
  
                                                                                                 
Equity
    
2,534
      
2,311
      
2,627
      
2,449
      
1,937
      
2,001
      
2,131
      
2,064
      
1,946
      
2,021
      
2,472
      
2,598
  
Fixed income
    
1,790
      
1,954
      
3,041
      
2,062
      
1,405
      
1,429
      
1,350
      
1,801
      
528
      
1,366
      
1,502
      
1,919
  
Other
    
344
      
157
      
480
      
(477
)
    
182
      
90
      
164
      
208
      
(46
)
    
82
      
(10
)
    
89
  
                                                                                                 
Net revenues
  
$
6,970
    
$
6,129
    
$
8,199
    
$
5,178
    
$
5,100
    
$
5,055
    
$
5,117
    
$
5,224
    
$
3,845
    
$
4,928
    
$
5,663
    
$
6,119
  
                                                                                                 
Provision for credit losses
    
13
      
113
      
217
      
388
      
52
      
49
      
13
      
37
      
10
      
(1
)
    
(54
)
    
26
  
                                                                                                 
Compensation and benefits
    
1,575
      
2,001
      
2,952
      
1,814
      
2,057
      
1,768
      
1,789
      
1,819
      
1,179
      
1,626
      
1,993
      
2,160
  
Non-compensation expenses
    
2,222
      
1,967
      
2,037
      
2,026
      
1,866
      
1,931
      
1,852
      
1,773
      
1,876
      
1,747
      
1,912
      
1,821
  
Total non-interest expenses
    
3,797
      
3,968
      
4,989
      
3,840
      
3,923
      
3,699
      
3,641
      
3,592
      
3,055
      
3,373
      
3,905
      
3,981
  
Income before taxes
  
$
3,160
    
$
2,048
    
$
2,993
    
$
950
    
$
1,125
    
$
1,307
    
$
1,463
    
$
1,595
    
$
780
    
$
1,556
    
$
1,812
    
$
2,112
  
                                                                                                 
Notes:
                                                                                                
As part of the Firm’s effort to continually improve the transparency and comparability of our external financial reporting, several updates to our financial presentation were implemented in the first quarter of 2021. The corresponding reclassifications have been made to prior periods to conform to the current presentation. The presentation changes are as follows:
  
(i) The Provision for credit losses for loans and lending commitments is now presented as a separate line in the consolidated income statements.
  
(ii) Gains and losses on external economic derivative hedges associated with held-for-sale and held-for-investment corporate loans, which were previously reported in Trading revenues, are now reported within Other revenues in the consolidated income statements.
  
(iii) In the Institutional Securities segment, sales and trading net revenues have been reorganized and reported into the following categories, Equity, Fixed Income and Other. In addition, Equity and Fixed Income now include certain Investments and Other revenues to the extent directly attributable to those businesses. The remaining Investments and Other revenues, along with amounts previously disclosed as “Other sales and trading” will be shown as “Other”.
  

12
This page represents an addendum to the 1Q 2021 Financial Supplement, Addendum I

Firm and segment historical income statement information which reflect reclassifications to certain prior period amounts to conform to the presentation changes made in the first quarter of 2021.

(unaudited, dollars in millions)

Wealth Management
                                                                        
     
4Q20
      
3Q20
      
2Q20
      
1Q20
      
4Q19
      
3Q19
      
2Q19
      
1Q19
      
4Q18
      
3Q18
      
2Q18
      
1Q18
  
Asset management
  
$
2,975
    
$
2,793
    
$
2,507
    
$
2,680
    
$
2,655
    
$
2,639
    
$
2,544
    
$
2,361
    
$
2,576
    
$
2,573
    
$
2,514
    
$
2,495
  
Transactional
    
1,340
      
880
      
1,075
      
399
      
829
      
595
      
728
      
817
      
422
      
698
      
691
      
747
  
Net interest income
    
1,207
      
889
      
1,030
      
896
      
1,033
      
1,043
      
1,016
      
1,130
      
1,095
      
1,070
      
1,043
      
1,069
  
Other
    
150
      
92
      
92
      
81
      
69
      
84
      
123
      
80
      
54
      
61
      
75
      
63
  
Net revenues
  
$
5,672
    
$
4,654
    
$
4,704
    
$
4,056
    
$
4,586
    
$
4,361
    
$
4,411
    
$
4,388
    
$
4,147
    
$
4,402
    
$
4,323
    
$
4,374
  
                                                                                                 
Provision for credit losses
    
(9
)
    
(2
)
    
22
      
19
      
5
      
2
      
4
      
(1
)
    
1
      
4
      
(1
)
    
0
  
                                                                                                 
Compensation and benefits
    
3,345
      
2,684
      
2,729
      
2,212
      
2,590
      
2,340
      
2,382
      
2,462
      
2,286
      
2,415
      
2,356
      
2,450
  
Non-compensation expenses
    
1,266
      
852
      
811
      
770
      
828
      
781
      
782
      
739
      
850
      
789
      
811
      
764
  
Total non-interest expenses
    
4,611
      
3,536
      
3,540
      
2,982
      
3,418
      
3,121
      
3,164
      
3,201
      
3,136
      
3,204
      
3,167
      
3,214
  
Income before taxes
  
$
1,070
    
$
1,120
    
$
1,142
    
$
1,055
    
$
1,163
    
$
1,238
    
$
1,243
    
$
1,188
    
$
1,010
    
$
1,194
    
$
1,157
    
$
1,160
  

Investment Management
                                                                                                
     
4Q20
      
3Q20
      
2Q20
      
1Q20
      
4Q19
      
3Q19
      
2Q19
      
1Q19
      
4Q18
      
3Q18
      
2Q18
      
1Q18
  
Asset management and related fees
  
$
869
    
$
795
    
$
684
    
$
665
    
$
736
    
$
664
    
$
612
    
$
617
    
$
628
    
$
604
    
$
610
    
$
626
  
Performance-based income and other
    
231
      
261
      
202
      
27
      
620
      
100
      
227
      
187
      
56
      
49
      
81
      
92
  
Net revenues
  
$
1,100
    
$
1,056
    
$
886
    
$
692
    
$
1,356
    
$
764
    
$
839
    
$
804
    
$
684
    
$
653
    
$
691
    
$
718
  
                                                                                                 
Compensation and benefits
    
530
      
401
      
354
      
257
      
581
      
319
      
360
      
370
      
322
      
269
      
272
      
304
  
Non-compensation expenses
    
374
      
340
      
316
      
292
      
328
      
280
      
280
      
260
      
288
      
282
      
279
      
266
  
Total non-interest expenses
    
904
      
741
      
670
      
549
      
909
      
599
      
640
      
630
      
610
      
551
      
551
      
570
  
Income before taxes
  
$
196
    
$
315
    
$
216
    
$
143
    
$
447
    
$
165
    
$
199
    
$
174
    
$
74
    
$
102
    
$
140
    
$
148
  
                                                                                                 
Notes:
                                                                                                
As part of the Firm’s effort to continually improve the transparency and comparability of our external financial reporting, several updates to our financial presentation were implemented in the first quarter of 2021. The corresponding reclassifications have been made to prior periods to conform to the current presentation. The presentation changes are as follows:
  
(i) The Provision for credit losses for loans and lending commitments is now presented as a separate line in the consolidated income statements.
  
(ii) In the Investment Management segment, we have renamed the previously disclosed revenue line “Asset management” to “Asset management and related fees” and combined the remaining revenue categories under a new line named “Performance-based income and other”.
  

13
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.

14
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, E*TRADE Bank, and E*TRADE 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.

15
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 represents client inflows (including dividend and interest) less client outflows (excluding activity from business combinations/divestitures and impact of fees and commissions).
(b)
Margin and other lending represents Wealth Management margin lending arrangements, which allow customers to borrow against the value of qualifying securities and Wealth Management 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)
Weighted average cost of deposits represents the annualized weighted average cost of deposits as of periods ended March 31, 2021, December 31, 2020 and March 31, 2020.
(e)
Advisor-led client assets represents client assets in accounts that have a Wealth Management representative assigned.
(f)
Fee-based client assets represents 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 includes net new fee-based assets, net account transfers, dividends, interest, and client fees and exclude institutional cash management related activity.
(h)
Self-directed assets represents active accounts which are not advisor led. Active accounts are defined as having $25 or more in assets.
(i)
Daily average revenue trades (DARTs) represents the total client-directed trades in a period divided by the number of trading days during that period.
(j)
Self-directed households represents 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 (Advisor-Led, Self-Directed, Workplace) 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 represents the market value of public company securities at the end of the period.
(l)
Workplace participants represents total accounts with vested or unvested assets >0 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 form 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.

16
Supplemental Quantitative Details and Calculations

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

     
1Q21
      
4Q20
      
1Q20
  
Compensation and benefits
  
$
6,798
    
$
5,450
    
$
4,283
  
                         
Non-compensation expenses:
                        
Brokerage, clearing and exchange fees
    
910
      
776
      
740
  
Information processing and communications
    
733
      
697
      
563
  
Professional services
    
624
      
679
      
449
  
Occupancy and equipment
    
405
      
456
      
365
  
Marketing and business development
    
146
      
161
      
132
  
Other
    
857
      
944
      
694
  
Total non-compensation expenses
    
3,675
      
3,713
      
2,943
  
                         
Total non-interest expenses
  
$
10,473
    
$
9,163
    
$
7,226
  

Page 2:
(1)
The quarter ended March 31, 2021 included pre-tax integration-related expenses of $75 million ($58 million after-tax), associated with the acquisitions of E*TRADE and Eaton Vance. The quarter ended December 31, 2020 also included pre-tax integration-related expenses of $231 million ($189 million after-tax) associated with the acquisition of E*TRADE. 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):

     
1Q21
      
4Q20
  
Earnings per diluted share - GAAP
  
$
2.19
    
$
1.81
  
Impact of adjustments
    
0.03
      
0.11
  
Earnings per diluted share excluding integration-related expenses - Non-GAAP
  
$
2.22
    
$
1.92
  
                 
Return on average common equity - GAAP
    
16.9
%
    
14.7
%
Impact of adjustments
    
0.2
%
    
0.9
%
Return on average common equity excluding integration-related expenses - Non-GAAP
    
17.1
%
    
15.6
%
                 
Return on average tangible common equity - GAAP
    
21.1
%
    
17.7
%
Impact of adjustments
    
0.3
%
    
1.0
%
Return on average tangible common equity excluding integration-related expenses - Non-GAAP
    
21.4
%
    
18.7
%
                 
Firm expense efficiency ratio - GAAP
    
66.6
%
    
67.5
%
Impact of adjustments
    
(0.5
)%
    
(1.7
)%
Firm expense efficiency ratio excluding integration-related expenses - Non-GAAP
    
66.1
%
    
65.8
%

(2)
The impacts of recognizing excess tax benefits upon conversion of awards are $82 million and $99 million in the quarters ended March 31, 2021 and March 31, 2020, respectively.
   
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 March 31, 2021, December 31, 2020 and March 31, 2020, the U.S. Bank investment securities portfolio included held to maturity investment securities of $64.6 billion, $52.6 billion and $28.8 billion, respectively.
   
Page 4:
(1)
Based on a Federal Reserve interim final rule in effect until March 31, 2021, our supplementary leverage ratio (SLR) and supplementary leverage exposure, effective June 30, 2020, reflect 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 0.7% as of March 31, 2021.
   
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: 1Q21: $603mm; 4Q20: $484mm; 1Q20: $484mm

Page 6:
(1)
For the quarters ended March 31, 2021 and December 31, 2020, integration-related compensation and non-compensation expenses associated with the acquisition of E*TRADE are as follows:

   
     
1Q21
      
4Q20
  
Compensation expenses
  
$
30
    
$
151
  
Non-compensation expenses
    
34
      
80
  
Total non-interest expenses
  
$
64
    
$
231
  
Income tax provision
    
15
      
42
  
Total non-interest expenses (after-tax)
  
$
49
    
$
189
  

(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: 1Q21: $15,101mm; 4Q20: $13,440mm; 1Q20: $7,802mm
   
Page 7:
(1)
Wealth Management other lending includes $3 billion of non-purpose securities based lending on non-bank entities in each period ended March 31, 2021, December 31, 2020 and March 31, 2020.
(2)
For the quarters ended March 31, 2021 and December 31, 2020, Wealth Management deposits of $322 billion and $306 billion, respectively, exclude off-balance sheet deposits of $8 billion and $25 billion, respectively, held by third parties outside of Morgan Stanley. Total deposits details are as follows:

     
1Q21
      
4Q20
  
Brokerage sweep deposits
  
$
253
    
$
232
  
Other deposits
    
69
      
74
  
Total balance sheet deposits
    
322
      
306
  
Off-balance sheet deposits
    
8
      
25
  
Total deposits
  
$
330
    
$
331
  

17
Supplemental Quantitative Details and Calculations

Page 8:
(1)
For the quarter ended March 31, 2021, integration-related compensation and non-compensation expenses associated with the acquisition of Eaton Vance are as follows:

     
1Q21
  
Compensation expenses
  
$
3
  
Non-compensation expenses
    
8
  
Total non-interest expenses
  
$
11
  
Income tax provision
    
2
  
Total non-interest expenses (after-tax)
  
$
9
  

(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: 1Q21: $3,174mm; 4Q20: $932mm; 1Q20: $932mm
   
Page 9:
(1)
Net Flows by region for the quarters ended March 31, 2021, December 31, 2020 and March 31, 2020 were:
 
North America: $35.0 billion, $21.4 billion and $57.9 billion
 
International: $7.2 billion, $3.6 billion and $(0.6) billion
(2)
Assets under management or supervision by region for the quarters ended March 31, 2021, December 31, 2020 and March 31, 2020 were:
 
North America: $1,058 billion, $449 billion and $359 billion
 
International: $361 billion, $332 billion and $225 billion

Page 10:
(1)
For the quarters ended March 31, 2021, December 31, 2020 and March 31, 2020, Investment Management reflected loan balances of $1,130 million, $443 million and $499 million, respectively.
   
Page 11:
(1)
For the quarter ended March 31, 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 - December 31, 2020
  
$
739
    
$
96
    
$
835
  
Net Charge Offs
    
(10
)
    
-
      
(10
)
Provision
    
(53
)
    
(5
)
    
(58
)
Other
    
(5
)
    
-
      
(5
)
Ending Balance - March 31, 2021
  
$
671
    
$
91
    
$
762
  
                         
                         
Lending Commitments
                        
                         
Allowance for Credit Losses (ACL)
                        
Beginning Balance - December 31, 2020
  
$
391
    
$
5
    
$
396
  
Net Charge Offs
    
-
      
-
      
-
  
Provision
    
(40
)
    
-
      
(40
)
Other
    
(1
)
    
(1
)
    
(2
)
Ending Balance - March 31, 2021
  
$
350
    
$
4
    
$
354
  
                         
                         
Loans and Lending Commitments
                        
                         
Allowance for Credit Losses (ACL)
                        
Beginning Balance - December 31, 2020
  
$
1,130
    
$
101
    
$
1,231
  
Net Charge Offs
    
(10
)
    
-
      
(10
)
Provision
    
(93
)
    
(5
)
    
(98
)
Other
    
(6
)
    
(1
)
    
(7
)
Ending Balance - March 31, 2021
  
$
1,021
    
$
95
    
$
1,116
  

18
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 first quarter earnings press release issued April 16, 2021.


19