EX-99.2 3 a51926474ex99_2.htm EXHIBIT 99.2
Exhibit 99.2

Quarterly Financial Supplement - 4Q 2018






    Page #
     
 
Consolidated Financial Summary
1
 
Consolidated Income Statement Information
2
 
Consolidated Financial Information and Statistical Data
3
 
Consolidated Return on Average Common Equity and Regulatory Capital Information
4
 
Consolidated Loans and Lending Commitments
5
 
Institutional Securities Income Statement Information
6
 
Institutional Securities Financial Information and Statistical Data
7
 
Wealth Management Income Statement Information
8
 
Wealth Management Financial Information and Statistical Data
9
 
Investment Management Income Statement Information
10
 
Investment Management Financial Information and Statistical Data
11
 
U.S. Bank Supplemental Financial Information
12
 
End Notes
13 - 14
 
Definition of U.S. GAAP to Non-GAAP Measures and Performance Metrics
15 - 16
 
Legal Notice
17





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

    
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2018
    
Sep 30, 2018
    
Dec 31, 2017
    
Sep 30, 2018
    
Dec 31, 2017
    
Dec 31, 2018
    
Dec 31, 2017
    
Change
  
Net revenues (1)
                                                
Institutional Securities
  
$
3,839
    
$
4,929
    
$
4,523
      
(22
%)
    
(15
%)
  
$
20,582
    
$
18,813
      
9
%
Wealth Management
    
4,144
      
4,399
      
4,407
      
(6
%)
    
(6
%)
    
17,242
      
16,836
      
2
%
Investment Management
    
684
      
653
      
637
      
5
%
    
7
%
    
2,746
      
2,586
      
6
%
Intersegment Eliminations
    
(119
)
    
(109
)
    
(67
)
    
(9
%)
    
(78
%)
    
(463
)
    
(290
)
    
(60
%)
Net revenues
  
$
8,548
    
$
9,872
    
$
9,500
      
(13
%)
    
(10
%)
  
$
40,107
    
$
37,945
      
6
%
                                                                 
Income (loss) from continuing operations before tax
                                                                
Institutional Securities
  
$
780
    
$
1,556
    
$
1,235
      
(50
%)
    
(37
%)
  
$
6,260
    
$
5,644
      
11
%
Wealth Management
    
1,010
      
1,194
      
1,150
      
(15
%)
    
(12
%)
    
4,521
      
4,299
      
5
%
Investment Management
    
74
      
102
      
80
      
(27
%)
    
(8
%)
    
464
      
456
      
2
%
Intersegment Eliminations
    
(7
)
    
(1
)
    
6
      
*
      
*
      
(8
)
    
4
      
*
  
Income (loss) from continuing operations before tax
  
$
1,857
    
$
2,851
    
$
2,471
      
(35
%)
    
(25
%)
  
$
11,237
    
$
10,403
      
8
%
                                                                 
Net Income (loss) applicable to Morgan Stanley
                                                               
Institutional Securities
  
$
702
    
$
1,120
    
$
357
      
(37
%)
    
97
%
  
$
4,906
    
$
3,536
      
39
%
Wealth Management
    
769
      
913
      
315
      
(16
%)
    
144
%
    
3,472
      
2,325
      
49
%
Investment Management
    
65
      
80
      
(35
)
    
(19
%)
    
*
      
376
      
246
      
53
%
Intersegment Eliminations
    
(5
)
    
(1
)
    
6
      
*
      
*
      
(6
)
    
4
      
*
  
Net Income (loss) applicable to Morgan Stanley
  
$
1,531
    
$
2,112
    
$
643
      
(28
%)
    
138
%
  
$
8,748
    
$
6,111
      
43
%
Earnings (loss) applicable to Morgan Stanley common shareholders
  
$
1,361
    
$
2,019
    
$
473
      
(33
%)
    
188
%
  
$
8,222
    
$
5,588
      
47
%
                                                                 
Financial Metrics:
                                                                
                                                                 
Earnings per basic share
  
$
0.81
    
$
1.19
    
$
0.27
      
(32
%)
    
200
%
  
$
4.81
    
$
3.14
      
53
%
Earnings per diluted share
  
$
0.80
    
$
1.17
    
$
0.26
      
(32
%)
    
*
    
$
4.73
    
$
3.07
      
54
%
 
                                                                
Return on average common equity
    
7.7
%
    
11.5
%
    
2.7
%
                    
11.8
%
    
8.0
%
        
Return on average tangible common equity
    
8.8
%
    
13.2
%
    
3.1
%
                    
13.5
%
    
9.2
%
        
                                                                 
Book value per common share
  
$
42.20
    
$
40.67
    
$
38.52
                    
$
42.20
    
$
38.52
          
Tangible book value per common share
  
$
36.99
    
$
35.50
    
$
33.46
                    
$
36.99
    
$
33.46
          
                                                                 
Excluding intermittent net discrete tax provision / benefit (2)(3)
                                                                
Adjusted earnings per diluted share
  
$
0.73
    
$
1.17
    
$
0.84
      
(38
%)
    
(13
%)
  
$
4.61
    
$
3.60
      
28
%
Adjusted return on average common equity
    
7.1
%
    
11.5
%
    
8.6
%
                    
11.5
%
    
9.4
%
        
Adjusted return on average tangible common equity
    
8.1
%
    
13.2
%
    
9.8
%
                    
13.2
%
    
10.8
%
        
                                                                 

Notes:
- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

1

Consolidated Income Statement Information
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2018
    
Sep 30, 2018
    
Dec 31, 2017
    
Sep 30, 2018
    
Dec 31, 2017
    
Dec 31, 2018
    
Dec 31, 2017
    
Change
  
Revenues:
                                                
Investment banking
  
$
1,488
    
$
1,567
    
$
1,548
      
(5
%)
    
(4
%)
  
$
6,482
    
$
6,003
      
8
%
Trading
    
1,736
      
2,752
      
2,246
      
(37
%)
    
(23
%)
    
11,551
      
11,116
      
4
%
Investments
    
28
      
136
      
325
      
(79
%)
    
(91
%)
    
437
      
820
      
(47
%)
Commissions and fees
    
1,046
      
932
      
1,064
      
12
%
    
(2
%)
    
4,190
      
4,061
      
3
%
Asset management
    
3,266
      
3,251
      
3,102
      
--
      
5
%
    
12,898
      
11,797
      
9
%
Other
    
(5
)
    
298
      
220
      
*
      
*
      
743
      
848
      
(12
%)
Total non-interest revenues
    
7,559
      
8,936
      
8,505
      
(15
%)
    
(11
%)
    
36,301
      
34,645
      
5
%
                                                                 
Interest income
    
4,111
      
3,627
      
2,586
      
13
%
    
59
%
    
13,892
      
8,997
      
54
%
Interest expense
    
3,122
      
2,691
      
1,591
      
16
%
    
96
%
    
10,086
      
5,697
      
77
%
Net interest
    
989
      
936
      
995
      
6
%
    
(1
%)
    
3,806
      
3,300
      
15
%
Net revenues (1)
    
8,548
      
9,872
      
9,500
      
(13
%)
    
(10
%)
    
40,107
      
37,945
      
6
%
Non-interest expenses:
                                                                
Compensation and benefits
    
3,787
      
4,310
      
4,279
      
(12
%)
    
(11
%)
    
17,632
      
17,166
      
3
%
                                                                 
Non-compensation expenses:
                                                                
Occupancy and equipment
    
358
      
351
      
339
      
2
%
    
6
%
    
1,391
      
1,329
      
5
%
Brokerage, clearing and exchange fees
    
598
      
559
      
537
      
7
%
    
11
%
    
2,393
      
2,093
      
14
%
Information processing and communications
    
529
      
513
      
471
      
3
%
    
12
%
    
2,016
      
1,791
      
13
%
Marketing and business development
    
220
      
152
      
190
      
45
%
    
16
%
    
691
      
609
      
13
%
Professional services
    
605
      
570
      
547
      
6
%
    
11
%
    
2,265
      
2,169
      
4
%
Other
    
594
      
566
      
666
      
5
%
    
(11
%)
    
2,482
      
2,385
      
4
%
Total non-compensation expenses (1)
    
2,904
      
2,711
      
2,750
      
7
%
    
6
%
    
11,238
      
10,376
      
8
%
 
                                                                
Total non-interest expenses
    
6,691
      
7,021
      
7,029
      
(5
%)
    
(5
%)
    
28,870
      
27,542
      
5
%
                                                                 
Income (loss) from continuing operations before taxes
    
1,857
      
2,851
      
2,471
      
(35
%)
    
(25
%)
    
11,237
      
10,403
      
8
%
Income tax provision / (benefit) from continuing operations (2)(3)
    
300
      
696
      
1,810
      
(57
%)
    
(83
%)
    
2,350
      
4,168
      
(44
%)
Income (loss) from continuing operations
    
1,557
      
2,155
      
661
      
(28
%)
    
136
%
    
8,887
      
6,235
      
43
%
Gain (loss) from discontinued operations after tax
    
1
      
(1
)
    
2
      
*
      
(50
%)
    
(4
)
    
(19
)
    
79
%
Net income (loss)
  
$
1,558
    
$
2,154
    
$
663
      
(28
%)
    
135
%
  
$
8,883
    
$
6,216
      
43
%
Net income applicable to nonredeemable noncontrolling interests
    
27
      
42
      
20
      
(36
%)
    
35
%
    
135
      
105
      
29
%
Net income (loss) applicable to Morgan Stanley
    
1,531
      
2,112
      
643
      
(28
%)
    
138
%
    
8,748
      
6,111
      
43
%
Preferred stock dividend / Other
    
170
      
93
      
170
      
83
%
    
--
      
526
      
523
      
1
%
Earnings (loss) applicable to Morgan Stanley common shareholders
  
$
1,361
    
$
2,019
    
$
473
      
(33
%)
    
188
%
  
$
8,222
    
$
5,588
      
47
%
                                                                 
Pre-tax profit margin
    
22
%
    
29
%
    
26
%
                    
28
%
    
27
%
        
Compensation and benefits as a % of net revenues
    
44
%
    
44
%
    
45
%
                    
44
%
    
45
%
        
Non-compensation expenses as a % of net revenues
    
34
%
    
27
%
    
29
%
                    
28
%
    
27
%
        
Firm expense efficiency ratio
    
78
%
    
71
%
    
74
%
                    
72
%
    
73
%
        
Effective tax rate from continuing operations (2)(3)
    
16.2
%
    
24.4
%
    
73.2
%
                    
20.9
%
    
40.1
%
        
                                                                 

Notes:
- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

2

Consolidated Financial Information and Statistical Data
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2018
    
Sep 30, 2018
    
Dec 31, 2017
    
Sep 30, 2018
    
Dec 31, 2017
    
Dec 31, 2018
    
Dec 31, 2017
    
Change
  
                                                 
Regional revenues
                                                
Americas
  
$
6,312
    
$
7,357
    
$
7,150
      
(14
%)
    
(12
%)
  
$
29,301
    
$
27,817
      
5
%
EMEA (Europe, Middle East, Africa)
    
1,200
      
1,355
      
1,294
      
(11
%)
    
(7
%)
    
6,092
      
5,714
      
7
%
Asia
    
1,036
      
1,160
      
1,056
      
(11
%)
    
(2
%)
    
4,714
      
4,414
      
7
%
Consolidated net revenues
  
$
8,548
    
$
9,872
    
$
9,500
      
(13
%)
    
(10
%)
  
$
40,107
    
$
37,945
      
6
%
                                                                 
Balance sheet
                                                                
Deposits
  
$
187,820
    
$
175,185
    
$
159,436
      
7
%
    
18
%
                        
Total Assets
  
$
853,531
    
$
865,517
    
$
851,733
      
(1
%)
    
--
                          
Global liquidity reserve
  
$
249,735
    
$
214,848
    
$
192,660
      
16
%
    
30
%
                        
Long-term debt outstanding
  
$
188,117
    
$
189,949
    
$
191,063
      
(1
%)
    
(2
%)
                        
Maturities of long-term debt outstanding (next 12 months)
  
$
24,694
    
$
24,122
    
$
23,870
      
2
%
    
3
%
                        
                                                                 
Common equity
  
$
71,726
    
$
70,183
    
$
68,871
      
2
%
    
4
%
                        
Less: Goodwill and intangible assets
    
(8,847
)
    
(8,918
)
    
(9,042
)
    
(1
%)
    
(2
%)
                        
Tangible common equity
  
$
62,879
    
$
61,265
    
$
59,829
      
3
%
    
5
%
                        
                                                                 
Preferred equity
  
$
8,520
    
$
8,520
    
$
8,520
      
--
      
--
                          
                                                                 
                                                                 
Period end common shares outstanding (millions)
    
1,700
      
1,726
      
1,788
      
(2
%)
    
(5
%)
                        
Average common shares outstanding (millions)
                                                                
Basic
    
1,674
      
1,697
      
1,752
      
(1
%)
    
(4
%)
    
1,708
      
1,780
      
(4
%)
Diluted
    
1,705
      
1,727
      
1,796
      
(1
%)
    
(5
%)
    
1,738
      
1,821
      
(5
%)
                                                                 
Worldwide employees
    
60,348
      
59,835
      
57,633
      
1
%
    
5
%
                        
                                                                 
                                                                 

Notes:
- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

3


Consolidated Return on Average Common Equity and Regulatory Capital Information
(unaudited)

   
Quarter Ended
    
Twelve Months Ended
  
   
Dec 31, 2018
    
Sep 30, 2018
    
Dec 31, 2017
    
Dec 31, 2018
    
Dec 31, 2017
  
Average Common Equity (billions)
                              
Institutional Securities
  
$
40.8
    
$
40.8
    
$
40.2
    
$
40.8
    
$
40.2
  
Wealth Management
    
16.8
      
16.8
      
17.2
      
16.8
      
17.2
  
Investment Management
    
2.6
      
2.6
      
2.4
      
2.6
      
2.4
  
Parent
    
10.7
      
10.0
      
10.2
      
9.8
      
10.0
  
Firm
  
$
70.9
    
$
70.2
    
$
70.0
    
$
70.0
    
$
69.8
  
                                         
Return on Average Common Equity
                                        
Institutional Securities
    
6
%
    
10
%
    
2
%
    
11
%
    
8
%
Wealth Management
    
17
%
    
21
%
    
7
%
    
20
%
    
13
%
Investment Management
    
10
%
    
12
%
    
*
      
14
%
    
10
%
Firm
    
8
%
    
11
%
    
3
%
    
12
%
    
8
%
                                         
Return on Average Tangible Common Equity (1)
                                        
Institutional Securities
    
6
%
    
10
%
    
2
%
    
11
%
    
8
%
Wealth Management
    
32
%
    
39
%
    
12
%
    
37
%
    
24
%
Investment Management
    
15
%
    
19
%
    
*
      
22
%
    
15
%
Firm
    
9
%
    
13
%
    
3
%
    
13
%
    
9
%
                                         
                                         
Regulatory Capital (millions) (2)
                                        
                                         
Common Equity Tier 1 capital (Fully Phased-in)
  
$
62,073
    
$
61,758
    
$
60,564
                  
Tier 1 capital (Fully Phased-in)
  
$
70,626
    
$
70,328
    
$
69,120
                  
                                         
Standardized Approach (Fully Phased-in)
                                        
Risk-weighted assets
  
$
369,060
    
$
370,714
    
$
377,241
                  
Common Equity Tier 1 capital ratio
    
16.8
%
    
16.7
%
    
16.1
%
                
Tier 1 capital ratio
    
19.1
%
    
19.0
%
    
18.3
%
                
Tier 1 leverage ratio
    
8.4
%
    
8.2
%
    
8.2
%
                
                                         
Advanced Approach (Fully Phased-in)
                                        
Risk-weighted assets
  
$
364,105
    
$
357,055
    
$
358,324
                  
Common Equity Tier 1 capital ratio
    
17.0
%
    
17.3
%
    
16.9
%
                
Tier 1 capital ratio
    
19.4
%
    
19.7
%
    
19.3
%
                
Supplementary Leverage Ratio
    
6.5
%
    
6.4
%
    
6.4
%
                
                                         

Notes:
- Return on average common equity excluding net intermittent discrete tax provision / benefit:
 
 4Q18:    Firm: 7%;   ISG: 5%;   WM: 18%;   IM: 7%                             4Q18 YTD:    Firm: 11%;   ISG: 11%;   WM: 20%;   IM: 13%
 
 4Q17:    Firm: 9%;   ISG: 7%;   WM: 16%;   IM: 11%                           4Q17 YTD:    Firm: 9%;   ISG: 9%;   WM: 15%;   IM: 14%
   - Return on average tangible common equity excluding net intermittent discrete tax provision / benefit:
 
4Q18:    Firm: 8%;   ISG: 5%;   WM: 32%;   IM: 10%                            4Q18 YTD:    Firm: 13%;   ISG: 11%;   WM: 37%;   IM: 21%
 
4Q17:    Firm: 10%;   ISG: 8%;   WM: 29%;   IM: 16%                          4Q17 YTD:    Firm: 11%;   ISG: 9%;   WM: 28%;   IM: 20%
  - Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

4

Consolidated Loans and Lending Commitments
(unaudited, dollars in billions)
   
Quarter Ended
    
Percentage Change From:
  
   
Dec 31, 2018
    
Sep 30, 2018
    
Dec 31, 2017
    
Sep 30, 2018
    
Dec 31, 2017
  
                               
Institutional Securities
                              
                               
Corporate loans (1)
  
$
13.3
    
$
12.0
    
$
12.5
      
11
%
    
6
%
                                         
Corporate lending commitments (2)
    
85.5
      
86.2
      
83.0
      
(1
%)
    
3
%
                                         
Corporate Loans and Lending Commitments (3)
    
98.8
      
98.2
      
95.5
      
1
%
    
3
%
                                         
Other loans
    
41.0
      
38.5
      
34.5
      
6
%
    
19
%
                                         
Other lending commitments
    
9.5
      
11.7
      
9.6
      
(19
%)
    
(1
%)
                                         
Other Loans and Lending Commitments (4)
    
50.5
      
50.2
      
44.1
      
1
%
    
15
%
                                         
Institutional Securities Loans and Lending Commitments (5)
  
$
149.3
    
$
148.4
    
$
139.6
      
1
%
    
7
%
                                         
                                         
Wealth Management
                                        
                                         
Loans
    
72.2
      
71.1
      
67.9
      
2
%
    
6
%
                                         
Lending commitments
    
10.7
      
10.7
      
9.4
      
--
      
14
%
                                         
Wealth Management Loans and Lending Commitments (6)
  
$
82.9
    
$
81.8
    
$
77.3
      
1
%
    
7
%
                                         
Consolidated Loans and Lending Commitments (7)
  
$
232.2
    
$
230.2
    
$
216.9
      
1
%
    
7
%
                                         
                                         

Notes:
- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

5

Institutional Securities
Income Statement Information
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2018
    
Sep 30, 2018
    
Dec 31, 2017
    
Sep 30, 2018
    
Dec 31, 2017
    
Dec 31, 2018
    
Dec 31, 2017
    
Change
  
Revenues:
                                                
Investment banking
  
$
1,417
    
$
1,459
    
$
1,437
      
(3
%)
    
(1
%)
  
$
6,088
    
$
5,537
      
10
%
Trading
    
1,847
      
2,573
      
2,054
      
(28
%)
    
(10
%)
    
11,191
      
10,295
      
9
%
Investments
    
(52
)
    
96
      
213
      
*
      
*
      
182
      
368
      
(51
%)
Commissions and fees
    
664
      
589
      
622
      
13
%
    
7
%
    
2,671
      
2,433
      
10
%
Asset management
    
97
      
112
      
91
      
(13
%)
    
7
%
    
421
      
359
      
17
%
Other
    
(13
)
    
244
      
188
      
*
      
*
      
535
      
630
      
(15
%)
Total non-interest revenues
    
3,960
      
5,073
      
4,605
      
(22
%)
    
(14
%)
    
21,088
      
19,622
      
7
%
                                                                 
Interest income
    
2,847
      
2,425
      
1,589
      
17
%
    
79
%
    
9,271
      
5,377
      
72
%
Interest expense
    
2,968
      
2,569
      
1,671
      
16
%
    
78
%
    
9,777
      
6,186
      
58
%
Net interest
    
(121
)
    
(144
)
    
(82
)
    
16
%
    
(48
%)
    
(506
)
    
(809
)
    
37
%
Net revenues (1)
    
3,839
      
4,929
      
4,523
      
(22
%)
    
(15
%)
    
20,582
      
18,813
      
9
%
                                                                 
Compensation and benefits
    
1,179
      
1,626
      
1,556
      
(27
%)
    
(24
%)
    
6,958
      
6,625
      
5
%
Non-compensation expenses (1)
    
1,880
      
1,747
      
1,732
      
8
%
    
9
%
    
7,364
      
6,544
      
13
%
Total non-interest expenses
    
3,059
      
3,373
      
3,288
      
(9
%)
    
(7
%)
    
14,322
      
13,169
      
9
%
                                                                 
                                                                 
Income (loss) from continuing operations before taxes
    
780
      
1,556
      
1,235
      
(50
%)
    
(37
%)
    
6,260
      
5,644
      
11
%
Income tax provision / (benefit) from continuing operations (2)
    
61
      
397
      
861
      
(85
%)
    
(93
%)
    
1,230
      
1,993
      
(38
%)
Income (loss) from continuing operations
    
719
      
1,159
      
374
      
(38
%)
    
92
%
    
5,030
      
3,651
      
38
%
Gain (loss) from discontinued operations after tax
   
1
      
(3
)
    
2
      
*
      
(50
%)
    
(6
)
    
(19
)
    
68
%
Net income (loss)
    
720
      
1,156
      
376
      
(38
%)
    
91
%
    
5,024
      
3,632
      
38
%
Net income applicable to nonredeemable noncontrolling interests
    
18
      
36
      
19
      
(50
%)
    
(5
%)
    
118
      
96
      
23
%
Net income (loss) applicable to Morgan Stanley
  
$
702
    
$
1,120
    
$
357
      
(37
%)
    
97
%
  
$
4,906
    
$
3,536
      
39
%
                                                                 
                                                                 
Pre-tax profit margin
    
20
%
    
32
%
    
27
%
                    
30
%
    
30
%
        
Compensation and benefits as a % of net revenues
    
31
%
    
33
%
    
34
%
                    
34
%
    
35
%
        
                                                                 

Notes:
- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.
 
6

Institutional Securities
Financial Information and Statistical Data
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2018
    
Sep 30, 2018
    
Dec 31, 2017
    
Sep 30, 2018
    
Dec 31, 2017
    
Dec 31, 2018
    
Dec 31, 2017
    
Change
  
Investment Banking
                                                
Advisory revenues
  
$
734
    
$
510
    
$
522
      
44
%
    
41
%
  
$
2,436
    
$
2,077
      
17
%
Underwriting revenues
                                                                
Equity
    
323
      
441
      
416
      
(27
%)
    
(22
%)
    
1,726
      
1,484
      
16
%
Fixed income
    
360
      
508
      
499
      
(29
%)
    
(28
%)
    
1,926
      
1,976
      
(3
%)
Total underwriting revenues
    
683
      
949
      
915
      
(28
%)
    
(25
%)
    
3,652
      
3,460
      
6
%
                                                                 
Total investment banking revenues
  
$
1,417
    
$
1,459
    
$
1,437
      
(3
%)
    
(1
%)
  
$
6,088
    
$
5,537
      
10
%
                                                                 
Sales & Trading
                                                                
Equity
  
$
1,929
    
$
2,019
    
$
1,920
      
(4
%)
    
--
    
$
8,976
    
$
7,982
      
12
%
Fixed Income
    
564
      
1,179
      
808
      
(52
%)
    
(30
%)
    
5,005
      
4,928
      
2
%
Other
    
(6
)
    
(68
)
    
(43
)
    
91
%
    
86
%
    
(204
)
    
(632
)
    
68
%
                                                                 
Total sales & trading net revenues
  
$
2,487
    
$
3,130
    
$
2,685
      
(21
%)
    
(7
%)
  
$
13,777
    
$
12,278
      
12
%
                                                                 
Investments & Other
                                                                
Investments
  
$
(52
)
  
$
96
    
$
213
      
*
      
*
    
$
182
    
$
368
      
(51
%)
Other
    
(13
)
    
244
      
188
      
*
      
*
      
535
      
630
      
(15
%)
Total investments & other revenues
  
$
(65
)
  
$
340
    
$
401
      
*
      
*
    
$
717
    
$
998
      
(28
%)
                                                                 
Institutional Securities net revenues (1)
  
$
3,839
    
$
4,929
    
$
4,523
      
(22
%)
    
(15
%)
  
$
20,582
    
$
18,813
      
9
%
                                                                 
                                                                 
Average Daily 95% / One-Day Value-at-Risk ("VaR")
                                                                
Primary Market Risk Category ($ millions, pre-tax)
                                                                
Interest rate and credit spread
  
$
36
    
$
29
    
$
29
                                          
Equity price
  
$
13
    
$
15
    
$
13
                                          
Foreign exchange rate
  
$
13
    
$
12
    
$
8
                                          
Commodity price
  
$
12
    
$
8
    
$
8
                                          
                                                                 
Aggregation of Primary Risk Categories
  
$
44
    
$
37
    
$
35
                                          
                                                                 
Credit Portfolio VaR
  
$
13
    
$
12
    
$
9
                                          
                                                                 
Trading VaR
  
$
49
    
$
42
    
$
38
                                          
                                                                 
                                                                 

Notes:
- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

7

Wealth Management
Income Statement Information
(unaudited, dollars in millions)

   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2018
    
Sep 30, 2018
    
Dec 31, 2017
    
Sep 30, 2018
    
Dec 31, 2017
    
Dec 31, 2018
    
Dec 31,2017
    
Change
  
Revenues:
                                                
Investment banking
  
$
92
    
$
129
    
$
128
      
(29
%)
    
(28
%)
  
$
475
    
$
533
      
(11
%)
Trading
    
(125
)
    
160
      
191
      
*
      
*
      
279
      
848
      
(67
%)
Investments
    
(2
)
    
0
      
0
      
*
      
*
      
1
      
3
      
(67
%)
Commissions and fees
    
455
      
409
      
471
      
11
%
    
(3
%)
    
1,804
      
1,737
      
4
%
Asset management
    
2,576
      
2,573
      
2,463
      
--
      
5
%
    
10,158
      
9,342
      
9
%
Other
    
53
      
58
      
77
      
(9
%)
    
(31
%)
    
248
      
268
      
(7
%)
Total non-interest revenues
    
3,049
      
3,329
      
3,330
      
(8
%)
    
(8
%)
    
12,965
      
12,731
      
2
%
                                                                 
Interest income
    
1,486
      
1,412
      
1,243
      
5
%
    
20
%
    
5,498
      
4,591
      
20
%
Interest expense
    
391
      
342
      
166
      
14
%
    
136
%
    
1,221
      
486
      
151
%
Net interest
    
1,095
      
1,070
      
1,077
      
2
%
    
2
%
    
4,277
      
4,105
      
4
%
Net revenues
    
4,144
      
4,399
      
4,407
      
(6
%)
    
(6
%)
    
17,242
      
16,836
      
2
%
                                                                 
Compensation and benefits
    
2,286
      
2,415
      
2,420
      
(5
%)
    
(6
%)
    
9,507
      
9,360
      
2
%
Non-compensation expenses 
    
848
      
790
      
837
      
7
%
    
1
%
    
3,214
      
3,177
      
1
%
Total non-interest expenses
    
3,134
      
3,205
      
3,257
      
(2
%)
    
(4
%)
    
12,721
      
12,537
      
1
%
                                                                 
Income (loss) from continuing operations before taxes
    
1,010
      
1,194
      
1,150
      
(15
%)
    
(12
%)
    
4,521
      
4,299
      
5
%
Income tax provision / (benefit) from continuing operations (1)
    
241
      
281
      
835
      
(14
%)
    
(71
%)
    
1,049
      
1,974
      
(47
%)
Income (loss) from continuing operations
    
769
      
913
      
315
      
(16
%)
    
144
%
    
3,472
      
2,325
      
49
%
Gain (loss) from discontinued operations after tax
    
-
      
-
      
-
      
--
      
--
      
0
      
0
      
--
  
Net income (loss)
    
769
      
913
      
315
      
(16
%)
    
144
%
    
3,472
      
2,325
      
49
%
Net income applicable to nonredeemable noncontrolling interests
    
-
      
-
      
-
      
--
      
--
      
-
      
-
      
--
  
Net income (loss) applicable to Morgan Stanley
  
$
769
    
$
913
    
$
315
      
(16
%)
    
144
%
  
$
3,472
    
$
2,325
      
49
%
                                                                 
Pre-tax profit margin
    
24
%
    
27
%
    
26
%
                    
26
%
    
26
%
        
Compensation and benefits as a % of net revenues
    
55
%
    
55
%
    
55
%
                    
55
%
    
56
%
        
                                                                 

Notes:
- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

8

Wealth Management
Financial Information and Statistical Data
(unaudited)

   
Quarter Ended
    
Percentage Change From:
  
   
Dec 31, 2018
    
Sep 30, 2018
    
Dec 31, 2017
    
Sep 30, 2018
    
Dec 31, 2017
  
                               
                               
Wealth Management Metrics
                              
                               
Wealth Management representatives
    
15,694
      
15,655
      
15,712
      
--
      
--
  
                                         
Annualized revenue per representative (000's)
  
$
1,058
    
$
1,125
    
$
1,120
      
(6
%)
    
(6
%)
                                         
Client assets (billions)
  
$
2,303
    
$
2,496
    
$
2,373
      
(8
%)
    
(3
%)
Client assets per representative (millions)
  
$
147
    
$
159
    
$
151
      
(8
%)
    
(3
%)
Client liabilities (billions)
  
$
83
    
$
83
    
$
80
      
--
      
4
%
                                         
Fee-based asset flows (billions)
  
$
16.2
    
$
16.2
    
$
20.9
      
--
      
(22
%)
Fee-based client account assets (billions)
  
$
1,046
    
$
1,120
    
$
1,045
      
(7
%)
    
--
  
Fee-based assets as a % of client assets
    
45
%
    
45
%
    
44
%
                
                                         
Retail locations
    
591
      
595
      
597
      
(1
%)
    
(1
%)
                                         
                                         

Notes:
- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.
 
9

Investment Management
Income Statement Information
(unaudited, dollars in millions)
   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2018
    
Sep 30, 2018
    
Dec 31, 2017
    
Sep 30, 2018
    
Dec 31, 2017
    
Dec 31, 2018
    
Dec 31, 2017
    
Change
  
Revenues:
                                                
Investment banking
  
$
-
    
$
-
    
$
-
      
--
      
--
    
$
-
    
$
-
      
--
  
Trading
    
2
      
2
      
(1
)
    
--
      
*
      
25
      
(22
)
    
*
  
Investments (1)
    
82
      
40
      
112
      
105
%
    
(27
%)
    
254
      
449
      
(43
%)
Commissions and fees
    
0
      
0
      
0
      
--
      
--
      
0
      
0
      
--
  
Asset management
    
628
      
604
      
572
      
4
%
    
10
%
    
2,468
      
2,196
      
12
%
Other
    
(40
)
    
(3
)
    
(46
)
    
*
      
13
%
    
(30
)
    
(37
)
    
19
%
Total non-interest revenues
    
672
      
643
      
637
      
5
%
    
5
%
    
2,717
      
2,586
      
5
%
                                                                 
Interest income
    
20
      
19
      
1
      
5
%
    
*
      
57
      
4
      
*
  
Interest expense
    
8
      
9
      
1
      
(11
%)
    
*
      
28
      
4
      
*
  
Net interest
    
12
      
10
      
0
      
20
%
    
*
      
29
      
0
      
*
  
Net revenues (2)
    
684
      
653
      
637
      
5
%
    
7
%
    
2,746
      
2,586
      
6
%
                                                                 
Compensation and benefits
    
322
      
269
      
303
      
20
%
    
6
%
    
1,167
      
1,181
      
(1
%)
Non-compensation expenses (2)
    
288
      
282
      
254
      
2
%
    
13
%
    
1,115
      
949
      
17
%
Total non-interest expenses
    
610
      
551
      
557
      
11
%
    
10
%
    
2,282
      
2,130
      
7
%
                                                                 
Income (loss) from continuing operations before taxes
    
74
      
102
      
80
      
(27
%)
    
(8
%)
    
464
      
456
      
2
%
Income tax provision / (benefit) from continuing operations (3)
    
0
      
18
      
114
      
*
      
*
      
73
      
201
      
(64
%)
Income (loss) from continuing operations
    
74
      
84
      
(34
)
    
(12
%)
    
*
      
391
      
255
      
53
%
Gain (loss) from discontinued operations after tax
    
0
      
2
      
0
      
*
      
--
      
2
      
0
      
*
  
Net income (loss)
    
74
      
86
      
(34
)
    
(14
%)
    
*
      
393
      
255
      
54
%
Net income applicable to nonredeemable noncontrolling interests
    
9
      
6
      
1
      
50
%
    
*
      
17
      
9
      
89
%
Net income (loss) applicable to Morgan Stanley
  
$
65
    
$
80
    
$
(35
)
    
(19
%)
    
*
    
$
376
    
$
246
      
53
%
                                                                 
Pre-tax profit margin
    
11
%
    
16
%
    
13
%
                    
17
%
    
18
%
        
Compensation and benefits as a % of net revenues
    
47
%
    
41
%
    
48
%
                    
42
%
    
46
%
        
                                                                 

Notes:
- Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

10


Investment Management
Financial Information and Statistical Data
(unaudited, dollars in millions)
   
Quarter Ended
    
Percentage Change From:
    
Twelve Months Ended
    
Percentage
  
   
Dec 31, 2018
    
Sep 30, 2018
    
Dec 31, 2017
    
Sep 30, 2018
    
Dec 31, 2017
    
Dec 31, 2018
    
Dec 31, 2017
    
Change
  
                                                 
Assets under management or supervision (AUM)
                                                 
                                                 
Net flows by asset class (1)
                                                
Equity
  
$
(0.9
)
  
$
1.6
    
$
1.5
      
*
      
*
    
$
6.0
    
$
2.0
      
200
%
Fixed Income
    
(2.7
)
    
1.6
      
2.3
      
*
      
*
      
(2.6
)
    
6.1
      
*
  
Alternative / Other
    
0.4
      
(0.2
)
    
0.9
      
*
      
(56
%)
    
1.4
      
3.9
      
(64
%)
Long-Term Net Flows
    
(3.2
)
    
3.0
      
4.7
      
*
      
*
      
4.8
      
12.0
      
(60
%)
                                                                 
Liquidity
    
13.9
      
(9.8
)
    
19.2
      
*
      
(28
%)
    
(13.8
)
    
10.8
      
*
  
                                                                 
Total net flows
  
$
10.7
    
$
(6.8
)
  
$
23.9
      
*
      
(55
%)
  
$
(9.0
)
  
$
22.8
      
*
  
                                                                 
Assets under management or supervision by asset class (2)
                                                                
Equity
  
$
103
    
$
117
    
$
105
      
(12
%)
    
(2
%)
                        
Fixed Income
    
68
      
71
      
73
      
(4
%)
    
(7
%)
                        
Alternative / Other
    
128
      
133
      
128
      
(4
%)
    
--
                          
Long‐Term Assets Under Management or Supervision
    
299
      
321
      
306
      
(7
%)
    
(2
%)
                        
                                                                 
Liquidity
    
164
      
150
      
176
      
9
%
    
(7
%)
                        
                                                                 
Total Assets Under Management or Supervision
  
$
463
    
$
471
    
$
482
      
(2
%)
    
(4
%)
                        
Share of minority stake assets
  
$
7
    
$
7
    
$
7
      
--
      
--
                          
                                                                 
                                                                 
                                                                 

Notes:
- In the second quarter of 2018, the Firm initiated a redesign of our Brokerage sweep deposit program in an effort to simplify our client cash sweep options. This resulted in approximately $18 billion of AUM liquidity outflows (3Q18: $8Bn, 2Q18: $10Bn), with a corresponding inflow in U.S. Bank deposits.
  - Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

11

U.S. Bank Supplemental Financial Information
(unaudited, dollars in billions)
    Quarter Ended     Percentage Change From:  
    Dec 31, 2018     Sep 30, 2018     Dec 31, 2017     Sep 30, 2018     Dec 31, 2017  
                               
                               
U.S. Bank assets (1)   $ 216.9     $ 203.2     $ 185.3       7 %     17 %
                                         
U.S. Bank deposits (1)   $ 187.1     $ 174.4     $ 159.1       7 %     18 %
                                         
U.S. Bank investment securities portfolio (2)   $ 69.2     $ 60.5     $ 59.5       14 %     16 %
                                         
                                         
Wealth Management U.S. Bank Data                                        
Securities-based lending and other loans
   $ 44.7     $ 44.4     $ 41.2       1 %     8 %
Residential real estate loans
     27.5       26.7       26.7       3 %     3 %
Total Securities-based and residential loans
   $ 72.2     $ 71.1     $ 67.9       2 %     6 %
                                         
                                         
Institutional Securities U.S. Bank Data                                        
Corporate Lending 
   $ 7.4     $ 7.0     $ 6.8       6 %     9 %
Other Lending:
                                        
Corporate loans
     23.5       23.0       17.4       2 %     35 %
Wholesale real estate and other loans
     10.5       10.9       12.2       (4 %)     (14 %)
Total other loans 
   $ 34.0     $ 33.9     $ 29.6       --       15 %
Total corporate and other loans
   $ 41.4     $ 40.9     $ 36.4       1 %     14 %
                                         
                                         
                                         

Notes:
- In the second quarter of 2018, the Firm initiated a redesign of our Brokerage sweep deposit program in an effort to simplify our client cash sweep options. This resulted in approximately $18 billion of U.S. Bank deposits inflows (3Q18: $8Bn, 2Q18: $10Bn), with a corresponding  amount of AUM liquidity outflows in the Investment
   Management segment.
  - Refer to End Notes, Definition of U.S. GAAP to Non-GAAP Measures, Definition of Performance Metrics and Legal Notice on pages 13 - 17.

12


End Notes

Pages 1 & 2:
(1)
Effective January 1, 2018, the Firm adopted new accounting guidance related to Revenue from Contracts with Customers, which among other things, requires a gross presentation of certain costs that were previously netted against net revenues.  For the quarter and full year ended 2018, this change in presentation resulted in an increase to net revenues and non-compensation expenses as follows:
4Q18:  Firm: $70 million, Institutional Securities: $62 million, Investment Management: $17 million, Intersegment elimination: $(9) million
3Q18:  Firm: $93 million, Institutional Securities: $85 million, Investment Management: $17 million, Intersegment elimination: $(9) million
4Q18 YTD:  Firm: $350 million, Institutional Securities: $320 million, Investment Management: $78 million, Intersegment elimination $(48) million
The change in presentation did not have an impact on net income.  Prior periods have not been restated pursuant to this guidance.
(2)
The income tax consequences related to share-based payments, which are recurring-type tax items, are recognized in Provision for income taxes in the consolidated income statement, and may be either a benefit or a provision.  Conversion of employee share-based awards to Firm shares will primarily occur in the first quarter of each year.  For the quarters and twelve months ended, the impact of recognizing excess tax benefits upon conversion of awards are as follows: 4Q18: $1 million, 3Q18: None, 4Q17: $16 million, 4Q18 YTD: $165 million and 4Q17 YTD: $155 million.
(3)
The quarter and full year ended December 31, 2018 included intermittent net discrete tax benefits of $111 million and $203 million, respectively, primarily associated with the new information pertaining to resolution of multi‐jurisdiction tax examinations.  The quarter and full year ended December 31, 2017 included an intermittent net discrete tax provision of $1.2 billion as a result of the enactment of the Tax Cuts and Jobs Act (the “Tax Act”), partially offset by an approximate intermittent net discrete tax benefit of $168 million in the quarter and $233 million in the full year primarily associated with the remeasurement of reserves and related interest relating to the status of multi‐year Internal Revenue Service (IRS) tax examinations.  This resulted in an aggregate intermittent net discrete tax provision of $1.03 billion for the fourth quarter of 2017 and $968 million for the full year 2017.
  The following sets forth the impact of the intermittent net discrete tax items to earnings per diluted share, return on average common equity and return on average tangible common equity:

   
4Q18
4Q17
FY 2018
FY 2017
  
 
Earnings per diluted share impact
 $    0.07
 $ (0.58)
 $      0.12
 $   (0.53)
  
 
Return on average common equity impact
 0.6 %
(5.9)%
 0.3 %
(1.4)%
  
 
Return on average tangible common equity impact
 0.7 %
(6.7)%
 0.3 %
(1.6)%
  

 
 The impact of intermittent net discrete tax provisions and benefits reflected above do not include the recurring-type discrete tax benefits associated with the accounting guidance related to employee share‐based payments as we anticipate conversion activity each year.

Page 4:
(1)
Segment average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction.   The segment adjustments are as follows:
   4Q18:    ISG: $641mm;   WM: $7,604mm;   IM: $950mm                                          4Q18 YTD:  ISG: $641mm;   WM: $7,604mm;   IM: $950mm
   3Q18:    ISG: $641mm;   WM: $7,604mm;   IM: $950mm                                          4Q17 YTD:  ISG: $622mm;   WM: $7,872mm;   IM: $779mm
   4Q17:    ISG: $622mm;   WM: $7,872mm;   IM: $779mm
(2)
Commencing January 1, 2018, regulatory compliance is based on risk-based capital ratios calculated under a fully phased-in approach.  Prior to that date, such capital ratios were determined based on transitional rules.  The fully phased-in risk-based capital ratios provided for periods prior to 2018 were pro-forma estimates.  For information on the calculation of regulatory capital and ratios for prior periods, please refer to Part II, Item 7 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2017.

Page 5:
(1)
For the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017, the percentage of Institutional Securities corporate loans by credit rating was as follows:
- % investment grade: 45%, 43% and 39%
- % non-investment grade: 55%, 57% and 61%
(2)
For the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017, the percentage of Institutional Securities corporate lending commitments by credit rating was as follows:
- % investment grade: 67%, 70% and 72%
- % non-investment grade: 33%, 30% and 28%
(3)
At December 31, 2018, September 30, 2018 and December 31, 2017, the event-driven portfolio of loans and lending commitments to non-investment grade borrowers were $12.7 billion, $10.2 billion and $9.7 billion, respectively.
(4)
The Institutional Securities business segment engages in other lending activity.  These activities include commercial and residential mortgage lending, asset-backed lending, corporate loans purchased in the secondary market and financing extended to equities and commodities customers and municipalities.
(5)
For the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017, Institutional Securities recorded a provision (release) for credit losses of $7 million, $(2) million and $(22) million, respectively, related to loans, and a provision for credit losses of $3 million, $1 million, and $18 million, respectively, related to lending commitments.
13

End Notes
Page 5 (continued):
(6)
For the quarters ended December 31, 2018 and September 30, 2018, Wealth Management recorded a provision for credit losses of $2 million and $3 million, respectively, related to loans.  For the quarter ended December 31, 2017, there was no material provision recorded by Wealth Management related to loans.   For the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017, there was no material provision recorded by Wealth Management related to lending commitments.
(7)
For the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017, Investment Management reflected loan balances of $26 million, $1.2 billion and $27 million, respectively, and lending commitments of $0 million, $164 million and $0 million, respectively, which are not included in the Consolidated Loans and Lending Commitments balance.
   
Page 6:
(1)
Effective January 1, 2018, the Firm adopted new accounting guidance related to Revenue from Contracts with Customers, which among other things, requires a gross presentation of certain costs that were previously netted against net revenues.  As a result, Institutional Securities segment recorded an increase to net revenues and non-compensation expenses as follows: 4Q18: $62 million, 3Q18: $85 million; and 4Q18 YTD: $320 million.  This change in presentation did not have an impact on net income.  Prior periods have not been restated pursuant to this guidance.
(2)
For the quarter and full year ended December 31, 2018, the Institutional Securities segment recorded an intermittent net discrete tax benefit of $94 million and $182 million, respectively, primarily associated with the new information pertaining to resolution of multi‐jurisdiction tax examinations.  For the quarter ended December 31, 2017, the Institutional Securities segment recorded an aggregate intermittent net discrete tax provision of $531 million, comprised of an approximate $705 million intermittent net discrete tax provision as a result of the enactment of the Tax Act, primarily from the remeasurement of certain net deferred tax assets using the lower enacted corporate tax rate, partially offset by an approximate $174 million intermittent net discrete tax benefit primarily associated with the remeasurement of reserves and related interest relating to the status of multi-year IRS tax examinations.
   
Page 7:
(1)
Effective January 1, 2018, the Firm adopted new accounting guidance related to Revenue from Contracts with Customers, which among other things, requires a gross presentation of certain costs that were previously netted against net revenues.  As a result, Institutional Securities segment recorded an increase to net revenues and non-compensation expenses as follows: 4Q18: $62 million, 3Q18: $85 million; and 4Q18 YTD: $320 million.  This change in presentation did not have an impact on net income.  Prior periods have not been restated pursuant to this guidance.
   
Page 8:
(1)
For the quarter ended December 31, 2017, the Wealth Management segment recorded an intermittent net discrete tax provision of $402 million as a result of the enactment of the Tax Act, primarily from the remeasurement of certain net deferred tax assets using the lower enacted corporate tax rate.
   
Page 10:
(1)
Includes investment gains or losses for certain funds included in the Firm's consolidated financial statements for which the limited partnership interests in these gains or losses were reported in net income (loss) applicable to nonredeemable noncontrolling interests.
(2)
Effective January 1, 2018, the Firm adopted new accounting guidance related to Revenue from Contracts with Customers, which among other things, requires a gross presentation of certain costs that were previously netted against net revenues.  As a result, Investment Management segment recorded an increase to net revenues and non-compensation expenses as follows: 4Q18: $17 million, 3Q18: $17 million and 4Q18 YTD: $78 million.  This change in presentation did not have an impact on net income.  Prior periods have not been restated pursuant to this guidance.
(3)
For the quarter and full year ended December 31, 2018, the Investment Management segment recorded an intermittent net discrete tax benefit of $20 million and $21 million, respectively.  For the quarter ended December 31, 2017, the Investment Management segment recorded an aggregate intermittent net discrete tax provision of $100 million, primarily comprised of an approximate $94 million intermittent net discrete tax provision as a result of the enactment of the Tax Act, primarily from the remeasurement of certain net deferred tax assets using the lower enacted corporate tax rate.
   
Page 11:
(1)
Net Flows by region for the quarters ended December 31, 2018,  September 30, 2018 and December 31, 2017 were:
 
North America: $3.1 billion, $(10.2) billion and $14.1 billion
 
International: $7.6 billion, $3.4 billion and $9.8 billion
(2)
Assets under management or supervision by region for the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017 were:
 
North America: $260 billion, $265 billion and $286 billion
 
International: $203 billion, $206 billion and $196 billion
   
Page 12:
(1)
U.S. Bank assets and deposits exclude balances between Bank subsidiaries, as well as deposits from the Parent and affiliates.
(2)
For the quarters ended December 31, 2018, September 30, 2018 and December 31, 2017, the U.S. Bank investment securities portfolio included held to maturity investment securities of $23.7 billion, $19.0 billion and $17.5 billion, respectively.

14

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 investors and analysts 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.
(b)
The following are considered non-GAAP financial measures that the Firm considers useful for investors to allow better comparability of operating performance.  These measures are calculated as follows:
    
 - The earnings per diluted share, excluding intermittent net discrete tax provision / benefit represents net income (loss) applicable to Morgan Stanley, adjusted for the impact of the intermittent net discrete tax provision / benefit, less preferred dividends divided by the average number of diluted shares outstanding.
        
-
The return on average common equity and return on average tangible common equity represents full year net income or annualized net income for the quarter applicable to Morgan Stanley less preferred dividends as a percentage of average common equity and average tangible common equity, respectively.
      
 - Segment return on average common equity and return on average tangible common equity represents 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 Firm and segment return on average common equity and the return on average tangible common equity excluding intermittent net discrete tax provision / benefit are adjusted in both the numerator and the denominator to exclude the intermittent net discrete tax provision / benefit.  Each segment is allocated their direct intermittent net discrete tax provision / benefit.
       
 - Tangible common equity represents common equity less goodwill and intangible assets net of allowable 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 percentages represent income from continuing operations before income taxes as percentages of net revenues.
(c)
 Regulatory compliance was determined based on the risk-based capital ratios calculated under the transitional rules until December 31, 2017.  The fully phased-in Common Equity Tier 1 risk-based capital ratios and fully phased-in Supplementary Leverage Ratio provided prior to 2018 were pro-forma estimates which represent non-GAAP financial measures that the Firm considers to be useful measures for evaluating compliance with new regulatory capital requirements that had not yet become effective.  For information on the calculation of regulatory capital and ratios for prior periods, please refer to Part II, Item 7 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2017 and Part I, Item 2 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.

15

Definition of Performance Metrics
(a)
Book value per common share represents common equity divided by period end common shares outstanding.
(b)
Preferred stock dividend / Other includes allocation of earnings to Participating Restricted Stock Units (RSUs) for periods prior to 2Q18.
(c)
The Firm expense efficiency ratio represents total non‐interest expenses as a percentage of net revenues.
(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 21 to the consolidated financial statements included in the Firm's 2017 Form 10-K.
(e)
The global liquidity reserve, which is held within the bank and non-bank operating subsidiaries, is comprised of highly liquid and diversified cash and cash equivalents and unencumbered securities. Eligible unencumbered securities include U.S. government securities, U.S. agency securities, U.S. agency mortgage-backed securities, non-U.S. government securities and other highly liquid investment grade securities.
(f)
The Firm's goodwill and intangible balances utilized in the calculation of tangible common equity are net of allowable mortgage servicing rights deduction.
(g)
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 use-of-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 fully phased‐in 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 Required Capital framework is expected to evolve over time in response to changes in the business and regulatory environment and to incorporate enhancements in modeling techniques.  For further discussion of the framework, refer to Part II, Item 7 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2017 and Part I, Item 2 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's Quarterly Report on Form 10‐Q for the quarter ended September 30, 2018.
(h)
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).
(i)
The Firm's risk-based capital ratios for purposes of determining regulatory compliance are the lower of the capital ratios computed under the (i) standardized approaches for calculating credit risk and market risk risk-weighted assets (RWAs) (the “Standardized Approach”); and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”).  At December 31, 2018, the Firm's ratios are based on the Standardized Approach fully phased-in rules.  Regulatory compliance was determined based on capital ratios calculated under transitional rules until December 31, 2017.  For information on the calculation of regulatory capital and ratios for prior periods, please refer to Part II, Item 7 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's 2017 Form 10-K and Part I, Item 2 "Liquidity and Capital Resources—Regulatory Requirements" in the Firm's 10‐Q for the quarter ended September 30, 2018.
(j)
Supplementary leverage ratio represents fully phased‐in Tier 1 capital divided by the fully phased‐in total supplementary leverage exposure.
(k)
Institutional Securities net income applicable to nonredeemable noncontrolling interests primarily represents the allocation to Mitsubishi UFJ Financial Group, Inc. of Morgan Stanley MUFG Securities Co., Ltd., which the Firm consolidates.
(l)
Institutional Securities discontinued operations primarily includes after-tax gains / (losses) related to Saxon.
(m)
VaR represents the loss amount that one would not expect to exceed, on average, more than five times every one hundred trading days in the Firm's trading positions if the portfolio were held constant for a one-day period. Further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology, is disclosed in Part II, Item 7A "Quantitative and Qualitative Disclosures about Market Risk" included in the Firm's 2017 Form 10-K.
(n)
The average annualized revenue per Wealth Management representative metric represents annualized net revenues divided by average representative headcount.
(o)
Client assets per Wealth Management representative represents total client assets divided by period end representative headcount.
(p)
Wealth Management client liabilities reflect U.S. Bank lending and broker dealer margin activity.
(q)
Wealth Management fee-based client account assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
(r)
Wealth Management fee-based asset flows include net new fee-based assets, net account transfers, dividends, interest, and client fees and exclude institutional cash management related activity.
(s)
Investment Management Alternative/Other asset class includes products in Fund of Funds, Real Estate, Private Equity and Credit strategies, as well as Multi-Asset portfolios.
(t)
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.
(u)
The share of minority stake assets represents Investment Management's proportional share of assets managed by entities in which it owns a minority stake.
(v)
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 and excludes balances between Bank subsidiaries, as well as deposits from the Parent and affiliates.
(w)
The Institutional Securities U.S. Bank other lending data includes activities related to commercial and residential mortgage lending, asset-backed lending, corporate loans purchased in the secondary market, financing extended to equities and commodities customers, and loans to municipalities.

16

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 fourth quarter earnings press release issued January 17, 2019.



17