Part I. Financial Information [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=5&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Morgan Stanley's Q2 2023 financial performance, segment results, liquidity, and capital management are discussed [Introduction](index=5&type=section&id=Introduction) Morgan Stanley is a global financial services firm operating across Institutional Securities, Wealth Management, and Investment Management - Morgan Stanley operates across **three primary business segments**: Institutional Securities, Wealth Management, and Investment Management, providing a wide array of financial products and services to corporations, governments, financial institutions, and individuals[12](index=12&type=chunk)[13](index=13&type=chunk)[14](index=14&type=chunk)[16](index=16&type=chunk) - Future results may be materially affected by **competition, risk factors, and regulatory developments**, and other external factors[15](index=15&type=chunk) [Executive Summary](index=6&type=section&id=Executive%20Summary) Morgan Stanley reported net revenues of $13.5 billion and net income of $2.2 billion for Q2 2023, with a ROTCE of 12.1% Consolidated Financial Results (Three Months Ended June 30) | Metric | 2Q 2023 ($ in millions) | 2Q 2022 ($ in millions) | Change (%) | |:----------------------------------------|:------------------------|:------------------------|:-----------| | Net Revenues | 13,457 | 13,132 | 2.5 | | Net Income Applicable to Morgan Stanley | 2,182 | 2,495 | (12.5) | | Earnings per Diluted Common Share | 1.24 | 1.39 | (10.8) | | ROTCE | 12.1% | 13.8% | (1.7 pp) | | Expense Efficiency Ratio | 78% | 74% | 4 pp | | Pre-tax Margin | 21% | 25% | (4 pp) | | Effective Tax Rate | 21.0% | 23.6% | (2.6 pp) | Consolidated Financial Results (Six Months Ended June 30) | Metric | YTD 2023 ($ in millions) | YTD 2022 ($ in millions) | Change (%) | |:----------------------------------------|:-------------------------|:-------------------------|:-----------| | Net Revenues | 27,974 | 27,933 | 0.1 | | Net Income Applicable to Morgan Stanley | 5,162 | 6,161 | (16.3) | | Earnings per Diluted Common Share | 2.95 | 3.41 | (13.4) | | ROTCE | 14.5% | 16.8% | (2.3 pp) | | Expense Efficiency Ratio | 75% | 71% | 4 pp | | Pre-tax Margin | 23% | 28% | (5 pp) | | Effective Tax Rate | 20.1% | 20.9% | (0.8 pp) | - Compensation and benefits expenses **increased 13%** in Q2 2023 (YoY) due to higher expenses related to deferred cash-based compensation plans (DCP) and severance costs, partially offset by lower discretionary incentive compensation[17](index=17&type=chunk)[21](index=21&type=chunk) - Provision for credit losses increased to **$161 million** in Q2 2023 (YoY **$101 million**), primarily due to credit deterioration in commercial real estate lending (office sector) and modest loan portfolio growth[18](index=18&type=chunk)[23](index=23&type=chunk) Key Balance Sheet and Capital Ratios (As of June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 ($ in millions) | December 31, 2022 ($ in millions) | Change ($ in millions) | |:----------------------------------------|:------------------------------|:----------------------------------|:-----------------------| | Total Assets | 1,164,911 | 1,180,231 | (15,320) | | Deposits | 348,511 | 356,646 | (8,135) | | Borrowings | 247,973 | 238,058 | 9,915 | | Common Shareholders' Equity | 91,636 | 91,391 | 245 | | Standardized Common Equity Tier 1 Ratio | 15.5% | 15.3% | 0.2 pp | | Tier 1 Leverage Ratio | 6.7% | 6.7% | 0.0 pp | [Business Segments](index=12&type=section&id=Business%20Segments) The firm's business segments showed mixed performance, with Institutional Securities down, Wealth Management up, and Investment Management down Net Revenues by Segment (Three Months Ended June 30) | Segment | 2Q 2023 ($ in millions) | 2Q 2022 ($ in millions) | Change (%) | |:------------------------|:------------------------|:------------------------|:-----------| | Institutional Securities| 5,654 | 6,119 | (8) | | Wealth Management | 6,660 | 5,736 | 16 |\ | Investment Management | 1,281 | 1,411 | (9) | | Total | 13,457 | 13,132 | 2.5 | Net Income Applicable to Morgan Stanley by Segment (Three Months Ended June 30) | Segment | 2Q 2023 ($ in millions) | 2Q 2022 ($ in millions) | Change (%) | |:------------------------|:------------------------|:------------------------|:-----------| | Institutional Securities| 759 | 1,121 | (32) |\ | Wealth Management | 1,308 | 1,190 | 10 |\ | Investment Management | 127 | 188 | (32) |\ | Total | 2,182 | 2,495 | (12.5) | Pre-tax Margin by Segment (Three Months Ended June 30) | Segment | 2Q 2023 | 2Q 2022 | |:------------------------|:--------|:--------| | Institutional Securities| 17% | 25% |\ | Wealth Management | 25% | 27% |\ | Investment Management | 13% | 18% | [Institutional Securities](index=13&type=section&id=Institutional%20Securities) Institutional Securities net revenues decreased 8% due to lower client activity and market volatility Institutional Securities Net Revenues (Three Months Ended June 30) | Revenue Category | 2Q 2023 ($ in millions) | 2Q 2022 ($ in millions) | Change (%) | |:------------------------|:------------------------|:------------------------|:-----------| | Investment Banking | 1,075 | 1,072 | — |\ | Equity | 2,548 | 2,960 | (14) |\ | Fixed Income | 1,716 | 2,500 | (31) |\ | Other | 315 | (413) | 176 |\ | **Total Net Revenues** | **5,654** | **6,119** | **(8)** | - Advisory revenues **decreased** due to fewer completed M&A transactions, while Equity and Fixed Income underwriting revenues **increased** on higher volumes[44](index=44&type=chunk)[45](index=45&type=chunk) - Equity net revenues **decreased 14%** due to higher funding costs and lower gains on inventory and client activity in derivatives and cash equities[48](index=48&type=chunk) - Fixed Income net revenues **decreased 31%** due to decreased client activity and market volatility, particularly in foreign exchange and credit products[49](index=49&type=chunk) - Other net revenues swung from a **$413 million loss** in 2Q 2022 to a **$315 million gain** in 2Q 2023, driven by lower mark-to-market losses and higher net interest income on corporate loans, as well as gains on DCP investments[50](index=50&type=chunk) - Provision for credit losses **increased 18% to $97 million** in Q2 2023, primarily due to credit deterioration in commercial real estate lending (office sector) and modest loan growth[41](index=41&type=chunk)[55](index=55&type=chunk) [Wealth Management](index=18&type=section&id=Wealth%20Management) Wealth Management net revenues increased 16% driven by DCP investments and higher net interest revenues Wealth Management Key Metrics (Three Months Ended June 30) | Metric | 2Q 2023 ($ in millions) | 2Q 2022 ($ in millions) | Change (%) | |:----------------------------------------|:------------------------|:------------------------|:-----------| | Net Revenues | 6,660 | 5,736 | 16 |\ | Provision for Credit Losses | 64 | 19 | N/M |\ | Compensation and Benefits | 3,503 | 2,895 | 21 |\ | Non-compensation Expenses | 1,412 | 1,301 | 9 |\ | Income before Provision for Income Taxes| 1,681 | 1,521 | 11 |\ | Net Income Applicable to Morgan Stanley | 1,308 | 1,190 | 10 | Wealth Management Client Assets and Flows | Metric | June 30, 2023 ($ in billions) | December 31, 2022 ($ in billions) | Change ($ in billions) | |:----------------------------------------|:------------------------------|:----------------------------------|:-----------------------| | Total Client Assets | 4,885 | 4,187 | 698 |\ | Net New Assets (3 months ended) | 89.5 | 52.9 (prior year quarter) | 36.6 | - Transactional revenues **increased significantly (199% YoY)** due to mark-to-market gains on DCP investments compared with losses in the prior year quarter[61](index=61&type=chunk)[68](index=68&type=chunk) - Net interest revenues **increased 23% (YoY)** due to the net effect of higher interest rates, partially offset by lower brokerage sweep deposits[61](index=61&type=chunk)[69](index=69&type=chunk) - Compensation and benefits expenses **increased** primarily due to higher expenses related to DCP and severance costs associated with employee actions[71](index=71&type=chunk) [Investment Management](index=21&type=section&id=Investment%20Management) Investment Management net revenues decreased 9% due to lower performance-based income and asset management fees Investment Management Key Metrics (Three Months Ended June 30) | Metric | 2Q 2023 ($ in millions) | 2Q 2022 ($ in millions) | Change (%) | |:----------------------------------------|:------------------------|:------------------------|:-----------| | Net Revenues | 1,281 | 1,411 | (9) |\ | Compensation and Benefits | 544 | 605 | (10) |\ | Non-compensation Expenses | 567 | 557 | 2 |\ | Income before Provision for Income Taxes| 170 | 249 | (32) |\ | Net Income Applicable to Morgan Stanley | 127 | 188 | (32) | - Asset management and related fees **decreased 3% (YoY)** due to lower average AUM from market declines and net outflows in Long-Term AUM[78](index=78&type=chunk) - Performance-based income and other revenues **decreased 88% (YoY) to $13 million**, primarily due to lower accrued carried interest across private funds, partially offset by mark-to-market gains on DCP and public investments[79](index=79&type=chunk) Assets Under Management (AUM) Rollforward (June 30, 2023) | Category | March 31, 2023 ($ in billions) | Inflows ($ in billions) | Outflows ($ in billions) | Market Impact ($ in billions) | June 30, 2023 ($ in billions) | |:-------------------------------|:-------------------------------|:------------------------|:-------------------------|:------------------------------|:------------------------------| | Long-Term AUM Subtotal | 900 | 52 | (49) | 38 | 936 |\ | Liquidity and Overlay Services | 462 | 575 | (562) | 4 | 476 |\ | **Total** | **1,362** | **627** | **(611)** | **42** | **1,412** | [Supplemental Financial Information](index=23&type=section&id=Supplemental%20Financial%20Information) Supplemental financial details for U.S. Bank Subsidiaries, accounting updates, and critical accounting estimates U.S. Bank Subsidiaries' Key Financials (As of June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 ($ in billions) | December 31, 2022 ($ in billions) | |:----------------------------------------|:------------------------------|:----------------------------------| | Total Investment Securities | 119.3 | 123.3 |\ | Wealth Management Loans (net of ACL) | 144.7 | 146.1 |\ | Institutional Securities Loans (net of ACL)| 64.4 | 60.2 |\ | Total Assets | 385.6 | 391.0 |\ | Deposits | 342.5 | 350.6 | - The firm is evaluating an accounting update on Investments—Tax Credit Structures, effective January 1, 2024, but **does not expect a material impact** on its financial condition or results of operations[91](index=91&type=chunk) - Critical accounting estimates include the fair value of financial instruments, goodwill and intangible assets, legal and regulatory contingencies, and income taxes, which involve a **higher degree of judgment and complexity**[92](index=92&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Morgan Stanley manages liquidity and capital, maintaining strong ratios and complying with regulatory requirements - The firm's liquidity and capital policies are established and maintained by senior management with oversight by the **Asset/Liability Management Committee** and the **Board of Directors**[93](index=93&type=chunk) Total Assets by Business Segment (As of June 30, 2023 vs. December 31, 2022) | Segment | June 30, 2023 ($ in millions) | December 31, 2022 ($ in millions) | |:------------------------|:------------------------------|:----------------------------------| | Institutional Securities| 784,785 | 789,837 |\ | Wealth Management | 362,627 | 373,305 |\ | Investment Management | 17,499 | 17,089 |\ | **Total Assets** | **1,164,911** | **1,180,231** | [Balance Sheet](index=24&type=section&id=Balance%20Sheet) Total assets remained stable, with substantial liquidity resources, decreased deposits, and slightly increased borrowings - Total assets were **$1,165 billion** at June 30, 2023, relatively unchanged from **$1,180 billion** at December 31, 2022[96](index=96&type=chunk) Liquidity Resources by Type of Investment (Average Daily Balance for Three Months Ended June 30, 2023) | Type of Investment | Amount ($ in millions) | |:--------------------------------------|:-----------------------| | Cash deposits with central banks | 60,876 |\ | Unencumbered HQLA Securities | 240,832 |\ | Cash deposits with banks (non-HQLA) | 9,016 |\ | **Total Liquidity Resources** | **310,724** | - Deposits **decreased** primarily due to a reduction in Brokerage sweep deposits, largely from net outflows to alternative cash-equivalent products, partially offset by an increase in Time deposits and Savings[113](index=113&type=chunk) - Borrowings **increased slightly to $248 billion** as of June 30, 2023, from **$238 billion** at December 31, 2022[114](index=114&type=chunk) [Regulatory Requirements](index=27&type=section&id=Regulatory%20Requirements) Morgan Stanley complies with regulatory capital requirements, maintaining strong ratios and reauthorizing share repurchases - Morgan Stanley and its U.S. Bank Subsidiaries are compliant with the minimum LCR and NSFR requirements of **100%** as of June 30, 2023[104](index=104&type=chunk) Key Regulatory Capital Ratios (As of June 30, 2023) | Metric | Required Ratio | Actual Ratio (Standardized) | Actual Ratio (Advanced) | |:----------------------------------------|:---------------|:----------------------------|:------------------------| | Common Equity Tier 1 Capital Ratio | 13.3% | 15.5% | 15.8% |\ | Tier 1 Capital Ratio | 14.8% | 17.4% | 17.8% |\ | Total Capital Ratio | 16.8% | 19.9% | 20.1% |\ | Tier 1 Leverage Ratio | 4.0% | 6.7% | N/A |\ | Supplementary Leverage Ratio (SLR) | 5.0% | 5.5% | N/A | - The firm's Stress Capital Buffer (SCB) is expected to be **5.4%** from October 1, 2022, through September 30, 2024, resulting in an aggregate Standardized Approach Common Equity Tier 1 ratio of **12.9%**[146](index=146&type=chunk) - The Board of Directors reauthorized a multi-year common stock repurchase program of up to **$20 billion** and **increased the quarterly common stock dividend to $0.85 per share**[147](index=147&type=chunk) - The firm is evaluating the **Basel III Finalization Proposal** and the **G-SIB Surcharge Proposal**, both proposed on July 27, 2023, for their potential impacts on capital requirements[162](index=162&type=chunk)[163](index=163&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Risk) Morgan Stanley's exposure to market, credit, country, operational, model, liquidity, and legal risks is detailed [Market Risk](index=37&type=section&id=Market%20Risk) Market risk from trading and non-trading activities is measured by VaR and sensitivity analyses - Market risk arises from changes in market factors (prices, rates, spreads, etc.) affecting positions, primarily in Institutional Securities for trading and Wealth/Investment Management for non-trading activities[165](index=165&type=chunk) 95%/One-Day Management VaR for the Trading Portfolio ($ in millions) | Risk Category | Period End (June 30, 2023) | Average (3 Months Ended June 30, 2023) | |:----------------------------------|:---------------------------|:---------------------------------------| | Interest rate and credit spread | 36 | 36 |\ | Equity price | 25 | 25 |\ | Foreign exchange rate | 8 | 10 |\ | Commodity price | 12 | 17 |\ | Less: Diversification benefit | (33) | (40) |\ | **Primary Risk Categories** | **48** | **48** |\ | Credit Portfolio | 23 | 22 |\ | Less: Diversification benefit | (20) | (18) |\ | **Total Management VaR** | **51** | **52** | - Average Total Management VaR for Q2 2023 **decreased** from Q1 2023, driven by reduced exposure in the Commodity price risk category and lower market volatility[167](index=167&type=chunk) Wealth Management Net Interest Income Sensitivity Analysis (Next 12 Months) | Basis Point Change | At June 30, 2023 ($ in millions) | At March 31, 2023 ($ in millions) | |:-------------------|:---------------------------------|:----------------------------------| | +100 | 532 | 533 |\ | -100 | (596) | (637) | - The Wealth Management business segment balance sheet is **asset sensitive**, leading to higher net interest income in increasing interest rate scenarios[175](index=175&type=chunk) [Credit Risk](index=40&type=section&id=Credit%20Risk) Credit risk from loans and commitments increased due to commercial real estate deterioration and loan growth - Total loans and lending commitments **increased by approximately $11 billion** since December 31, 2022, primarily due to growth in Secured lending facilities and Corporate lending within Institutional Securities[181](index=181&type=chunk) Allowance for Credit Losses (ACL) Rollforward (Six Months Ended June 30, 2023) | Metric | Amount ($ in millions) | |:----------------------------------------|:-----------------------| | Total ACL at December 31, 2022 | 1,343 |\ | Gross Charge-offs | (101) |\ | Provision for Credit Losses | 395 |\ | Other | 6 |\ | **Total ACL at June 30, 2023** | **1,643** | - The increase in ACL is primarily related to **credit deterioration in commercial real estate lending (mainly the office sector)**, modest growth in certain loan portfolios, and a deteriorating macroeconomic outlook[184](index=184&type=chunk)[184](index=184&type=chunk) - Over **90%** of Institutional Securities' total lending exposure (loans and lending commitments) is **investment grade and/or secured by collateral**[189](index=189&type=chunk) - Wealth Management's lending against commercial real estate totaled **$7.0 billion**, representing **4.3%** of its total exposure, with over **95%** of these loans benefiting from guarantees from high or ultra-high net worth clients[201](index=201&type=chunk) - The firm is exposed to credit risk from OTC derivatives, with total gross derivative assets of **$340.4 billion** at June 30, 2023, mitigated by counterparty netting and collateral[207](index=207&type=chunk) [Country and Other Risks](index=47&type=section&id=Country%20and%20Other%20Risks) Country, operational, model, liquidity, legal, and climate risks are managed through comprehensive frameworks - Country risk exposure is actively managed through a **comprehensive risk management framework** combining credit and market fundamentals[208](index=208&type=chunk) - Operational risk includes losses from inadequate processes, human factors, or external events like **cyber attacks**, impacting all business activities[212](index=212&type=chunk) - Model risk arises from decisions based on incorrect or misused model outputs, potentially leading to **financial loss or poor strategic decisions**[213](index=213&type=chunk) - Climate risk, encompassing physical and transition risks, is an overarching long-term risk **not expected to significantly affect** consolidated results or financial condition in the near-term[216](index=216&type=chunk) [Report of Independent Registered Public Accounting Firm](index=49&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP reviewed interim financials, finding no material modifications needed for U.S. GAAP - Deloitte & Touche LLP conducted reviews of Morgan Stanley's interim financial information for the three-month and six-month periods ended June 30, 2023 and 2022[218](index=218&type=chunk) - Based on their reviews, **no material modifications are deemed necessary** for the interim financial information to conform with U.S. GAAP[218](index=218&type=chunk) - The condensed consolidated balance sheet as of December 31, 2022, is **fairly stated in all material respects** in relation to the previously audited consolidated balance sheet[219](index=219&type=chunk) [Item 1. Consolidated Financial Statements and Notes](index=50&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20and%20Notes) Unaudited consolidated financial statements and detailed notes on accounting policies and financial instruments [Consolidated Income Statement (Unaudited)](index=50&type=section&id=Consolidated%20Income%20Statement%20(Unaudited)) Q2 2023 net revenues increased slightly to $13.46 billion, while net income decreased to $2.18 billion Consolidated Income Statement Highlights (Three Months Ended June 30) | Metric | 2Q 2023 ($ in millions) | 2Q 2022 ($ in millions) | Change ($ in millions) | |:----------------------------------------|:------------------------|:------------------------|:-----------------------| | Net Revenues | 13,457 | 13,132 | 325 |\ | Provision for Credit Losses | 161 | 101 | 60 |\ | Total Non-interest Expenses | 10,484 | 9,712 | 772 |\ | Income before Provision for Income Taxes| 2,812 | 3,319 | (507) |\ | Provision for Income Taxes | 591 | 783 | (192) |\ | Net Income Applicable to Morgan Stanley | 2,182 | 2,495 | (313) |\ | Earnings per Diluted Common Share | 1.24 | 1.39 | (0.15) | Consolidated Income Statement Highlights (Six Months Ended June 30) | Metric | YTD 2023 ($ in millions) | YTD 2022 ($ in millions) | Change ($ in millions) | |:----------------------------------------|:-------------------------|:-------------------------|:-----------------------| | Net Revenues | 27,974 | 27,933 | 41 |\ | Provision for Credit Losses | 395 | 158 | 237 |\ | Total Non-interest Expenses | 21,007 | 19,868 | 1,139 |\ | Income before Provision for Income Taxes| 6,572 | 7,907 | (1,335) |\ | Provision for Income Taxes | 1,318 | 1,656 | (338) |\ | Net Income Applicable to Morgan Stanley | 5,162 | 6,161 | (999) |\ | Earnings per Diluted Common Share | 2.95 | 3.41 | (0.46) | [Consolidated Comprehensive Income Statement (Unaudited)](index=50&type=section&id=Consolidated%20Comprehensive%20Income%20Statement%20(Unaudited)) Q2 2023 comprehensive income was $1.54 billion, reflecting net income and other comprehensive loss Consolidated Comprehensive Income Statement Highlights (Three Months Ended June 30) | Metric | 2Q 2023 ($ in millions) | 2Q 2022 ($ in millions) | |:----------------------------------------|:------------------------|:------------------------| | Net Income | 2,221 | 2,536 |\ | Total Other Comprehensive Income (Loss) | (684) | (209) |\ | Comprehensive Income | 1,537 | 2,327 |\ | Comprehensive Income Applicable to Morgan Stanley | 1,593 | 2,376 | Consolidated Comprehensive Income Statement Highlights (Six Months Ended June 30) | Metric | YTD 2023 ($ in millions) | YTD 2022 ($ in millions) | |:----------------------------------------|:-------------------------|:-------------------------| | Net Income | 5,254 | 6,251 |\ | Total Other Comprehensive Income (Loss) | (161) | (2,044) |\ | Comprehensive Income | 5,093 | 4,207 |\ | Comprehensive Income Applicable to Morgan Stanley | 5,115 | 4,242 | [Consolidated Balance Sheet (Unaudited at June 30, 2023)](index=51&type=section&id=Consolidated%20Balance%20Sheet%20(Unaudited%20at%20June%2030%2C%202023)) Total assets decreased slightly to $1,164.9 billion, with changes in cash, trading assets, and deposits Consolidated Balance Sheet Highlights (As of June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 ($ in millions) | December 31, 2022 ($ in millions) | Change ($ in millions) | |:----------------------------------------|:------------------------------|:----------------------------------|:-----------------------| | Cash and Cash Equivalents | 104,994 | 128,127 | (23,133) |\ | Trading Assets at Fair Value | 328,454 | 301,315 | 27,139 |\ | Investment Securities | 151,792 | 159,931 | (8,139) |\ | Loans (net of ACL) | 200,528 | 198,997 | 1,531 |\ | Goodwill | 16,652 | 16,652 | 0 |\ | Total Assets | 1,164,911 | 1,180,231 | (15,320) |\ | Deposits | 348,511 | 356,646 | (8,135) |\ | Trading Liabilities at Fair Value | 147,043 | 154,438 | (7,395) |\ | Borrowings | 247,973 | 238,058 | 9,915 |\ | Total Liabilities | 1,063,550 | 1,079,000 | (15,450) |\ | Total Morgan Stanley Shareholders' Equity| 100,386 | 100,141 | 245 |\ | Total Equity | 101,361 | 101,231 | 130 | [Consolidated Statement of Changes in Total Equity (Unaudited)](index=52&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Total%20Equity%20(Unaudited)) Total equity increased slightly to $101.36 billion, reflecting net income, dividends, and repurchases Consolidated Statement of Changes in Total Equity Highlights (Six Months Ended June 30) | Metric | YTD 2023 ($ in millions) | YTD 2022 ($ in millions) | |:----------------------------------------|:-------------------------|:-------------------------| | Beginning Balance (Total Equity) | 101,231 | 102,662 |\ | Net Income Applicable to Morgan Stanley | 5,162 | 6,161 |\ | Preferred Stock Dividends | (277) | (228) |\ | Common Stock Dividends | (2,597) | (2,473) |\ | Repurchases of Common Stock | (3,305) | (6,518) |\ | Net Change in Accumulated Other Comprehensive Income (Loss) | (47) | (1,919) |\ | **Ending Balance (Total Equity)** | **101,361** | **102,662** | [Consolidated Cash Flow Statement (Unaudited)](index=53&type=section&id=Consolidated%20Cash%20Flow%20Statement%20(Unaudited)) Net cash used for operating activities was $19.53 billion, leading to a $23.13 billion decrease in cash Consolidated Cash Flow Statement Highlights (Six Months Ended June 30) | Cash Flow Category | YTD 2023 ($ in millions) | YTD 2022 ($ in millions) | |:----------------------------------------|:-------------------------|:-------------------------| | Net Cash Provided by (Used for) Operating Activities | (19,531) | 15,152 |\ | Net Cash Provided by (Used for) Investing Activities | 5,200 | (8,369) |\ | Net Cash Provided by (Used for) Financing Activities | (8,781) | 1,306 |\ | Net Increase (Decrease) in Cash and Cash Equivalents | (23,133) | 3,561 |\ | Cash and Cash Equivalents, End of Period | 104,994 | 131,286 | - The significant shift in operating cash flow was primarily driven by **changes in trading assets/liabilities, securities borrowed/loaned, and customer receivables/payables**[226](index=226&type=chunk) - Investing activities were **positively impacted** by proceeds from sales and maturities of AFS and HTM securities, partially offset by payments for premises, equipment, and software[226](index=226&type=chunk) - Financing activities were **negatively impacted** by payments for borrowings, common stock repurchases, and cash dividends, partially offset by proceeds from issuance of borrowings[226](index=226&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=54&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) Detailed notes support financial statements, covering segments, policies, fair values, and regulatory requirements [1. Introduction and Basis of Presentation](index=54&type=section&id=1.%20Introduction%20and%20Basis%20of%20Presentation) Morgan Stanley's business segments and U.S. GAAP financial statement preparation are outlined - Morgan Stanley operates through **Institutional Securities, Wealth Management, and Investment Management segments**, providing diverse products and services to a broad client base[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - Financial statements are prepared under **U.S. GAAP**, requiring estimates and assumptions for valuations of financial instruments, goodwill, intangible assets, legal/tax matters, deferred tax assets, and allowance for credit losses (ACL)[231](index=231&type=chunk) - The financial statements include consolidated accounts of the firm, its wholly-owned subsidiaries, and other entities where it has a controlling financial interest, including certain **Variable Interest Entities (VIEs)**[233](index=233&type=chunk) [2. Significant Accounting Policies](index=54&type=section&id=2.%20Significant%20Accounting%20Policies) No significant accounting policy updates, except for the Financial Instruments—Credit Losses adoption - **No significant updates** to the firm's accounting policies occurred during the six months ended June 30, 2023, except for the adoption of the Financial Instruments—Credit Losses accounting update[235](index=235&type=chunk) - The **Financial Instruments—Credit Losses accounting update**, adopted January 1, 2023, eliminated accounting guidance for troubled debt restructurings (TDRs) and requires new disclosures for certain loan modifications and current period gross charge-offs by year of origination[236](index=236&type=chunk) [3. Cash and Cash Equivalents](index=56&type=section&id=3.%20Cash%20and%20Cash%20Equivalents) Cash and cash equivalents decreased to $104.99 billion, primarily interest-bearing deposits Cash and Cash Equivalents (As of June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 ($ in millions) | December 31, 2022 ($ in millions) | |:-------------------------------------|:------------------------------|:----------------------------------| | Cash and Due from Banks | 5,690 | 5,409 |\ | Interest Bearing Deposits with Banks | 99,304 | 122,718 |\ | **Total Cash and Cash Equivalents** | **104,994** | **128,127** |\ | Restricted Cash | 32,785 | 35,380 | [4. Fair Values](index=56&type=section&id=4.%20Fair%20Values) Fair value measurements of assets and liabilities are detailed, including Level 3 rollforwards and NAV Assets at Fair Value on a Recurring Basis (As of June 30, 2023) | Category | Level 1 ($ in millions) | Level 2 ($ in millions) | Level 3 ($ in millions) | Netting ($ in millions) | Total ($ in millions) | |:----------------------------------------|:------------------------|:------------------------|:------------------------|:------------------------|:----------------------| | Trading Assets | 191,448 | 160,293 | 10,094 | (38,909) | 322,926 |\ | Investment Securities—AFS | 47,973 | 31,594 | — | — | 79,567 |\ | Securities Purchased Under Agreements to Resell | — | 9 | — | — | 9 |\ | **Total Assets at Fair Value** | **239,421** | **191,896** | **10,094** | **(38,909)** | **402,502** | Liabilities at Fair Value on a Recurring Basis (As of June 30, 2023) | Category | Level 1 ($ in millions) | Level 2 ($ in millions) | Level 3 ($ in millions) | Netting ($ in millions) | Total ($ in millions) | |:----------------------------------------|:------------------------|:------------------------|:------------------------|:------------------------|:----------------------| | Deposits | — | 5,945 | 36 | — | 5,981 |\ | Trading Liabilities | 104,148 | 85,913 | 2,958 | (45,977) | 147,042 |\ | Securities Sold Under Agreements to Repurchase | — | 675 | 454 | — | 1,129 |\ | Other Secured Financings | — | 5,448 | 90 | — | 5,538 |\ | Borrowings | — | 86,038 | 1,787 | — | 87,825 |\ | **Total Liabilities at Fair Value** | **104,148** | **184,019** | **5,325** | **(45,977)** | **247,515** | - The firm's investments in private equity, real estate, and hedge funds are measured based on Net Asset Value (NAV), totaling **$5.53 billion** at June 30, 2023[252](index=252&type=chunk) [5. Fair Value Option](index=67&type=section&id=5.%20Fair%20Value%20Option) Fair value option for borrowings totaled $87.83 billion, with Q2 2023 net revenues showing a loss - The firm uses the fair value option for instruments risk-managed on a fair value basis to mitigate income statement volatility and simplify accounting[260](index=260&type=chunk) Borrowings Measured at Fair Value Option (As of June 30, 2023 vs. December 31, 2022) | Business Unit Responsible for Risk Management | June 30, 2023 ($ in millions) | December 31, 2022 ($ in millions) | |:----------------------------------------------|:------------------------------|:----------------------------------| | Equity | 44,901 | 38,945 |\ | Interest Rates | 28,097 | 26,077 |\ | Commodities | 11,274 | 10,717 |\ | Credit | 2,048 | 1,564 |\ | Foreign Exchange | 1,505 | 1,417 |\ | **Total** | **87,825** | **78,720** | Net Revenues from Borrowings under Fair Value Option (Three Months Ended June 30) | Metric | 2Q 2023 ($ in millions) | 2Q 2022 ($ in millions) | |:-------------------|:------------------------|:------------------------| | Trading Revenues | (513) | 7,672 |\ | Interest Expense | 119 | 64 |\ | **Net Revenues** | **(632)** | **7,608** | [6. Derivative Instruments and Hedging Activities](index=68&type=section&id=6.%20Derivative%20Instruments%20and%20Hedging%20Activities) Derivative instruments and hedging activities are detailed, including fair values and potential collateral calls Fair Values of Derivative Contracts (Assets at June 30, 2023) | Type of Derivative | Bilateral OTC ($ in millions) | Cleared OTC ($ in millions) | ExchangeTraded ($ in millions) | Total ($ in millions) | |:-------------------|:------------------------------|:----------------------------|:-------------------------------|:----------------------| | Designated as Accounting Hedges | 220 | 43 | — | 263 |\ | Not Designated as Accounting Hedges | 268,604 | 71,501 | 37,596 | 377,701 |\ | **Total Gross Derivatives** | **268,824** | **71,544** | **37,596** | **377,964** |\ | Amounts Offset (Netting) | (228,681) | (71,027) | (35,352) | (335,060) |\ | **Total in Trading Assets** | **40,143** | **517** | **2,244** | **42,904** | Fair Values of Derivative Contracts (Liabilities at June 30, 2023) | Type of Derivative | Bilateral OTC ($ in millions) | Cleared OTC ($ in millions) | ExchangeTraded ($ in millions) | Total ($ in millions) | |:-------------------|:------------------------------|:----------------------------|:-------------------------------|:----------------------| | Designated as Accounting Hedges | 526 | 40 | — | 566 |\ | Not Designated as Accounting Hedges | 263,256 | 72,106 | 36,963 | 372,325 |\ | **Total Gross Derivatives** | **263,782** | **72,146** | **36,963** | **372,891** |\ | Amounts Offset (Netting) | (234,699) | (72,077) | (35,352) | (342,128) |\ | **Total in Trading Liabilities** | **29,083** | **69** | **1,611** | **30,763** | Incremental Collateral/Termination Payments upon Potential Future Ratings Downgrade (As of June 30, 2023) | Downgrade Scenario | Amount ($ in millions) | |:-------------------|:-----------------------| | One-notch downgrade| 504 |\ | Two-notch downgrade| 350 |\ | Bilateral downgrade agreements included | 749 | [7. Investment Securities](index=71&type=section&id=7.%20Investment%20Securities) Investment securities (AFS and HTM) totaled $141.53 billion, with details on unrealized losses and ACL AFS and HTM Securities (As of June 30, 2023) | Security Type | Amortized Cost ($ in millions) | Gross Unrealized Gains ($ in millions) | Gross Unrealized Losses ($ in millions) | Fair Value ($ in millions) | |:--------------------------|:-------------------------------|:---------------------------------------|:----------------------------------------|:---------------------------| | **AFS Securities** | **84,401** | **80** | **4,914** | **79,567** |\ | U.S. Treasury securities | 49,615 | 34 | 1,676 | 47,973 |\ | U.S. agency securities | 26,778 | 1 | 2,733 | 24,046 |\ | Agency CMBS | 5,859 | 2 | 467 | 5,394 |\ | State and municipal securities | 1,099 | 43 | 9 | 1,133 |\ | FFELP student loan ABS | 1,050 | — | 29 | 1,021 |\ | **HTM Securities** | **72,225** | **—** | **10,263** | **61,962** |\ | U.S. Treasury securities | 26,845 | — | 1,718 | 25,127 |\ | U.S. agency securities | 42,494 | — | 8,225 | 34,269 |\ | Agency CMBS | 1,692 | — | 155 | 1,537 |\ | Non-agency CMBS | 1,194 | — | 165 | 1,029 |\ | **Total Investment Securities** | **156,626** | **80** | **15,177** | **141,529** | - The firm believes there are **no AFS securities in an unrealized loss position that have credit losses**, and it does not intend or is not likely to be required to sell these securities prior to recovery of the amortized cost basis[287](index=287&type=chunk) - HTM securities reflect an ACL of **$39 million** at June 30, 2023, predominantly related to Non-agency CMBS[288](index=288&type=chunk) Gross Realized Gains (Losses) on Sales of AFS Securities (Three Months Ended June 30) | Metric | 2Q 2023 ($ in millions) | 2Q 2022 ($ in millions) | |:------------------------|:------------------------|:------------------------| | Gross Realized Gains | 7 | 24 |\ | Gross Realized (Losses) | (17) | (6) |\ | **Total** | **(10)** | **18** | [8. Collateralized Transactions](index=74&type=section&id=8.%20Collateralized%20Transactions) Collateralized transactions, including securities financing and netting agreements, are detailed Offsetting of Certain Collateralized Transactions (Assets at June 30, 2023) | Asset Category | Gross Amounts ($ in millions) | Amounts Offset ($ in millions) | Balance Sheet Net Amounts ($ in millions) | Amounts Not Offset ($ in millions) | Net Amounts ($ in millions) | |:----------------------------------------------|:------------------------------|:-------------------------------|:------------------------------------------|:-----------------------------------|:----------------------------| | Securities Purchased Under Agreements to Resell | 209,804 | (111,890) | 97,914 | (94,398) | 3,516 |\ | Securities Borrowed | 156,774 | (17,648) | 139,126 | (135,147) | 3,979 | Offsetting of Certain Collateralized Transactions (Liabilities at June 30, 2023) | Liability Category | Gross Amounts ($ in millions) | Amounts Offset ($ in millions) | Balance Sheet Net Amounts ($ in millions) | Amounts Not Offset ($ in millions) | Net Amounts ($ in millions) | |:----------------------------------------------|:------------------------------|:-------------------------------|:------------------------------------------|:-----------------------------------|:----------------------------| | Securities Sold Under Agreements to Repurchase | 168,253 | (111,890) | 56,363 | (52,023) | 4,340 |\ | Securities Loaned | 31,017 | (17,648) | 13,369 | (13,261) | 108 | Fair Value of Collateral Received with Right to Sell or Repledge | Metric | June 30, 2023 ($ in millions) | December 31, 2022 ($ in millions) | |:----------------------------------------|:------------------------------|:----------------------------------| | Collateral received with right to sell or repledge | 674,314 | 637,941 |\ | Collateral that was sold or repledged | 515,526 | 486,820 | [9. Loans, Lending Commitments and Related Allowance for Credit Losses](index=78&type=section&id=9.%20Loans%2C%20Lending%20Commitments%20and%20Related%20Allowance%20for%20Credit%20Losses) Loan portfolios and ACL are detailed, with increases due to commercial real estate deterioration Loans by Type (As of June 30, 2023 vs. December 31, 2022) | Loan Type | HFI Loans (June 30, 2023, $ in millions) | HFS Loans (June 30, 2023, $ in millions) | Total Loans (June 30, 2023, $ in millions) | |:--------------------------------|:-----------------------------------------|:-----------------------------------------|:-------------------------------------------| | Corporate | 6,835 | 11,226 | 18,061 |\ | Secured Lending Facilities | 37,795 | 3,597 | 41,392 |\ | Commercial Real Estate | 8,674 | 436 | 9,110 |\ | Residential Real Estate | 57,215 | 24 | 57,239 |\ | Securities-based Lending and Other Loans | 91,090 | 1 | 91,091 |\ | **Total Loans** | **201,609** | **15,284** | **216,893** | Allowance for Credit Losses (ACL) Rollforward (Loans, Six Months Ended June 30, 2023) | Metric | Corporate ($ in millions) | Secured Lending Facilities ($ in millions) | CRE ($ in millions) | Residential Real Estate ($ in millions) | SBL and Other ($ in millions) | Total ($ in millions) | |:----------------------------------------|:--------------------------|:-------------------------------------------|:--------------------|:----------------------------------------|:------------------------------|:----------------------| | December 31, 2022 | 235 | 153 | 275 | 87 | 89 | 839 |\ | Gross Charge-offs | (30) | — | (69) | — | (2) | (101) |\ | Provision (release) | 50 | 3 | 178 | 25 | 83 | 339 |\ | Other | 2 | — | 1 | — | 1 | 4 |\ | **June 30, 2023** | **257** | **156** | **385** | **112** | **171** | **1,081** | - The ACL for loans and lending commitments **increased** primarily due to **credit deterioration in commercial real estate lending (office sector)**, modest growth in certain loan portfolios, and a deteriorating macroeconomic outlook[318](index=318&type=chunk)[319](index=319&type=chunk) Nonaccrual Loans Held for Investment (Before Allowance, As of June 30, 2023 vs. December 31, 2022) | Loan Type | June 30, 2023 ($ in millions) | December 31, 2022 ($ in millions) | |:--------------------------------|:------------------------------|:----------------------------------| | Corporate | 121 | 71 |\ | Secured Lending Facilities | 8 | 94 |\ | Commercial Real Estate | 348 | 209 |\ | Residential Real Estate | 113 | 118 |\ | Securities-based Lending and Other Loans | 58 | 10 |\ | **Total** | **648** | **502** | [10. Other Assets—Equity Method Investments](index=82&type=section&id=10.%20Other%20Assets%E2%80%94Equity%20Method%20Investments) Equity method investments totaled $1.87 billion, with Q2 2023 income of $61 million Equity Method Investments (As of June 30, 2023 and Three Months Ended June 30) | Metric | June 30, 2023 ($ in millions) | 2Q 2023 Income (Loss) ($ in millions) | |:----------------------------------------|:------------------------------|:--------------------------------------| | Investments | 1,870 | 61 | Income from Japanese Securities Joint Venture (MUMSS) (Three Months Ended June 30) | Metric | 2Q 2023 ($ in millions) | 2Q 2022 ($ in millions) | |:----------------------------------------|:------------------------|:------------------------| | Income (loss) from investment in MUMSS | 63 | 14 | [11. Deposits](index=82&type=section&id=11.%20Deposits) Deposits decreased to $348.51 billion, with details on types and FDIC insurance status Deposits (As of June 30, 2023 vs. December 31, 2022) | Deposit Type | June 30, 2023 ($ in millions) | December 31, 2022 ($ in millions) | |:----------------------------------|:------------------------------|:----------------------------------| | Savings and Demand Deposits | 286,050 | 319,948 |\ | Time Deposits | 62,461 | 36,698 |\ | **Total** | **348,511** | **356,646** |\ | Deposits Subject to FDIC Insurance| 270,042 | 260,420 |\ | Deposits Not Subject to FDIC Insurance | 78,469 | 96,226 | Time Deposit Maturities (As of June 30, 2023) | Year | Amount ($ in millions) | |:-----|:-----------------------| | 2023 | 18,234 |\ | 2024 | 25,185 |\ | 2025 | 8,321 |\ | 2026 | 4,040 |\ | 2027 | 3,187 |\ | Thereafter | 3,494 |\ | **Total** | **62,461** | [12. Borrowings and Other Secured Financings](index=82&type=section&id=12.%20Borrowings%20and%20Other%20Secured%20Financings) Borrowings increased to $247.97 billion, with a weighted average maturity of 6.8 years Borrowings (As of June 30, 2023 vs. December 31, 2022) | Borrowing Type | June 30, 2023 ($ in millions) | December 31, 2022 ($ in millions) | |:----------------------------------------|:------------------------------|:----------------------------------| | Original maturities of one year or less | 4,153 | 4,191 |\ | Senior (original maturities > 1 year) | 231,706 | 221,667 |\ | Subordinated (original maturities > 1 year) | 12,114 | 12,200 |\ | **Total Borrowings** | **247,973** | **238,058** |\ | Weighted Average Stated Maturity (years)| 6.8 | 6.7 | Other Secured Financings (As of June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 ($ in millions) | December 31, 2022 ($ in millions) | |:----------------------------------------|:------------------------------|:----------------------------------| | Original maturities: One year or less | 1,235 | 944 |\ | Original maturities: Greater than one year | 7,059 | 7,214 |\ | **Total** | **8,294** | **8,158** |\ | Transfers of assets accounted for as secured financings | 1,936 | 1,119 | - Other secured financings include liabilities related to collateralized notes, transfers of financial assets accounted for as financings, and consolidated VIEs where the firm is the primary beneficiary[331](index=331&type=chunk) [13. Commitments, Guarantees and Contingencies](index=84&type=section&id=13.%20Commitments%2C%20Guarantees%20and%20Contingencies) Commitments, guarantees, and legal contingencies, including ongoing tax and block trading matters Commitments by Years to Maturity (As of June 30, 2023) | Commitment Type | Less than 1 Year ($ in millions) | 1-3 Years ($ in millions) | 3-5 Years ($ in millions) | Over 5 Years ($ in millions) | Total ($ in millions) | |:----------------------------------------|:---------------------------------|:--------------------------|:--------------------------|:-----------------------------|:----------------------| | Lending | 38,060 | 43,890 | 59,773 | 3,855 | 145,890 |\ | Forward-starting secured financing receivables | 61,949 | — | — | — | 61,949 |\ | Central Counterparty | 300 | — | — | 8,464 | 8,764 |\ | Underwriting | 394 | — | — | — | 394 |\ | Investment Activities | 1,739 | 194 | 110 | 289 | 2,332 |\ | Letters of Credit and Other Financial Guarantees | 106 | 35 | — | 10 | 151 |\ | **Total** | **102,548** | **44,119** | **60,206** | **12,607** | **219,480** | Guarantees: Maximum Potential Payout/Notional (As of June 30, 2023) | Guarantee Type | Less than 1 Year ($ in millions) | 1-3 Years ($ in millions) | 3-5 Years ($ in millions) | Over 5 Years ($ in millions) | Total ($ in millions) | |:----------------------------------------|:---------------------------------|:--------------------------|:--------------------------|:-----------------------------|:----------------------| | Non-credit Derivatives | 1,310,340 | 1,228,197 | 321,208 | 694,877 | 3,554,622 |\ | Standby Letters of Credit and Other Financial Guarantees | 1,435 | 701 | 1,459 | 2,800 | 6,395 |\ | Securitization Representations and Warranties | — | — | — | 78,650 | 78,650 |\ | General Partner Guarantees | 366 | 20 | 136 | 41 | 563 | - The firm is involved in ongoing legal actions and regulatory investigations, including a challenge by the **Dutch Tax Authority** and investigations into its **block trading business**[339](index=339&type=chunk)[340](index=340&type=chunk)[344](index=344&type=chunk)[347](index=347&type=chunk) - Legal expenses were **$45 million** in Q2 2023, significantly **lower than $262 million** in Q2 2022[342](in

Morgan Stanley (NYSE:MS) Q2 2023 Earnings Conference Call July 18, 2023 9:30 AM ET Company Participants James Gorman - Chairman and Chief Executive Officer Sharon Yeshaya - Chief Financial Officer Conference Call Participants Ebrahim Poonawala - Bank of America Devin Ryan - JMP Securities Glenn Schorr - Evercore ISI Group Steven Chubak - Wolfe Research Mike Mayo - Wells Fargo Brennan Hawken - UBS Dan Fannon - Jefferies Gerard Cassidy - RBC Capital Markets Andrew Lim - SocGen Operator Good morning. On behalf ...

Summary of Morgan Stanley Conference Call - June 12, 2023 Company Overview - **Company**: Morgan Stanley (NYSE: MS) - **Participants**: James Gorman (Chairman and CEO) Key Points Leadership Transition - James Gorman announced his upcoming departure as CEO, emphasizing the importance of a structured succession process rather than a spontaneous decision based on age or market conditions [5][9][10] - The Board is aligned and has internal candidates prepared for the transition, with a focus on cultural fit and operational experience [11][12] Business Model Shift - Morgan Stanley has shifted its revenue mix significantly towards Wealth and Investment Management, which now accounts for $30 billion in revenues, up from a lower percentage when Gorman took over [16][17] - The pre-tax profit mix from Wealth and Investment Management has increased from 26% to 52% [16][17] Growth Strategy - The firm aims to generate $1 trillion in net new assets every three years, with a focus on organic growth rather than relying solely on acquisitions [23][24] - Gorman highlighted the importance of capturing market share in wealth management, particularly in the U.S., where there are still significant opportunities [20][21] Market Conditions and Economic Outlook - Gorman expressed confidence that the Federal Reserve is nearing the end of its rate hikes, predicting potential cuts in the following year [41][42] - He noted that the current economic environment is complicated but believes that the institutional business will recover and grow faster than GDP in the long term [19][20] Technology Integration - Morgan Stanley is leveraging technology to enhance its wealth management services, including the integration of E*TRADE and the use of AI to improve client service [36][38] - The firm is focused on using technology to increase productivity rather than reducing headcount [37][38] Investment Management and Asset Growth - Gorman discussed the potential for further growth in investment management, particularly through acquisitions and expanding into new markets [44][46] - He emphasized the importance of having a diversified asset management strategy to capture global opportunities [46] Institutional Securities - Gorman noted that M&A and underwriting activities have been under pressure but expects a recovery as market conditions stabilize [48][49] - He indicated that there are signs of increased activity and confidence among CEOs regarding future transactions [49][50] Regulatory Environment - The upcoming Basel 3 regulations are expected to increase capital requirements, but Gorman believes that the industry is well-capitalized and can adapt to these changes [62][63] - He anticipates a lengthy transition period for these regulations, with potential investment opportunities arising from market reactions [66][67] Future Outlook - Gorman expressed optimism about Morgan Stanley's future, highlighting the strength of its institutional business and the growth potential in wealth management and asset management [71][72][73] - He believes that the firm is well-positioned to navigate upcoming challenges and capitalize on opportunities in the financial sector [71][72] Additional Insights - Gorman's leadership has focused on building a resilient and adaptable organization, preparing for both challenges and opportunities in the evolving financial landscape [70][73] - The emphasis on a strong internal culture and leadership continuity is seen as critical for Morgan Stanley's long-term success [11][12][70]

Summary of Morgan Stanley's Wealth Management Conference Call Company Overview - **Company**: Morgan Stanley (NYSE: MS) - **Event**: Bernstein 39th Annual Strategic Decisions Conference - **Date**: May 31, 2023 - **Key Participant**: Andy Saperstein, Co-President and Head of Wealth Management Key Points on Wealth Management Business - **Transformation**: Over the past decade, Morgan Stanley has transformed its wealth management business, focusing on client segments, technology, and advisor roles, leading to significant growth [4][5][6] - **Growth Phases**: The business has evolved through four phases: - **Phase 1**: Building scale through acquisitions like Smith Barney [5] - **Phase 2**: Modernizing wealth management with technology to enhance advisor productivity [6] - **Phase 3**: Expanding client segments and service channels through acquisitions of Solium and E*Trade, targeting younger clients and self-directed investors [7][8] - **Phase 4**: Aiming for accelerated growth by deepening client relationships and converting them into advisory clients [8][15] - **Client Relationships**: Increased from 2.5 million to 18 million, showcasing the firm's ability to expand its reach and service offerings [9] Financial Performance and Growth Strategy - **Organic Growth**: The firm generated $110 billion in the first quarter and is confident in achieving $10 trillion in total client assets, with wealth management contributing approximately $8 trillion [14][19] - **Profitability Targets**: Aiming for $12 billion in profit before tax (PBT) with margins exceeding 30% as assets grow [19][20] - **Market Dynamics**: Despite a challenging environment, the firm continues to see strong organic growth and is focused on increasing client relationships [35][36] Industry and Macro Environment - **Market Volatility**: The current environment is characterized by volatility, geopolitical uncertainties, and inflation, which has made clients more cautious [23][24] - **Opportunities**: Morgan Stanley is actively looking for acquisition opportunities in the asset and wealth management space, leveraging its experience in integrating acquisitions [26][27] Technology and Innovation - **Partnerships with Fintechs**: Morgan Stanley views fintechs as partners rather than competitors, integrating innovative technologies to enhance advisor productivity and client service [38][39] - **AI Integration**: The firm is investing in AI to change how advisors work and serve clients, with ongoing initiatives to roll out new capabilities [41][44] Competitive Advantage - **Ecosystem Integration**: The firm's competitive advantage lies in its ability to integrate various services and technologies into a cohesive ecosystem, which is difficult for competitors to replicate [13][46][47] - **Workplace Strategy**: Morgan Stanley's comprehensive workplace strategy allows it to serve clients across multiple needs, enhancing its value proposition [50][52] Generational Wealth Transfer - **Focus on Family Advisory**: The firm is preparing for the transfer of wealth from baby boomers to millennials by offering services that cater to entire families, including estate planning and financial education [53] Conclusion - **Future Outlook**: Morgan Stanley believes it is at the starting line of a period of accelerated growth, with a strong focus on deepening client relationships and leveraging technology to drive organic growth [21][15]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 Commission File Number 1-11758 (Exact name of Registrant as specified in its charter) | --- | --- | --- | --- | |---------------------------------------------------------------|----------------------------------------------------|------------------------------|----------------------------------- ...

Financial Data and Key Metrics Changes - The company reported revenues of over $14.5 billion for Q1 2023, with a net income of $3 billion and a ROTCE of 17% [3][7] - The efficiency ratio for the first quarter was 72%, impacted by deferred cash-based compensation plans and increased operational expenses [8][21] - Net interest income (NII) was $2.2 billion, reflecting a 40% year-over-year increase due to higher interest rates [16] Business Line Data and Key Metrics Changes - Institutional Securities revenues were $6.8 billion, an 11% decline year-over-year, with fixed income and equity partially offsetting weakness in banking [9] - Wealth Management revenues reached $6.6 billion, with net new asset growth of $110 billion, representing a 10% annualized growth rate [14][15] - Investment Management revenues declined 3% year-over-year to $1.3 billion, primarily due to lower AUM from declining asset values [18] Market Data and Key Metrics Changes - Asia delivered its third-highest quarter ever in terms of revenue, benefiting from policy dynamics in Japan and the reopening of China [9] - The company experienced a 3% decline in deposits to $341 billion, while cash and cash equivalents increased to 23% of adviser-led assets [15][51] Company Strategy and Development Direction - The company aims to reach $10 trillion in client assets, with a target of $1 trillion every three years [5][17] - Focus remains on expense management while continuing to invest in long-term growth opportunities across all client platforms [8][22] - The company is not pursuing private banking in Europe but is focused on growth in the U.S. and Asia [59] Management's Comments on Operating Environment and Future Outlook - Management believes the current environment is not indicative of a systemic banking crisis, contrasting it with the 2008 financial crisis [4][22] - The outlook for 2023 is uncertain, with expectations of potential rate increases and a modest recession [33][34] - Management remains optimistic about the second half of 2023, anticipating a pickup in banking and underwriting activities [34] Other Important Information - The company repurchased $1.5 billion of stock while maintaining a CET ratio of 15.1% [3][21] - The allowance for credit losses on ISG loans increased to $1.3 billion, driven by higher recessionary probabilities [13] Q&A Session Summary Question: Can you talk about adviser recruitment and retention in the current environment? - The adviser recruiting pipeline remains healthy, with the company being a destination of choice for new advisers and assets [24] Question: How do you think about wealth management margin expansion in this environment? - The company does not expect expansion of quarterly NII moving forward, but aims for a long-term margin goal of 30% [26] Question: What is the outlook for cash and cash equivalents in relation to deposits? - Cash and cash equivalents are at a historically high level, and as assets are deployed into different products, it will positively impact margins [28] Question: Can you dimensionalize the commercial real estate portfolio? - The portfolio is diversified, and the company has been reducing direct exposure to commercial real estate [31] Question: What is going right in Asia and what challenges are faced in investment management? - Asia had a strong quarter due to favorable market conditions, while investment management revenues are down due to lower AUM and market volatility [60]

Morgan Stanley (NYSE:MS) Annual Morgan Stanley European Financials Conference March 14, 2023 6:00 AM ET Company Participants Ted Pick - Co-President, European Financials Conference Call Participants Magdalena Stoklosa - Morgan Stanley Magdalena Stoklosa All right. But thank you very much, everybody, for being here. I'm absolutely delighted to welcome Ted Pick, Morgan Stanley's Co-President to the European Financials Conference, and of course, to our fireside chat. Ted, thank you very much for being with us ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 2022 Commission File Number 1-11758 | --- | --- | --- | --- | |---------------------------------------------------------------|---------------------------------------------------------|--------------------------------------|-----------------------------------------------------| | Delaware | 1585 Broadway | 36-31 ...

Morgan Stanley (NYSE:MS) Credit Suisse 24th Annual Financial Services Forum February 14, 2023 12:45 PM ET Company Participants Sharon Yeshaya - Executive Vice President and Chief Financial Officer Conference Call Participants Susan Katzke - Credit Suisse Susan Katzke Okay. Good afternoon. For those of you with us virtually, I am Susan Katzke. I cover the large-cap banks for Credit Suisse. Our next speaker in the bank group is Morgan Stanley, and I'm quite privileged to have Morgan Stanley's CFO, Sharon Yesh ...

Morgan Stanley (NYSE:MS) Q4 2022 Results Conference Call January 17, 2023 8:30 AM ET Company Participants James Gorman - Chairman and Chief Executive Officer Sharon Yeshaya - Chief Financial Officer Conference Call Participants Glenn Schorr - Evercore ISI Ebrahim Poonawala - Bank of America Brennan Hawken - UBS Steven Chubak - Wolfe Research Dan Fannon - Jefferies Gerard Cassidy - RBC Mike Mayo - Wells Fargo Matt O'Connor - Deutsche Bank Operator Good morning. On behalf of Morgan Stanley, I will begin the c ...