Financial Summary2,3
Firm ($ millions, except per share data)		3Q 2022				3Q 2021
Net revenues		$	12,986			$	14,753
Provision for credit losses		$	35			$	24
Compensation expense		$	5,614			$	5,920
Non-compensation expenses		$	3,949			$	3,935
Pre-tax income8		$	3,388			$	4,874
Net income app. to MS		$	2,632			$	3,707
Expense efficiency ratio6			74	%			67	%
Earnings per diluted share		$	1.47			$	1.98
Book value per share		$	54.46			$	54.56
Tangible book value per share		$	39.93			$	40.47
Return on equity			10.7	%			14.5	%
Return on tangible equity4			14.6	%			19.6	%
Institutional Securities
Net revenues		$	5,817			$	7,495
Investment Banking		$	1,277			$	2,849
Equity		$	2,459			$	2,876
Fixed Income		$	2,181			$	1,640
Wealth Management
Net revenues		$	6,120			$	5,935
Fee-based client assets ($ billions)9		$	1,628			$	1,752
Fee-based asset flows ($ billions)10		$	16.7			$	70.6
Net new assets ($ billions)		$	64.8			$	134.5
Loans ($ billions)		$	145.7			$	121.2
Investment Management
Net revenues		$	1,168			$	1,453
AUM ($ billions)11		$	1,279			$	1,522
Long-term net flows ($ billions)12		$	(1.9	)		$	(2.3	)

•	The Firm reported net revenues of $13.0 billion, demonstrating our resilient business model against a volatile market backdrop.
•	The Firm delivered ROTCE of 14.6%, or 15.2% excluding the impact of integration-related expenses.4,5
•	The Firm’s expense efficiency ratio year-to-date was 72%, or 71% excluding the impact of integration-related expenses.5,6
•	Standardized Common Equity Tier 1 was 14.8%.
•	Institutional Securities net revenues of $5.8 billion reflect strong performance in Fixed Income and solid results in Equity, while the uncertain macroeconomic environment continued to drive limited activity in Investment Banking.
•	Wealth Management delivered a pre-tax margin of 26.9% or 28.4% excluding integration-related expenses.5,7  Results reflect higher net interest income on higher interest rates. The business added $65 billion in net new assets, bringing total net new assets year-to-date to $260 billion.
•	Investment Management delivered net revenues of $1.2 billion on AUM of $1.3 trillion in a challenging market environment.

•	Other revenues decreased from a year ago driven by mark-to-market losses on corporate loans held for sale, net of hedges compared to gains in the prior year quarter and higher mark-to-market losses on investments associated with certain employee deferred compensation plans.

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1 Includes preferred dividends related to the calculation of earnings per share of $138 million and $123 million for the third quarter of 2022 and 2021, respectively.

 

2 The Firm prepares its Consolidated Financial Statements using accounting principles generally accepted in the United States (U.S. GAAP). From time to time, Morgan Stanley may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. The Securities and Exchange Commission defines a “non-GAAP financial measure” as a numerical measure of historical or future financial performance, financial position, or cash flows that is subject to adjustments that effectively exclude, or include amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. Non-GAAP financial measures disclosed by Morgan Stanley are provided as additional information to analysts, investors and other stakeholders in order to provide them with greater transparency about, or an alternative method for assessing our financial condition, operating results, or capital adequacy. 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.

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

 

4 Return on average tangible common equity and return on average tangible common equity excluding integration-related expenses are non-GAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance and capital adequacy.  The calculation of return on average tangible common equity represents full year or annualized net income applicable to Morgan Stanley less preferred dividends as a percentage of average tangible common equity.  Tangible common equity, also a non-GAAP financial measure, represents common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction. The calculation of return on average tangible common equity excluding integration-related expenses is adjusted in both the numerator and the denominator to exclude the integration-related expenses associated with the acquisitions of E*TRADE and Eaton Vance.

 

5 The Firm’s and business segment’s third quarter results for 2022 and 2021 include integration-related expenses as a result of the E*TRADE and Eaton Vance acquisitions reported in the Wealth Management segment and Investment Management segment, respectively. The amounts are presented as follows (in millions):

 

 

6 The Firm expense efficiency ratio represents total non-interest expenses as a percentage of net revenues. The Firm expense efficiency ratio excluding integration-related expenses is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance.

 

7 Pre-tax margin represents income before taxes divided by net revenues.  Wealth Management pre-tax margin excluding the integration-related expenses represents income before taxes less those expenses divided by net revenues.  Wealth Management pre-tax margin excluding integration-related expenses is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance.

 

8 Pre-tax income represents income before provision for income taxes.

 

9 Wealth Management fee-based client assets represent the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.

 

10 Wealth Management fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest, and client fees, and exclude institutional cash management related activity.

 

11 AUM is defined as assets under management or supervision.

 

12 Long-term net flows include the Equity, Fixed Income and Alternative and Solutions asset classes and excludes the Liquidity and Overlay Services asset class.

 

13 Transactional revenues include investment banking, trading, and commissions and fee revenues.  Transactional revenues excluding the impact of mark-to-market gains/losses on investments associated with certain employee deferred compensation plans is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow better comparability of period-to-period operating performance and capital adequacy.

 

14 Capital ratios are estimates as of the press release date, October 14, 2022.

 

15 CET1 capital is defined as Common Equity Tier 1 capital.  The Firm’s risk-based capital ratios are computed under each of the (i) standardized approaches for calculating credit risk and market risk risk‐weighted assets (RWAs) (the “Standardized Approach”) and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”).  For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K).

 

16 The Tier 1 leverage ratio is a leverage-based capital requirement that measures the Firm’s leverage.  Tier 1 leverage ratio utilizes Tier 1 capital as the numerator and average adjusted assets as the denominator.

 

17 The Firm’s supplementary leverage ratio (SLR) utilizes a Tier 1 capital numerator of approximately $76.4 billion and $83.4 billion, and supplementary leverage exposure denominator of approximately $1.41 trillion and $1.46 trillion, for the third quarter of 2022 and 2021, respectively.

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Consolidated Financial Metrics, Ratios and Statistical Data
(unaudited)
		Quarter Ended												Percentage Change From:								Nine Months Ended								Percentage
		Sep 30, 2022				Jun 30, 2022				Sep 30, 2021				Jun 30, 2022				Sep 30, 2021				Sep 30, 2022				Sep 30, 2021				Change
Financial Metrics:
Earnings per basic share		$	1.49			$	1.40			$	2.01				6	%			(26	%)		$	4.95			$	6.11				(19	%)
Earnings per diluted share		$	1.47			$	1.39			$	1.98				6	%			(26	%)		$	4.88			$	6.02				(19	%)
Return on average common equity			10.7	%			10.1	%			14.5	%											11.9	%			15.1	%
Return on average tangible common equity			14.6	%			13.8	%			19.6	%											16.1	%			19.7	%
Book value per common share		$	54.46			$	54.46			$	54.56											$	54.46			$	54.56
Tangible book value per common share		$	39.93			$	40.07			$	40.47											$	39.93			$	40.47
Excluding integration-related expenses
Adjusted earnings per diluted share		$	1.53			$	1.44			$	2.04				6	%			(25	%)		$	5.04			$	6.15				(18	%)
Adjusted return on average common equity			11.1	%			10.5	%			15.0	%											12.2	%			15.4	%
Adjusted return on average tangible common equity			15.2	%			14.3	%			20.2	%											16.6	%			20.2	%
Financial Ratios:
Pre-tax profit margin			26	%			25	%			33	%											28	%			33	%
Compensation and benefits as a % of net revenues			43	%			42	%			40	%											43	%			42	%
Non-compensation expenses as a % of net revenues			30	%			32	%			27	%											29	%			25	%
Firm expense efficiency ratio			74	%			74	%			67	%											72	%			67	%
Firm expense efficiency ratio excluding integration-related expenses			73	%			73	%			66	%											71	%			67	%
Effective tax rate			21.4	%			23.6	%			23.6	%											21.1	%			22.9	%
Statistical Data:
Period end common shares outstanding (millions)			1,694				1,723				1,799				(2	%)			(6	%)
Average common shares outstanding (millions)
Basic			1,674				1,704				1,781				(2	%)			(6	%)			1,704				1,797				(5	%)
Diluted			1,697				1,723				1,812				(2	%)			(6	%)			1,725				1,824				(5	%)
Worldwide employees			81,567				78,386				73,620				4	%			11	%

Consolidated Financial Metrics, Ratios and Statistical Data
(unaudited)
		Quarter Ended												Percentage Change From:								Nine Months Ended								Percentage
		Sep 30, 2022				Jun 30, 2022				Sep 30, 2021				Jun 30, 2022				Sep 30, 2021				Sep 30, 2022				Sep 30, 2021				Change
Financial Metrics:
Earnings per basic share		$	1.49			$	1.40			$	2.01				6	%			(26	%)		$	4.95			$	6.11				(19	%)
Earnings per diluted share		$	1.47			$	1.39			$	1.98				6	%			(26	%)		$	4.88			$	6.02				(19	%)
Return on average common equity			10.7	%			10.1	%			14.5	%											11.9	%			15.1	%
Return on average tangible common equity			14.6	%			13.8	%			19.6	%											16.1	%			19.7	%
Book value per common share		$	54.46			$	54.46			$	54.56											$	54.46			$	54.56
Tangible book value per common share		$	39.93			$	40.07			$	40.47											$	39.93			$	40.47
Excluding integration-related expenses (1)
Adjusted earnings per diluted share		$	1.53			$	1.44			$	2.04				6	%			(25	%)		$	5.04			$	6.15				(18	%)
Adjusted return on average common equity			11.1	%			10.5	%			15.0	%											12.2	%			15.4	%
Adjusted return on average tangible common equity			15.2	%			14.3	%			20.2	%											16.6	%			20.2	%
Financial Ratios:
Pre-tax profit margin			26	%			25	%			33	%											28	%			33	%
Compensation and benefits as a % of net revenues			43	%			42	%			40	%											43	%			42	%
Non-compensation expenses as a % of net revenues			30	%			32	%			27	%											29	%			25	%
Firm expense efficiency ratio			74	%			74	%			67	%											72	%			67	%
Firm expense efficiency ratio excluding integration-related expenses (1)			73	%			73	%			66	%											71	%			67	%
Effective tax rate			21.4	%			23.6	%			23.6	%											21.1	%			22.9	%
Statistical Data:
Period end common shares outstanding (millions)			1,694				1,723				1,799				(2	%)			(6	%)
Average common shares outstanding (millions)
Basic			1,674				1,704				1,781				(2	%)			(6	%)			1,704				1,797				(5	%)
Diluted			1,697				1,723				1,812				(2	%)			(6	%)			1,725				1,824				(5	%)
Worldwide employees			81,567				78,386				73,620				4	%			11	%