MORGAN STANLEY - FORM 8-K - EX-99.2 - EXHIBIT 99.2

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EX-99.3 - EXHIBIT 99.3 - MORGAN STANLEY	a52363086_ex993.htm
EX-99.1 - EXHIBIT 99.1 - MORGAN STANLEY	a52363086_ex991.htm
8-K - MORGAN STANLEY 8-K - MORGAN STANLEY	a52363086.htm

Exhibit 99.2

Fourth Quarter 2020 Earnings Results


Quarterly Financial Supplement	Page

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

The Firm's fourth quarter earnings results reflect the completed acquisition of E*TRADE Financial Corporation (E*TRADE), which closed on October 2, 2020. The comparisons of current and prior periods are impacted by the financial results of E*TRADE reported in the Wealth Management Segment.

Consolidated Financial Summary
(unaudited, dollars in millions)



	Quarter Ended									Percentage Change From:						Twelve Months Ended						Percentage
	Dec 31, 2020			Sep 30, 2020			Dec 31, 2019			Sep 30, 2020			Dec 31, 2019			Dec 31, 2020			Dec 31, 2019			Change
Net revenues
Institutional Securities	$	7,004		$	6,062		$	5,054			16	%		39	%	$	25,948		$	20,386			27	%
Wealth Management		5,681			4,657			4,582			22	%		24	%		19,055			17,737			7	%
Investment Management		1,100			1,056			1,356			4	%		(19	%)		3,734			3,763			(1	%)
Intersegment Eliminations		(145	)		(118	)		(135	)		(23	%)		(7	%)		(539	)		(467	)		(15	%)
Net revenues	$	13,640		$	11,657		$	10,857			17	%		26	%	$	48,198		$	41,419			16	%

Non-interest expenses
Institutional Securities	$	3,844		$	4,014		$	3,929			(4	%)		(2	%)	$	16,797		$	14,896			13	%
Wealth Management		4,611			3,537			3,419			30	%		35	%		14,668			12,905			14	%
Investment Management		904			741			909			22	%		(1	%)		2,864			2,778			3	%
Intersegment Eliminations		(149	)		(122	)		(133	)		(22	%)		(12	%)		(549	)		(461	)		(19	%)
Non-interest expenses ⁽¹⁾	$	9,210		$	8,170		$	8,124			13	%		13	%	$	33,780		$	30,118			12	%

Income before taxes
Institutional Securities	$	3,160		$	2,048		$	1,125			54	%		181	%	$	9,151		$	5,490			67	%
Wealth Management		1,070			1,120			1,163			(4	%)		(8	%)		4,387			4,832			(9	%)
Investment Management		196			315			447			(38	%)		(56	%)		870			985			(12	%)
Intersegment Eliminations		4			4			(2	)		--			*			10			(6	)		*
Income before taxes	$	4,430		$	3,487		$	2,733			27	%		62	%	$	14,418		$	11,301			28	%

Net Income applicable to Morgan Stanley
Institutional Securities	$	2,422		$	1,647		$	1,034			47	%		134	%	$	7,012		$	4,599			52	%
Wealth Management		802			842			889			(5	%)		(10	%)		3,361			3,728			(10	%)
Investment Management		158			225			317			(30	%)		(50	%)		615			719			(14	%)
Intersegment Eliminations		3			3			(1	)		--			*			8			(4	)		*
Net Income applicable to Morgan Stanley	$	3,385		$	2,717		$	2,239			25	%		51	%	$	10,996		$	9,042			22	%
Earnings applicable to Morgan Stanley common shareholders	$	3,266		$	2,597		$	2,085			26	%		57	%	$	10,500		$	8,512			23	%

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

Consolidated Financial Metrics, Ratios and Statistical Data
(unaudited)



	Quarter Ended									Percentage Change From:						Twelve Months Ended						Percentage
	Dec 31, 2020			Sep 30, 2020			Dec 31, 2019			Sep 30, 2020			Dec 31, 2019			Dec 31, 2020			Dec 31, 2019			Change

Financial Metrics:

Earnings per basic share	$	1.84		$	1.68		$	1.33			10	%		38	%	$	6.55		$	5.26			25	%
Earnings per diluted share	$	1.81		$	1.66		$	1.30			9	%		39	%	$	6.46		$	5.19			24	%

Return on average common equity		14.7	%		13.2	%		11.3	%								13.1	%		11.7	%
Return on average tangible common equity		17.7	%		15.0	%		13.0	%								15.2	%		13.4	%

Book value per common share	$	51.13		$	50.67		$	45.82								$	51.13		$	45.82
Tangible book value per common share	$	41.95		$	44.81		$	40.01								$	41.95		$	40.01

Excluding integration-related expenses ⁽¹⁾
Adjusted earnings per diluted share	$	1.92		$	1.66		$	1.30			16	%		48	%	$	6.58		$	5.19			27	%
Adjusted return on average common equity		15.6	%		13.2	%		11.3	%								13.3	%		11.7	%
Adjusted return on average tangible common equity		18.7	%		15.0	%		13.0	%								15.4	%		13.4	%


Financial Ratios:

Pre-tax profit margin		32	%		30	%		25	%								30	%		27	%
Compensation and benefits as a % of net revenues		40	%		44	%		48	%								43	%		45	%
Non-compensation expenses as a % of net revenues		28	%		26	%		27	%								27	%		27	%
Firm expense efficiency ratio		68	%		70	%		75	%								70	%		73	%
Firm expense efficiency ratio excluding integration-related expenses ⁽¹⁾		66	%		70	%		75	%								70	%		73	%
Effective tax rate		23.0	%		21.1	%		15.7	%								22.5	%		18.3	%


Statistical Data:

Period end common shares outstanding (millions)		1,810			1,576			1,594			15	%		14	%
Average common shares outstanding (millions)
Basic		1,774			1,542			1,573			15	%		13	%		1,603			1,617			(1	%)
Diluted		1,802			1,566			1,602			15	%		12	%		1,624			1,640			(1	%)

Worldwide employees		68,097			63,051			60,431			8	%		13	%

Notes:
-	The Firm’s fourth quarter results include $231 million of integration-related expenses on a pre-tax basis ($189 million after-tax) as a result of the E*TRADE acquisition. Total non-interest expenses include $151 million in compensation expense and $80 million in non-compensation expense.
-	The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.

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



	Quarter Ended									Percentage Change From:						Twelve Months Ended				Percentage
	Dec 31, 2020			Sep 30, 2020			Dec 31, 2019			Sep 30, 2020			Dec 31, 2019			Dec 31, 2020		Dec 31, 2019		Change

Consolidated Balance sheet

Total assets	$	1,115,862		$	955,940		$	895,429			17	%		25	%
Loans ⁽¹⁾	$	161,745		$	154,570		$	141,963			5	%		14	%
Deposits	$	310,782		$	239,253		$	190,356			30	%		63	%
Liquidity Resources⁽²⁾	$	338,623		$	267,292		$	215,868			27	%		57	%
Long-term debt outstanding	$	213,388		$	198,891		$	190,060			7	%		12	%
Maturities of long-term debt outstanding (next 12 months)	$	24,241		$	20,247		$	20,402			20	%		19	%

Common equity	$	92,531		$	79,874		$	73,029			16	%		27	%
Less: Goodwill and intangible assets		(16,615	)		(9,228	)		(9,249	)		80	%		80	%
Tangible common equity	$	75,916		$	70,646		$	63,780			7	%		19	%

Preferred equity	$	9,250		$	8,520		$	8,520			9	%		9	%

U.S. Bank Supplemental Financial Information
Total assets	$	346,515		$	266,221		$	219,636			30	%		58	%
Loans	$	148,885		$	140,639		$	129,852			6	%		15	%
Investment securities portfolio ⁽³⁾	$	142,929		$	91,096		$	68,472			57	%		109	%
Deposits	$	309,712		$	238,025		$	189,266			30	%		64	%

Regional revenues
Americas	$	10,219		$	8,387		$	7,890			22	%		30	%	$	35,017	$	30,226		16	%
EMEA (Europe, Middle East, Africa)		1,760			1,473			1,374			19	%		28	%		6,430		6,061		6	%
Asia		1,661			1,797			1,593			(8	%)		4	%		6,751		5,132		32	%
Consolidated net revenues	$	13,640		$	11,657		$	10,857			17	%		26	%	$	48,198	$	41,419		16	%

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



	Quarter Ended									Percentage Change From:						Twelve Months Ended				Percentage
	Dec 31, 2020			Sep 30, 2020			Dec 31, 2019			Sep 30, 2020			Dec 31, 2019			Dec 31, 2020		Dec 31, 2019		Change

Average Common Equity
Institutional Securities	$	42.8		$	42.8		$	40.4			--			6	%	$	42.8	$	40.4		6	%
Wealth Management		26.5			18.2			18.2			46	%		46	%		20.8		18.2		14	%
Investment Management		2.6			2.6			2.5			--			4	%		2.6		2.5		4	%
Parent		16.7			15.1			12.4			11	%		35	%		14.0		11.6		21	%
Firm	$	88.6		$	78.7		$	73.5			13	%		21	%	$	80.2	$	72.7		10	%



Regulatory Capital

Common Equity Tier 1 capital	$	78.7		$	71.2		$	64.8			11	%		21	%
Tier 1 capital	$	88.1		$	79.9		$	73.4			10	%		20	%

Standardized Approach
Risk-weighted assets	$	453.5		$	408.9		$	394.2			11	%		15	%
Common Equity Tier 1 capital ratio		17.4	%		17.4	%		16.4	%
Tier 1 capital ratio		19.4	%		19.5	%		18.6	%

Advanced Approach
Risk-weighted assets	$	444.9		$	420.1		$	382.5			6	%		16	%
Common Equity Tier 1 capital ratio		17.7	%		16.9	%		16.9	%
Tier 1 capital ratio		19.8	%		19.0	%		19.2	%

Leverage-based capital
Tier 1 leverage ratio		8.4	%		8.3	%		8.3	%
Supplementary Leverage Ratio⁽¹⁾		7.4	%		7.4	%		6.4	%

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


	Quarter Ended									Percentage Change From:						Twelve Months Ended						Percentage
	Dec 31, 2020			Sep 30, 2020			Dec 31, 2019			Sep 30, 2020			Dec 31, 2019			Dec 31, 2020			Dec 31, 2019			Change
Revenues:

Advisory	$	827		$	357		$	654			132	%		26	%	$	2,008		$	2,116			(5	%)
Equity		1,000			874			422			14	%		137	%		3,092			1,708			81	%
Fixed income		475			476			500			--			(5	%)		2,104			1,910			10	%
Underwriting		1,475			1,350			922			9	%		60	%		5,196			3,618			44	%
Investment Banking		2,302			1,707			1,576			35	%		46	%		7,204			5,734			26	%

Equity		2,498			2,262			1,920			10	%		30	%		9,801			8,056			22	%
Fixed Income		1,664			1,924			1,273			(14	%)		31	%		8,824			5,546			59	%
Other		58			(32	)		1			*			*			167			93			80	%
Sales and Trading		4,220			4,154			3,194			2	%		32	%		18,792			13,695			37	%

Investments		68			87			68			(22	%)		--			166			325			(49	%)
Other		414			114			216			*			92	%		(214	)		632			*

Net revenues		7,004			6,062			5,054			16	%		39	%		25,948			20,386			27	%

Compensation and benefits		1,575			2,001			2,057			(21	%)		(23	%)		8,342			7,433			12	%
Non-compensation expenses		2,269			2,013			1,872			13	%		21	%		8,455			7,463			13	%
Total non-interest expenses		3,844			4,014			3,929			(4	%)		(2	%)		16,797			14,896			13	%


Income before taxes		3,160			2,048			1,125			54	%		181	%		9,151			5,490			67	%
Net income applicable to Morgan Stanley	$	2,422		$	1,647		$	1,034			47	%		134	%	$	7,012		$	4,599			52	%


Pre-tax profit margin		45	%		34	%		22	%								35	%		27	%
Compensation and benefits as a % of net revenues		22	%		33	%		41	%								32	%		36	%
Non-compensation expenses as a % of net revenues		32	%		33	%		37	%								33	%		37	%

Return on Average Common Equity		22	%		15	%		9	%								15	%		10	%
Return on Average Tangible Common Equity ⁽¹⁾		22	%		15	%		9	%								16	%		10	%

Trading VaR (Average Daily 95% / One-Day VaR)	$	55		$	58		$	39

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


	Quarter Ended									Percentage Change From:						Twelve Months Ended						Percentage
	Dec 31, 2020			Sep 30, 2020			Dec 31, 2019			Sep 30, 2020			Dec 31, 2019			Dec 31, 2020			Dec 31, 2019			Change
Revenues:
Asset management	$	2,975		$	2,793		$	2,655			7	%		12	%	$	10,955		$	10,199			7	%
Transactional		1,340			880			829			52	%		62	%		3,694			2,969			24	%
Net interest income		1,207			889			1,033			36	%		17	%		4,022			4,222			(5	%)
Other		159			95			65			67	%		145	%		384			347			11	%
Net revenues		5,681			4,657			4,582			22	%		24	%		19,055			17,737			7	%

Compensation and benefits⁽¹⁾		3,345			2,684			2,590			25	%		29	%		10,970			9,774			12	%
Non-compensation expenses⁽¹⁾		1,266			853			829			48	%		53	%		3,698			3,131			18	%
Total non-interest expenses ⁽¹⁾		4,611			3,537			3,419			30	%		35	%		14,668			12,905			14	%

Income before taxes⁽¹⁾		1,070			1,120			1,163			(4	%)		(8	%)		4,387			4,832			(9	%)
Net income applicable to Morgan Stanley	$	802		$	842		$	889			(5	%)		(10	%)	$	3,361		$	3,728			(10	%)

Pre-tax profit margin		19	%		24	%		25	%								23	%		27	%
Pre-tax profit margin excluding integration-related expenses		23	%		24	%		25	%								24	%		27	%
Compensation and benefits as a % of net revenues		59	%		58	%		57	%								58	%		55	%
Non-compensation expenses as a % of net revenues		22	%		18	%		18	%								19	%		18	%

Return on Average Common Equity		12	%		18	%		19	%								16	%		20	%
Return on Average Tangible Common Equity ⁽²⁾		23	%		31	%		34	%								29	%		36	%

Notes:
-	Wealth Management’s fourth quarter results include $231 million of integration-related expenses on a pre-tax basis ($189 million after-tax) as a result of the E*TRADE acquisition. Total non-interest expenses include $151 million in compensation expense and $80 million in non-compensation expense.
-	The End Notes are an integral part of this presentation. See pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice.

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



	Quarter Ended									Percentage Change From:
	Dec 31, 2020			Sep 30, 2020			Dec 31, 2019			Sep 30, 2020			Dec 31, 2019


Wealth Management Metrics

Total client assets	$	3,999		$	2,852		$	2,700			40	%		48	%
Net new assets	$	66.1		$	51.8		$	27.1			28	%		144	%
U.S. Bank loans	$	98.1		$	91.3		$	80.1			7	%		22	%
Margin and other lending ⁽¹⁾	$	23.1		$	9.1		$	9.7			154	%		138	%
Deposits ⁽²⁾	$	306		$	234		$	187			31	%		64	%
Annualized average rate on deposits		0.24	%		0.38	%		0.91	%

Advisor-led channel

Advisor-led client assets	$	3,167		$	2,759		$	2,623			15	%		21	%

Fee-based client assets	$	1,472		$	1,333		$	1,267			10	%		16	%
Fee-based asset flows	$	24.1		$	23.8		$	24.9			1	%		(3	%)
Fee-based assets as a % of advisor-led client assets		46	%		48	%		48	%

Wealth Management representatives		15,950			15,469			15,468			3	%		3	%

Self-directed channel

Self-directed assets	$	832		$	93		$	77			*			*
Daily average revenue trades (000's)		1,106			6			3			*			*
Self-directed households (000's)		6,747			1,668			1,649			*			*

Workplace channel

Workplace unvested assets	$	435		$	157		$	133			177	%		*
Number of participants (000's)		4,885			2,694			2,737			81	%		78	%

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


	Quarter Ended									Percentage Change From:						Twelve Months Ended						Percentage
	Dec 31, 2020			Sep 30, 2020			Dec 31, 2019			Sep 30, 2020			Dec 31, 2019			Dec 31, 2020			Dec 31, 2019			Change
Revenues:
Asset management	$	869		$	795		$	736			9	%		18	%	$	3,013		$	2,629			15	%
Investments⁽¹⁾		256			258			670			(1	%)		(62	%)		808			1,213			(33	%)
Other		(25	)		3			(50	)		*			50	%		(87	)		(79	)		(10	%)
Net revenues		1,100			1,056			1,356			4	%		(19	%)		3,734			3,763			(1	%)

Compensation and benefits		530			401			581			32	%		(9	%)		1,542			1,630			(5	%)
Non-compensation expenses		374			340			328			10	%		14	%		1,322			1,148			15	%
Total non-interest expenses		904			741			909			22	%		(1	%)		2,864			2,778			3	%

Income before taxes		196			315			447			(38	%)		(56	%)		870			985			(12	%)
Net income applicable to Morgan Stanley	$	158		$	225		$	317			(30	%)		(50	%)	$	615		$	719			(14	%)

Pre-tax profit margin		18	%		30	%		33	%								23	%		26	%
Compensation and benefits as a % of net revenues		48	%		38	%		43	%								41	%		43	%
Non-compensation expenses as a % of net revenues		34	%		32	%		24	%								35	%		31	%

Return on Average Common Equity		24	%		34	%		51	%								23	%		29	%
Return on Average Tangible Common Equity ⁽²⁾		37	%		53	%		82	%								36	%		47	%

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



	Quarter Ended								Percentage Change From:						Twelve Months Ended				Percentage
	Dec 31, 2020			Sep 30, 2020			Dec 31, 2019		Sep 30, 2020			Dec 31, 2019			Dec 31, 2020		Dec 31, 2019		Change

Assets under management or supervision (AUM)

Net flows by asset class ⁽¹⁾
Equity	$	12.2		$	10.0		$	2.4		22	%		*		$	32.8	$	7.3		*
Fixed Income		(1.3	)		3.1			3.4		*			*			7.5		5.8		29	%
Alternative / Other		(2.4	)		(2.7	)		0.9		11	%		*			0.7		2.3		(70	%)
Long-Term Net Flows		8.5			10.4			6.7		(18	%)		27	%		41.0		15.4		166	%

Liquidity		16.5			2.1			22.4		*			(26	%)		89.9		28.7		*

Total net flows	$	25.0		$	12.5		$	29.1		100	%		(14	%)	$	130.9	$	44.1		197	%


Assets under management or supervision by asset class⁽²⁾
Equity	$	242		$	202		$	138		20	%		75	%
Fixed Income		98			92			79		7	%		24	%
Alternative / Other		153			150			139		2	%		10	%
Long‐Term Assets Under Management or Supervision		493			444			356		11	%		38	%

Liquidity		288			271			196		6	%		47	%

Total Assets Under Management or Supervision	$	781		$	715		$	552		9	%		41	%

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


	Quarter Ended						Percentage Change From:
	Dec 31, 2020		Sep 30, 2020		Dec 31, 2019		Sep 30, 2020			Dec 31, 2019

Institutional Securities

Loans:
Corporate	$	14.3	$	15.8	$	11.5		(9	%)		24	%
Secured lending facilities		29.5		30.3		29.6		(3	%)		--
Commercial and residential real estate		11.1		9.6		13.1		16	%		(15	%)
Securities-based lending and other		8.3		7.0		7.4		19	%		12	%

Total Loans		63.2		62.7		61.6		1	%		3	%

Lending Commitments		113.5		105.5		106.9		8	%		6	%

Institutional Securities Loans and Lending Commitments	$	176.7	$	168.2	$	168.5		5	%		5	%


Wealth Management

Loans:
Securities-based lending and other	$	62.9	$	57.7	$	49.9		9	%		26	%
Residential real estate		35.2		33.6		30.2		5	%		17	%

Total Loans		98.1		91.3		80.1		7	%		22	%

Lending Commitments		14.4		14.6		13.1		(1	%)		10	%

Wealth Management Loans and Lending Commitments	$	112.5	$	105.9	$	93.2		6	%		21	%

Consolidated Loans and Lending Commitments ⁽¹⁾	$	289.2	$	274.1	$	261.7		6	%		11	%

Consolidated Loans and Lending Commitments
Allowance for Credit Losses (ACL) as of December 31, 2020
(unaudited, dollars in millions)


	Loans and Lending Commitments		ACL⁽¹⁾		ACL %			Q4 Provision ⁽²⁾
	(Gross)
Loans:
Held For Investment (HFI)

Corporate	$	6,046	$	309		5.1	%	$	(55	)
Secured lending facilities		25,727		198		0.8	%		5
Commercial and residential real estate		7,346		211		2.9	%		24
Other		1,279		21		1.7	%		(7	)
Institutional Securities - HFI	$	40,398	$	739		1.8	%	$	(33	)

Wealth Management - HFI		98,215		96		0.1	%		(9	)

Held For Investment	$	138,613	$	835		0.6	%	$	(42	)

Held For Sale		12,801

Fair Value		10,723

Total Loans		162,137		835					(42	)

Lending Commitments		127,855		396		0.3	%		47

Consolidated Loans and Lending Commitments	$	289,992	$	1,231				$	5

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

(a)	The Firm prepares its Consolidated Financial Statements using accounting principles generally accepted in the United States (U.S. GAAP). From time to time, Morgan Stanley may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. The Securities and Exchange Commission defines a “non-GAAP financial measure” as a numerical measure of historical or future financial performance, financial positions, or cash flows that is subject to adjustments that effectively exclude, or include amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. Non-GAAP financial measures disclosed by Morgan Stanley are provided as additional information to analysts, investors and other stakeholders in order to provide them with greater transparency about, or an alternative method for assessing, our financial condition, operating results, or prospective regulatory capital requirements. These measures are not in accordance with, or a substitute for U.S. GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable U.S. GAAP financial measure. In addition to the following notes, please also refer to the Firm's Annual Report on Form 10-K for the year ended December 31, 2019.
(b)	The following are considered non-GAAP financial measures that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of operating performance and capital adequacy. These measures are calculated as follows:
	-	Earnings per diluted share excluding integration-related expenses represents net income applicable to Morgan Stanley, adjusted for the impact of the integration-related expenses associated with the acquisition of E*TRADE, less preferred dividends divided by the average number of diluted shares outstanding.
	-	The return on average tangible common equity represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average tangible common equity.
	-	The return on average common equity and the return on average tangible common equity excluding integration-related expenses are adjusted in both the numerator and the denominator to exclude the integration-related expenses associated with the acquisition of E*TRADE.
	-	Segment return on average common equity and return on average tangible common equity represent full year net income or annualized net income for the quarter applicable to Morgan Stanley for each segment, less preferred dividend segment allocation, divided by average common equity and average tangible common equity for each respective segment. The segment adjustments to common equity to derive segment average tangible common equity are generally set at the beginning of the year, and will remain fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition).
	-	Tangible common equity represents common equity less goodwill and intangible assets net of certain mortgage servicing rights deduction.
	-	Tangible book value per common share represents tangible common equity divided by period end common shares outstanding.
	-	Pre-tax profit margin excluding integration-related expenses represents income before income taxes less integration-related expenses associated with the acquisition of E*TRADE as percentages of net revenues.
	-	The Firm expense efficiency ratio excluding integration-related expenses represents total non‐interest expenses less integration-related expenses associated with the acquisition of E*TRADE as a percentage of net revenues.

Definitions of Performance Metrics and Terms

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

Page 1:
(a)	Net income applicable to Morgan Stanley represents net income, less net income applicable to nonredeemable noncontrolling interests.
(b)	Earnings applicable to Morgan Stanley common shareholders represents net income applicable to Morgan Stanley, less preferred dividends.

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

Page 3:
(a)	Liquidity Resources, which are held within the bank and non-bank operating subsidiaries, are comprised of high quality liquid assets (HQLA) and cash deposits with banks ("Liquidity Resources"). The total amount of Liquidity Resources is actively managed by us considering the following components: unsecured debt maturity profile; balance sheet size and composition; funding needs in a stressed environment, inclusive of contingent cash outflows; legal entity, regional and segment liquidity requirements; regulatory requirements; and collateral requirements.
(b)	The Firm's goodwill and intangible balances utilized in the calculation of tangible common equity are net of certain mortgage servicing rights deduction.
(c)	U.S. Bank refers to the Firm's U.S. Bank operating subsidiaries Morgan Stanley Bank, N.A. and Morgan Stanley Private Bank, National Association, ETRADE Bank, and ETRADE Savings Bank, and excludes balances between Bank subsidiaries, as well as deposits from the Parent and affiliates.
(d)	Firmwide regional revenues reflect the Firm's consolidated net revenues on a managed basis. Further discussion regarding the geographic methodology for net revenues is disclosed in Note 21 to the consolidated financial statements included in the Firm's Annual Report on Form 10-K for the year ended December 31, 2019 (2019 Form 10-K).

Page 4:
(a)	The Firm's attribution of average common equity to the business segments is based on the Required Capital framework, an internal capital adequacy measure. This framework is a risk-based and leverage-based capital measure, which is compared with the Firm's regulatory capital to ensure that the Firm maintains an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time. The Required Capital Framework is based on the Firm's regulatory capital requirements. The Firm defines the difference between its total average common equity and the sum of the average common equity amounts allocated to its business segments as Parent common equity. The amount of capital allocated to the business segments is generally set at the beginning of the year, and will remain fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). We are planning to make updates to our Required Capital framework for 2021 to take into account changes to our risk-based capital requirements resulting from the stress capital buffer and we will continue to evaluate the framework with respect to the impact of other future regulatory requirements as appropriate. For further discussion of the framework, refer to "Quantitative and Qualitative Disclosures about Risk" in the Firm's Annual Report on Form 10-K for the year ended December 31, 2019.
(b)	The Firm's risk-based capital ratios are computed under each of the (i) standardized approaches for calculating credit risk and market risk risk-weighted assets (RWAs) (the “Standardized Approach”) and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”). For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s Form 10-Q for the period ended September 30, 2020 and in the Firm's 2019 Form 10-K.
(c)	Supplementary leverage ratio represents Tier 1 capital divided by the total supplementary leverage exposure.

Page 5:
(a)	Institutional Securities Sales and Trading net revenues includes trading, net interest income (interest income less interest expense), asset management and commissions and fees revenues.
(b)	Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.
(c)	VaR represents the unrealized loss in portfolio value that one would not expect to exceed, on average, more than five times every one hundred trading days in the Firm's trading positions if the portfolio were held constant for a one-day period. Further discussion of the calculation of VaR and the limitations of the Firm's VaR methodology, is disclosed in "Quantitative and Qualitative Disclosures about Risk" included in the Firm's 2019 Form 10-K.

Definitions of Performance Metrics and Terms

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

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

Page 7:
(a)	Net new assets represents client inflows (including dividend and interest) less client outflows (excluding activity from business combinations/divestitures and impact of fees and commissions).
(b)	Margin and other lending represents Wealth Management margin lending arrangements, which allow customers to borrow against the value of qualifying securities and Wealth Management other lending which includes non-purpose securities based lending on non-bank entities.
(c)	Deposits reflects Wealth Management deposit liabilities sourced from both Wealth Management client deposits and external funding on the US Bank entities. Deposits include internal and external brokerage sweeps deposits programs, savings and other, and time deposits.
(d)	Annualized average rate on deposits represents the weighted average cost of deposits as of periods ended December 31, 2020, September 30, 2020 and December 31, 2019.
(e)	Advisor-led client assets represents client assets in accounts that have a Wealth Management representative assigned.
(f)	Fee-based client assets represents the amount of assets in client accounts where the basis of payment for services is a fee calculated on those assets.
(g)	Fee‐based asset flows includes net new fee‐based assets, net account transfers, dividends, interest, and client fees and exclude institutional cash management related activity.
(h)	Self-directed assets represents active accounts which are not advisor led. Active accounts are defined as having $25 or more in assets.
(i)	Daily average revenue trades (DARTs) represents the total client-directed trades in a period divided by the number of trading days during that period.
(j)	Self-directed households represents the total number of households that include at least one account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels (Advisor-Led, Self-Directed, Workplace) will be included in each of the respective channel counts.
(k)	Workplace unvested assets represents the market value at the end of the period. Workplace unvested assets represent the market value of public company securities at the end of the period.
(l)	Workplace participants represents total accounts with vested or unvested assets >0 in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.

Page 8:
(a)	Other revenues for the Investment Management segment includes investment banking, trading, net interest and other revenues.
(b)	Pre-tax profit margin percentages represent income before income taxes as percentages of net revenues.

Page 9:
(a)	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.
(b)	Investment Management net flows include new commitments, investments or reinvestments, net of client redemptions, returns of capital post-fund investment period and dividends not reinvested and excludes the impact of the transition of funds from their commitment period to the invested capital period.
(c)	Total assets under management or supervision excludes shares of minority stake assets which represent the Investment Management business segment’s proportional share of assets managed by third-party asset managers in which we hold investments accounted for under the equity method.

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

Supplemental Quantitative Details and Calculations

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

		4Q20		3Q20		4Q19	4Q20 YTD		4Q19 YTD
Compensation and benefits	$	5,450	$	5,086	$	5,228	$	20,854	$	18,837

Non-compensation expenses:
Brokerage, clearing and exchange fees		776		697		633		2,929		2,493
Information processing and communications		697		616		567		2,465		2,194
Professional services		679		542		555		2,205		2,137
Occupancy and equipment		456		373		375		1,559		1,428
Marketing and business development		161		78		200		434		660
Other		991		778		566		3,334		2,369
Total non-compensation expenses		3,760		3,084		2,896		12,926		11,281

Total non-interest expenses	$	9,210	$	8,170	$	8,124	$	33,780	$	30,118

Page 2:
(1)	The fourth quarter and full year ended December 31, 2020 also included pre-tax integration-related expenses of $231 million ($189 million after-tax) associated with the acquisition of E*TRADE. The following sets forth the impact of the integration-related expenses to earnings per diluted share, return on average common equity and return on average tangible common equity (which are excluded):

		4Q20		4Q20 YTD
Earnings per diluted share - GAAP	$	1.81		$	6.46
Impact of adjustments	$	0.11		$	0.12
Earnings per diluted share excluding integration-related expenses - Non-GAAP	$	1.92		$	6.58

Return on average common equity - GAAP		14.7	%		13.1	%
Impact of adjustments		0.9	%		0.2	%
Return on average common equity excluding integration-related expenses - Non-GAAP		15.6	%		13.3	%

Return on average tangible common equity - GAAP		17.7	%		15.2	%
Impact of adjustments		1.0	%		0.2	%
Return on average tangible common equity excluding integration-related expenses - Non-GAAP		18.7	%		15.4	%

Firm expense efficiency ratio - GAAP		67.5	%		70.1	%
Impact of adjustments		(1.7	)%		(0.5	)%
Firm expense efficiency ratio excluding integration-related expenses - Non-GAAP		65.8	%		69.6	%

Page 3:
(1)	Includes loans held for investment (net of allowance), loans held for sale and also includes loans at fair value which are included in Trading assets on the balance sheet.
(2)	Beginning in the quarter ended March 31, 2020, the internal measure of liquidity was changed from Global Liquidity Reserve to Liquidity Resources to be more aligned with the current regulatory definition HQLA. December 31, 2019 has been recast.
(3)	As of December 31, 2020, September 30, 2020 and December 31, 2019, the U.S. Bank investment securities portfolio included held to maturity investment securities of $52.6 billion, $28.2 billion and $26.1 billion, respectively.

Page 4:
(1)	Based on a Federal Reserve interim final rule in effect until March 31, 2021, our supplementary leverage ratio (SLR) and supplementary leverage exposure, effective June 30, 2020, reflect the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. The exclusion of these assets had the effect of increasing our SLR by 0.8% as of December 31, 2020.

Page 5:
(1)	Institutional Securities average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 4Q20: $484mm; 3Q20: $484mm; 4Q19: $536mm; 4Q20 YTD: $484mm; 4Q19 YTD: $536mm

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

		4Q20
Compensation expenses	$	151
Non-compensation expenses		80
Total non-interest expenses	$	231
Income tax provision		42
Total non-interest expenses (after-tax)	$	189

(2)

Wealth Management average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 4Q20: $13,440mm; 3Q20: $7,802mm; 4Q19: $8,088mm; 4Q20 YTD: $9,536mm; 4Q19 YTD: $8,088mm

Supplemental Quantitative Details and Calculations

Page 7:
(1)	Wealth Management other lending includes $3 billion of non-purpose securities based lending on non-bank entities in each period ended December 31, 2020, September 30, 2020 and December 31, 2019.
(2)	For the quarter ended December 31, 2020, Wealth Management deposits of $306 billion exclude off-balance sheet deposits of $25 billion held by third parties outside of Morgan Stanley.
	Total deposits details are as follows:

		4Q20
Brokerage sweep deposits	$	232
Other deposits		74
Total balance sheet deposits		306
Off-balance sheet deposits		25
Total deposits	$	331

Page 8:
(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 applicable to nonredeemable noncontrolling interests.
(2)	Investment Management average tangible common equity represents average common equity adjusted to exclude goodwill and intangible assets net of allowable mortgage servicing rights deduction. The adjustments are as follows: 4Q20: $932mm; 3Q20: $932mm; 4Q19: $940mm; 4Q20 YTD: $932mm; 4Q19 YTD: $940mm

Page 9:
(1)	Net Flows by region for the quarters ended December 31, 2020, September 30, 2020 and December 31, 2019 were:
	North America: $21.4 billion, $(3.5) billion and $19.4 billion
	International: $3.6 billion, $16.0 billion and $9.7 billion
(2)	Assets under management or supervision by region for the quarters ended December 31, 2020, September 30, 2020 and December 31, 2019 were:
	North America: $449 billion, $409 billion and $307 billion
	International: $332 billion, $306 billion and $245 billion

Page 10:
(1)	For the quarters ended December 31, 2020, September 30, 2020 and December 31, 2019, Investment Management reflected loan balances of $441 million, $569 million and $256 million, respectively, and lending commitments of $21 million for the quarter ended December 31, 2019, which are not included in the Consolidated Loans and Lending Commitments balance.

Page 11:
(1)	For the quarter ended December 31, 2020, the Allowance Rollforward for Loans and Lending Commitments is as follows:

	Institutional Securities			Wealth Management			Total
Loans

Allowance for Credit Losses (ACL)
Beginning Balance - September 30, 2020	$	806		$	107		$	913
Net Charge Offs		(41	)		(2	)		(43	)
Provision		(33	)		(9	)		(42	)
Other		7			-			7
Ending Balance - December 31, 2020	$	739		$	96		$	835


Lending Commitments

Allowance for Credit Losses (ACL)
Beginning Balance - September 30, 2020	$	342		$	5		$	347
Net Charge Offs		-			-			-
Provision		47			-			47
Other		2			-			2
Ending Balance - December 31, 2020	$	391		$	5		$	396


Loans and Lending Commitments

Allowance for Credit Losses (ACL)
Beginning Balance - September 30, 2020	$	1,148		$	112		$	1,260
Net Charge Offs		(41	)		(2	)		(43	)
Provision		14			(9	)		5
Other		9			-			9
Ending Balance - December 31, 2020	$	1,130		$	101		$	1,231

(2)	The provision for credit losses associated with loans held for investment is reported in other revenues while the provision for credit losses related to lending commitments is reported in other expenses.

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 20, 2021.

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