- Fourth Quarter Net Revenues of $9.5
Billion; Earnings per Diluted Share of $0.29
- Excluding the Net Discrete Tax
Provision of $1.0 Billion, Earnings per Diluted Share of
$0.841,2
- Investment Banking Ranked #1 in
Global IPOs and Global Equity; Continued Strength in Equity Sales
and Trading3
- Record Quarterly Wealth Management
Revenues of $4.4 Billion; Pre-Tax Margin of 26%1,4
- Full Year Net Revenues of $37.9
Billion; Earnings per Diluted Share of $3.09
- Full Year Earnings per Diluted Share
of $3.60 Excluding the Net Discrete Tax
Provision1,2
- Full Year Results Reflect Revenue
and Pre-Tax Income Growth Across All Segments
- Full Year Return on Equity of 8.1%,
or 9.4% Excluding the Impact of Net Discrete Tax
Provision1,5
Financial Overview
Morgan Stanley (NYSE:MS) today reported net revenues of
$9.5 billion for the fourth quarter ended December 31, 2017
compared with $9.0 billion a year ago. For the current quarter, net
income applicable to Morgan Stanley was $686 million, or $0.29 per
diluted share.2,6 Results for the current quarter included a net
discrete tax provision of $990 million or a loss of $0.55 per
diluted share as described below.2 Excluding net discrete tax
items, net income applicable to Morgan Stanley was $1.7 billion, or
$0.84 per diluted share compared with net income of $1.5 billion,
or $0.74 per diluted share, for the same period a year ago.2,6
In the current quarter, the Firm recorded a net discrete tax
provision of $990 million, comprised of an approximate $1.2 billion
net discrete tax provision as a result of the enactment of the Tax
Cuts and Jobs Act (“Tax Act”), primarily from the remeasurement of
certain net deferred tax assets using the lower enacted
corporate tax rate, partially offset by an approximate $168 million
net discrete tax benefit primarily associated with the
remeasurement of reserves and related interest relating to the
status of multi-year Internal Revenue Service tax examinations.
7
Compensation expense of $4.3 billion increased from $4.1 billion
a year ago on higher revenues. Non-compensation expenses of $2.8
billion compared with $2.7 billion a year ago. The Firm’s expense
efficiency ratio for the current quarter was 74%.8
The annualized return on average common equity in the current
quarter was 2.9 percent, or 8.6 percent excluding the impact of the
net discrete tax provision.5
James P. Gorman, Chairman and Chief Executive Officer,
said, “Over the course of the full year we achieved the strategic
objectives outlined two years ago. In 2017, pre-tax earnings grew
by 18%, driven by a 10% increase in revenues, with growth across
all our business segments. This, coupled with strong expense
discipline demonstrates the Firm’s operating leverage. We enter
2018 with strong momentum aided by rising interest rates, tax
reform and an evolving regulatory framework.”
Summary of Firm Results
MS Net Income ($mm)9
EPS ROE
As Reported Adjusted(a)
As Reported Adjusted(a)
As Reported Adjusted(a)
4Q17 $686 $1,676 $0.29 $0.84
2.9% 8.6% FY17 $6,154
$7,079 $3.09 $3.60 8.1%
9.4% (a) Results adjusted to exclude the fourth quarter net
discrete tax provision that resulted from the Tax Act and other
intermittent discrete tax benefits. 2,5,7,10
Summary of Segment Results (dollars in millions)
Net Revenues
Pre-Tax Income11
4Q 2017 4Q 2016
4Q 2017 4Q 2016 Institutional
Securities $4,523 $4,614 $1,235 $1,326 Wealth
Management $4,407 $3,990 $1,150 $891 Investment Management $637
$500 $80 $28 Firm $9,500 $9,021
$2,471 $2,246
Business Highlights
- Institutional Securities net revenues
were $4.5 billion reflecting strength in both underwriting and
equity sales and trading, with lower results in fixed income sales
and trading.
- Wealth Management net revenues were
$4.4 billion and pre-tax margin was 26%.4 Fee-based asset flows for
the quarter were a record $20.9 billion.
- Investment Management net revenues were
$637 million. Assets under management were $482 billion and reflect
positive net flows of $23.9 billion.
Institutional Securities
Institutional Securities reported pre-tax income from continuing
operations of $1.2 billion compared with pre-tax income of $1.3
billion a year ago. Net revenues for the current quarter were $4.5
billion compared with $4.6 billion a year ago.
- Investment Banking revenues of $1.4
billion increased from $1.3 billion a year ago:
- Advisory revenues of $522 million
decreased from $628 million a year ago on lower levels of completed
M&A activity.
- Equity underwriting revenues of $416
million increased from $225 million in the prior year quarter
driven by higher revenues on IPOs and follow-on offerings.
- Fixed income underwriting revenues of
$499 million increased from $421 million in the prior year quarter
reflecting higher non-investment grade loan fees.
- Sales and Trading net revenues of $2.7
billion decreased from $3.2 billion a year ago:
- Equity sales and trading net revenues
of $1.9 billion decreased from $2.0 billion a year ago reflecting
lower revenues in execution services driven by a decline in
derivatives, partially offset by increases in the financing
business.
- Fixed Income sales and trading net
revenues of $808 million decreased from $1.5 billion a year ago
primarily driven by lower results in rates and foreign exchange,
partially offset by increases in credit products. Results in the
prior year quarter reflected improved market conditions following
the U.S. elections.
- Other sales and trading net losses of
$43 million compared with net losses of $234 million in the prior
year period reflecting lower funding and liquidity costs and lower
losses associated with corporate loan hedging activity.
- Investment revenues of $213 million
increased from $3 million a year ago reflecting an increase in the
value of Institutional Securities’ business-related
investments.
- Compensation expense of $1.6 billion
and non-compensation expenses of $1.7 billion for the current
quarter were relatively unchanged from a year ago.
Morgan Stanley’s average trading Value-at-Risk (VaR) measured at
the 95% confidence level was $38 million compared with $43 million
from the third quarter of 2017 and $39 million in the fourth
quarter of the prior year.12
Wealth Management
Wealth Management reported pre-tax income from continuing
operations of $1.2 billion compared with $891 million in the fourth
quarter of last year. The quarter’s pre-tax margin was 26%.4 Net
revenues for the current quarter were $4.4 billion compared with
$4.0 billion a year ago.
- Asset management revenues of $2.5
billion increased from $2.2 billion a year ago reflecting higher
asset levels and positive flows.
- Transactional revenues13 of $790
million increased from $774 million a year ago primarily reflecting
gains on investments associated with certain employee deferred
compensation plans, partially offset by lower fixed income
revenues.
- Net interest income of $1.1 billion
increased from $984 million a year ago driven by growth in bank
lending and higher interest rates. Wealth Management client
liabilities were $80 billion at quarter end compared with $73
billion in the prior year quarter.14
- Compensation expense for the current
quarter of $2.4 billion increased from $2.2 billion a year ago
primarily driven by higher revenues. Non-compensation expenses of
$837 million decreased from $876 million a year ago. Results for
the prior year quarter included a provision in connection with the
reporting of incorrect cost basis tax information to the Internal
Revenue Service and retail brokerage clients.
Total client assets were $2.4 trillion and client assets in
fee-based accounts were $1.0 trillion at the end of the quarter.
Fee-based asset flows for the quarter were $20.9 billion.
Wealth Management representatives of 15,712 produced average
annualized revenue per representative of $1.1 million in the
current quarter.15
Investment Management
Investment Management reported pre-tax income from continuing
operations of $80 million compared with $28 million in the fourth
quarter of last year. Net revenues of $637 million increased from
$500 million in the prior year.
- Asset management revenues of $572
million increased from $512 million in the prior year quarter on
higher levels of assets under management.
- Investment revenues of $112 million
compared with investment losses of $24 million in the prior year
quarter. Results for the prior year quarter included sales and
markdowns of legacy assets.
- Other revenues were a loss of $46
million compared with revenue of $3 million in the prior year
reflecting an impairment of Investment Management’s non-controlling
interest in a third party asset manager.
- Compensation expense for the current
quarter of $303 million increased from $249 million a year ago
principally due to an increase in deferred compensation associated
with carried interest. Non-compensation expenses of $254 million
increased from $223 million a year ago on higher brokerage and
clearing expenses.
- Assets under management or supervision
at December 31, 2017 were $482 billion compared with $417 billion a
year ago.
FULL YEAR RESULTS
Full year net revenues were $37.9 billion compared with $34.6
billion a year ago. Net income applicable to Morgan Stanley for the
current year was $6.2 billion, or $3.09 per diluted share.2,6
Results for the current year included a net discrete tax provision
of $925 million or a loss of $0.51 per diluted share as described
below.2 Excluding net discrete tax items, net income applicable to
Morgan Stanley was $7.1 billion, or $3.60 per diluted share
compared with net income of $5.9 billion, or $2.88 per diluted
share, a year ago.2,6
For the current year, the Firm recorded a net discrete tax
provision of approximately $925 million, comprised of an
approximate $1.2 billion net discrete tax provision as a result of
the enactment of the Tax Act, primarily from the remeasurement of
certain net deferred tax assets using the lower enacted
corporate tax rate, partially offset by an approximate $233 million
net discrete tax benefit primarily associated with the
remeasurement of reserves and related interest relating to the
status of multi-year Internal Revenue Service tax
examinations.7
The Firm’s compensation expense of $17.2 billion for the current
year increased from $15.9 billion a year ago. Non-compensation
expenses of $10.4 billion compared with $9.9 billion a year ago.
The Firm’s expense efficiency ratio for the full year was 73%.8
The return on average common equity in the current year was 8.1
percent or 9.4 percent excluding the impact of the net discrete tax
provision for the full year ended 2017.5
Full Year Summary of Segment Results (dollars in
millions)
Net Revenues
Pre-Tax Income11
FY 2017 FY 2016
FY 2017 FY 2016 Institutional
Securities $18,813 $17,459 $5,644 $5,123 Wealth
Management $16,836 $15,350 $4,299 $3,437 Investment Management
$2,586 $2,112 $456 $287 Firm $37,945 $34,631
$10,403 $8,848
Institutional Securities
Institutional Securities reported pre-tax income from continuing
operations of $5.6 billion compared with $5.1 billion a year ago.
Net revenues for the current year were $18.8 billion compared with
$17.5 billion a year ago. Compensation expense of $6.6 billion
increased from $6.3 billion a year ago on higher revenues. The
compensation to net revenue ratio for the current year was 35%.
Non-compensation expenses of $6.5 billion compared with $6.1
billion a year ago.
Wealth Management
Wealth Management reported pre-tax income from continuing
operations of $4.3 billion compared with $3.4 billion a year ago.
Net revenues for the current year were $16.8 billion compared with
$15.4 billion a year ago. The current year’s pre-tax margin was
25.5%.4 Compensation expense was $9.4 billion compared with $8.7
billion a year ago. The compensation to net revenue ratio for the
current year was 56%. Non-compensation expenses of $3.2 billion for
the current year were relatively unchanged from a year ago.
Investment Management
Investment Management reported pre-tax income from continuing
operations of $456 million compared with $287 million a year ago.
Net revenues of $2.6 billion increased from $2.1 billion a year
ago. Compensation expense was $1.2 billion compared with $937
million a year ago. Non-compensation expenses of $949 million
compared with $888 million a year ago.
Capital
As of December 31, 2017, the Firm’s Common Equity Tier 1 and
Tier 1 risk-based capital ratios under Standardized Approach
transitional provisions were approximately 16.5% and 18.9%,
respectively.16
As of December 31, 2017, the Firm estimates its pro forma fully
phased-in Common Equity Tier 1 risk-based capital ratio under the
Standardized Approach and pro forma fully phased-in Supplementary
Leverage Ratio to be approximately 16.0% and 6.4%,
respectively.16,17,18
At December 31, 2017, book value and tangible book value per
common share were $38.54 and $33.48,19 respectively, based on
approximately 1.8 billion shares outstanding.
Other Matters
The effective tax rate from continuing operations for the
quarter was 71.5%, or 31.4% excluding the impact of the net
discrete tax provision.10,20 The effective tax rate from continuing
operations for the full year was 39.7%, or 30.8% excluding the
impact of the net discrete tax provision.10,20
During the quarter ended December 31, 2017, the Firm repurchased
approximately $1.25 billion of its common stock or approximately 25
million shares. During the year ended December 31, 2017, the Firm
repurchased $3.75 billion of its common stock or approximately 80
million shares.
The Board of Directors declared a $0.25 quarterly dividend per
share, payable on February 15, 2018 to common shareholders of
record on January 31, 2018.
Morgan Stanley is a leading global financial services firm
providing a wide range of investment banking, securities, wealth
management and investment management services. With offices in more
than 42 countries, the Firm’s employees serve clients worldwide
including corporations, governments, institutions and individuals.
For further information about Morgan Stanley, please visit
www.morganstanley.com.
A financial summary follows. Financial, statistical and
business-related information, as well as information regarding
business and segment trends, is included in the Financial
Supplement. Both the earnings release and the Financial Supplement
are available online in the Investor Relations section at
www.morganstanley.com.
NOTICE:
The information provided herein and in the financial supplement
may include certain non-GAAP financial measures. The definition of
such measures or reconciliation of such metrics to the comparable
U.S. GAAP figures are included in this earnings release and the
Financial Supplement, both of which are available on
www.morganstanley.com.
This earnings release may contain forward-looking statements
including the attainment of certain financial and other targets,
objectives and goals. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the
date on which they are made, which reflect management’s current
estimates, projections, expectations, assumptions, interpretations
or beliefs and which are subject to risks and uncertainties that
may cause actual results to differ materially. For a discussion of
risks and uncertainties that may affect the future results of the
Firm, please see “Forward-Looking Statements” immediately preceding
Part I, Item 1, “Competition” and “Supervision and Regulation” in
Part I, Item 1, “Risk Factors” in Part I, Item 1A, “Legal
Proceedings” in Part I, Item 3, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in Part
II, Item 7 and “Quantitative and Qualitative Disclosures about
Market Risk” in Part II, Item 7A in the Firm’s Annual Report on
Form 10-K for the year ended December 31, 2016 and other items
throughout the Form 10-K, the Firm’s Quarterly Reports on Form 10-Q
and the Firm’s Current Reports on Form 8-K, including any
amendments thereto.
1 The Firm prepares its Consolidated Financial Statements using
accounting principles generally accepted in the United States (U.S.
GAAP). From time to time, Morgan Stanley may disclose certain
“non-GAAP financial measures” in the course of its earnings
releases, earnings conference calls, financial presentations and
otherwise. The Securities and Exchange Commission defines a
“non-GAAP financial measure” as a numerical measure of historical
or future financial performance, financial positions, or cash flows
that is subject to adjustments that effectively exclude, or include
amounts from the most directly comparable measure calculated and
presented in accordance with U.S. GAAP. Non-GAAP financial measures
disclosed by Morgan Stanley are provided as additional information
to investors and analysts in order to provide them with greater
transparency about, or an alternative method for assessing, our
financial condition, operating results, or prospective regulatory
capital requirements. These measures are not in accordance with, or
a substitute for, U.S. GAAP and may be different from or
inconsistent with non-GAAP financial measures used by other
companies. Whenever we refer to a non-GAAP financial measure, we
will also generally define it or present the most directly
comparable financial measure calculated and presented in accordance
with U.S. GAAP, along with a reconciliation of the differences
between the non-GAAP financial measure we reference and such
comparable U.S. GAAP financial measure.
2 Net income (loss) applicable to Morgan
Stanley and earnings (loss) per diluted share, excluding
intermittent net discrete tax items are non-GAAP financial measures
that the Firm considers useful for investors to allow better
comparability of operating performance. The 2017 intermittent net
discrete tax provision adjustment is comprised of an approximate
$1.2 billion net discrete tax provision as a result of the
enactment of the Tax Act, partially offset by a net discrete tax
benefit of $168 million for the quarter and $233 million for the
full year, primarily associated with the remeasurement of reserves
and related interest relating to the status of multi-year Internal
Revenue Service (IRS) tax examinations. The 2017 intermittent net
discrete tax provision adjustment does not include the
recurring-type discrete tax benefit associated with the accounting
guidance related to employee share-based payments (refer to
footnote 10). The fourth quarter and full year of 2016 reflected a
net discrete tax benefit of $135 million and $68 million,
respectively, also related to the remeasurement of reserves and
related interest due to new information regarding the status of a
multi-year IRS tax examination. The reconciliation of these
financial measures from a reported to adjusted basis are as follows
(net income and number of shares are presented in millions):
4Q 2017
4Q 2016
FY 2017
FY 2016
Net income (loss) applicable to MS $686 $1,666 $6,154 $5,979
Impact of Net Discrete Tax Items $(990) $135 $(925) $68 Net income
(loss) applicable to MS - Adjusted $1,676 $1,531 $7,079 $5,911
Earnings (loss) per diluted share $0.29 $0.81 $3.09
$2.92 Impact of Net Discrete Tax Items $(0.55) $0.07 $(0.51) $0.04
Earnings (loss) per diluted share - Adjusted $0.84 $0.74 $3.60
$2.88 Average diluted shares 1,796 1,853 1,821 1,887
3 Source: Thomson Reuters – for the period of January 1, 2017 to
December 31, 2017 as of January 2, 2018.
4 Pre-tax margin is a non-GAAP financial measure that the Firm
considers useful for investors and analysts to assess operating
performance. Pre-tax margin represents income (loss) from
continuing operations before taxes divided by net revenues.
5 Annualized return on average common equity and return on
average common equity are non-GAAP financial measures that the Firm
considers useful for investors and analysts to allow better
comparability of period-to-period operating performance. The
calculation of return on average common equity uses annualized net
income for the quarter or full year net income applicable to Morgan
Stanley less preferred dividends as a percentage of average common
equity. To determine the ROE, excluding the impact of the net
discrete tax provision, both the numerator and denominator were
adjusted to exclude the impact of those items:
4Q 2017
FY 2017
ROE 2.9% 8.1% Impact of Net Discrete Tax Provision (5.7%)
(1.3%) ROE - Adjusted 8.6% 9.4%
6 Includes preferred dividends and other adjustments related to
the calculation of earnings per share for the fourth quarter of
2017 and 2016 of approximately $170 million and $157 million,
respectively. Includes preferred dividends and other adjustments
related to the calculation of earnings per share for the years
ended 2017 and 2016 of approximately $523 million and $471 million,
respectively.
7 On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax
Act”) was enacted that significantly revises U.S. corporate
income tax law by, among other things, reducing the corporate
income tax rate to 21% and implementing a modified territorial tax
system, that includes a one-time transition tax on deemed
repatriated earnings of foreign subsidiaries. The estimated
enactment net discrete tax provision incorporates assumptions made
based upon the Firm’s current interpretation of the Tax Act, and
may change as it receives additional clarification and
implementation guidance and as the interpretation of the Tax Act
evolves over time.
8 The Firm Expense Efficiency Ratio is a non-GAAP financial
measure that the Firm considers useful for investors and analysts
to assess operating performance. The Firm Expense Efficiency Ratio
represents total non-interest expenses as a percentage of net
revenues.
9 Morgan Stanley net income represents net income (loss)
applicable to Morgan Stanley adjusted for net income (loss)
applicable to noncontrolling interests.
10 Effective January 1, 2017, the Firm adopted new accounting
guidance related to employee share-based payments whereby the
income tax consequences related to share-based payments are
required to be recognized in Provision for income taxes in the
consolidated income statement instead of additional paid-in
capital. The impact of the income tax consequences may be either a
benefit or a provision. Conversion of employee share-based awards
to Firm shares will primarily occur in the first quarter of each
year. The impact of recognizing excess tax benefits upon conversion
of awards was a benefit of $16 million in the fourth quarter of
2017 and a benefit of $155 million in the full year 2017 recorded
to the Provision for income taxes. Results for 2016 have not been
restated pursuant to the guidance.
11 Pre-tax income represents income (loss) from continuing
operations before taxes.
12 VaR represents the loss amount that one would not expect to
exceed, on average, more than five times every one hundred trading
days in the Firm’s trading positions if the portfolio were held
constant for a one-day period. Further discussion of the
calculation of VaR and the limitations of the Firm’s VaR
methodology is disclosed in Part II, Item 7A “Quantitative and
Qualitative Disclosures about Market Risk” included in the Annual
Report on Form 10-K for the year ended December 31, 2016 (“2016
Form 10-K”). Refer to page 7 of Morgan Stanley’s Financial
Supplement accompanying this release for the VaR disclosure.
13 Transactional revenues include investment banking, trading,
and commissions and fee revenues.
14 Wealth Management client liabilities reflect U.S. Bank
Subsidiaries’ lending and broker dealer margin activity.
15 Annualized revenue per Wealth Management representative is
defined as annualized revenue divided by average representative
headcount.
16 The Firm’s risk-based capital ratios for purposes of
determining regulatory compliance are the lower of the capital
ratios computed under the (i) standardized approaches for
calculating credit risk risk-weighted assets (RWAs) and market risk
RWAs (the “Standardized Approach”); and (ii) applicable advanced
approaches for calculating credit risk, market risk and operational
risk RWAs (the “Advanced Approach”). At December 31, 2017, the
Firm’s ratio is based on the Standardized Approach transitional
rules. For information on the calculation of regulatory capital and
ratios for prior periods, please refer to Part II, Item 7
“Liquidity and Capital Resources – Regulatory Requirements” in the
Firm’s 2016 10-K and Part I, Item 2 “Liquidity and Capital
Resources – Regulatory Requirements” in the Firm’s 10-Q for the
quarter ended September 30, 2017.
17 The pro forma fully phased-in Common Equity Tier 1 risk-based
capital ratio and pro forma fully phased-in Supplementary Leverage
Ratio are non-GAAP financial measures that the Firm considers to be
useful measures for investors and analysts to evaluate compliance
with new regulatory capital requirements that have not yet become
effective.
18 The Firm is required to disclose information related to its
supplementary leverage ratio, which through the end of 2017
included the effects of transitional provisions. The supplementary
leverage ratio will become effective as a capital standard on
January 1, 2018. Specifically, beginning on January 1, 2018, the
Firm must maintain a Tier 1 supplementary leverage capital buffer
of at least 2% in addition to the 3% minimum supplementary leverage
ratio (for a total of at least 5%), in order to avoid limitations
on capital distributions, including dividends and stock
repurchases, and discretionary bonus payments to executive
officers. The Firm’s pro forma Supplementary Leverage Ratio
estimate utilizes a fully phased-in Tier 1 capital numerator of
approximately $69.0 billion and a fully phased-in supplementary
leverage exposure denominator of approximately $1.08 trillion. The
Firm’s estimates are subject to risks and uncertainties that may
cause actual results to differ materially from estimates based on
these regulations. Further, these expectations should not be taken
as projections of what the Firm’s supplementary leverage ratios or
earnings, assets or exposures will actually be at future dates. See
“Risk Factors” in Part I, Item 1A in the 2016 Form 10-K for a
discussion of risks and uncertainties that may affect the future
results of the Firm.
19 Tangible common equity and tangible book value per common
share are non-GAAP financial measures that the Firm considers to be
useful measures of capital adequacy for investors and analysts.
Tangible common equity equals common equity less goodwill and
intangible assets net of allowable mortgage servicing rights
deduction. Tangible book value per common share equals tangible
common equity divided by period end common shares outstanding.
20 The reconciliation of the effective tax rate from continuing
operations excluding the intermittent net discrete tax provision is
as follows:
4Q 2017
FY 2017
Effective Tax Rate 71.5% 39.7% Impact of Net Discrete Tax
Provision (40.1%) (8.9%) Effective Tax Rate - Adjusted 31.4% 30.8%
Morgan Stanley
Consolidated Financial Summary
(unaudited,
dollars in millions, except for per share data) Quarter
Ended Percentage Change From: Twelve Months Ended
Percentage Dec 31, 2017 Sept 30, 2017 Dec
31, 2016 Sept 30, 2017 Dec 31, 2016 Dec 31,
2017 Dec 31, 2016 Change Net revenues
Institutional Securities $ 4,523 $ 4,376 $ 4,614 3 % (2 %) $ 18,813
$ 17,459 8 % Wealth Management 4,407 4,220 3,990 4 % 10 % 16,836
15,350 10 % Investment Management 637 675 500 (6 %) 27 % 2,586
2,112 22 % Intersegment Eliminations (67 ) (74 )
(83 ) 9 % 19 % (290 ) (290 ) -- Net revenues $
9,500 $ 9,197 $ 9,021 3 % 5 % $ 37,945
$ 34,631 10 %
Income (loss) from continuing
operations before tax Institutional Securities $ 1,235 $ 1,236
$ 1,326 -- (7 %) $ 5,644 $ 5,123 10 % Wealth Management 1,150 1,119
891 3 % 29 % 4,299 3,437 25 % Investment Management 80 131 28 (39
%) 186 % 456 287 59 % Intersegment Eliminations 6
(4 ) 1 * * 4 1 *
Income (loss) from continuing operations before tax $ 2,471
$ 2,482 $ 2,246 -- 10 % $ 10,403 $ 8,848
18 %
Net Income (loss) applicable to Morgan
Stanley Institutional Securities $ 312 $ 973 $ 1,104 (68 %) (72
%) $ 3,491 $ 3,649 (4 %) Wealth Management 404 698 531 (42 %) (24
%) 2,414 2,104 15 % Investment Management (36 ) 114 30 * * 245 225
9 % Intersegment Eliminations 6 (4 ) 1
* * 4 1 * Net Income (loss)
applicable to Morgan Stanley $ 686 $ 1,781 $ 1,666
(61 %) (59 %) $ 6,154 $ 5,979 3 % Earnings
(loss) applicable to Morgan Stanley common shareholders $ 516
$ 1,688 $ 1,509 (69 %) (66 %) $ 5,631 $
5,508 2 %
Financial Metrics: Earnings
per basic share $ 0.29 $ 0.95 $ 0.84 (69 %) (65 %) $ 3.16 $ 2.98 6
% Earnings per diluted share $ 0.29 $ 0.93 $ 0.81 (69 %) (64 %) $
3.09 $ 2.92 6 % Earnings per diluted share excluding net discrete
tax provision / benefit $ 0.84 $ 0.88 $ 0.74 (5 %) 14 % $ 3.60 $
2.88 25 % Return on average common equity 2.9 % 9.6 % 8.7 %
8.1 % 8.0 % Return on average common equity excluding net discrete
tax provision / benefit 8.6 % 9.1 % 8.0 % 9.4 % 7.9 % Book
value per common share $ 38.54 $ 38.87 $ 36.99 $ 38.54 $ 36.99
Tangible book value per common share $ 33.48 $ 33.86 $ 31.98 $
33.48 $ 31.98
Notes:
-
Refer to End Notes, Definition of U.S.
GAAP to Non-GAAP Measures and Definition of Performance Metrics on
pages 13 - 16 from the Financial Supplement for additional
information related to the calculation of the financial
metrics.
10
Morgan Stanley
Consolidated Income Statement Information
(unaudited, dollars in millions) Quarter Ended
Percentage Change From: Twelve Months Ended
Percentage Dec 31, 2017 Sept 30, 2017 Dec
31, 2016 Sept 30, 2017 Dec 31, 2016 Dec 31,
2017 Dec 31, 2016 Change Revenues: Investment
banking $ 1,548 $ 1,380 $ 1,377 12 % 12 % $ 6,003 $ 4,933 22 %
Trading 2,246 2,704 2,789 (17 %) (19 %) 11,116 10,209 9 %
Investments 325 167 (19 ) 95 % * 820 160 * Commissions and fees
1,064 937 1,043 14 % 2 % 4,061 4,109 (1 %) Asset management 3,102
3,026 2,754 3 % 13 % 11,797 10,697 10 % Other 220
200 194 10 % 13 % 848
825 3 % Total non-interest revenues 8,505 8,414 8,138
1 % 5 % 34,645 30,933 12 % Interest income 2,586 2,340 1,868
11 % 38 % 8,997 7,016 28 % Interest expense 1,591
1,557 985 2 % 62 % 5,697
3,318 72 % Net interest 995 783
883 27 % 13 % 3,300 3,698
(11 %) Net revenues 9,500 9,197
9,021 3 % 5 % 37,945 34,631
10 % Non-interest expenses: Compensation and benefits 4,279
4,169 4,083 3 % 5 % 17,166 15,878 8 % Non-compensation
expenses: Occupancy and equipment 339 330 311 3 % 9 % 1,329 1,308 2
% Brokerage, clearing and exchange fees 537 522 480 3 % 12 % 2,093
1,920 9 % Information processing and communications 471 459 460 3 %
2 % 1,791 1,787 -- Marketing and business development 190 128 169
48 % 12 % 609 587 4 % Professional services 547 534 578 2 % (5 %)
2,169 2,128 2 % Other 666 573
694 16 % (4 %) 2,385 2,175 10 %
Total non-compensation expenses 2,750 2,546 2,692 8 % 2 % 10,376
9,905 5 % Total non-interest
expenses 7,029 6,715 6,775
5 % 4 % 27,542 25,783 7 %
Income (loss) from continuing operations before taxes 2,471 2,482
2,246 -- 10 % 10,403 8,848 18 % Income tax provision / (benefit)
from continuing operations 1,767 697
566 154 % * 4,125 2,726
51 % Income (loss) from continuing operations 704
1,785 1,680 (61 %) (58 %) 6,278
6,122 3 % Gain (loss) from discontinued
operations after tax 2 6 0
(67 %) * (19 ) 1 * Net income (loss) $
706 $ 1,791 $ 1,680 (61 %) (58 %) $ 6,259 $ 6,123 2 % Net income
applicable to nonredeemable noncontrolling interests 20
10 14 100 % 43 % 105
144 (27 %) Net income (loss) applicable to
Morgan Stanley 686 1,781 1,666
(61 %) (59 %) 6,154 5,979 3 %
Preferred stock dividend / Other 170 93
157 83 % 8 % 523 471 11 %
Earnings (loss) applicable to Morgan Stanley common shareholders $
516 $ 1,688 $ 1,509 (69 %) (66 %) $ 5,631
$ 5,508 2 % Pre-tax profit margin 26 % 27 % 25
% 27 % 26 % Compensation and benefits as a % of net revenues 45 %
45 % 45 % 45 % 46 % Non-compensation expenses as a % of net
revenues 29 % 28 % 30 % 27 % 29 % Firm expense efficiency ratio 74
% 73 % 75 % 73 % 74 % Effective tax rate from continuing operations
71.5 % 28.1 % 25.2 % 39.7 % 30.8 %
Notes:
-
Refer to End Notes, Definition of U.S.
GAAP to Non-GAAP Measures and Definition of Performance Metrics on
pages 13 - 16 from the Financial Supplement for additional
information.
11
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Morgan StanleyMedia Relations: Michele Davis,
212-761-9621Investor Relations: Sharon Yeshaya,
212-761-1632
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