Morgan Stanley MS Form 10-Q filing Q2 FY2024

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley,” “Firm,” “us,” “we” or “our” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-Q.

A description of the clients and principal products and services of each of our business segments is as follows:

Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity securities and other products, as well as advice on mergers and acquisitions, restructurings and project finance. Our Equity and Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to clients. Other activities include research.

Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions. Wealth Management covers: financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services.

Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are generally served through intermediaries, including affiliated and non-affiliated distributors.

Management’s Discussion and Analysis includes certain metrics that 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. Such metrics, when used, are defined and may be different from or inconsistent with metrics used by other companies.

The results of operations in the past have been, and in the future may continue to be, materially affected by: competition; risk factors; legislative, legal and regulatory developments; and other factors. These factors also may have an adverse impact on our ability to achieve our strategic objectives. Additionally, the discussion of our results of operations herein may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, see “Forward-Looking Statements,” “Business—Competition,” “Business—Supervision and Regulation” and “Risk Factors” in the 2023 Form 10-K and “Liquidity and Capital Resources—Regulatory Requirements” herein.

4 June 2024 Form 10-Q

Management’s Discussion and Analysis

Executive Summary

Overview of Financial Results

Consolidated Results—Three Months Ended June 30, 2024

• The Firm reported net revenues of $15.0 billion, balanced across Wealth Management and Institutional Securities.
• The Firm delivered ROE of 13.0% and ROTCE of 17.5% (see “Selected Non-GAAP Financial Information” herein).
• The Firm’s expense efficiency ratio was 72% for both the second quarter and first half of the year, benefiting from our scale and intentional expense management.
• The Firm accreted $1.5 billion of Common Equity Tier 1 capital while supporting our clients and executing capital actions. At June 30, 2024, the Firm’s Standardized Common Equity Tier 1 capital ratio was 15.2%.
• Institutional Securities net revenues of $7.0 billion reflect strong performance across the franchise, with notable strength in Equity, driven by higher client activity, and in Investment Banking, on robust debt underwriting results.
• Wealth Management delivered a pre-tax margin of 26.8%. Net revenues were $6.8 billion on higher asset management revenues driven by cumulative fee-based asset flows and a positive market environment. Fee-based asset flows were $26 billion for the second quarter and $52 billion for the first half of the year. The business added net new assets of $36 billion in the quarter and $131 billion in the first half of the year.
• Investment Management results reflect net revenues of $1.4 billion, primarily driven by increased asset management revenues on higher long-term average AUM.

Net Revenues

($ in millions)

Net Income Applicable to Morgan Stanley

($ in millions)

Earnings per Diluted Common Share

We reported net revenues of $15.0 billion in the quarter ended June 30, 2024 (“current quarter,” or “2Q 2024”), which increased by 12% compared with $13.5 billion in the quarter ended June 30, 2023 (“prior year quarter,” or “2Q 2023”). Net income applicable to Morgan Stanley was $3.1 billion in the current quarter, which increased by 41% compared with $2.2 billion in the prior year quarter. Diluted earnings per common share was $1.82, which increased by 47% compared with $1.24 in the prior year quarter.

We reported net revenues of $30.2 billion in the six months ended June 30, 2024 (“current year period,” or “YTD 2024”), which increased by 8% compared with $28.0 billion in the six months ended June 30, 2023 (“prior year period,” or “YTD 2023”). Net income applicable to Morgan Stanley was $6.5 billion in the current year period, which increased by 26%, compared with $5.2 billion in the prior year period. Diluted earnings per common share was $3.85, which increased by 31% compared with $2.95 in the prior year period.

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Management’s Discussion and Analysis

Non-interest Expenses

($ in millions)

• Compensation and benefits expenses of $6,460 million in the current quarter and $13,156 million in the current year period increased 3% and 4%, respectively, compared with the prior year periods, primarily due to higher formulaic payout to Wealth Management representatives driven by higher compensable revenues and higher discretionary compensation on higher revenues. This was partially offset by lower severance costs and lower expenses related to certain employee deferred cash-based compensation plans linked to investment performance (“DCP”).
• Non-compensation expenses of $4,409 million in the current quarter and $8,460 million in the current year period increased 4% and 1%, respectively, compared with the prior year periods, primarily due to higher execution-related expenses and increased technology spend, partially offset by lower legal expenses and professional services expenses.

Provision for Credit Losses

The Provision for credit losses on loans and lending commitments of $76 million in the current quarter was primarily related to provisions for certain specific commercial real estate loans, mainly in the office sector and modest growth in the corporate loan portfolio. The Provision for credit losses on loans and lending commitments in the prior year quarter was $161 million, primarily related to credit deterioration in commercial real estate lending, mainly in the office sector, and modest growth in certain other loan portfolios.

The Provision for credit losses on loans and lending commitments of $70 million in the current year period was primarily related to provisions for certain specific commercial real estate loans, mainly in the office sector, modest growth in certain corporate and other loan portfolios and provisions for certain specific securities-based loans. The impact was partially offset by improvements in the macroeconomic outlook. The Provision for credit losses on loans and lending commitments of $395 million in the prior year period was primarily related to credit deterioration in commercial real estate lending, mainly in the office sector, modest growth in certain loan portfolios, as well as deterioration in the macroeconomic outlook.

For further information on the Provision for credit losses, see “Credit Risk” herein.

Business Segment Results

Net Revenues by Segment1

($ in millions)

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Management’s Discussion and Analysis

Net Income Applicable to Morgan Stanley by Segment1

($ in millions)

1.The amounts in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to the total presented on top of the bars due to intersegment eliminations. See Note 19 to the financial statements for details of intersegment eliminations.

• Institutional Securities net revenues of $6,982 million in the current quarter and $13,998 million in the current year period increased 23% and 12%, respectively, compared with the prior year periods, primarily reflecting higher Equity, Fixed Income and underwriting results within Investment Banking.
• Wealth Management net revenues of $6,792 million in the current quarter and $13,672 million in the current year period increased 2% and 3%, respectively, compared with the prior year periods, primarily reflecting higher Asset management revenues, partially offset by lower Net interest income.
• Investment Management net revenues of $1,386 million in the current quarter and $2,763 million in the current year period increased 8% in both periods, compared with the prior year periods, reflecting higher Asset management and related fees and Performance based income and other revenues.

Net Revenues by Region1

($ in millions)

1.For a discussion of how the geographic breakdown of net revenues is determined, see Note 22 to the financial statements in the 2023 Form 10-K.

• Americas net revenues increased 8% in both the current quarter and the current year period, primarily driven by higher results across businesses within the Institutional Securities business segment and higher Asset management revenues within the Wealth Management business segment.
• EMEA net revenues in the current quarter increased 25% from the prior year quarter, primarily driven by higher results across business segments. EMEA net revenues in the current year period increased 14% from the prior year period, primarily driven by higher results from Equity and Investment Banking within the Institutional Securities business segment.

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Management’s Discussion and Analysis

• Asia net revenues in the current quarter increased 20% from the prior year quarter, primarily driven by higher results from Equity and Investment Banking within the Institutional Securities business segment. Asia net revenues in the current year period increased 2% from the prior year period, primarily driven by higher results from Equity and Investment Banking, partially offset by lower results from Fixed Income within the Institutional Securities business segment.

Selected Financial Information and Other Statistical Data

1.The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues.

2.ROE and ROTCE represent annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively.

3.Represents a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein.

4.Pre-tax margin represents income before provision for income taxes as a percentage of net revenues.

5.For a discussion of Liquidity resources, see “Liquidity and Capital Resources—Balance Sheet—Liquidity Risk Management Framework—Liquidity Resources” herein.

6.Includes loans held for investment, net of ACL, loans held for sale and also includes loans at fair value, which are included in Trading assets in the balance sheet.

7.Book value per common share and tangible book value per common share equal common equity and tangible common equity, respectively, divided by common shares outstanding.

8.Client assets represents Wealth Management client assets and Investment Management AUM. Certain Wealth Management client assets are invested in Investment Management products and are also included in Investment Management’s AUM.

9.For a discussion of our capital ratios, see “Liquidity and Capital Resources—Regulatory Requirements” herein.

Economic and Market Conditions

The economic environment, client and investor confidence and overall market sentiment improved in the first half of 2024. However, geopolitical risks, inflation and uncertainty regarding the U.S. political cycle and the future path of interest rates, which have remained high relative to recent years, present ongoing risks to the economic environment. These factors have impacted, and could continue to impact capital markets and our businesses, as discussed further in “Business Segments” herein.

For more information on economic and market conditions, and the potential effects of geopolitical events and acts of war or aggression on our future results, refer to “Risk Factors” and “Forward-Looking Statements” in the 2023 Form 10-K.

Selected Non-GAAP Financial Information

We prepare our financial statements using U.S. GAAP. From time to time, we may disclose certain “non-GAAP financial measures” in this document or in the course of our earnings releases, earnings and other conference calls, financial presentations, definitive proxy statements and other public disclosures. A “non-GAAP financial measure” excludes, or includes, amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We consider the non-GAAP financial measures we disclose to be useful to us, investors, analysts and other stakeholders by providing further transparency about, or an alternate means of assessing or comparing our financial condition, operating results and 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 U.S. GAAP financial measure and the non-GAAP financial measure.

We present certain non-GAAP financial measures that exclude the impact of mark-to-market gains and losses, net of financing costs on DCP investments from net revenues. We also exclude the impact of mark-to-market gains and losses on DCP from compensation expenses. The impact of DCP investments and DCP are primarily reflected in our Wealth Management business segment results. These measures allow for better comparability of period-to-period underlying

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Management’s Discussion and Analysis

operating performance and revenue trends. By excluding the impact of these items, we are better able to describe the business drivers and resulting impact to net revenues and corresponding change to the associated compensation expenses.

Compensation expense for DCP awards is calculated based on the notional value of the award granted, adjusted for changes in the fair value of the referenced investments that employees select. Compensation expense is recognized over the vesting period relevant to each separately vesting portion of deferred awards.

We invest directly, as principal, in financial instruments and other investments to economically hedge certain of our obligations under these DCP awards. Changes in the fair value of such investments, net of financing costs, are recorded in net revenues, and included in Transactional revenues in the Wealth Management business segment. Although changes in compensation expense resulting from changes in the fair value of the referenced investments will generally be offset by changes in the fair value of investments recognized in net revenues, there is typically a timing difference between the immediate recognition of gains and losses on our investments and the deferred recognition of the related compensation expense over the vesting period. While this timing difference may not be material to our Income before provision for income taxes in any individual period, it may impact the Wealth Management business segment reported ratios and operating metrics in certain periods due to potentially significant impacts to net revenues and compensation expenses.

For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Matters” in the 2023 Form 10-K.

Tangible common equity is a non-GAAP financial measure that we believe analysts, investors and other stakeholders consider useful to allow for comparability to peers and of the period-to-period use of our equity. The calculation of tangible common equity represents common shareholders’ equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction. In addition, we believe that certain ratios that utilize tangible common equity, such as return on average tangible common equity (“ROTCE”) and tangible book value per common share, also non-GAAP financial measures, are useful for evaluating the operating performance and capital adequacy of the business period-to-period, respectively. The calculation of ROTCE represents annualized earnings applicable to Morgan Stanley common shareholders as a percentage of average tangible common equity. The calculation of tangible book value per common share represents tangible common equity divided by common shares outstanding.

The principal non-GAAP financial measures presented in this document are set forth in the following tables.

Reconciliations from U.S. GAAP to Non-GAAP Consolidated Financial Measures

June 2024 Form 10-Q 9

Management’s Discussion and Analysis

Non-GAAP Financial Measures by Business Segment

1.Net revenues and compensation expense are adjusted for DCP investments and DCP for both Firm and Wealth Management business segment. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Matters” in the 2023 Form 10-K for more information.

2.Average common equity and average tangible common equity for each business segment is determined using our Required Capital framework (see “Liquidity and Capital Resources—Regulatory Requirements—Attribution of Average Common Equity According to the Required Capital Framework” herein). The sums of the segments’ Average common equity and Average tangible common equity do not equal the Consolidated measures due to Parent Company equity.

3.The calculation of ROE and ROTCE by segment uses net income applicable to Morgan Stanley by segment less preferred dividends allocated to each segment, annualized as a percentage of average common equity and average tangible common equity, respectively, allocated to each segment.

Return on Tangible Common Equity Goal

We have an ROTCE goal of 20%. Our ROTCE goal is a forward-looking statement that is based on a normal market environment and may be materially affected by many factors.

See “Risk Factors” and “Forward-Looking Statements” in the 2023 Form 10-K for further information on market and economic conditions and their potential effects on our future operating results.

ROTCE represents a non-GAAP financial measure. For further information on non-GAAP measures, see “Selected Non-GAAP Financial Information” herein.

Business Segments

Substantially all of our operating revenues and operating expenses are directly attributable to our business segments. Certain revenues and expenses have been allocated to each business segment, generally in proportion to its respective net revenues, non-interest expenses or other relevant measures. See Note 19 to the financial statements for segment net revenues by income statement line item and information on intersegment transactions.

For an overview of the components of our business segments, net revenues, compensation expense and income taxes, see “Management’s Discussion and Analysis of Financial

Condition and Results of Operations—Business Segments” in the 2023 Form 10-K.

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Management’s Discussion and Analysis

Institutional Securities

Income Statement Information

Investment Banking

Investment Banking Volumes

Source: Refinitiv data as of July 1, 2024. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal, change in value or change in timing of certain transactions.

1.Includes transactions of $100 million or more. Based on full credit to each of the advisors in a transaction.

2.Based on full credit for single book managers and equal credit for joint book managers.

3.Includes Rule 144A issuances and registered public offerings of common stock, convertible securities and rights offerings.

4.Includes Rule 144A and publicly registered issuances, non-convertible preferred stock, mortgage-backed and asset-backed securities, and taxable municipal debt. Excludes leveraged loans and self-led issuances.

Investment Banking Revenues

Revenues of $1,619 million in the current quarter increased 51% from the prior year quarter, reflecting increases across businesses.

• Advisory revenues increased on higher completed M&A transactions.
• Equity underwriting revenues increased on higher private placement offerings, initial public offerings and convertible issuances, partially offset by lower revenues from follow-on offerings.
• Fixed Income underwriting revenues increased, primarily in non-investment grade issuances.

Revenues of $3,066 million in the current year period increased 32% compared with the prior year period, primarily reflecting an increase in underwriting revenues.

• Advisory revenues decreased primarily due to lower fee realizations.
• Equity underwriting revenues increased on higher volumes across products, particularly in initial public offerings.
• Fixed Income underwriting revenues increased across products, particularly in non-investment grade issuances.

While Investment Banking results improved from recent quarters, we continue to operate in a market environment with lower completed M&A activity relative to longer-term averages.

See “Investment Banking Volumes” herein.

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Management’s Discussion and Analysis

Equity, Fixed Income and Other Net Revenues

Equity and Fixed Income Net Revenues

1.Includes Commissions and fees and Asset management revenues.

2.Includes funding costs, which are allocated to the businesses based on funding usage.

3.Includes Investments and Other revenues.

Equity

Net revenues of $3,018 million in the current quarter increased 18% compared with the prior year quarter, primarily reflecting an increase in Execution services and Financing, particularly in Asia.

• Financing revenues increased primarily due to higher average client balances and activity, partially offset by lower spreads driven by changes in the client balance mix and higher funding costs.
• Execution services revenues increased on higher gains on inventory held to facilitate client activity and increased client activity in derivatives and cash equities.

Net revenues of $5,860 million in the current year period increased 11% compared with the prior year period, primarily reflecting an increase in Execution services.

• Financing revenues increased primarily due to higher average client balances and activity, partially offset by lower gains on inventory held to facilitate client activity in Asia compared with elevated results in the prior year period.
• Execution services revenues increased on higher gains on inventory held to facilitate client activity and increased client activity in derivatives and cash equities.

Fixed Income

Net revenues of $1,999 million in the current quarter increased 16% from the prior year quarter, primarily reflecting an increase in Credit and Global macro products.

• Global macro products revenues increased primarily due to improved results in foreign exchange products, partially offset by a decline in rates products.
• Credit products revenues increased across products, most notably in securitized products.
• Commodities products and other fixed income revenues decreased primarily due to decreased client activity, partially offset by gains on inventory held to facilitate client activity.

Net revenues of $4,484 million in the current year period increased 4% compared with the prior year period, primarily reflecting an increase in Credit products.

• Global macro products revenues decreased primarily due to a decline in rates products, partially offset by improved results in foreign exchange products.
• Credit products revenues increased primarily due to higher gains on securitized products.
• Commodities products and other fixed income revenues increased primarily due to higher gains on inventory held to facilitate client activity, partially offset by lower client activity.

Other Net Revenues

Other net revenues were $346 million in the current quarter, compared with $315 million in the prior year quarter, primarily due to higher net interest income and fees and lower mark-to-market losses on corporate loans, inclusive of hedges.

Other net revenues were $588 million in the current year period compared with $560 million in the prior year period, primarily due to higher net interest income and fees, partially offset by higher mark-to-market losses on corporate loans, inclusive of hedges.

Provision for Credit Losses

The Provision for credit losses on loans and lending commitments of $54 million in the current quarter was primarily related to provisions for certain specific commercial real estate loans, mainly in the office sector, and modest growth in the corporate loan portfolio. The Provision for credit losses on loans and lending commitments was $97 million in the prior year quarter, primarily related to credit deterioration in commercial real estate lending, mainly in the office sector, and modest growth in certain loan portfolios.

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Management’s Discussion and Analysis

The Provision for credit losses on loans and lending commitments of $56 million in the current year period was primarily related to provisions for certain specific commercial real estate loans, mainly in the office sector, and modest growth in certain corporate loan portfolios. This was partially offset by improvements in the macroeconomic outlook. The Provision for credit losses on loans and lending commitments was $286 million in the prior year period, primarily related to credit deterioration in commercial real estate lending, mainly in the office sector, modest growth in certain loan portfolios and deterioration in the macroeconomic outlook.

For further information on the Provision for credit losses, see “Credit Risk” herein.

Non-interest Expenses

Non-interest expenses of $4,882 million in the current quarter and $9,545 million in the current year period increased 7% and 3%, respectively, compared with the prior year periods, primarily as a result of higher Non-compensation expenses.

• Compensation and benefits expenses increased primarily due to higher discretionary incentive compensation on higher revenues, partially offset by lower severance costs.
• Non-compensation expenses increased primarily due to higher execution-related expenses and increased technology spend, partially offset by lower legal expenses.

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Management’s Discussion and Analysis

Wealth Management

Income Statement Information

1.Transactional includes Investment banking, Trading, and Commissions and fees revenues. Other includes Investments and Other revenues.

Wealth Management Metrics

1.Client assets represent those for which Wealth Management is providing services including financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage and investment advisory services; financial and wealth planning services; workplace services, including stock plan administration, and retirement plan services. See “Advisor-Led Channel” and “Self-Directed Channel” herein for additional information.

2.Margin and other lending represents margin lending arrangements, which allow customers to borrow against the value of qualifying securities and other lending which includes non‐purpose securities-based lending on non‐bank entities.

3.Deposits reflect liabilities sourced from Wealth Management clients and other sources of funding on our U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other deposits, and time deposits.

4.Annualized weighted average represents the total annualized weighted average cost of the various deposit products, excluding the effect of related hedging derivatives. The period end cost of deposits is based upon balances and rates as of June 30, 2024 and December 31, 2023. The period average is based on daily balances and rates for the period.

Net New Assets

NNA represent client asset inflows, inclusive of interest, dividends and asset acquisitions, less client asset outflows, and exclude the impact of business combinations/divestitures and the impact of fees and commissions. The level of NNA in a given period is influenced by a variety of factors, including macroeconomic factors that impact client investment and spending behaviors, seasonality, our ability to attract and retain financial advisors and clients, and large idiosyncratic inflows and outflows. These factors have had an impact on our NNA in recent periods. Should these factors continue, the growth rate of our NNA may be impacted.

Advisor-led Channel

1.Advisor-led client assets represent client assets in accounts that have a Wealth Management representative assigned.

2.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.

3.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. For a description of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets in the 2023 Form 10-K.

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Management’s Discussion and Analysis

Self-directed Channel

1.Self-directed client assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets.

2.Self-directed households represent the total number of households that include at least one active account with self-directed assets. Individual households or participants that are engaged in one or more of our Wealth Management channels are included in each of the respective channel counts.

3.DARTs represent the total self-directed trades in a period divided by the number of trading days during that period.

Workplace Channel1

1.The workplace channel includes equity compensation solutions for companies, their executives and employees.

2.Stock plan unvested assets represent the market value of public company securities at the end of the period.

3.Stock plan participants represent total accounts with vested and/or unvested stock plan assets in the workplace channel. Individuals with accounts in multiple plans are counted as participants in each plan.

Net Revenues

Asset Management

Asset management revenues of $3,989 million in the current quarter and $7,818 million in the current year period increased 16% and 14%, respectively, compared with the prior year periods, primarily reflecting higher fee-based asset levels in the current quarter due to higher market levels and the cumulative impact of positive fee-based flows.

See “Fee-Based Client Assets Rollforwards” herein.

Transactional Revenues

Transactional revenues of $782 million in the current quarter decreased 10% compared with the prior year quarter, primarily driven by losses on DCP investments compared with gains in the prior year quarter, partially offset by higher equity related transactions.

In the current year period, transactional revenues of $1,815 million increased 1% compared with the prior year period, primarily driven by higher equity related transactions, partially offset by lower gains on DCP investments.

For further information on the impact of DCP, see “Selected Non-GAAP Financial Information” herein.

Net Interest

Net interest revenues of $1,798 million in the current quarter and $3,654 million in the current year period decreased 17% and 15%, respectively, compared with the prior year periods, primarily due to changes in deposit mix, partially offset by the net effect of higher interest rates.

The level and pace of interest rate changes and other macroeconomic factors continued to impact client preferences for cash allocation to higher-yielding products and client demand for loans. Certain of these factors have impacted our net interest income and to the extent they persist, or others arise, such as pricing changes to certain deposit types due to various competitive dynamics, net interest income may be further impacted in future periods.

Provision for Credit Losses

The Provision for credit losses on loans and lending commitments of $22 million in the current quarter was primarily related to certain specific securities-based loans. The Provision for credit losses on loans and lending commitments of $64 million in the prior year quarter was primarily related to credit deterioration in commercial real estate lending, mainly in the office sector.

The Provision for credit losses on loans and lending commitments of $14 million in the current year period was primarily related to certain specific securities-based and commercial real estate loans, mainly in the office sector. This was partially offset by improvements in the macroeconomic outlook. In the prior year period, the Provision for credit losses on loans and lending commitments of $109 million was primarily related to credit deterioration in commercial real estate lending, mainly in the office sector, and deterioration in the macroeconomic outlook.

Non-interest Expenses

Non-interest expenses of $4,949 million in the current quarter and $10,031 million in the current year period increased 1% and 3%, respectively, compared with the prior year periods, as a result of higher Compensation and benefits expenses, partially offset by lower Non-compensation expenses.

• Compensation and benefits expenses increased from the prior year periods, primarily as a result of an increase in the formulaic payout to Wealth Management representatives driven by higher compensable revenues, partially offset by lower severance costs and lower expenses related to DCP.
• Non-compensation expense decreased from the prior year periods reflecting lower professional services and legal expenses, partially offset by higher spend on technology.

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Management’s Discussion and Analysis

Fee-Based Client Assets Rollforwards

1.Inflows include new accounts, account transfers, deposits, dividends and interest.

2.Outflows include closed or terminated accounts, account transfers, withdrawals and client fees.

3.Market impact includes realized and unrealized gains and losses on portfolio investments.

4.Includes non-custody account values based on asset values reported on a quarter lag by third-party custodians.

Average Fee Rates1

1.Based on Asset management revenues related to advisory services associated with fee-based assets.

For a description of fee-based client assets in the previous tables, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Wealth Management Fee-Based Client Assets” in the 2023 Form 10-K.

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Management’s Discussion and Analysis

Investment Management

Income Statement Information

1.Includes Investments, Trading, Commissions and fees, Net interest, and Other revenues.

Net Revenues

Asset Management and Related Fees

Asset management and related fees of $1,342 million in the current quarter and $2,688 million in the current year period increased 6% and 7%, respectively, from the prior year periods, primarily driven by higher average AUM on higher market levels from the prior year periods.

Asset management revenues are influenced by the level, relative mix of AUM and related fee rates. While higher market levels drove increases in average AUM in the current quarter, we have continued to see net outflows in the Equity asset class, which may be influenced by the performance of our products relative to their benchmarks, partially offset by

net inflows in the Alternatives and Solutions asset class reflecting client preferences. To the extent these conditions continue, we would expect our Asset management revenue to continue to be impacted.

See “Assets under Management or Supervision” herein.

Performance-based Income and Other

Performance-based income and other revenues of $44 million in the current quarter and $75 million in the current year period increased, from the prior year periods, primarily due to higher accrued carried interest in certain private funds, partially offset by lower revenues from DCP investments.

Non-interest Expenses

Non-interest expenses of $1,164 million in the current quarter increased 5% from the prior year quarter, as a result of higher Non-compensation expenses and Compensation expenses.

• Compensation and benefits expenses increased in the current quarter, primarily due to higher expenses related to compensation associated with carried interest, partially offset by lower expenses related to DCP.
• Non-compensation expenses increased in the current quarter, primarily due to increased technology and infrastructure spend.

Non-interest expenses of $2,300 million in the current year period increased 3% from the prior year period, as a result of higher Non-compensation expenses and Compensation expenses.

• Compensation and benefits expenses increased in the current year period, primarily due to higher expenses related to compensation associated with carried interest, partially offset by lower expenses related to DCP.
• Non-compensation expenses increased in the current year period, primarily due to higher distribution expenses on higher AUM and increased technology and infrastructure spend.

June 2024 Form 10-Q 17

Management’s Discussion and Analysis

Assets under Management or Supervision Rollforwards

1.Inflows represent investments or commitments from new and existing clients in new or existing investment products, including reinvestments of client dividends and increases in invested capital. Inflows exclude the impact of exchanges, whereby a client changes positions within the same asset class.

2.Outflows represent redemptions from clients’ funds, transition of funds from the committed capital period to the invested capital period and decreases in invested capital. Outflows exclude the impact of exchanges, whereby a client changes positions within the same asset class.

3.Market impact includes realized and unrealized gains and losses on portfolio investments. This excludes any funds where market impact does not impact management fees.

4.Other contains both distributions and foreign currency impact for all periods. Distributions represent decreases in invested capital due to returns of capital after the investment period of a fund. It also includes fund dividends that the client has not reinvested. Foreign currency impact reflects foreign currency changes for non-U.S. dollar dominated funds.

5.In 2023, our Retail Municipal and Corporate Fixed Income business (“FIMS”) was combined with our Parametric retail customized solutions business. The impact of the change was a $6 billion movement in AUM from Fixed Income to the Alternatives and Solutions asset class included in Other.

Average AUM

Average Fee Rates1

1.Based on Asset management revenues, net of waivers, excluding performance-based fees and other non-management fees. For certain non-U.S. funds, it includes the portion of advisory fees that the advisor collects on behalf of third-party distributors. The payment of those fees to the distributor is included in Non-compensation expenses in the income statement.

For a description of the asset classes in the previous tables, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Segments—Investment Management—Assets Under Management or Supervision” in the 2023 Form 10-K.

18 June 2024 Form 10-Q

Management’s Discussion and Analysis

Supplemental Financial Information

U.S. Bank Subsidiaries

Our U.S. Bank Subsidiaries, Morgan Stanley Bank N.A. (“MSBNA”) and Morgan Stanley Private Bank, National Association (“MSPBNA”) (together, “U.S. Bank Subsidiaries”), accept deposits, provide loans to a variety of customers, including large corporate and institutional clients, as well as high to ultra-high net worth individuals, and invest in securities. Lending activity in our U.S. Bank Subsidiaries from the Institutional Securities business segment primarily includes Secured lending facilities, Commercial and Residential real estate and Corporate loans. Lending activity in our U.S. Bank Subsidiaries from the Wealth Management business segment primarily includes Securities-based lending, which allows clients to borrow money against the value of qualifying securities, and Residential real estate loans.

For a further discussion of our credit risks, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” herein. For a further discussion about loans and lending commitments, see Notes 9 and 13 to the financial statements.

U.S. Bank Subsidiaries’ Supplemental Financial Information1

1.Amounts exclude transactions between the bank subsidiaries, as well as deposits from the Parent Company and affiliates.

2.For a further discussion of loans in the Wealth Management and Institutional Securities business segments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” herein.

3.Other loans primarily include tailored lending. For a further discussion of Other loans, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” herein.

4.For further information on deposits, see “Liquidity and Capital Resources—Funding Management—Balance Sheet—Unsecured Financing” herein.

Accounting Development Updates

The Financial Accounting Standards Board has issued certain accounting updates that apply to us. Accounting updates not listed below were assessed and determined to be either not applicable or to not have a material impact on our financial condition or results of operations upon adoption.

We are currently evaluating the following accounting updates; however, we do not expect a material impact on our financial condition or results of operations upon adoption:

• Income Tax Disclosures. This accounting update requires disclosure of additional information in relation to income taxes, including additional disaggregation of the income tax rate reconciliation and income taxes paid. For the income tax rate reconciliation, this update requires (1) disclosure of specific categories of reconciling items; and (2) additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). For income taxes paid, this update requires disclosure of information, including (1) the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes; and (2) the amount of income taxes paid (net of refunds received), disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). Additionally, the update requires disclosure of (1) income (or loss) before income taxes, disaggregated between domestic and foreign; and (2) income taxes disaggregated by federal, state and foreign. The accounting update is effective for annual periods beginning January 1, 2025, with early adoption permitted.
• Segment Reporting. This accounting update requires additional reportable segment disclosures on an annual and interim basis, primarily about significant segment expenses and other segment items that are regularly provided to the chief operating decision maker and included within the reported measure of segment profit or loss. This update does not change how operating segments are identified or aggregated, or how quantitative thresholds are applied to determine the reportable segments. The accounting update is effective for fiscal years beginning January 1, 2024, and interim periods within fiscal years beginning January 1, 2025, with early adoption permitted.

Critical Accounting Estimates

Our financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions (see Note 1 to the financial statements). We believe that of our significant accounting policies (see Note 2 to the financial statements in the 2023 Form 10-K and Note 2 to the financial statements), the fair value of financial instruments, goodwill and intangible assets, legal and regulatory contingencies (see Note 14 to the financial statements in the 2023 Form 10-K and Note 13 to the financial statements) and income taxes policies involve a higher degree of judgment and complexity. For a further discussion about our critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in the 2023 Form 10-K.

June 2024 Form 10-Q 19

Management’s Discussion and Analysis

Liquidity and Capital Resources

Our liquidity and capital policies are established and maintained by senior management, with oversight by the Asset/Liability Management Committee and our Board of Directors (“Board”). Through various risk and control committees, senior management reviews business performance relative to these policies, monitors the availability of alternative sources of financing, and oversees the liquidity, interest rate and currency sensitivity of our asset and liability position. Our Corporate Treasury department (“Treasury”), Firm Risk Committee, Asset/Liability Management Committee, and other committees and control groups assist in evaluating, monitoring and managing the impact that our business activities have on our balance sheet, liquidity and capital structure. Liquidity and capital matters are reported regularly to the Board and the Risk Committee of the Board.

Balance Sheet

We monitor and evaluate the composition and size of our balance sheet on a regular basis. Our balance sheet management process includes quarterly planning, business-specific thresholds, monitoring of business-specific usage versus key performance metrics and new business impact assessments.

We establish balance sheet thresholds at the consolidated and business segment levels. We monitor balance sheet utilization and review variances resulting from business activity and market fluctuations. On a regular basis, we review current performance versus established thresholds and assess the need to re-allocate our balance sheet based on business segment needs. We also monitor key metrics, including asset and liability size and capital usage.

Total Assets by Business Segment

1.Amounts include loans held for investment, net of ACL, and loans held for sale but exclude loans at fair value, which are included in Trading assets in the balance sheet (see Note 9 to the financial statements).

2.Other assets primarily includes premises, equipment and software, ROU assets related to leases, other investments, and deferred tax assets.

A substantial portion of total assets consists of cash and cash equivalents, liquid marketable securities and short-term receivables. In the Institutional Securities business segment, these arise from market-making, financing and prime brokerage activities, and in the Wealth Management business segment, these arise from banking activities, including management of the investment portfolio. Total assets of $1,212 billion at June 30, 2024 were relatively unchanged from $1,194 billion at December 31, 2023.

Liquidity Risk Management Framework

The core components of our Liquidity Risk Management Framework are the Required Liquidity Framework, Liquidity Stress Tests and Liquidity Resources, which support our target liquidity profile. For a further discussion about the Firm’s Required Liquidity Framework and Liquidity Stress Tests, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity Risk Management Framework” in the 2023 Form 10-K.

At June 30, 2024 and December 31, 2023, we maintained sufficient liquidity to meet current and contingent funding obligations as modeled in our Liquidity Stress Tests.

Liquidity Resources

We maintain sufficient liquidity resources, which consist of HQLA and cash deposits with banks (“Liquidity Resources”), to cover daily funding needs and to meet strategic liquidity targets sized by the Required Liquidity Framework and Liquidity Stress Tests. We actively manage the amount of our Liquidity Resources 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.

20 June 2024 Form 10-Q

Management’s Discussion and Analysis

The amount of Liquidity Resources we hold is based on our risk appetite and is calibrated to meet various internal and regulatory requirements and to fund prospective business activities. The Liquidity Resources are primarily held within the Parent Company and its major operating subsidiaries. The Total HQLA values in the tables immediately following are different from Eligible HQLA, which, in accordance with the LCR rule, also takes into account certain regulatory weightings and other operational considerations.

Liquidity Resources by Type of Investment

1.HQLA is presented prior to applying weightings and includes all HQLA held in subsidiaries.

2.Primarily composed of unencumbered French, U.K., Japanese, Italian, German, and Spanish government obligations.

Liquidity Resources by Bank and Non-Bank Legal Entities

Liquidity Resources may fluctuate from period to period based on the overall size and composition of our balance sheet, the maturity profile of our unsecured debt, and estimates of funding needs in a stressed environment, among other factors.

Regulatory Liquidity Framework

Liquidity Coverage Ratio and Net Stable Funding Ratio

We and our U.S. Bank Subsidiaries are required to maintain a minimum LCR and NSFR of 100%.

The LCR rule requires large banking organizations to have sufficient Eligible HQLA to cover net cash outflows arising

from significant stress over 30 calendar days, thus promoting the short-term resilience of the liquidity risk profile of banking organizations. In determining Eligible HQLA for LCR purposes, weightings (or asset haircuts) are applied to HQLA, and certain HQLA held in subsidiaries is excluded.

The NSFR rule requires large banking organizations to maintain an amount of available stable funding, which is their regulatory capital and liabilities subject to standardized weightings, equal to or greater than their required stable funding, which is their projected minimum funding needs, over a one-year time horizon.

As of June 30, 2024, we and our U.S. Bank Subsidiaries are compliant with the minimum LCR and NSFR requirements of 100%.

Liquidity Coverage Ratio

1.Primarily includes U.S. Treasuries, U.S. agency mortgage-backed securities, sovereign bonds and investment grade corporate bonds.

Net Stable Funding Ratio

Funding Management

We manage our funding in a manner that reduces the risk of disruption to our operations. We pursue a strategy of diversification of secured and unsecured funding sources (by product, investor and region) and attempt to ensure that the tenor of our liabilities equals or exceeds the expected holding period of the assets being financed. Our goal is to achieve an optimal mix of durable secured and unsecured financing.

We fund our balance sheet on a global basis through diverse sources. These sources include our equity capital, borrowings, bank notes, securities sold under agreements to repurchase, securities lending, deposits, letters of credit and lines of credit. We have active financing programs for both standard and structured products targeting global investors and currencies.

Treasury allocates interest expense to our businesses based on the tenor and interest rate profile of the assets being funded. Treasury similarly allocates interest income to businesses

June 2024 Form 10-Q 21

Management’s Discussion and Analysis

carrying deposit products and other liabilities across the businesses based on the characteristics of those deposits and other liabilities.

Secured Financing

For a discussion of our secured financing activities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Funding Management—Secured Financing” in the 2023 Form 10-K.

Collateralized Financing Transactions

1.Included within Trading assets in the balance sheet.

See “Total Assets by Business Segment” herein for additional information on the assets shown in the previous table and Note 2 to the financial statements in the 2023 Form 10-K and Note 8 to the financial statements for additional information on collateralized financing transactions.

In addition to the collateralized financing transactions shown in the previous table, we engage in financing transactions collateralized by customer-owned securities, which are segregated in accordance with regulatory requirements. Receivables under these financing transactions, primarily margin loans, are included in Customer and other receivables in the balance sheet, and payables under these financing transactions, primarily to prime brokerage customers, are included in Customer and other payables in the balance sheet. Our risk exposure on these transactions is mitigated by collateral maintenance policies and the elements of our Liquidity Risk Management Framework.

Unsecured Financing

For a discussion of our unsecured financing activities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Funding Management—Unsecured Financing” in the 2023 Form 10-K.

Deposits

1.Amounts represent balances swept from client brokerage accounts.

2.Our Time deposits are predominantly brokered certificates of deposit.

3.Our deposits are primarily held in U.S. offices.

Deposits are primarily sourced from our Wealth Management clients and are considered to have stable, low-cost funding characteristics relative to other sources of funding. Each category of deposits presented above has a different cost profile and clients may respond differently to changes in interest rates and other macroeconomic conditions. Total deposits in the current year period were relatively unchanged as a result of a continued reduction in Brokerage sweep deposits, largely due to net outflows to alternative cash equivalent and other investment products, offset by an increase in Time deposits.

Borrowings by Maturity at June 30, 20241

1.Original maturity in the table is generally based on contractual final maturity. For borrowings with put options, maturity represents the earliest put date.

2.Includes only borrowings with original maturities greater than one year.

Borrowings of $275 billion as of June 30, 2024 increased when compared with $264 billion at December 31, 2023 primarily due to issuances net of maturities and redemptions.

We believe that accessing debt investors through multiple distribution channels helps provide consistent access to the unsecured markets. In addition, the issuance of borrowings with original maturities greater than one year allows us to reduce reliance on short-term credit-sensitive instruments. Borrowings with original maturities greater than one year are generally managed to achieve staggered maturities, thereby mitigating refinancing risk, and to maximize investor diversification through sales to global institutional and retail clients across regions, currencies and product types.

The availability and cost of financing to us can vary depending on market conditions, the volume of certain trading and lending activities, our credit ratings and the overall

22 June 2024 Form 10-Q

Management’s Discussion and Analysis

availability of credit. We also engage in, and may continue to engage in, repurchases of our borrowings as part of our market-making activities.

For further information on Borrowings, see Note 12 to the financial statements.

Credit Ratings

We rely on external sources to finance a significant portion of our daily operations. Our credit ratings are one of the factors in the cost and availability of financing and can have an impact on certain trading revenues, particularly in those businesses where longer-term counterparty performance is a key consideration, such as certain OTC derivative transactions. When determining credit ratings, rating agencies consider both company-specific and industry-wide factors. See also “Risk Factors—Liquidity Risk” in the 2023 Form 10-K.

Parent Company and U.S. Bank Subsidiaries Issuer Ratings at July 31, 2024

Parent Company

Short-Term Debt Long-Term Debt Rating Outlook

DBRS, Inc. R-1 (middle) A (high) Positive

Fitch Ratings, Inc. F1 A+ Stable

Moody’s Investors Service, Inc. P-1 A1 Stable

Rating and Investment Information, Inc. a-1 A+ Stable

S&P Global Ratings A-2 A- Stable

MSBNA

Short-Term Debt Long-Term Debt Rating Outlook

Fitch Ratings, Inc. F1+ AA- Stable

Moody’s Investors Service, Inc. P-1 Aa3 Stable

S&P Global Ratings A-1 A+ Stable

MSPBNA

Short-Term Debt Long-Term Debt Rating Outlook

Moody’s Investors Service, Inc. P-1 Aa3 Stable

S&P Global Ratings A-1 A+ Stable

Incremental Collateral or Terminating Payments

In connection with certain OTC derivatives and certain other agreements where we are a liquidity provider to certain financing vehicles associated with the Institutional Securities business segment, we may be required to provide additional collateral, immediately settle any outstanding liability balances with certain counterparties or pledge additional collateral to certain clearing organizations in the event of a future credit rating downgrade irrespective of whether we are in a net asset or net liability position. See Note 6 to the financial statements for additional information on OTC derivatives that contain such contingent features.

While certain aspects of a credit rating downgrade are quantifiable pursuant to contractual provisions, the impact it would have on our business and results of operations in future periods is inherently uncertain and would depend on a number

of interrelated factors, including, among other things, the magnitude of the downgrade, the rating relative to peers, the rating assigned by the relevant agency before the downgrade, individual client behavior and future mitigating actions we might take. The liquidity impact of additional collateral requirements is included in our Liquidity Stress Tests.

Capital Management

We view capital as an important source of financial strength and actively manage our consolidated capital position based upon, among other things, business opportunities, risks, capital availability and rates of return together with internal capital policies, regulatory requirements, such as the SCB, and rating agency guidelines. In the future, we may expand or contract our capital base to address the changing needs of our businesses.

Common Stock Repurchases

For additional information on our common stock repurchases, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein and Note 16 to the financial statements.

For a description of our capital plan, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.

Common Stock Dividend Announcement

Announcement date July 16, 2024

Amount per share $0.925

Date to be paid August 15, 2024

Shareholders of record as of July 31, 2024

For additional information on our common stock dividends, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” herein.

For additional information on our common stock and information on our preferred stock, see Note 16 to the financial statements.

Off-Balance Sheet Arrangements

We enter into various off-balance sheet arrangements, including through unconsolidated SPEs and lending-related financial instruments (e.g., guarantees and commitments), primarily in connection with the Institutional Securities and Investment Management business segments.

June 2024 Form 10-Q 23

Management’s Discussion and Analysis

We utilize SPEs primarily in connection with securitization activities. For information on our securitization activities, see Note 15 to the financial statements in the 2023 Form 10-K.

For information on our commitments, obligations under certain guarantee arrangements and indemnities, see Note 13 to the financial statements. For a further discussion of our lending commitments, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Loans and Lending Commitments” herein.

Regulatory Requirements

Regulatory Capital Framework

We are a financial holding company (“FHC”) under the Bank Holding Company Act of 1956, as amended (“BHC Act”) and are subject to the regulation and oversight of the Federal Reserve. The Federal Reserve establishes capital requirements for us, including “well-capitalized” standards, and evaluates our compliance with such capital requirements. The OCC establishes similar capital requirements and standards for our U.S. Bank Subsidiaries. The regulatory capital requirements are largely based on the Basel III capital standards established by the Basel Committee and also implement certain provisions of the Dodd-Frank Act. For us to remain an FHC, we must remain well-capitalized in accordance with standards established by the Federal Reserve, and our U.S. Bank Subsidiaries must remain well-capitalized in accordance with standards established by the OCC. In addition, many of our regulated subsidiaries are subject to regulatory capital requirements, including regulated subsidiaries registered as swap dealers with the CFTC or conditionally registered as security-based swap dealers with the SEC or registered as broker-dealers or futures commission merchants. For additional information on regulatory capital requirements for our U.S. Bank Subsidiaries, as well as our subsidiaries that are swap entities, see Note 15 to the financial statements.

Regulatory Capital Requirements

We are required to maintain minimum risk-based and leverage-based capital and TLAC ratios. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Capital Requirements” in the 2023 Form 10-K. For additional information on TLAC, see “Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” herein.

Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 (“CET1”) capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus our capital buffer requirement. Capital requirements require certain adjustments to, and deductions from, capital for purposes of determining these ratios.

Risk-Based Regulatory Capital Ratio Requirements

1.For additional information on the SCB, see “Capital Plans, Stress Tests and the Stress Capital Buffer” herein and in the 2023 Form 10-K.

2.For a further discussion of the G-SIB capital surcharge, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—G-SIB Capital Surcharge” in the 2023 Form 10-K.

3.The CCyB can be set up to 2.5%, but is currently set by the Federal Reserve at zero.

The capital buffer requirement represents the amount of CET1 capital we must maintain above the minimum risk-based capital requirements in order to avoid restrictions on our ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. Our capital buffer requirement computed under the standardized approaches for calculating credit risk and market RWAs (“Standardized Approach”) is equal to the sum of our SCB, G-SIB capital surcharge and CCyB, and our capital buffer requirement computed under the applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (“Advanced Approach”) is equal to our 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB.

1.Required ratios represent the regulatory minimum plus the capital buffer requirement.

Our risk-based capital ratios are computed under each of (i) the Standardized Approach and (ii) the Advanced Approach. The credit risk RWA calculations between the two approaches differ in that the Standardized Approach requires calculation of RWA using prescribed risk weights and exposure methodologies, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights. At June 30, 2024 and December 31, 2023, the differences between the actual and required ratios were lower under the Standardized Approach.

Leverage-Based Regulatory Capital. Leverage-based capital requirements include a minimum Tier 1 leverage ratio of 4%, a minimum SLR of 3% and an enhanced SLR capital buffer of at least 2%.

CECL Deferral. Beginning on January 1, 2020, we elected to defer the effect of the adoption of CECL on our risk-based and leverage-based capital amounts and ratios, as well as our

24 June 2024 Form 10-Q

Management’s Discussion and Analysis

RWA, adjusted average assets and supplementary leverage exposure calculations, over a five-year transition period. The deferral impacts began to phase in at 25% per year from January 1, 2022 and are phased-in at 75% from January 1, 2024. The deferral impacts will become fully phased-in beginning on January 1, 2025.

Regulatory Capital Ratios

Risk-based capital

1.Required ratios are inclusive of any buffers applicable as of the date presented.

Leveraged-based capital

1.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments, certain deferred tax assets and other capital deductions.

2.Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures.

3.Required ratios are inclusive of any buffers applicable as of the date presented.

Regulatory Capital

1.Other adjustments and deductions used in the calculation of Common Equity Tier 1 capital primarily includes net after-tax DVA, the credit spread premium over risk-free rate for derivative liabilities, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments and certain deferred tax assets.

June 2024 Form 10-Q 25

Management’s Discussion and Analysis

RWA Rollforward

Regulatory VaR—VaR for regulatory capital requirements

In the current year period, Credit risk RWA increased under both the Standardized and Advanced Approaches. Under the Standardized Approach, the increase was primarily due to higher securities financing transactions, increase in Other credit risk driven by higher securitizations, and increased exposure in Corporate lending, partially offset by decreased exposure in derivatives. Under the Advanced Approach, the increase was primarily due to growth in Corporate lending and increase in Other credit risk driven by securitizations, partially offset by decreased exposure in derivatives.

Market risk RWA increased in the current year period under both the Standardized and Advanced Approaches, primarily due to higher Regulatory Stressed VaR, higher Specific risk charges on non-securitization standardized charges, and increased Incremental risk charges.

Operational risk RWA in the current year period remained relatively unchanged.

Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements

The Federal Reserve has established external TLAC, long-term debt (“LTD”) and clean holding company requirements for top-tier BHCs of U.S. G-SIBs (“covered BHCs”), including the Parent Company. These requirements are designed to ensure that covered BHCs will have enough loss-absorbing resources at the point of failure to be recapitalized

through the conversion of eligible LTD to equity or otherwise by imposing losses on eligible LTD or other forms of TLAC where an SPOE resolution strategy is used.

Required and Actual TLAC and Eligible LTD Ratios

1.Required ratios are inclusive of applicable buffers.

2.External TLAC consists of Common Equity Tier 1 capital and Additional Tier 1 capital (each excluding any noncontrolling minority interests), as well as eligible LTD.

3.Consists of TLAC-eligible LTD reduced by 50% for amounts of unpaid principal due to be paid in more than one year but less than two years from each respective balance sheet date.

We are in compliance with all TLAC requirements as of June 30, 2024 and December 31, 2023.

For a further discussion of TLAC and related requirements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Total Loss-Absorbing Capacity, Long-Term Debt and Clean Holding Company Requirements” in the 2023 Form 10-K.

Capital Plans, Stress Tests and the Stress Capital Buffer

The Federal Reserve has capital planning and stress test requirements for large BHCs, which form part of the Federal Reserve’s annual CCAR framework.

We must submit, on at least an annual basis, a capital plan to the Federal Reserve, taking into account the results of separate annual stress tests designed by us and the Federal Reserve, so that the Federal Reserve may assess our systems and processes that incorporate forward-looking projections of revenues and losses to monitor and maintain our internal capital adequacy. As banks with less than $250 billion of total assets, our U.S. Bank Subsidiaries are not subject to company-run stress test regulatory requirements.

As part of its annual capital supervisory stress testing process, the Federal Reserve determines an SCB for each large BHC, including us.

Our SCB will remain at 5.4% through September 30, 2024. Together with other features of the regulatory capital framework, this SCB results in an aggregate Standardized Approach Common Equity Tier 1 required ratio of 12.9%.

For the 2024 capital planning and stress test cycle, we submitted our capital plan and company-run stress test results to the Federal Reserve on April 5, 2024. On June 26, 2024,

26 June 2024 Form 10-Q

Management’s Discussion and Analysis

the Federal Reserve published summary results of its supervisory stress tests of each large BHC, in which the projected decline in our Common Equity Tier 1 ratio in the severely adverse scenario increased from the prior annual supervisory stress test by 50 basis points, from 4.1% to 4.6%. Following the publication of the supervisory stress test results, we announced that our SCB is expected to be 6.0% from October 1, 2024 through September 30, 2025. In addition to the projected decline in our Common Equity Tier 1 ratio in the severely adverse scenario, our expected SCB reflects the increase in our common stock dividend in the dividend add-on. Together with other features of the regulatory capital framework, this SCB results in an aggregate Standardized Approach Common Equity Tier 1 ratio of 13.5%. Generally, our SCB is determined annually based on the results of the supervisory stress test.

We also disclosed a summary of the results of our company-run stress tests on our Investor Relations website and increased our quarterly common stock dividend to $0.925 per share from $0.85, beginning with the common stock dividend announced on July 16, 2024.

For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer” in the 2023 Form 10-K.

Attribution of Average Common Equity According to the Required Capital Framework

Our required capital (“Required Capital”) estimation is based on the Required Capital framework, an internal capital adequacy measure. Common equity attribution to the business segments is based on capital usage calculated under the Required Capital framework, as well as each business segment’s relative contribution to our total Required Capital.

The Required Capital framework is a risk-based and leverage-based capital measure, which is compared with our regulatory capital to ensure that we maintain an amount of going concern capital after absorbing potential losses from stress events, where applicable, at a point in time. The amount of capital allocated to the business segments is generally set at the beginning of each year and remains fixed throughout the year until the next annual reset unless a significant business change occurs (e.g., acquisition or disposition). We define the difference between our total average common equity and the sum of the average common equity amounts allocated to our business segments as Parent Company common equity. We generally hold Parent Company common equity for prospective regulatory requirements, organic growth, potential future acquisitions and other capital needs.

Average Common Equity Attribution under the Required Capital Framework1

1.The attribution of average common equity to the business segments is a non-GAAP financial measure. See “Selected Non-GAAP Financial Information” herein.

We continue to evaluate our Required Capital framework with respect to the impact of evolving regulatory requirements, as appropriate.

Resolution and Recovery Planning

We are required to submit once every two years to the Federal Reserve and the FDIC (“Agencies”) a resolution plan that describes our strategy for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of our material financial distress or failure. We submitted our 2023 full resolution plan on June 30, 2023. In June 2024, we received joint feedback on our 2023 resolution plan from the Agencies, with no shortcomings or deficiencies identified.

As described in our most recent resolution plan, our preferred resolution strategy is an SPOE strategy. In line with our SPOE strategy, the Parent Company has transferred, and has agreed to transfer on an ongoing basis, certain assets to its wholly owned, direct subsidiary Morgan Stanley Holdings LLC (the “Funding IHC”). In addition, the Parent Company has entered into an amended and restated support agreement with its material entities (including the Funding IHC) and certain other subsidiaries. In the event of a resolution scenario, the Parent Company would be obligated to contribute all of its contributable assets to our supported entities and/or the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to our supported entities. The combined implication of the SPOE resolution strategy and the requirement to maintain certain levels of TLAC is that losses in resolution would be imposed on the holders of eligible LTD and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on creditors of our supported entities and without requiring taxpayer or government financial support.

For more information about resolution and recovery planning requirements and our activities in these areas, including the implications of such activities in a resolution scenario, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning,” “Risk Factors—Legal, Regulatory and Compliance Risk” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Resolution and Recovery Planning” in the 2023 Form 10-K.

June 2024 Form 10-Q 27

Management’s Discussion and Analysis

Regulatory Developments and Other Matters

FDIC Final Rulemaking on Insured Depository Institution Resolution Plans

On June 20, 2024, the FDIC adopted a final rule to modify the required cadence and informational content of covered insured depository institution ("IDI") resolution plan submissions, which describe the IDI's strategy for a rapid and orderly resolution in the event of material financial distress or failure of the IDI. As a result of the final rule, our U.S. Bank Subsidiaries will be required to submit full resolution plans every two years and interim targeted information at certain times between full resolution plan submissions. In addition, the new rule introduces a new credibility standard that will be used to evaluate full resolution plan submissions, which would be subject to FDIC enforcement action. The final rule is effective beginning October 1, 2024, and the first submission for our U.S. Bank Subsidiaries under the new rule will be in 2026. For more information on our resolution plan-related submissions and associated regulatory actions, see “Business—Supervision and Regulation—Financial Holding Company—Resolution and Recovery Planning" in the 2023 Form 10-K.

FDIC Final Rulemaking on Special Assessment

Following the failures of certain banks and resulting losses to the FDIC’s Deposit Insurance Fund in the first half of 2023, the FDIC adopted a final rule on November 16, 2023 to implement a special assessment to recover the cost associated with protecting uninsured depositors. Under the final rule, the assessment base for the special assessment is equal to an IDI’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion of uninsured deposits. The $5 billion exclusion is applied once to the aggregate uninsured deposits of our U.S. Bank Subsidiaries. The final rule provides that, starting in 2024, the FDIC will collect the special assessment at a quarterly rate of 3.36 basis points over eight quarterly assessment periods, subject to change depending on any adjustments to the loss estimate, mergers, failures, or amendments to reported estimates of uninsured deposits. We recorded the cost of the special assessment of $286 million in Non-interest expenses when the final rule was published in the Federal Register, in the fourth quarter of 2023. We recorded the incremental estimated cost of $50 million during the first half of 2024 based on subsequent notifications received from the FDIC which contained the revised estimated losses as well as the estimated recoveries from its receivership residual interests from those bank failures.

Basel III Endgame and G-SIB Surcharge Proposals

On July 27, 2023, U.S. banking agencies proposed revisions to risk-based capital and related standards applicable to us and our U.S. Bank Subsidiaries (“Basel III Endgame Proposal”). For more information on the Basel III Endgame Proposal, as well as the proposed revisions to the G-SIB capital surcharge framework, see “Management’s Discussion and Analysis of

Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Developments and Other Matters” in the 2023 Form 10-K.

28 June 2024 Form 10-Q

Quantitative and Qualitative Disclosures about Risk

Management believes effective risk management is vital to the success of our business activities. For a discussion of our Enterprise Risk Management framework and risk management functions, see “Quantitative and Qualitative Disclosures about Risk—Risk Management” in the 2023 Form 10-K.

Market Risk

Market risk refers to the risk that a change in the level of one or more market prices, rates, spreads, indices, volatilities, correlations or other market factors, such as market liquidity, will result in losses for a position or portfolio. Generally, we incur market risk as a result of trading, investing and client facilitation activities, principally within the Institutional Securities business segment where the substantial majority of our VaR for market risk exposures is generated. In addition, we incur non-trading market risk, principally within the Wealth Management and Investment Management business segments. The Wealth Management business segment primarily incurs non-trading market risk (including interest rate risk) from lending and deposit-taking activities. The Investment Management business segment primarily incurs non-trading market risk from capital investments in its funds. For a further discussion of market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk” in the 2023 Form 10-K.

Trading Risks

We have exposures to a wide range of risks related to interest rates and credit spreads, equity prices, foreign exchange rates and commodity prices as well as the associated implied volatilities, correlations and spreads of the global markets in which we conduct our trading activities.

The statistical technique known as VaR is one of the tools we use to measure, monitor and review the market risk exposures of our trading portfolios.

For information regarding our primary risk exposures and market risk management, VaR methodology, assumptions and limitations, see “Quantitative and Qualitative Disclosures about Risk—Market Risk—Trading Risks” in the 2023 Form 10-K.

95%/One-Day Management VaR for the Trading Portfolio

1.The high and low VaR values for the Total Management VaR and each of the component VaRs might have occurred on different days during the quarter, and, therefore, the diversification benefit is not an applicable measure.

2.Diversification benefit equals the difference between the total VaR and the sum of the component VaRs. This benefit arises because the simulated one-day losses for each of the components occur on different days. Similar diversification benefits are also are taken into account within each component.

Average Total Management VaR and average Management VaR for the Primary Risk Categories decreased from the three months ended March 31, 2024, primarily driven by reduced exposure in interest rates.

Distribution of VaR Statistics and Net Revenues

We evaluate the reasonableness of our VaR model by comparing the potential declines in portfolio values generated by the model with corresponding actual trading results for the Firm, as well as individual business units. For days where losses exceed the VaR statistic, we examine the drivers of trading losses to evaluate the VaR model’s accuracy. There was one trading loss day in the current quarter, which did not exceed 95% Total Management VaR.

June 2024 Form 10-Q 29

Risk Disclosures

Daily 95%/One-Day Total Management VaR for the Current Quarter

($ in millions)

Daily Net Trading Revenues for the Current Quarter

($ in millions)

Daily net trading revenues include profits and losses from Interest rate and credit spread, Equity price, Foreign exchange rate, Commodity price, and Credit Portfolio positions and intraday trading activities for our trading businesses. Certain items such as fees, commissions, net interest income and counterparty default risk are excluded from daily net trading revenues and the VaR model. Revenues required for Regulatory VaR backtesting further exclude intraday trading.

Non-Trading Risks

We believe that sensitivity analysis is an appropriate representation of our non-trading risks. The following sensitivity analyses cover substantially all of the non-trading risk in our portfolio.

Credit Spread Risk Sensitivity1

1.Amounts represent the potential gain for each 1 bps widening of our credit spread.

The Wealth Management business segment reflects a substantial portion of our non-trading interest rate risk. Net interest income in the Wealth Management business segment primarily consists of interest income earned on non-trading assets held, including loans and investment securities, as well as margin and other lending on non-bank entities and interest expense incurred on non-trading liabilities, primarily deposits.

Wealth Management Net Interest Income Sensitivity Analysis

The previous table presents an analysis of selected instantaneous upward and downward parallel interest rate shocks (subject to a floor of zero percent in the downward scenario) on net interest income over the next 12 months for our Wealth Management business segment. These shocks are applied to our 12-month forecast for our Wealth Management business segment, which incorporates market expectations of interest rates and our forecasted balance sheet and business activity. The forecast includes modeled prepayment behavior, reinvestment of net cash flows from maturing assets and liabilities, and deposit pricing sensitivity to interest rates. These key assumptions are updated periodically based on historical data and future expectations.

We do not manage to any single rate scenario but rather manage net interest income in our Wealth Management business segment across a range of possible outcomes, including non-parallel rate change scenarios. The sensitivity analysis assumes that we take no action in response to these scenarios, assumes there are no changes in other macroeconomic variables normally correlated with changes in interest rates and includes subjective assumptions regarding customer and market re-pricing behavior and other factors.

Our Wealth Management business segment balance sheet is asset sensitive, given assets reprice faster than liabilities,

30 June 2024 Form 10-Q

Risk Disclosures

resulting in higher net interest income in increasing interest rate scenarios. The level of interest rates may impact the amount of deposits held at the Firm, given competition for deposits from other institutions and alternative cash-equivalent products available to depositors. Further, the level of interest rates could also impact client demand for loans.

Net interest income sensitivity to interest rates at June 30, 2024 decreased from March 31, 2024, primarily driven by the effect of changes in the mix of our assets and liabilities.

Investments Sensitivity, Including Related Carried Interest

We have exposure to public and private companies through direct investments, as well as through funds that invest in these assets. These investments are predominantly equity positions with long investment horizons, a portion of which is for business facilitation purposes. The market risk related to these investments is measured by estimating the potential reduction in net revenues associated with a reasonably possible 10% decline in investment values and related impact on performance-based income, as applicable.

Asset Management Revenue Sensitivity

Certain asset management revenues in the Wealth Management and Investment Management business segments are derived from management fees, which are based on fee-based client assets in Wealth Management or AUM in Investment Management (together, “client holdings”). The assets underlying client holdings are primarily composed of equity, fixed income and alternative investments and are sensitive to changes in related markets. These revenues depend on multiple factors including, but not limited to, the level and duration of a market increase or decline, price volatility, the geographic and industry mix of client assets, and client behavior such as the rate and magnitude of client investments and redemptions. Therefore, overall revenues may not correlate completely with changes in the related markets.

Credit Risk

Credit risk refers to the risk of loss arising when a borrower, counterparty or issuer does not meet its financial obligations to us. We are primarily exposed to credit risk from institutions and individuals through our Institutional Securities and Wealth Management business segments. For a further discussion of our credit risks, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” in the 2023 Form 10-K.

Loans and Lending Commitments

Total exposure—consists of Total loans, net of ACL, and Lending commitments

1.FVO includes the fair value of certain unfunded lending commitments.

2.Investment Management business segment loans are related to certain of our activities as an investment adviser and manager. Loans held at fair value are the result of the consolidation of investment vehicles (including CLOs) managed by Investment Management, composed primarily of senior secured loans to corporations.

3.Lending commitments represent the notional amount of legally binding obligations to provide funding to clients for lending transactions. Since commitments associated with these business activities may expire unused or may not be utilized to full capacity, they do not necessarily reflect the actual future cash funding requirements.

June 2024 Form 10-Q 31

Risk Disclosures

We provide loans and lending commitments to a variety of customers, including large corporate and institutional clients, as well as high to ultra-high net worth individuals. In addition, we purchase loans in the secondary market. Loans and lending commitments are either held for investment, held for sale or carried at fair value. For more information on these loan classifications, see Note 2 to the financial statements in the 2023 Form 10-K.

Total loans and lending commitments increased by approximately $21 billion since December 31, 2023, primarily due to an increase in Corporate lending commitments and Secured lending facilities within the Institutional Securities business segment, and growth in Residential real estate loans within the Wealth Management business segment.

See Notes 4, 5, 9 and 13 to the financial statements for further information.

Allowance for Credit Losses—Loans and Lending Commitments

Provision for Credit Losses by Business Segment

Credit exposure arising from our loans and lending commitments is measured in accordance with our internal risk management standards. Risk factors considered in determining the allowance for credit losses for loans and lending commitments include the borrower’s financial strength, industry, facility structure, LTV ratio, debt service ratio, collateral and covenants. Qualitative and environmental factors such as economic and business conditions, nature and volume of the portfolio and lending terms, and volume and severity of past due loans may also be considered.

The allowance for credit losses for loans and lending commitments increased since December 31, 2023, primarily related to provisions for certain specific commercial real estate loans, mainly in the office sector, modest growth in certain corporate and other loan portfolios and provisions for certain specific securities-based loans. The impact was partially offset by improvements in the macroeconomic outlook. Charge-offs in the current year period were primarily related to Commercial real estate and Secured lending facilities.

The base scenario used in our ACL models as of June 30, 2024 was generated using a combination of consensus economic forecasts, forward rates, and internally developed and validated models. This scenario assumes modest economic growth in 2024, followed by a gradual improvement in 2025 as well as lower credit spreads and higher interest rates relative to the prior forecast. Given the nature of our lending portfolio, the most sensitive model input is U.S. gross domestic product (“GDP”).

Forecasted U.S. Real GDP Growth Rates in Base Scenario

See Note 2 to the financial statements in the 2023 Form 10-K for a discussion of the Firm’s ACL methodology under CECL.

Status of Loans Held for Investment

1.Nonaccrual loans are loans where principal or interest is not expected when contractually due or are past due 90 days or more.

Net Charge-off Ratios for Loans Held for Investment

CRE—Commercial real estate

SBL—Securities-based lending

1.Net charge-off ratio represents gross charge-offs net of recoveries divided by total average loans held for investment before ACL.

32 June 2024 Form 10-Q

Risk Disclosures

Institutional Securities Loans and Lending Commitments1

NIG–Non-investment grade

1.Counterparty credit ratings are internally determined by the CRM.

2.Unrated loans and lending commitments are primarily trading positions that are measured at fair value and risk-managed as a component of market risk. For a further discussion of our market risk, see “Quantitative and Qualitative Disclosures about Risk—Market Risk” herein.

Institutional Securities Loans and Lending Commitments by Industry

Institutional Securities Lending Activities

The Institutional Securities business segment lending activities include Corporate, Secured lending facilities, Commercial and Residential real estate, and Securities-based lending and Other. As of June 30, 2024 and December 31, 2023, over 90% of our total lending exposure, which consists of loans and lending commitments, was investment grade and/or secured by collateral. For a description of Institutional Securities’ lending activities, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” in the 2023 Form 10-K.

Institutional Securities Event-Driven Loans and Lending Commitments

Event-driven loans and lending commitments are associated with certain underwritings and/or syndications to finance a specific transaction, such as merger, acquisition, recapitalization or project finance activities. Balances may fluctuate as such lending is related to transactions that vary in timing and size from period to period.

June 2024 Form 10-Q 33

Risk Disclosures

Institutional Securities Loans and Lending Commitments Held for Investment

Institutional Securities Commercial Real Estate Loans and Lending Commitments

By Region

By Property Type

LC–Lending Commitments

1. Amounts include HFI, HFS and FVO loans and lending commitments. HFI loans are presented net of ACL.

The current economic environment and changes in business and consumer behavior have adversely impacted commercial real estate borrowers due to pressure from higher interest rates, tenant lease renewals, and elevated refinancing risks for loans with near-term maturities, among other issues. While we continue to actively monitor all our loan portfolios, the commercial real estate sector remains under heightened focus given the sector’s sensitivity to economic and secular factors, credit conditions, and difficulties specific to certain property types, most notably office.

As of June 30, 2024 and December 31, 2023, our lending against commercial real estate (“CRE”) properties within the Institutional Securities business segment totaled $11.4 billion and $9.4 billion, respectively. This represents 5.0% and 4.5%, respectively, of total exposure reflected in the Institutional

Securities Loans and Lending Commitments table above. Those CRE loans are originated for experienced sponsors and are generally secured by specific institutional CRE properties. In many cases, loans are subsequently syndicated or securitized on a full or partial basis, reducing our ongoing exposure.

In addition to the amounts included in the table above, we provide certain secured lending facilities which are typically collateralized by pooled CRE mortgage loans and are included in Secured lending facilities in the Institutional Securities Loans and Lending Commitments Held for Investment table above. These secured lending facilities benefit from structural protections including cross-collateralization and diversification across property types.

Institutional Securities Allowance for Credit Losses—Loans and Lending Commitments

Institutional Securities HFI Loans—Ratios of Allowance for Credit Losses to Balance Before Allowance

34 June 2024 Form 10-Q

Risk Disclosures

Wealth Management Loans and Lending Commitments

The principal Wealth Management business segment lending activities include Securities-based lending and Residential real estate loans.

Securities-based lending allows clients to borrow money against the value of qualifying securities, generally for any purpose other than purchasing, trading or carrying securities or refinancing margin debt. Other loans primarily include tailored lending, which typically consist of bespoke lending arrangements provided to ultra-high net worth clients. Securities-based lending and Other loans are generally secured by various types of eligible collateral, including marketable securities, private investments, commercial real estate and other financial assets. For more information about our Securities-based lending and Residential real estate loans, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” in the 2023 Form 10-K.

Wealth Management Commercial Real Estate Loans and Lending Commitments by Property Type

LC–Lending Commitments

1.Amounts include HFI loans and lending commitments. HFI loans are presented net of ACL.

As of June 30, 2024 and December 31, 2023, our direct lending against CRE properties totaled $7.5 billion and $7.1 billion, respectively, within the Wealth Management business segment. This represents 4.4% and 4.3%, respectively, of total exposure reflected in the Wealth Management Loans and Lending Commitments table above, primarily included within Securities-based lending and Other loans. Such loans are originated through our private banking platform, are both

secured and generally benefiting from full or partial guarantees from high or ultra-high net worth clients, which partially reduce associated credit risk. At both June 30, 2024 and December 31, 2023, greater than 95% of the CRE loans balance in the Wealth Management business segment received guarantees. All of our lending against CRE properties within Wealth Management are in the Americas region.

Wealth Management Allowance for Credit Losses—Loans and Lending Commitments

As of June 30, 2024 and December 31, 2023, more than 75% of Wealth Management residential real estate loans were to borrowers with “Exceptional” or “Very Good” FICO scores (i.e., exceeding 740). Additionally, Wealth Management’s securities-based lending portfolio remains well-collateralized and subject to daily client margining, which includes requiring customers to deposit additional collateral or reduce debt positions, when necessary.

Customer and Other Receivables

Margin Loans and Other Lending

The Institutional Securities and Wealth Management business segments provide margin lending arrangements that allow customers to borrow against the value of qualifying securities, primarily for the purpose of purchasing additional securities, as well as to collateralize short positions. Institutional Securities primarily includes margin loans in the Equity Financing business. Wealth Management includes margin loans as well as non-purpose securities-based lending on non-bank entities. Amounts may fluctuate from period to period as overall client balances change as a result of market levels, client positioning and leverage.

Credit exposures arising from margin lending activities are generally mitigated by their short-term nature, the value of collateral held and our right to call for additional margin when

June 2024 Form 10-Q 35

Risk Disclosures

collateral values decline. However, we could incur losses in the event that the customer fails to meet margin calls and collateral values decline below the loan amount. This risk is elevated in loans backed by collateral pools with significant concentrations in individual issuers or securities with similar risk characteristics. For a further discussion, see “Risk Factors—Credit Risk” in the 2023 Form 10-K.

Employee Loans

For information on employee loans and related ACL, see Note 9 to the financial statements.

Derivatives

Fair Value of OTC Derivative Assets

1.Counterparty credit ratings are determined internally by the CRM.

We are exposed to credit risk as a dealer in OTC derivatives. Credit risk with respect to derivative instruments arises from the possibility that a counterparty may fail to perform according to the terms of the contract. For more information on derivatives, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Derivatives” in the 2023 Form 10-K and Note 6 to the financial statements.

36 June 2024 Form 10-Q

Risk Disclosures

Country Risk

Country risk exposure is the risk that events in, or that affect, a foreign country (any country other than the U.S.) might adversely affect us. We actively manage country risk exposure through a comprehensive risk management framework that combines credit and other market fundamentals and allows us to effectively identify, monitor and limit country risk. For a further discussion of our country risk exposure see “Quantitative and Qualitative Disclosures about Risk—Country and Other Risks” in the 2023 Form 10-K.

Top 10 Non-U.S. Country Exposures

1.Net inventory represents exposure to both long and short single-name and index positions (i.e., bonds and equities at fair value and CDS based on a notional amount assuming zero recovery adjusted for the fair value of any receivable or payable).

2.Net counterparty exposure (e.g., repurchase transactions, securities lending and OTC derivatives) is net of the benefit of collateral received and also is net by counterparty when legally enforceable master netting agreements are in place. For more information, see “Additional Information—Top 10 Non-U.S. Country Exposures” herein.

3.Amounts represent net CDS hedges (purchased and sold) on net counterparty exposure and lending executed by trading desks responsible for hedging counterparty and lending credit risk exposures. Amounts are based on the CDS notional amount assuming zero recovery adjusted for the fair value of any receivable or payable. For further description of the contractual terms for purchased credit protection and whether they may limit the effectiveness of our hedges, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk—Derivatives” in the 2023 Form 10-K.

Additional Information—Top 10 Non-U.S. Country Exposures

Collateral Held Against Net Counterparty Exposure1

1.The benefit of collateral received is reflected in the Top 10 Non-U.S. Country Exposures at June 30, 2024.

2.Primarily consists of cash and government obligations of the countries listed.

Operational Risk

Operational risk refers to the risk of loss, or of damage to our reputation, resulting from inadequate or failed processes or systems, from human factors or from external events (e.g., cyberattacks or third-party vulnerabilities) that may manifest as, for example, loss of information, business disruption, theft and fraud, legal and compliance risks, or damage to physical assets. We may incur operational risk across the full scope of our business activities, including revenue-generating activities and support and control groups (e.g., information technology and trade processing). For a further discussion about our operational risk, see “Quantitative and Qualitative Disclosures about Risk—Operational Risk” in the 2023 Form 10-K.

Model Risk

Model risk refers to the potential for adverse consequences from decisions based on incorrect or misused model outputs. Model risk can lead to financial loss, poor business and strategic decision-making or damage to our reputation. The risk inherent in a model is a function of the materiality, complexity and uncertainty around inputs and assumptions. Model risk is generated from the use of models impacting financial statements, regulatory filings, capital adequacy assessments and the formulation of strategy. For a further discussion about our model risk, see “Quantitative and Qualitative Disclosures about Risk—Model Risk” in the 2023 Form 10-K.

Liquidity Risk

Liquidity risk refers to the risk that we will be unable to finance our operations due to a loss of access to the capital markets or difficulty in liquidating our assets. Liquidity risk also encompasses our ability (or perceived ability) to meet our financial obligations without experiencing significant business disruption or reputational damage that may threaten our viability as a going concern. For a further discussion about our liquidity risk, see “Quantitative and Qualitative Disclosures about Risk—Liquidity Risk” in the 2023 Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” herein.

June 2024 Form 10-Q 37

Risk Disclosures

Legal, Regulatory and Compliance Risk

Legal, regulatory and compliance risk includes the risk of legal or regulatory sanctions, material financial loss, including fines, penalties, judgments, damages and/or settlements, limitations on our business, or loss to reputation that we may suffer as a result of failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. This risk also includes contractual and commercial risk, such as the risk that a counterparty’s performance obligations will be unenforceable. It also includes compliance with AML, terrorist financing, and anti-corruption rules and regulations. For a further discussion about our legal and compliance risk, see “Quantitative and Qualitative Disclosures about Risk—Legal, Regulatory and Compliance Risk” in the 2023 Form 10-K.

Climate Risk

Climate change manifests as physical and transition risks. The physical risks of climate change include harm to people and property arising from acute climate-related events, such as floods, hurricanes, heatwaves, droughts and wildfires, and chronic, longer-term shifts in climate patterns, such as higher global average temperatures, rising sea levels and long-term droughts. The transition risk of climate change include policy, legal, technology and market changes. Examples of these transition risks include changes in consumer behavior and business sentiment, related technologies, shareholder preferences and any additional regulatory and legislative requirements, including increased disclosure or carbon taxes. Climate risk, which is not expected to have a significant effect on our consolidated results of operations or financial condition in the near term, is an overarching risk that can impact other categories of risk. For a further discussion about our climate risk, see “Quantitative and Qualitative Disclosures about Risk—Climate Risk” in the 2023 Form 10-K.

38 June 2024 Form 10-Q

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Morgan Stanley:

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Morgan Stanley and subsidiaries (the “Firm”) as of June 30, 2024, and the related condensed consolidated income statements, comprehensive income statements and statements of changes in total equity for the three-month and six-month periods ended June 30, 2024 and 2023, and the cash flow statements for the six-month periods ended June 30, 2024 and 2023, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Firm as of December 31, 2023, and the related consolidated income statement, comprehensive income statement, cash flow statement and statement of changes in total equity for the year then ended (not presented herein) included in the Firm’s Annual Report on Form 10-K; and in our report dated February 22, 2024, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2023, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Firm’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Firm in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Deloitte & Touche LLP

New York, New York

August 5, 2024

June 2024 Form 10-Q 39

Consolidated Income Statement (Unaudited)

1.Prior period amounts have been adjusted to conform with the current period presentation. See Note 2 for additional information.

Consolidated Comprehensive Income Statement

(Unaudited)

June 2024 Form 10-Q 40 See Notes to Consolidated Financial Statements

Consolidated Balance Sheet

$ in millions, except share data (Unaudited) At June 30, 2024 At December 31, 2023

Assets

Cash and cash equivalents $90,160 $89,232

Trading assets at fair value ($161,797 and $162,698 were pledged to various parties) 357,043 367,074

Investment securities:

Available-for-sale at fair value (amortized cost of $95,042 and $92,149) 91,238 88,113

Held-to-maturity (fair value of $53,960 and $57,453) 64,193 66,694

Securities purchased under agreements to resell (includes $— and $7 at fair value) 118,910 110,740

Securities borrowed 122,709 121,091

Customer and other receivables 88,718 80,105

Loans:

Held for investment (net of allowance for credit losses of $1,175 and $1,169) 212,964 203,385

Held for sale 15,283 15,255

Goodwill 16,719 16,707

Intangible assets (net of accumulated amortization of $5,148 and $4,847) 6,763 7,055

Other assets 27,747 28,242

Total assets $1,212,447 $1,193,693

Liabilities

Deposits (includes $6,792 and $6,472 at fair value) $348,890 $351,804

Trading liabilities at fair value 155,018 151,513

Securities sold under agreements to repurchase (includes $1,012 and $1,020 at fair value) 65,677 62,651

Securities loaned 17,078 15,057

Other secured financings (includes $13,123 and $9,899 at fair value) 17,140 12,655

Customer and other payables 205,897 208,148

Other liabilities and accrued expenses 25,944 28,151

Borrowings (includes $97,055 and $93,900 at fair value) 275,197 263,732

Total liabilities 1,110,841 1,093,711

Commitments and contingent liabilities (see Note 13)

Equity

Morgan Stanley shareholders’ equity:

Preferred stock 8,750 8,750

Common stock, $0.01 par value:

Shares authorized: 3,500,000,000; Shares issued: 2,038,893,979; Shares outstanding: 1,619,075,147 and 1,626,828,437 20 20

Additional paid-in capital 29,459 29,832

Retained earnings 101,374 97,996

Employee stock trusts 5,110 5,314

Accumulated other comprehensive income (loss) (6,760) (6,421)

Common stock held in treasury at cost, $0.01 par value (419,818,832 and 412,065,542 shares) (32,129) (31,139)

Common stock issued to employee stock trusts (5,110) (5,314)

Total Morgan Stanley shareholders’ equity 100,714 99,038

Noncontrolling interests 892 944

Total equity 101,606 99,982

Total liabilities and equity $1,212,447 $1,193,693

See Notes to Consolidated Financial Statements 41 June 2024 Form 10-Q

Consolidated Statement of Changes in Total Equity (Unaudited)

1.The Firm adopted the Investments - Tax Credit Structures accounting standard update on January 1, 2024. Refer to Note 2 for further information.

2.See Note 16 for information regarding dividends per share for each class of stock.

June 2024 Form 10-Q 42 See Notes to Consolidated Financial Statements

Consolidated Cash Flow Statement (Unaudited)

See Notes to Consolidated Financial Statements 43 June 2024 Form 10-Q

Notes to Consolidated Financial Statements (Unaudited)

1. Introduction and Basis of Presentation

The Firm

Morgan Stanley is a global financial services firm that maintains significant market positions in each of its business segments—Institutional Securities, Wealth Management and Investment Management. Morgan Stanley, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Unless the context otherwise requires, the terms “Morgan Stanley” or the “Firm” mean Morgan Stanley (the “Parent Company”) together with its consolidated subsidiaries. See the “Glossary of Common Terms and Acronyms” for the definition of certain terms and acronyms used throughout this Form 10-Q.

A description of the clients and principal products and services of each of the Firm’s business segments is as follows:

Institutional Securities provides a variety of products and services to corporations, governments, financial institutions and ultra-high net worth clients. Investment Banking services consist of capital raising and financial advisory services, including the underwriting of debt, equity securities and other products, as well as advice on mergers and acquisitions, restructurings and project finance. Our Equity and Fixed Income businesses include sales, financing, prime brokerage, market-making, Asia wealth management services and certain business-related investments. Lending activities include originating corporate loans and commercial real estate loans, providing secured lending facilities, and extending securities-based and other financing to clients. Other activities include research.

Wealth Management provides a comprehensive array of financial services and solutions to individual investors and small to medium-sized businesses and institutions. Wealth Management covers: financial advisor-led brokerage, custody, administrative and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; securities-based lending, residential real estate loans and other lending products; banking; and retirement plan services.

Investment Management provides a broad range of investment strategies and products that span geographies, asset classes, and public and private markets to a diverse group of clients across institutional and intermediary channels. Strategies and products, which are offered through a variety of investment vehicles, include equity, fixed income, alternatives and solutions, and liquidity and overlay services. Institutional clients include defined benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors and corporations. Individual clients are

generally served through intermediaries, including affiliated and non-affiliated distributors.

Basis of Financial Information

The financial statements are prepared in accordance with U.S. GAAP, which requires the Firm to make estimates and assumptions regarding the valuations of certain financial instruments, the valuations of goodwill and intangible assets, the outcome of legal and tax matters, deferred tax assets, ACL, and other matters that affect its financial statements and related disclosures. The Firm believes that the estimates utilized in the preparation of its financial statements are prudent and reasonable. Actual results could differ materially from these estimates.

The Notes are an integral part of the Firm’s financial statements. The Firm has evaluated subsequent events for adjustment to or disclosure in these financial statements through the date of this report and has not identified any recordable or disclosable events not otherwise reported in these financial statements or the notes thereto.

The accompanying financial statements should be read in conjunction with the Firm’s financial statements and notes thereto included in the 2023 Form 10-K. Certain footnote disclosures included in the 2023 Form 10-K have been condensed or omitted from these financial statements as they are not required for interim reporting under U.S. GAAP. The financial statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for the fair presentation of the results for the interim period. The results of operations for interim periods are not necessarily indicative of results for the entire year.

Consolidation

The financial statements include the accounts of the Firm, its wholly owned subsidiaries and other entities in which the Firm has a controlling financial interest, including certain VIEs (see Note 14). Intercompany balances and transactions have been eliminated. For consolidated subsidiaries that are not wholly owned, the third-party holdings of equity interests are referred to as Noncontrolling interests. The net income attributable to Noncontrolling interests for such subsidiaries is presented as Net income applicable to noncontrolling interests in the income statement. The portion of shareholders’ equity that is attributable to Noncontrolling interests for such subsidiaries is presented as Noncontrolling interests, a component of Total equity, in the balance sheet.

For a discussion of the Firm’s significant regulated U.S. and international subsidiaries and its involvement with VIEs, see Note 1 to the financial statements in the 2023 Form 10-K.

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Notes to Consolidated Financial Statements (Unaudited)

2. Significant Accounting Policies

For a detailed discussion about the Firm’s significant accounting policies and for further information on accounting updates adopted in the prior year, see Note 2 to the financial statements in the 2023 Form 10-K.

In the first quarter of 2024, the Firm implemented certain presentation changes that impacted interest income and interest expense but had no effect on net interest income. These changes were made to align the accounting treatment between the balance sheet and the related interest income or expense, primarily by offsetting interest income and expense for certain prime brokerage-related customer receivables and payables that are currently accounted for as a single unit of account on the balance sheet. The current and previous presentation of these interest income and interest expense amounts are acceptable and the change does not represent a change in accounting principle. These changes were applied retrospectively to the income statement in 2023 and accordingly, prior period amounts were adjusted to conform with the current presentation.

During the six months ended June 30, 2024 there were no significant updates to the Firm’s significant accounting policies, other than for the accounting update adopted.

Accounting Updates Adopted in 2024

Investments - Tax Credit Structures

The Firm adopted the Investments - Equity Method and Joint Ventures - Tax Credit Structures accounting update on January 1, 2024 using the modified retrospective method. This accounting update permits an election to account for tax equity investments using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the income tax credits and other income tax benefits received and recognized net in the income statement as a component of provision for income taxes. The update requires a separate accounting policy election to be made for each tax credit program. Additional disclosures are required regarding (i) the nature of our tax equity investments and (ii) the effect of our tax equity investments and related income tax credits on the financial condition and results of operations (see Note 10).

The adoption resulted in a decrease to Retained earnings of $60 million as of January 1, 2024, net of tax, and a corresponding reduction to Other assets.

3. Cash and Cash Equivalents

For additional information on cash and cash equivalents, including restricted cash, see Note 2 to the financial statements in the 2023 Form 10-K.

4. Fair Values

Recurring Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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Notes to Consolidated Financial Statements (Unaudited)

MABS—Mortgage- and asset-backed securities

1.For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Netting.” Positions classified within the same level that are with the same counterparty are netted within that level. For further information on derivative instruments and hedging activities, see Note 6.

2.For a further breakdown by type, see the following Detail of Loans and Lending Commitments at Fair Value table.

3.For trading purposes, the Firm holds or sells short equity securities issued by entities in diverse industries and of varying sizes.

4.Amounts exclude certain investments that are measured based on NAV per share, which are not classified in the fair value hierarchy. For additional disclosure about such investments, see “Net Asset Value Measurements” herein.

5.At June 30, 2024 and December 31, 2023, the Firm's Trading assets included an insignificant amount of equity securities subject to contractual sale restrictions that generally prohibit the Firm from selling the security for a period of time as of the measurement date.

Detail of Loans and Lending Commitments at Fair Value

Unsettled Fair Value of Futures Contracts1

1.These contracts are primarily Level 1, actively traded, valued based on quoted prices from the exchange and are excluded from the previous recurring fair value tables.

For a description of the valuation techniques applied to the Firm’s major categories of assets and liabilities measured at fair value on a recurring basis, see Note 4 to the financial statements in the 2023 Form 10-K. During the current quarter,

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Notes to Consolidated Financial Statements (Unaudited)

there were no significant revisions made to the Firm’s valuation techniques.

Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

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Notes to Consolidated Financial Statements (Unaudited)

Level 3 instruments may be hedged with instruments classified in Level 1 and Level 2. The realized and unrealized gains or losses for assets and liabilities within the Level 3 category presented in the previous tables do not reflect the related realized and unrealized gains or losses on hedging instruments that have been classified by the Firm within the Level 1 and/or Level 2 categories.

The unrealized gains (losses) during the period for assets and liabilities within the Level 3 category may include changes in fair value during the period that were attributable to both observable and unobservable inputs. Total realized and unrealized gains (losses) are primarily included in Trading revenues in the income statement.

Additionally, in the previous tables, consolidations of VIEs are included in Purchases, and deconsolidations of VIEs are included in Settlements.

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Notes to Consolidated Financial Statements (Unaudited)

Significant Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements

Valuation Techniques and Unobservable Inputs

Points—Percentage of par

IR—Interest rate

FX—Foreign exchange

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Notes to Consolidated Financial Statements (Unaudited)

1.A single amount is disclosed for range and average when there is no significant difference between the minimum, maximum and average. Amounts represent weighted averages except where simple averages and the median of the inputs are more relevant.

2.Includes derivative contracts with multiple risks (i.e., hybrid products).

The previous table provides information on the valuation techniques, significant unobservable inputs, and the ranges and averages for each major category of assets and liabilities measured at fair value on a recurring and nonrecurring basis with a significant Level 3 balance. The level of aggregation and breadth of products cause the range of inputs to be wide and not evenly distributed across the inventory of financial instruments. Further, the range of unobservable inputs may differ across firms in the financial services industry because of diversity in the types of products included in each firm’s inventory. Generally, there are no predictable relationships between multiple significant unobservable inputs attributable to a given valuation technique.

For a description of the Firm’s significant unobservable inputs and qualitative information about the effect of hypothetical changes in the values of those inputs, see Note 4 to the financial statements in the 2023 Form 10-K. During the current quarter, there were no significant revisions made to the descriptions of the Firm’s significant unobservable inputs.

Net Asset Value Measurements

Fund Interests

Amounts in the previous table represent the Firm’s carrying value of general and limited partnership interests in fund investments, as well as any related performance-based income in the form of carried interest. The carrying amounts are measured based on the NAV of the fund taking into account the distribution terms applicable to the interest held. This same measurement applies whether the fund investments are accounted for under the equity method or fair value.

For a description of the Firm’s investments in private equity funds, real estate funds and hedge funds, which are measured based on NAV, see Note 4 to the financial statements in the 2023 Form 10-K.

See Note 13 for information regarding general partner guarantees, which include potential obligations to return performance fee distributions previously received. See Note 19 for information regarding unrealized carried interest at risk of reversal.

Nonredeemable Funds by Contractual Maturity

Nonrecurring Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

1.For significant Level 3 balances, refer to “Significant Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements” section herein for details of the significant unobservable inputs used for nonrecurring fair value measurement.

Gains (Losses) from Nonrecurring Fair Value Remeasurements1

1.Gains and losses for Loans and Other assets—Other investments are classified in Other revenues. For other items, gains and losses are recorded in Other revenues if the item is held for sale; otherwise, they are recorded in Other expenses.

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Notes to Consolidated Financial Statements (Unaudited)

2.Nonrecurring changes in the fair value of loans and lending commitments, which exclude the impact of related economic hedges, are calculated as follows: for the held-for-investment category, based on the value of the underlying collateral; and for the held-for-sale category, based on recently executed transactions, market price quotations, valuation models that incorporate market observable inputs where possible, such as comparable loan or debt prices and CDS spread levels adjusted for any basis difference between cash and derivative instruments, or default recovery analysis where such transactions and quotations are unobservable.

3.Losses related to Other assets—Other investments were determined using techniques that included discounted cash flow models, methodologies that incorporate multiples of certain comparable companies and recently executed transactions.

4.Losses related to Other assets—Premises, equipment and software generally include impairments as well as write-offs related to the disposal of certain assets.

5.Losses related to Other Assets—ROU assets include impairments related to the discontinued leased properties

Financial Instruments Not Measured at Fair Value

1.Amounts include loans measured at fair value on a nonrecurring basis.

2.Loans amounts have been disaggregated into HFI and HFS for the first time in the fourth quarter of 2023. Prior period amounts have been revised to match the current period presentation.

3.Represents Lending commitments accounted for as Held for Investment and Held for Sale. For a further discussion on lending commitments, see Note 13.

The previous tables exclude all non-financial assets and liabilities, such as Goodwill and Intangible assets, and certain financial instruments, such as equity method investments and certain receivables.

5. Fair Value Option

The Firm has elected the fair value option for certain eligible instruments that are risk managed on a fair value basis to mitigate income statement volatility caused by measurement basis differences between the elected instruments and their associated risk management transactions or to eliminate complexities of applying certain accounting models.

Borrowings Measured at Fair Value on a Recurring Basis

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Notes to Consolidated Financial Statements (Unaudited)

Net Revenues from Borrowings under the Fair Value Option

1.Amounts do not reflect any gains or losses from related economic hedges.

Gains (losses) from changes in fair value are recorded in Trading revenues and are mainly attributable to movements in the reference price or index, interest rates or foreign exchange rates.

Gains (Losses) Due to Changes in Instrument-Specific Credit Risk

1.Loans and other receivables-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses.

Difference Between Contractual Principal and Fair Value1

1.Amounts indicate contractual principal greater than or (less than) fair value.

2.The majority of the difference between principal and fair value amounts for loans and other receivables relates to distressed debt positions purchased at amounts well below par.

3.Excludes borrowings where the repayment of the initial principal amount fluctuates based on changes in a reference price or index.

The previous tables exclude non-recourse debt from consolidated VIEs, liabilities related to transfers of financial assets treated as collateralized financings, pledged commodities and other liabilities that have specified assets attributable to them.

Fair Value Loans on Nonaccrual Status

6. Derivative Instruments and Hedging Activities

Fair Values of Derivative Contracts

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Notes to Consolidated Financial Statements (Unaudited)

1.Amounts relate to master netting agreements and collateral agreements that have been determined by the Firm to be legally enforceable in the event of default but where certain other netting criteria are not met in accordance with applicable offsetting accounting guidance.

See Note 4 for information related to the unsettled fair value of futures contracts not designated as accounting hedges, which are excluded from the previous tables.

Notionals of Derivative Contracts

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Notes to Consolidated Financial Statements (Unaudited)

The notional amounts of derivative contracts generally overstate the Firm’s exposure. In most circumstances, notional amounts are used only as a reference point from which to calculate amounts owed between the parties to the contract. Furthermore, notional amounts do not reflect the

benefit of legally enforceable netting arrangements or risk mitigating transactions.

For a discussion of the Firm’s derivative instruments and hedging activities, see Note 6 to the financial statements in the 2023 Form 10-K.

Gains (Losses) on Accounting Hedges

1.For the current quarter ended June 30, 2024, there were no forecasted transactions that failed to occur. The net gains (losses) associated with cash flow hedges expected to be reclassified from AOCI within 12 months as of June 30, 2024, is approximately $(56) million. The maximum length of time over which forecasted cash flows are hedged is 18 months.

Fair Value Hedges—Hedged Items

1.Hedge accounting basis adjustments are primarily related to outstanding hedges.

Gains (Losses) on Economic Hedges of Loans

1.Amounts related to hedges of certain held-for-investment and held-for-sale loans.

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Notes to Consolidated Financial Statements (Unaudited)

Net Derivative Liabilities and Collateral Posted

The previous table presents the aggregate fair value of certain derivative contracts that contain credit risk-related contingent features that are in a net liability position for which the Firm has posted collateral in the normal course of business.

Incremental Collateral and Termination Payments upon Potential Future Ratings Downgrade

1.Amount represents arrangements between the Firm and other parties where upon the downgrade of one party, the downgraded party must deliver collateral to the other party. These bilateral downgrade arrangements are used by the Firm to manage the risk of counterparty downgrades.

The additional collateral or termination payments that may be called in the event of a future credit rating downgrade vary by contract and can be based on ratings by Moody’s Investors Service, Inc., S&P Global Ratings and/or other rating agencies. The previous table shows the future potential collateral amounts and termination payments that could be called or required by counterparties or exchange and clearing organizations in the event of one-notch or two-notch downgrade scenarios based on the relevant contractual downgrade triggers.

Maximum Potential Payout/Notional of Credit Protection Sold1

Fair Value Asset (Liability) of Credit Protection Sold1

1.Investment grade/non-investment grade determination is based on the internal credit rating of the reference obligation. Internal credit ratings serve as the CRM’s assessment of credit risk and the basis for a comprehensive credit limits framework used to control credit risk. The Firm uses quantitative models and judgment to estimate the various risk parameters related to each obligor.

Protection Purchased with CDS

The Firm enters into credit derivatives, principally CDS, under which it receives or provides protection against the risk of default on a set of debt obligations issued by a specified reference entity or entities. A majority of the Firm’s counterparties for these derivatives are banks, broker-dealers, and insurance and other financial institutions.

The fair value amounts as shown in the previous tables are prior to cash collateral or counterparty netting. For further

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Notes to Consolidated Financial Statements (Unaudited)

information on credit derivatives and other credit contracts, see Note 6 to the financial statements in the 2023 Form 10-K.

7. Investment Securities

AFS and HTM Securities

1.Amounts are net of any ACL.

2.U.S. agency securities consist mainly of agency mortgage pass-through pool securities, CMOs and agency-issued debt.

3.Underlying loans are backed by a guarantee, ultimately from the U.S. Department of Education, of at least 95% of the principal balance and interest outstanding.

AFS Securities in an Unrealized Loss Position

For AFS securities, the Firm believes there are no securities in an unrealized loss position that have credit losses after performing the analysis described in Note 2 in the 2023 Form 10-K and the Firm expects to recover the amortized cost basis of these securities. Additionally, the Firm does not intend to sell these securities and is not likely to be required to sell these securities prior to recovery of the amortized cost basis. As of June 30, 2024 and December 31, 2023, the securities in an unrealized loss position are predominantly investment grade.

The HTM securities net carrying amounts at June 30, 2024 and December 31, 2023 reflect an ACL of $47 million and $44 million, respectively, predominantly related to Non-agency CMBS. See Note 2 in the 2023 Form 10-K for a description of the ACL methodology used for HTM Securities. As of June 30, 2024 and December 31, 2023, Non-Agency CMBS HTM securities were predominantly on accrual status and investment grade.

See Note 14 for additional information on securities issued by VIEs, including U.S. agency mortgage-backed securities, non-agency CMBS, and FFELP student loan ABS.

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Notes to Consolidated Financial Statements (Unaudited)

Investment Securities by Contractual Maturity

1.Amounts are net of any ACL.

2.Annualized average yield is computed using the effective yield, weighted based on the amortized cost of each security. The effective yield is shown pre-tax and excludes the effect of related hedging derivatives.

3.At June 30, 2024, the annualized average yield, including the interest rate swap accrual of related hedges, was 2.5% for AFS securities contractually maturing within 1 year and 4.1% for all AFS securities.

Gross Realized Gains (Losses) on Sales of AFS Securities

1.Realized gains and losses are recognized in Other revenues in the income statement.

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Notes to Consolidated Financial Statements (Unaudited)

8. Collateralized Transactions

Offsetting of Certain Collateralized Transactions

1.Amounts relate to master netting agreements that have been determined by the Firm to be legally enforceable in the event of default but where certain other criteria are not met in accordance with applicable offsetting accounting guidance.

For further discussion of the Firm’s collateralized transactions, see Notes 2 and 8 to the financial statements in the 2023 Form 10-K. For information related to offsetting of derivatives, see Note 6.

Gross Secured Financing Balances by Remaining Contractual Maturity

Gross Secured Financing Balances by Class of Collateral Pledged

Carrying Value of Assets Loaned or Pledged without Counterparty Right to Sell or Repledge

The Firm pledges certain of its trading assets to collateralize securities sold under agreements to repurchase, securities loaned, other secured financings and derivatives and to cover customer short sales. Counterparties may or may not have the right to sell or repledge the collateral.

Pledged financial instruments that can be sold or repledged by the secured party are identified as Trading assets (pledged to various parties) in the balance sheet.

Fair Value of Collateral Received with Right to Sell or Repledge

1.Does not include securities used to meet federal regulations for the Firm’s U.S. broker-dealers.

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Notes to Consolidated Financial Statements (Unaudited)

The Firm receives collateral in the form of securities in connection with securities purchased under agreements to resell, securities borrowed, securities-for-securities transactions, derivative transactions, customer margin loans and securities-based lending. In many cases, the Firm is permitted to sell or repledge this collateral to secure securities sold under agreements to repurchase, to enter into securities lending and derivative transactions or to deliver to counterparties to cover short positions.

Securities Segregated for Regulatory Purposes

1.Securities segregated under federal regulations for the Firm’s U.S. broker-dealers are sourced from Securities purchased under agreements to resell and Trading assets in the balance sheet.

Customer Margin and Other Lending

The Firm provides margin lending arrangements that allow customers to borrow against the value of qualifying securities. Receivables from these arrangements are included within Customer and other receivables in the balance sheet. Under these arrangements, the Firm receives collateral, which includes U.S. government and agency securities, other sovereign government obligations, corporate and other debt, and corporate equities. Margin loans are collateralized by customer-owned securities held by the Firm. The Firm monitors required margin levels and established credit terms daily and, pursuant to such guidelines, requires customers to deposit additional collateral, or reduce positions, when necessary.

For a further discussion of the Firm’s margin lending activities, see Note 8 to the financial statements in the 2023 Form 10-K.

Also included in the amounts in the previous table is non-purpose securities-based lending on entities in the Wealth Management business segment.

Other Secured Financings

The Firm has additional secured liabilities. For a further discussion of other secured financings, see Note 12. Additionally, for certain secured financing transactions that meet applicable netting criteria, the Firm offset Other secured financing liabilities against financing receivables recorded within Trading assets in the amount of $1,473 million at June 30, 2024 and $3,472 million at December 31, 2023.

9. Loans, Lending Commitments and Related Allowance for Credit Losses

Loans by Type

For additional information on the Firm’s held-for-investment and held-for-sale loan portfolios, see Note 9 to the financial statements in the 2023 Form 10-K.

Loans by Interest Rate Type

See Note 4 for further information regarding Loans and lending commitments held at fair value. See Note 13 for details of current commitments to lend in the future.

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Notes to Consolidated Financial Statements (Unaudited)

Loans Held for Investment before Allowance by Credit Quality and Origination Year

IG—Investment Grade

NIG—Non-investment Grade

1. Securities-based loans are subject to collateral maintenance provisions, and at June 30, 2024 and December 31, 2023, these loans are predominantly over-collateralized. For more information on the ACL methodology related to securities-based loans, see Note 2 to the financial statements in the 2023 Form 10-K.

2. Other loans primarily include certain loans originated in the tailored lending business within the Wealth Management business segment, which typically consist of bespoke lending arrangements provided to ultra-high worth net clients. These facilities are generally secured by eligible collateral.

Past Due Loans Held for Investment before Allowance1

1.As of June 30, 2024, the majority of the amounts are 90 days or more past due. As of December 31, 2023, the majority of the amounts are past due for a period of less than 90 days.

Nonaccrual Loans Held for Investment before Allowance1

1.There were no loans held for investment that were 90 days or more past due and still accruing as of June 30, 2024 and December 31, 2023. For further information on the Firm’s nonaccrual policy, see Note 2 to the financial statements in the 2023 Form 10-K.

See Note 2 to the financial statements in the 2023 Form 10-K for a description of the ACL calculated under the CECL methodology, including credit quality indicators, used for HFI loans.

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Notes to Consolidated Financial Statements (Unaudited)

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Firm may modify the terms of certain loans for economic or legal reasons related to a borrower's financial difficulties, and these modifications include interest rate reductions, principal forgiveness, term extensions and other-than-insignificant payment delays or a combination of these aforementioned modifications. Modified loans are typically evaluated individually for allowance for credit losses.

Modified Loans Held for Investment

Period-end loans held for investment modified during the following periods1:

1.Lending commitments to borrowers for which the Firm has modified terms of the receivable, during the three months ended June 30, 2024 and 2023, are $116 million and $74 million, as of June 30, 2024 and June 30, 2023, respectively. Lending commitments to borrowers for which the Firm has modified terms of the receivable, during the six months ended June 30, 2024 and 2023, are $439 million and $661 million, as of June 30, 2024 and June 30, 2023, respectively.

2.Percentage of total loans represents the percentage of modified loans to total loans held for investment by loan type.

Financial Effect of Modifications on Loans Held for Investment

1.In instances where more than one loan was modified, modification impact is presented on a weighted-average basis.

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Notes to Consolidated Financial Statements (Unaudited)

Past Due Loans Held for Investment Modified in the Last 12 months

As of June 30, 2023, there were no past due loans held for investment modified during the 12 months prior. There were no loans held for investment that had been modified in the 12 months prior and subsequently defaulted during the six months ended June 30, 2024.

Provision for Credit Losses

Allowance for Credit Losses Rollforward and Allocation—Loans and Lending Commitments

CRE—Commercial real estate

SBL—Securities-based lending

1.Percent of loans to total loans represents loans held for investment by loan type to total loans held for investment.

The allowance for credit losses for loans and lending commitments increased for the six months ended June 30, 2024, reflecting provisions for certain specific commercial real estate loans, mainly in the office sector, modest growth in certain corporate and other loan portfolios and provisions for certain specific securities-based loans. The impact was partially offset by improvements in the macroeconomic outlook. Charge-offs in the current year period primarily related to Commercial real estate and Secured lending facilities. The base scenario used in our ACL models as of June 30, 2024 was generated using a combination of consensus economic forecasts, forward rates, and internally developed and validated models. This scenario assumes modest economic growth in 2024, followed by a gradual improvement in 2025 as well as lower credit spreads and higher interest rates relative to the prior forecast. Given the nature of our lending portfolio, the most sensitive model input is U.S. gross domestic product (“GDP”). For a further discussion of the Firm’s loans as well as the Firm’s allowance methodology, refer to Notes 2 and 9 to the financial statements in the 2023 Form 10-K.

Selected Credit Ratios

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Notes to Consolidated Financial Statements (Unaudited)

Employee Loans

1.These loans are predominantly current.

2.These loans are predominantly past due for a period of 90 days or more.

Employee loans are granted in conjunction with a program established primarily to recruit certain Wealth Management financial advisors, are full recourse and generally require periodic repayments, and are due in full upon termination of employment with the Firm. These loans are recorded in Customer and other receivables in the balance sheet. See Note 2 to the financial statements in the 2023 Form 10-K for a description of the CECL allowance methodology, including credit quality indicators, for employee loans.

10. Other Assets

Equity Method Investments

Equity method investments, other than investments in certain fund interests, are summarized above and are included in Other assets in the balance sheet with related income or loss included in Other revenues in the income statement. See “Net Asset Value Measurements—Fund Interests” in Note 4 for the carrying value of certain of the Firm’s fund interests, which are composed of general and limited partnership interests, as well as any related carried interest.

Japanese Securities Joint Venture

For more information on MUMSS and other relationships with MUFG, see Note 11 to the financial statements in the 2023 Form 10-K.

Tax Equity Investments

The Firm invests in tax equity investment interests which entitle the Firm to a share of tax credits and other income tax benefits generated by the projects underlying the investments.

Effective January 1, 2024, the Firm made an election to account for certain renewable energy and other tax equity investments programs using the proportional amortization method under newly adopted accounting guidance.

Tax Equity Investments under the Proportional Amortization Method

1.Amounts include unfunded equity contributions of $637 million and $661 million as of June 30, 2024 and December 31, 2023, respectively. The corresponding liabilities for the commitments to fund these equity contributions are recorded in Other liabilities and accrued expenses. The majority of these commitments are expected to be funded within 5 years.

2.Prior to adoption of the Investments - Tax Credit Structures accounting update on January 1, 2024, Renewable energy and other investments were accounted for under the equity method.

3.At June 30, 2024, this amount excludes $47 million of tax equity investments within programs for which the Firm elected the proportional amortization method that do not meet the conditions to apply the proportional amortization method, which are accounted for as equity method investments.

Income tax credits and other income tax benefits recognized as well as proportional amortization are included in the Provision for income taxes line in the consolidated income statement and in the Depreciation and amortization line in the consolidated cash flow statement.

Net Benefits Attributable to Tax Equity Investments under the Proportional Amortization Method

11. Deposits

Deposits

Time Deposit Maturities

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Notes to Consolidated Financial Statements (Unaudited)

12. Borrowings and Other Secured Financings

Borrowings

1.Only includes borrowings with original maturities greater than one year.

Other Secured Financings

Other secured financings include the liabilities related to collateralized notes, transfers of financial assets that are accounted for as financings rather than sales and consolidated VIEs where the Firm is deemed to be the primary beneficiary. These liabilities are generally payable from the cash flows of the related assets accounted for as Trading assets. See Note 14 for further information on other secured financings related to VIEs and securitization activities.

For transfers of assets that fail to meet accounting criteria for a sale, the Firm continues to record the assets and recognizes the associated liabilities in the balance sheet.

13. Commitments, Guarantees and Contingencies

Commitments

1.Forward-starting secured financing receivables are generally settled within three business days.

Since commitments associated with these instruments may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.

For a further description of these commitments, refer to Note 14 to the financial statements in the 2023 Form 10-K.

Guarantees

1.The carrying amounts of derivative contracts that meet the accounting definition of a guarantee are shown on a gross basis. For further information on derivatives contracts, see Note 6.

2.These amounts include certain issued standby letters of credit participated to third parties, totaling $0.7 billion of notional and collateral/recourse, due to the nature of the Firm’s obligations under these arrangements.

3.As of June 30, 2024, the carrying amount of standby letters of credit and other financial guarantees issued includes an allowance for credit losses of $64 million.

4.Related to commercial and residential mortgage securitizations.

The Firm has obligations under certain guarantee arrangements, including contracts and indemnification agreements, that contingently require the Firm to make payments to the guaranteed party based on changes in an underlying measure (such as an interest or foreign exchange rate, security or commodity price, an index, or the occurrence or non-occurrence of a specified event) related to an asset, liability or equity security of a guaranteed party. Also included as guarantees are contracts that contingently require the Firm to make payments to the guaranteed party based on another entity’s failure to perform under an agreement, as well as indirect guarantees of the indebtedness of others.

For more information on the nature of the obligations and related business activities for our guarantees, see Note 14 to the financial statements in the 2023 Form 10-K.

Other Guarantees and Indemnities

In the normal course of business, the Firm provides guarantees and indemnifications in a variety of transactions. These provisions generally are standard contractual terms. Certain of these guarantees and indemnifications related to indemnities, exchange and clearinghouse member guarantees and merger and acquisition guarantees are described in Note 14 to the financial statements in the 2023 Form 10-K.

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In addition, in the ordinary course of business, the Firm guarantees the debt and/or certain trading obligations (including obligations associated with derivatives, foreign exchange contracts and the settlement of physical commodities) of certain subsidiaries. These guarantees generally are entity or product specific and are required by investors or trading counterparties. The activities of the Firm’s subsidiaries covered by these guarantees (including any related debt or trading obligations) are included in the financial statements.

Finance Subsidiary

The Parent Company fully and unconditionally guarantees the securities issued by Morgan Stanley Finance LLC, a wholly owned finance subsidiary. No other subsidiary of the Parent Company guarantees these securities.

Contingencies

Legal

In addition to the matters described below, in the normal course of business, the Firm has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. In some cases, the third-party entities that are, or would otherwise be, the primary defendants in such cases are bankrupt, in financial distress, or may not honor applicable indemnification obligations. These actions have included, but are not limited to, antitrust claims, claims under various false claims act statutes, and matters arising from our sales and trading businesses and our activities in the capital markets.

The Firm is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental or other regulatory agencies regarding the Firm’s business, and involving, among other matters, sales, trading, financing, prime brokerage, market-making activities, investment banking advisory services, capital markets activities, financial products or offerings sponsored, underwritten or sold by the Firm, wealth and investment management services, and accounting and operational matters, certain of which may result in adverse judgments, settlements, fines, penalties, disgorgement, restitution, forfeiture, injunctions, limitations on our ability to conduct certain business, or other relief.

The Firm contests liability and/or the amount of damages as appropriate in each pending matter. Where available information indicates that it is probable a liability had been incurred at the date of the financial statements and the Firm can reasonably estimate the amount of that loss or the range of loss, the Firm accrues an estimated loss by a charge to

income, including with respect to certain of the individual proceedings or investigations described below.

The Firm’s legal expenses can, and may in the future, fluctuate from period to period, given the current environment regarding government or regulatory agency investigations and private litigation affecting global financial services firms, including the Firm.

In many legal proceedings and investigations, it is inherently difficult to determine whether any loss is probable or reasonably possible, or to estimate the amount of any loss. In addition, even where the Firm has determined that a loss is probable or reasonably possible or an exposure to loss or range of loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, the Firm may be unable to reasonably estimate the amount of the loss or range of loss. It is particularly difficult to determine if a loss is probable or reasonably possible, or to estimate the amount of loss, where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, forfeiture, disgorgement or penalties. Numerous issues may need to be resolved in an investigation or proceeding before a determination can be made that a loss or additional loss (or range of loss or range of additional loss) is probable or reasonably possible, or to estimate the amount of loss, including through potentially lengthy discovery or determination of important factual matters, determination of issues related to class certification, the calculation of damages or other relief, and consideration of novel or unsettled legal questions relevant to the proceedings or investigations in question.

The Firm has identified below any individual proceedings or investigations where the Firm believes a material loss to be reasonably possible. In certain legal proceedings in which the Firm has determined that a material loss is reasonably possible, the Firm is unable to reasonably estimate the loss or range of loss. There are other matters in which the Firm has determined a loss or range of loss to be reasonably possible, but the Firm does not believe, based on current knowledge and after consultation with counsel, that such losses could have a material adverse effect on the Firm’s financial statements as a whole, although the outcome of such proceedings or investigations may significantly impact the Firm’s business or results of operations for any particular reporting period, or cause significant reputational harm.

While the Firm has identified below certain proceedings or investigations that the Firm believes to be material, individually or collectively, there can be no assurance that material losses will not be incurred from claims that have not

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yet been asserted or those where potential losses have not yet been determined to be probable or reasonably possible.

Antitrust Related Matters

The Firm and other financial institutions are responding to a number of governmental investigations and civil litigation matters related to allegations of anticompetitive conduct in various aspects of the financial services industry, including the matters described below.

Beginning in February of 2016, the Firm was named as a defendant in multiple purported antitrust class actions now consolidated into a single proceeding in the United States District Court for the Southern District of New York (“SDNY”) styled In Re: Interest Rate Swaps Antitrust Litigation. Plaintiffs allege, inter alia, that the Firm, together with a number of other financial institution defendants, violated U.S. and New York state antitrust laws from 2008 through December of 2016 in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for interest rate swaps trading. Complaints were filed both on behalf of a purported class of investors who purchased interest rate swaps from defendants, as well as on behalf of three operators of swap execution facilities that allegedly were thwarted by the defendants in their efforts to develop such platforms. The consolidated complaints seek, among other relief, certification of the investor class of plaintiffs and treble damages. On July 28, 2017, the court granted in part and denied in part the defendants’ motion to dismiss the complaints. On December 15, 2023, the court denied the class plaintiffs’ motion for class certification. On December 29, 2023, the class plaintiffs petitioned the United States Court of Appeals for the Second Circuit for leave to appeal that decision. On February 28, 2024, the parties reached an agreement in principle to settle the class claims. On July 11, 2024, the court granted preliminary approval of the settlement.

In August of 2017, the Firm was named as a defendant in a purported antitrust class action in the United States District Court for the SDNY styled Iowa Public Employees’ Retirement System et al. v. Bank of America Corporation et al. Plaintiffs allege, inter alia, that the Firm, together with a number of other financial institution defendants, violated U.S. antitrust laws and New York state law in connection with their alleged efforts to prevent the development of electronic exchange-based platforms for securities lending. The class action complaint was filed on behalf of a purported class of borrowers and lenders who entered into stock loan transactions with the defendants. The class action complaint seeks, among other relief, certification of the class of plaintiffs and treble damages. On September 27, 2018, the court denied the defendants’ motion to dismiss the class action complaint. Plaintiffs’ motion for class certification was referred by the District Court to a magistrate judge who, on June 30, 2022, issued a report and recommendation that the District Court certify a class. On May 20, 2023, the Firm

reached an agreement in principle to settle the litigation. On September 1, 2023, the court granted preliminary approval of the settlement.

The Firm is a defendant in three antitrust class action complaints which have been consolidated into one proceeding in the United States District Court for the SDNY under the caption City of Philadelphia, et al. v. Bank of America Corporation, et al. Plaintiffs allege, inter alia, that the Firm, along with a number of other financial institution defendants, violated U.S. antitrust laws and relevant state laws in connection with alleged efforts to artificially inflate interest rates for Variable Rate Demand Obligations (“VRDO”). Plaintiffs seek, among other relief, treble damages. The class action complaint was filed on behalf of a class of municipal issuers of VRDO for which defendants served as remarketing agent. On November 2, 2020, the court granted in part and denied in part the defendants’ motion to dismiss the consolidated complaint, dismissing state law claims, but denying dismissal of the U.S. antitrust claims. On September 21, 2023, the court granted plaintiffs’ motion for class certification. On October 5, 2023, defendants petitioned the United States Court of Appeals for the Second Circuit for leave to appeal that decision, which was granted on February 5, 2024.

European Matters

Tax

In matters styled Case number 15/3637 and Case number 15/4353, the Dutch Tax Authority (“Dutch Authority”) is challenging in the Dutch courts the prior set-off by the Firm of approximately €124 million (approximately $133 million) plus accrued interest of withholding tax credits against the Firm’s corporation tax liabilities for the tax years 2007 to 2012. The Dutch Authority alleges that the Firm was not entitled to receive the withholding tax credits on the basis, inter alia, that a Firm subsidiary did not hold legal title to certain securities subject to withholding tax on the relevant dates. The Dutch Authority has also alleged that the Firm failed to provide certain information to the Dutch Authority and to keep adequate books and records. On April 26, 2018, the District Court in Amsterdam issued a decision dismissing the Dutch Authority’s claims with respect to certain of the tax years in dispute. On May 12, 2020, the Court of Appeal in Amsterdam granted the Dutch Authority's appeal in matters re-styled Case number 18/00318 and Case number 18/00319. On January 19, 2024, the Dutch High Court granted the Firm’s appeal in matters re-styled Case number 20/01884 and referred the case to the Court of Appeal in The Hague.

On June 22, 2021, Dutch criminal authorities sought various documents in connection with an investigation of the Firm related to the civil claims asserted by the Dutch Authority concerning the accuracy of the Firm subsidiary’s tax returns for 2007 to 2012. The Dutch criminal authorities have requested additional information, and the Firm is continuing

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to respond to them in connection with their ongoing investigation.

Danish Underwriting Matter

On October 5, 2017, various institutional investors filed a claim against the Firm and another bank in a matter now styled Case number B-803-18 (previously BS 99-6998/2017), in the City Court of Copenhagen, Denmark concerning their roles as underwriters of the initial public offering (“IPO”) in March 2014 of the Danish company OW Bunker A/S. The claim seeks damages of approximately DKK529 million (approximately $76 million) plus interest in respect of alleged losses arising from investing in shares in OW Bunker, which entered into bankruptcy in November 2014. Separately, on November 29, 2017, another group of institutional investors joined the Firm and another bank as defendants to pending proceedings in the High Court of Eastern Denmark against various other parties involved in the IPO in a matter styled Case number B-2073-16. The claim brought against the Firm and the other bank has been given its own Case number B-2564-17. The investors claim damages of approximately DKK767 million (approximately $110 million) plus interest from the Firm and the other bank on a joint and several basis with the Defendants to these proceedings. Both claims are based on alleged prospectus liability; the second claim also alleges professional liability of banks acting as financial intermediaries. On June 8, 2018, the City Court of Copenhagen, Denmark ordered that the matters now styled Case number B-803-18, Case number B-2073-16, and Case number B-2564-17 (“the Cases”) be heard together before the High Court of Eastern Denmark. On July 1, 2024, defendants reached a conditional settlement agreement with the plaintiffs in the Cases. A conditional settlement agreement has also been reached in an additional related claim to which the Firm is not a party but which forms part of the complex of cases proceeding before the High Court of Eastern Denmark in connection with the bankruptcy of OW Bunker (Case number B-407-17). The conditional settlement agreements are conditioned upon approval of the settlement of Case number B-407-17 by the 14th Division of the Danish Court of Appeal Eastern Division.

U.K. Government Bond Matter

The Firm is engaging with the U.K. Competition and Markets Authority in connection with its investigation of suspected anti-competitive arrangements in the financial services sector, specifically regarding the Firm's activities concerning certain liquid fixed income products between 2009 and 2012. On May 24, 2023, the U.K. Competition and Markets Authority issued a Statement of Objections setting out its provisional findings that the Firm had breached U.K. competition law by sharing competitively sensitive information in connection with gilts and gilt asset swaps between 2009 and 2012. The Firm is contesting the provisional findings. Separately, on June 16, 2023, the Firm was named as a defendant in a purported antitrust class action in the United States District

Court for the SDNY styled Oklahoma Firefighters Pension and Retirement System v. Deutsche Bank Aktiengesellschaft, et al., alleging, inter alia, that the Firm, together with a number of other financial institution defendants, violated U.S. antitrust laws in connection with their alleged effort to fix prices of gilts traded in the United States between 2009 and 2013. On September 28, 2023, the defendants filed a joint motion to dismiss the complaint, which has been fully briefed.

Other

On August 13, 2021, the plaintiff in Camelot Event Driven Fund, a Series of Frank Funds Trust v. Morgan Stanley & Co. LLC, et al. filed in the Supreme Court of the State of New York, New York County (“Supreme Court of NY”) a purported class action complaint alleging violations of the federal securities laws against ViacomCBS (“Viacom”), certain of its officers and directors, and the underwriters, including the Firm, of two March 2021 Viacom offerings: a $1.7 billion Viacom Class B Common Stock offering and a $1 billion offering of 5.75% Series A Mandatory Convertible Preferred Stock (collectively, the “Offerings”). The complaint alleges, inter alia, that the Viacom offering documents for both issuances contained material omissions because they did not disclose that certain of the underwriters, including the Firm, had prime brokerage relationships and/or served as counterparties to certain derivative transactions with Archegos Capital Management LP, (“Archegos”), a fund with significant exposure to Viacom securities across multiple prime brokers. The complaint, which seeks, among other things, unspecified compensatory damages, alleges that the offering documents did not adequately disclose the risks associated with Archegos’s concentrated Viacom positions at the various prime brokers, including that the unwind of those positions could have a deleterious impact on the stock price of Viacom. On November 5, 2021, the complaint was amended to add allegations that defendants failed to disclose that certain underwriters, including the Firm, had intended to unwind Archegos’s Viacom positions while simultaneously distributing the Offerings. On February 6, 2023, the court issued a decision denying the motions to dismiss as to the Firm and the other underwriters, but granted the motion to dismiss as to Viacom and the Viacom individual defendants. On February 15, 2023, the underwriters, including the Firm, filed their notices of appeal of the denial of their motions to dismiss. On March 10, 2023, the plaintiff appealed the dismissal of Viacom and the individual Viacom defendants. On April 4, 2024, the Appellate Division upheld the lower court’s decision as to the Firm and other underwriter defendants that had prime brokerage relationships and/or served as counterparties to certain derivative transactions with Archegos, dismissed the remaining underwriters, and upheld the dismissal of Viacom and its officers and directors. On July 25, 2024, the Appellate Division denied the plaintiff’s and the Firm’s respective motions for leave to reargue or appeal the April 4, 2024 decision. On January 4, 2024, the court granted the plaintiff’s motion for class certification. On February 14,

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2024, the defendants filed their notice of appeal of the court’s grant of class certification.

On May 17, 2013, the plaintiff in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Firm and certain affiliates in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Firm to plaintiffs was approximately $133 million. The complaint alleges causes of action against the Firm for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks, among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Firm’s motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the remaining amount of certificates allegedly issued by the Firm or sold to plaintiffs by the Firm was approximately $116 million. On August 11, 2016, the Appellate Division affirmed the trial court’s order denying in part the Firm’s motion to dismiss the complaint. On July 15, 2022, the Firm filed a motion for summary judgment on all remaining claims. On March 1, 2023, the court granted in part and denied in part the Firm’s motion for summary judgment, narrowing the alleged misrepresentations at issue in the case. On March 26, 2024, the Appellate Division affirmed the trial court’s summary judgment order. On October 1, 2024, trial is scheduled to begin.

The Firm has been named in two putative class actions regarding cash sweep programs for retail clients. On February 1, 2024, ETRADE Securities LLC (ETRADE) and Morgan Stanley Smith Barney LLC (MSSB) were named in Burmin, et al. v. ETRADE Securities LLC, et al., filed in the United States District Court for the District of New Jersey, alleging that, from February 2018 to present, ETRADE (and post-merger MSSB) breached customer agreements by failing to pay a reasonable rate of interest to Individual Retirement Account holders on cash balances swept to affiliate bank deposit programs. A motion to dismiss is pending. On June 14, 2024, MSSB and other Firm entities were named in Estate of Sherlip, et al. v. Morgan Stanley, et al., filed in the United States District Court for the SDNY, alleging the defendants failed to pay a reasonable rate of interest to brokerage, retirement, and advisory account holders on cash balances swept to affiliate bank deposit programs. The class action complaints seek, among other relief, certification of the class of plaintiffs and unspecified damages.

Since April 2024, the Firm has been engaged with and is responding to requests for information from the Enforcement Division of the SEC regarding advisory account cash balances swept to affiliate bank deposit programs and compliance with the Investment Advisers Act of 1940.

14. Variable Interest Entities and Securitization Activities

Consolidated VIE Assets and Liabilities by Type of Activity

MTOB—Municipal tender option bonds

1.Amounts include transactions backed by residential mortgage loans, commercial mortgage loans and other types of assets, including consumer or commercial assets and may be in loan or security form. The value of assets is determined based on the fair value of the liabilities and the interests owned by the Firm in such VIEs as the fair values for the liabilities and interests owned are more observable.

2.Amounts include investment funds and CLOs.

Consolidated VIE Assets and Liabilities by Balance Sheet Caption

Consolidated VIE assets and liabilities are presented in the previous tables after intercompany eliminations. Generally, most assets owned by consolidated VIEs cannot be removed unilaterally by the Firm and are not available to the Firm while the related liabilities issued by consolidated VIEs are non-recourse to the Firm. However, in certain consolidated VIEs, the Firm either has the unilateral right to remove assets or provides additional recourse through derivatives such as total return swaps, guarantees or other forms of involvement.

In general, the Firm’s exposure to loss in consolidated VIEs is limited to losses that would be absorbed on the VIE net assets recognized in its financial statements, net of amounts absorbed by third-party variable interest holders.

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Non-consolidated VIEs

1.Amounts include transactions backed by residential mortgage loans, commercial mortgage loans and other types of assets, including consumer or commercial assets, and may be in loan or security form.

2.Other primarily includes exposures to commercial real estate property and investment funds.

3.Where notional amounts are utilized in quantifying the maximum exposure related to derivatives, such amounts do not reflect changes in fair value recorded by the Firm.

4.Additional VIE assets owned represents the carrying value of total exposure to non-consolidated VIEs for which the maximum exposure to loss is less than specific thresholds, primarily interests issued by securitization SPEs. The Firm’s maximum exposure to loss generally equals the fair value of the assets owned. These assets are primarily included in Trading assets and Investment securities and are measured at fair value (see Note 4). The Firm does not provide additional support in these transactions through contractual facilities, guarantees or similar derivatives.

The previous tables include VIEs sponsored by unrelated parties, as well as VIEs sponsored by the Firm; examples of the Firm’s involvement with these VIEs include its secondary market-making activities and the securities held in its Investment securities portfolio (see Note 7).

The Firm’s maximum exposure to loss is dependent on the nature of the Firm’s variable interest in the VIE and is limited to the notional amounts of certain liquidity facilities and other credit support, total return swaps and written put options, as well as the fair value of certain other derivatives and investments the Firm has made in the VIE.

The Firm’s maximum exposure to loss in the previous tables does not include the offsetting benefit of hedges or any

reductions associated with the amount of collateral held as part of a transaction with the VIE or any party to the VIE directly against a specific exposure to loss.

Liabilities issued by VIEs generally are non-recourse to the Firm.

Detail of Mortgage- and Asset-Backed Securitization Assets

Transferred Assets with Continuing Involvement

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RML—Residential mortgage loans

CML—Commercial mortgage loans

1.Amounts include CLO transactions managed by unrelated third parties.

2.Amounts include assets transferred by unrelated transferors.

3.Amounts include transactions where the Firm also holds retained interests as part of the transfer.

The previous tables include transactions with SPEs in which the Firm, acting as principal, transferred financial assets with continuing involvement and received sales treatment. The transferred assets are carried at fair value prior to securitization, and any changes in fair value are recognized in the income statement. The Firm may act as underwriter of the beneficial interests issued by these securitization vehicles, for which Investment banking revenues are recognized. The Firm may retain interests in the securitized financial assets as one or more tranches of the securitization. Certain retained interests are carried at fair value in the balance sheet with changes in fair value recognized in the income statement. Fair value for these interests is measured using techniques that are consistent with the valuation techniques applied to the Firm’s major categories of assets and liabilities as described in Note 2 in the 2023 Form 10-K and Note 4 herein. Further, as permitted by applicable guidance, certain transfers of assets where the Firm’s only continuing involvement is a derivative are only reported in the following Assets Sold with Retained Exposure table.

Proceeds from New Securitization Transactions and Sales of Loans

1.Net gains on new transactions and sales of corporate loans to CLO entities at the time of the sale were not material for all periods presented.

The Firm has provided, or otherwise agreed to be responsible for, representations and warranties regarding certain assets transferred in securitization transactions sponsored by the Firm (see Note 13).

Assets Sold with Retained Exposure

1.The carrying value of assets derecognized at the time of sale approximates gross cash proceeds.

The Firm enters into transactions in which it sells securities, primarily equities, and contemporaneously enters into bilateral OTC derivatives with the purchasers of the securities, through which it retains exposure to the sold securities.

For a discussion of the Firm’s VIEs, the determination and structure of VIEs and securitization activities, see Note 15 to the financial statements in the 2023 Form 10-K.

15. Regulatory Requirements

Regulatory Capital Framework and Requirements

For a discussion of the Firm’s regulatory capital framework, see Note 16 to the financial statements in the 2023 Form 10-K.

The Firm is required to maintain minimum risk-based and leverage-based capital ratios under regulatory capital requirements. A summary of the calculations of regulatory capital and RWA follows.

Risk-Based Regulatory Capital. Risk-based capital ratio requirements apply to Common Equity Tier 1 (“CET1”) capital, Tier 1 capital and Total capital (which includes Tier 2 capital), each as a percentage of RWA, and consist of regulatory minimum required ratios plus the Firm’s capital buffer requirement. Capital requirements require certain adjustments to, and deductions from, capital for purposes of determining these ratios. At June 30, 2024 and December 31, 2023, the differences between the actual and required ratios were lower under the Standardized Approach.

CECL Deferral. Beginning on January 1, 2020, the Firm elected to defer the effect of the adoption of CECL on its risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure calculations, over a five-year transition period. The deferral impacts began to phase in at 25% per year from January 1, 2022 and are phased-in at 75% from January 1,

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2024. The deferral impacts will become fully phased-in beginning on January 1, 2025.

Capital Buffer Requirements

1.The CCyB can be set up to 2.5%, but is currently set by the Federal Reserve at zero.

The capital buffer requirement represents the amount of Common Equity Tier 1 capital the Firm must maintain above the minimum risk-based capital requirements in order to avoid restrictions on the Firm’s ability to make capital distributions, including the payment of dividends and the repurchase of stock, and to pay discretionary bonuses to executive officers. The Firm’s capital buffer requirement computed under the standardized approaches for calculating credit risk and market risk RWA (“Standardized Approach”) is equal to the sum of the SCB, G-SIB capital surcharge and CCyB, and the capital buffer requirement computed under the applicable advanced approaches for calculating credit risk, market risk and operational risk RWA (“Advanced Approach”) is equal to the sum of the 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB.

Risk-Based Regulatory Capital Ratio Requirements

1.Required ratios represent the regulatory minimum plus the capital buffer requirement.

The Firm’s Regulatory Capital and Capital Ratios

Risk-based capital

1.Required ratios are inclusive of any buffers applicable as of the date presented.

Leveraged-based capital

1.Adjusted average assets represents the denominator of the Tier 1 leverage ratio and is composed of the average daily balance of consolidated on-balance sheet assets for the quarters ending on the respective balance sheet dates, reduced by disallowed goodwill, intangible assets, investments in covered funds, defined benefit pension plan assets, after-tax gain on sale from assets sold into securitizations, investments in our own capital instruments, certain deferred tax assets and other capital deductions.

2.Supplementary leverage exposure is the sum of Adjusted average assets used in the Tier 1 leverage ratio and other adjustments, primarily: (i) for derivatives, potential future exposure and the effective notional principal amount of sold credit protection offset by qualifying purchased credit protection; (ii) the counterparty credit risk for repo-style transactions; and (iii) the credit equivalent amount for off-balance sheet exposures.

3.Required ratios are inclusive of any buffers applicable as of the date presented.

U.S. Bank Subsidiaries’ Regulatory Capital and Capital Ratios

The OCC establishes capital requirements for the U.S. Bank Subsidiaries, and evaluates their compliance with such capital requirements. Regulatory capital requirements for the U.S. Bank Subsidiaries are calculated in a similar manner to the Firm’s regulatory capital requirements, although G-SIB capital surcharge and SCB requirements do not apply to the U.S. Bank Subsidiaries.

The OCC’s regulatory capital framework includes Prompt Corrective Action (“PCA”) standards, including “well-capitalized” PCA standards that are based on specified regulatory capital ratio minimums. For the Firm to remain an FHC, its U.S. Bank Subsidiaries must remain well-capitalized in accordance with the OCC’s PCA standards. In addition,

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failure by the U.S. Bank Subsidiaries to meet minimum capital requirements may result in certain mandatory and discretionary actions by regulators that, if undertaken, could have a direct material effect on the U.S. Bank Subsidiaries’ and the Firm’s financial statements.

At June 30, 2024 and December 31, 2023, MSBNA and MSPBNA risk-based capital ratios are based on the Standardized Approach rules. Beginning on January 1, 2020, MSBNA and MSPBNA elected to defer the effect of the adoption of CECL on risk-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure calculations, over a five-year transition period. The deferral impacts began to phase in at 25% per year from January 1, 2022 and are phased-in at 75% from January 1, 2024. The deferral impacts will become fully phased-in beginning on January 1, 2025.

MSBNA’s Regulatory Capital

MSPBNA’s Regulatory Capital

1.Required ratios are inclusive of any buffers applicable as of the date presented. Failure to maintain the buffers would result in restrictions on the ability to make capital distributions, including the payment of dividends.

Additionally, MSBNA is conditionally registered with the SEC as a security-based swap dealer and is registered with the CFTC as a swap dealer. However, as MSBNA is prudentially regulated as a bank, its capital requirements continue to be determined by the OCC.

Other Regulatory Capital Requirements

MS&Co. Regulatory Capital

MS&Co. is registered as a broker-dealer and a futures commission merchant with the SEC and the CFTC,

respectively, and is registered as a swap dealer with the CFTC.

As an Alternative Net Capital broker-dealer, and in accordance with Securities Exchange Act of 1934 (“Exchange Act”) Rule 15c3-1, Appendix E, MS&Co. is subject to minimum net capital and tentative net capital requirements and operates with capital in excess of its regulatory capital requirements. As a futures commission merchant and registered swap dealer, MS&Co. is subject to CFTC capital requirements. In addition, MS&Co. must notify the SEC if its tentative net capital falls below certain levels. At June 30, 2024 and December 31, 2023, MS&Co. exceeded its net capital requirement and had tentative net capital in excess of the minimum and notification requirements.

Other Regulated Subsidiaries

Certain other subsidiaries are also subject to various regulatory capital requirements. Such subsidiaries include the following, each of which operated with capital in excess of their respective regulatory capital requirements as of June 30, 2024 and December 31, 2023, as applicable:

• MSSB,
• MSIP,
• MSESE,
• MSMS,
• MSCS, and
• MSCG

See Note 16 to the financial statements in the 2023 Form 10-K for further information.

16. Total Equity

Preferred Stock

1.Series C preferred stock is held by MUFG.

For a description of Series A through Series P preferred stock, see Note 17 to the financial statements in the 2023 Form 10-K. The Firm’s preferred stock has a preference over its

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common stock upon liquidation. The Firm’s preferred stock qualifies as and is included in Tier 1 capital in accordance with regulatory capital requirements (see Note 15).

Share Repurchases

On June 28, 2024, the Firm announced that its Board of Directors reauthorized a multi-year repurchase program of up to $20 billion of outstanding common stock, without a set expiration date, beginning in the third quarter of 2024, which will be exercised from time to time as conditions warrant. For more information on share repurchases, see Note 17 to the financial statements in the 2023 Form 10-K.

On July 30, 2024, the Firm issued 40 million depositary shares of Series Q Preferred Stock, for an aggregate price of $1.0 billion. Each depositary share represents a 1/1000th interest in a share of 6.625% Non-Cumulative Preferred Stock, Series Q, $0.01 par value (“Series Q Preferred Stock”). The Series Q Preferred Stock is redeemable at the Firm’s option, (i) in whole or in part, from time to time, on any dividend payment date on or after October 15, 2029 or (ii) in whole but not in part at any time within 90 days following a regulatory capital treatment event (as described in the terms of this series), in each case at a redemption price of $25,000 per share (equivalent to $25 per depositary share). The Series Q Preferred Stock also has a preference over the Firm’s common stock upon liquidation and qualifies as Tier 1 capital.

Common Shares Outstanding for Basic and Diluted EPS

Dividends

1.Common and Preferred Stock dividends are payable quarterly unless otherwise noted.

2.Series M is payable semiannually until September 15, 2026 and thereafter will be payable quarterly.

3. Series N was payable semiannually until March 15, 2023 and thereafter is payable quarterly.

Accumulated Other Comprehensive Income (Loss)1

1.Amounts are net of tax and noncontrolling interests.

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Components of Period Changes in OCI

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Notes to Consolidated Financial Statements (Unaudited)

17. Interest Income and Interest Expense

1.In the fourth quarter of 2023, interest bearing Cash and cash equivalents and related interest were presented separately for the first time. The prior period amounts for Customer receivables and Other have been disaggregated to exclude Cash and cash equivalents to align with the current presentation.

2.Includes interest paid on Securities purchased under agreements to resell.

3.Includes fees paid on Securities borrowed.

4.Certain prior period amounts have been adjusted to conform with the current period presentation. This adjustment resulted in a decrease to both interest income and interest expense of $1,135 million and $2,025 million for the three months and six months ended, June 30, 2023, respectively. There was no change to net interest income for the Institutional Securities segment. See Note 2 for additional information.

5.Includes interest received on Securities sold under agreements to repurchase.

6.Includes fees received on Securities loaned.

7.Includes fees received from Equity Financing customers related to their short transactions, which can be under either margin or securities lending arrangements.

Interest income and Interest expense are classified in the income statement based on the nature of the instrument and related market conventions. When included as a component of the instrument’s fair value, interest is included within Trading revenues or Investments revenues. Otherwise, it is included within Interest income or Interest expense.

Accrued Interest

18. Income Taxes

The Firm is routinely under examination by the IRS and other tax authorities in certain countries, such as Japan and the U.K., and in states and localities in which it has significant business operations, such as New York.

The Firm believes that the resolution of these tax examinations will not have a material effect on the annual financial statements, although a resolution could have a

material impact in the income statement and on the effective tax rate for any period in which such resolutions occur.

It is reasonably possible that significant changes in the balance of unrecognized tax benefits may occur within the next 12 months. At this time, however, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits and the impact on the Firm’s effective tax rate over the next 12 months.

19. Segment, Geographic and Revenue Information

Selected Financial Information by Business Segment

75 June 2024 Form 10-Q

Notes to Consolidated Financial Statements (Unaudited)

1.Substantially all revenues are from contracts with customers.

2.Includes certain fees that may relate to services performed in prior periods.

3.Certain prior period amounts have been adjusted to conform with the current period presentation. This adjustment resulted in a decrease to both interest income and interest expense of $1,135 million and $2,025 million for the three months and six months ended, June 30, 2023, respectively. There was no change to net interest income for Institutional Securities segment. See Note 2 for additional information.

For a discussion about the Firm’s business segments, see Note 22 to the financial statements in the 2023 Form 10-K.

Detail of Investment Banking Revenues

Trading Revenues by Product Type

1.Dividend income is included within equity contracts.

The previous table summarizes realized and unrealized gains and losses primarily related to the Firm’s Trading assets and

June 2024 Form 10-Q 76

Notes to Consolidated Financial Statements (Unaudited)

liabilities, from derivative and non-derivative financial instruments, included in Trading revenues in the income statement. The Firm generally utilizes financial instruments across a variety of product types in connection with its market-making and related risk management strategies. The trading revenues presented in the table are not representative of the manner in which the Firm manages its business activities and are prepared in a manner similar to the presentation of trading revenues for regulatory reporting purposes.

Investment Management Investments Revenues—Net Cumulative Unrealized Carried Interest

The Firm’s portion of net cumulative performance-based fees in the form of unrealized carried interest, for which the Firm is not obligated to pay compensation, is at risk of reversing when the return in certain funds fall below specified performance targets. See Note 13 for information regarding general partner guarantees, which include potential obligations to return performance fee distributions previously received.

Investment Management Asset Management Revenues—Reduction of Fees Due to Fee Waivers

The Firm waives a portion of its fees in the Investment Management business segment from certain registered money market funds that comply with the requirements of Rule 2a-7 of the Investment Company Act of 1940.

Certain Other Fee Waivers

Separately, the Firm’s employees, including its senior officers, may participate on the same terms and conditions as other investors in certain funds that the Firm sponsors primarily for client investment, and the Firm may waive or lower applicable fees and charges for its employees.

Other Expenses—Transaction Taxes

Transaction taxes are composed of securities transaction taxes and stamp duties, which are levied on the sale or purchase of securities listed on recognized stock exchanges in certain markets. These taxes are imposed mainly on trades of equity securities in Asia and EMEA. Similar transaction taxes are

levied on trades of listed derivative instruments in certain countries.

Net Revenues by Region

For a discussion about the Firm’s geographic net revenues, see Note 22 to the financial statements in the 2023 Form 10-K.

Revenues Recognized from Prior Services

The previous table includes revenues from contracts with customers recognized where some or all services were performed in prior periods. These revenues primarily include investment banking advisory fees.

Receivables from Contracts with Customers

Receivables from contracts with customers, which are included within Customer and other receivables in the balance sheet, arise when the Firm has both recorded revenues and the right per the contract to bill the customer.

Assets by Business Segment

1. Parent assets have been fully allocated to the business segments.

77 June 2024 Form 10-Q

Financial Data Supplement (Unaudited)

Average Balances and Interest Rates and Net Interest Income

1.In the fourth quarter of 2023, interest bearing Cash and cash equivalents and related interest were presented separately for the first time. The prior period amounts for Customer receivables and Other have been disaggregated to exclude Cash and cash equivalents to align with the current presentation.

2.Amounts include primarily U.S. balances.

3.Includes interest paid on Securities purchased under agreements to resell.

4.Includes fees paid on Securities borrowed.

5.Average daily balance includes borrowings carried at fair value, but for certain borrowings, interest expense is considered part of fair value and is recorded in Trading revenues.

6.Includes interest received on Securities sold under agreements to repurchase.

7.Includes fees received on Securities loaned.

8.The annualized average rate was calculated using (a) interest expense incurred on all securities sold under agreements to repurchase and securities loaned transactions, whether or not such transactions were reported in the balance sheet and (b) net average on-balance sheet balances, which exclude certain securities-for-securities transactions.

9.Includes fees received from Equity Financing customers related to their short transactions, which can be under either margin or securities lending arrangements.

10.Certain prior period amounts have been adjusted to conform with the current period presentation. See Note 2 for additional information.

June 2024 Form 10-Q 78

Glossary of Common Terms and Acronyms

2023 Form 10-K Annual report on Form 10-K for year ended December 31, 2023 filed with the SEC

ABS Asset-backed securities

ACL Allowance for credit losses

AFS Available-for-sale

AML Anti-money laundering

AOCI Accumulated other comprehensive income (loss)

AUM Assets under management or supervision

Balance sheet Consolidated balance sheet

BHC Bank holding company

bps Basis points; one basis point equals 1/100th of 1%

Cash flow statement Consolidated cash flow statement

CCAR Comprehensive Capital Analysis and Review

CCyB Countercyclical capital buffer

CDO Collateralized debt obligation(s), including Collateralized loan obligation(s)

CDS Credit default swaps

CECL Current Expected Credit Losses, as calculated under the Financial Instruments—Credit Losses accounting update

CET1 Common Equity Tier 1

CFTC U.S. Commodity Futures Trading Commission

CLN Credit-linked note(s)

CLO Collateralized loan obligation(s)

CMBS Commercial mortgage-backed securities

CMO Collateralized mortgage obligation(s)

CRE Commercial real estate

CRM Credit Risk Management Department

CTA Cumulative foreign currency translation adjustments

DCP Employee deferred cash-based compensation plans linked to investment performance

DCP investments Investments associated with certain DCP

DVA Debt valuation adjustment

EBITDA Earnings before interest, taxes, depreciation and amortization

EMEA Europe, Middle East and Africa

EPS Earnings per common share

FDIC Federal Deposit Insurance Corporation

FFELP Federal Family Education Loan Program

FHC Financial holding company

FICO Fair Isaac Corporation

Financial statements Consolidated financial statements

FVO Fair value option

G-SIB Global systemically important bank

HFI Held-for-investment

HFS Held-for-sale

HQLA High-quality liquid assets

HTM Held-to-maturity

I/E Intersegment eliminations

IHC Intermediate holding company

IM Investment Management

Income statement Consolidated income statement

IRS Internal Revenue Service

IS Institutional Securities

LCR Liquidity coverage ratio, as adopted by the U.S. banking agencies

LTV Loan-to-value

M&A Merger, acquisition and restructuring transaction

MSBNA Morgan Stanley Bank, N.A.

MS&Co. Morgan Stanley & Co. LLC

MSCG Morgan Stanley Capital Group Inc.

MSCS Morgan Stanley Capital Services LLC

MSEHSE Morgan Stanley Europe Holdings SE

MSESE Morgan Stanley Europe SE

MSIP Morgan Stanley & Co. International plc

MSMS Morgan Stanley MUFG Securities Co., Ltd.

MSPBNA Morgan Stanley Private Bank, National Association

MSSB Morgan Stanley Smith Barney LLC

MUFG Mitsubishi UFJ Financial Group, Inc.

MUMSS Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

MWh Megawatt hour

N/A Not Applicable

N/M Not Meaningful

NAV Net asset value

Non-GAAP Non-generally accepted accounting principles in the U.S.

NSFR Net stable funding ratio, as adopted by the U.S. banking agencies

OCC Office of the Comptroller of the Currency

OCI Other comprehensive income (loss)

OTC Over-the-counter

PSU Performance-based stock unit

ROE Return on average common equity

ROTCE Return on average tangible common equity

ROU Right-of-use

RSU Restricted stock unit

RWA Risk-weighted assets

SCB Stress capital buffer

SEC U.S. Securities and Exchange Commission

SLR Supplementary leverage ratio

S&P Standard & Poor’s

SPE Special purpose entity

SPOE Single point of entry

TLAC Total loss-absorbing capacity

U.K. United Kingdom

UPB Unpaid principal balance

U.S. United States of America

U.S. Bank Subsidiaries MSBNA and MSPBNA

U.S. GAAP Accounting principles generally accepted in the U.S.

VaR Value-at-Risk

VIE Variable interest entity

WACC Implied weighted average cost of capital

WM Wealth Management

79 June 2024 Form 10-Q

Controls and Procedures

Under the supervision and with the participation of the Firm’s management, including the Chief Executive Officer and Chief Financial Officer, the Firm conducted an evaluation of the effectiveness of the Firm’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Firm’s disclosure controls and procedures were effective as of the end of the period covered by this report.

No change in the Firm’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) occurred during the period covered by this report that materially affected, or is reasonably likely to materially affect, the Firm’s internal control over financial reporting.

Legal Proceedings

See “Contingencies—Legal” in Note 13 to the Financial

Statements for information about our material legal

proceedings.

Risk Factors

For a discussion of the risk factors affecting the Firm, see “Risk Factors” in Part I, Item 1A of the 2023 Form 10-K.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

1.Includes 782,909 shares acquired by the Firm in satisfaction of the tax withholding obligations on stock-based awards granted under the Firm’s stock-based compensation plans during the three months ended June 30, 2024.

2.Excludes excise tax of $4 million levied on share repurchases, net of issuances, payable in April 2025.

3.Share purchases under publicly announced authorizations are made pursuant to open-market purchases, Rule 10b5-1 plans or privately negotiated transactions (including with employee benefit plans) as market conditions warrant and at prices the Firm deems appropriate and may be suspended at any time.

4.On June 30, 2023, the Firm announced that its Board of Directors reauthorized a multi-year repurchase authorization of up to $20 billion of outstanding common stock (the “Share Repurchase Authorization”) from time to time as conditions warrant and subject to limitations on distributions from the Federal Reserve. The Share Repurchase Authorization is for capital management purposes and considers, among other things, business segment capital needs, as well as equity-based compensation and benefit plan requirements. The Share Repurchase Authorization has no set expiration or termination date.

On June 28, 2024, the Firm announced that its Board of Directors reauthorized a multi-year repurchase authorization of up to $20 billion of outstanding common stock, without a

set expiration date, beginning in the third quarter of 2024, which will be exercised from time to time as conditions warrant. For further information, see “Liquidity and Capital Resources—Regulatory Requirements—Capital Plans, Stress Tests and the Stress Capital Buffer.”

Other Information

None.

Exhibits

Exhibit No. Description

3.1 Amended and Restated Certificate of Incorporation of Morgan Stanley, as amended to date. (15) Letter of awareness from Deloitte & Touche LLP, dated August 5 2024, concerning unaudited interim financial information. 31.1 Rule 13a-14(a) Certification of Chief Executive Officer. 31.2 Rule 13a-14(a) Certification of Chief Financial Officer. 32.1 Section 1350 Certification of Chief Executive Officer. 32.2 Section 1350 Certification of Chief Financial Officer. (101) Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline eXtensible Business Reporting Language (“Inline XBRL”). (104) Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

June 2024 Form 10-Q 80