Morgan Stanley Fourth Quarter and Full Year 2020 Earnings Results

Rhea-AI Summary

Morgan Stanley (NYSE: MS) reported net revenues of $13.6 billion for Q4 2020, a 24% increase from $10.9 billion in Q4 2019. The net income was $3.4 billion, or $1.81 per diluted share, marking a 31% increase year-over-year. Full-year net revenues hit a record $48.2 billion, up 16%, with net income of $11 billion, or $6.46 per diluted share, up 22% compared to 2019. Institutional Securities drove strong performance, with record revenues of $25.9 billion for the year. The firm also announced a $10 billion stock repurchase program for 2021.

Positive

• Q4 2020 net income of $3.4 billion, a 31% increase year-over-year.
• Full-year net revenues reached a record $48.2 billion, up 16% from 2019.
• Institutional Securities reported record annual net revenues of $25.9 billion.
• Return on tangible equity for FY 2020 was 15.2%.
• Board authorized a $10 billion stock repurchase program for 2021.

Negative

• Investment Management net revenues down 19% year-over-year in Q4 2020.
• Increased non-compensation expenses due to E*TRADE acquisition-related costs.

Morgan Stanley (NYSE: MS) today reported net revenues of $13.6 billion for the fourth quarter ended December 31, 2020 compared with $10.9 billion a year ago. Net income applicable to Morgan Stanley was $3.4 billion, or $1.81 per diluted share,¹ compared with $2.2 billion, or $1.30 per diluted share,¹ for the same period a year ago. The comparisons of current year results to prior periods were impacted by the acquisition of E*TRADE Financial Corporation (“E*TRADE”), completed on October 2, 2020, reported in the Wealth Management segment.

Full year net revenues were a record $48.2 billion compared with $41.4 billion a year ago. Net income applicable to Morgan Stanley for the current year was $11.0 billion, or $6.46 per diluted share,¹ compared with $9.0 billion, or $5.19 per diluted share,¹ a year ago.

James P. Gorman, Chairman and Chief Executive Officer, said, “The Firm produced a very strong quarter and record full-year results, with excellent performance across all three businesses and geographies. I am extremely proud of how our employees came together to support each other and our communities and deliver for our clients in an incredibly challenging year. Our unique business model continues to serve us well as we further execute on our long-term strategy with the acquisitions of E*TRADE and Eaton Vance. We enter 2021 with significant momentum, and I am very confident in our competitive position and our opportunities for continued growth.”

Financial Summary2,3								Highlights
Firm ($MM, except per share data)	4Q 2020		4Q 2019		FY 2020		FY 2019
								The Firm’s full year results reflect both record net revenues of $48 billion up 16% year over year and net income of $11 billion up 22%.   The Firm delivered full year ROTCE of 15.2% or 15.4% excluding the impact of integration-related expenses.4,5   The full year Firm expense efficiency ratio was 70% excluding the impact of integration-related expenses.5,6   Common Equity Tier 1 capital standardized ratio of 17.4%.   Institutional Securities delivered record full year net revenues of $25.9 billion. Fourth quarter net revenues were up 39% driven by continued strong client engagement in a constructive market environment.   Wealth Management delivered a full year pre-tax margin of 23.0% (24.2% excluding $231 million of integration-related expenses).7 Fourth quarter results reflect growth in client assets, increases in bank deposits and lending as well as strong transactional activity.   Strong Investment Management results reflect record asset management fees in both the quarter and full year driven by record AUM of $781 billion and record long-term net flows of $41 billion.
Net revenues	$13,640		$10,857		$48,198		$41,419
Compensation expense	$5,450		$5,228		$20,854		$18,837
Non-compensation expenses	$3,760		$2,896		$12,926		$11,281
Pre-tax income8	$4,430		$2,733		$14,418		$11,301
Net income app. to MS	$3,385		$2,239		$10,996		$9,042
Expense efficiency ratio6	68%		75%		70%		73%
Earnings per diluted share	$1.81		$1.30		$6.46		$5.19
Book value per share	$51.13		$45.82		$51.13		$45.82
Tangible book value per share	$41.95		$40.01		$41.95		$40.01
Return on equity	14.7%		11.3%		13.1%		11.7%
Return on tangible equity4	17.7%		13.0%		15.2%		13.4%
Institutional Securities
Net revenues	$7,004		$5,054		$25,948		$20,386
Investment Banking	$2,302		$1,576		$7,204		$5,734
Sales & Trading	$4,220		$3,194		$18,792		$13,695
Wealth Management
Net revenues	$5,681		$4,582		$19,055		$17,737
Fee-based client assets ($Bn)9	$1,472		$1,267		$1,472		$1,267
Fee-based asset flows ($Bn)10	$24.1		$24.9		$77.4		$64.9
Net new assets ($Bn)11	$66.1		$27.1		$175.4		$97.8
Loans ($Bn)	$98.1		$80.1		$98.1		$80.1
Investment Management
Net revenues	$1,100		$1,356		$3,734		$3,763
AUM ($Bn)12	$781		$552		$781		$552
Long-term net flows ($Bn)13	$8.5		$6.7		$41.0		$15.4

Fourth Quarter Results

Institutional Securities

Institutional Securities reported net revenues for the current quarter of $7.0 billion compared with $5.1 billion a year ago. Pre-tax income was $3.2 billion compared with $1.1 billion a year ago.⁸

Investment Banking revenues up 46% from a year ago:
•	Advisory revenues increased from a year ago driven by higher M&A completed transactions.		($ millions)		4Q 2020		4Q 2019
			Net Revenues		$7,004		$5,054
•	Equity underwriting revenues increased from a year ago driven by higher revenues on IPOs, blocks and follow-on offerings.		Investment Banking		$2,302		$1,576
			Advisory		$827		$654
•	Fixed income underwriting revenues decreased from a year ago as lower volumes contributed to a decline in bond revenues, partially offset by higher event driven activity.		Equity underwriting		$1,000		$422
			Fixed income underwriting		$475		$500
Sales and Trading net revenues up 32% from a year ago:
•	Equity sales and trading net revenues increased from a year ago reflecting strong performance across products and geographies driven by increased client activity, with particular strength in derivatives.		Sales and Trading		$4,220		$3,194
			Equity		$2,498		$1,920
•	Fixed Income sales and trading net revenues increased from a year ago reflecting strong performance across businesses, benefitting from strong client engagement and market volatility, with notable strength in foreign exchange and credit products.		Fixed Income		$1,664		$1,273
			Other		$58		$1
•	Other sales and trading net revenues increased from a year ago reflecting gains on investments associated with certain employee deferred compensation plans.
			Investments and Other		$482		$284
Investments and Other:			Investments		$68		$68
			Other		$414		$216
•	Other revenues increased from a year ago primarily driven by a reduction in the provision for credit losses on loans held for investment, mark-to-market gains on loans held for sale related to corporate lending activity and gains on the sale of a commodities related intangible asset.
			Total Expenses		$3,844		$3,929
			Compensation		$1,575		$2,057
			Non-compensation		$2,269		$1,872

Total Expenses:

• Compensation expense decreased from a year ago driven by lower discretionary compensation, partially offset by increases in the fair value of deferred compensation plan referenced investments.

• Non-compensation expenses increased from a year ago driven by higher volume related expenses, higher litigation expense, and an increase in the provision for credit losses on unfunded lending commitments.

Wealth Management

Wealth Management reported net revenues for the current quarter of $5.7 billion compared with $4.6 billion a year ago. Pre-tax income of $1.1 billion⁸ in the current quarter resulted in a pre-tax margin of 18.8%⁷ or 22.9% excluding the impact of integration-related expenses.⁵ The comparisons of current year results to prior periods were impacted by the acquisition of E*TRADE.

Net revenues up 24% from a year ago:
Asset management revenues increased from a year ago reflecting higher asset levels driven by market appreciation and strong fee-based flows.	($ millions)	4Q 2020		4Q 2019
	Net Revenues	$5,681		$4,582
	Asset management	$2,975		$2,655
Transactional revenues14 increased 37% excluding the impact of mark-to-market gains on investments associated with certain employee deferred compensation plans. Results reflect strong client activity in both the advisor-led and self-directed channels.	Transactional14	$1,340		$829
	Net interest	$1,207		$1,033
Net interest income (NII) increased from a year ago driven by incremental NII as a result of the E*TRADE acquisition as well as higher deposits and bank lending, partially offset by the impact of lower average rates.	Other	$159		$65
Total Expenses:	Total Expenses	$4,611		$3,419
Compensation expense increased from a year ago driven by incremental compensation as a result of the E*TRADE acquisition and integration-related expenses,5 increases in the fair value of deferred compensation plan referenced investments,and higher compensable revenues.	Compensation	$3,345		$2,590
Non-compensation expense increased from a year ago primarily driven by incremental operating and other expenses as a result of the E*TRADE acquisition and integration-related expenses.5	Non-compensation	$1,266		$829

Investment Management

Investment Management reported net revenues of $1.1 billion compared with $1.4 billion a year ago. Pre-tax income was $196 million compared with $447 million a year ago.⁸

Net revenues down 19% from a year ago:	($ millions)	4Q 2020		4Q 2019
	Net Revenues	$1,100		$1,356
Asset management revenues increased from a year ago driven by record AUM, reflecting strong investment performance and positive net flows.	Asset management	$869		$736
Investments revenues decreased from a year ago due to significant gains reflected in the prior year quarter related to an investment’s initial public offering within an Asia private equity fund.	Investments	$256		$670
	Other	$(25)		$(50)
Total Expenses:	Total Expenses	$904		$909
Compensation expense decreased from a year ago principally due to lower carried interest in the quarter.	Compensation	$530		$581
Non-compensation expenses increased from a year ago driven by higher brokerage and clearing expense.	Non-compensation	$374		$328

Full Year Results

Institutional Securities

Institutional Securities reported net revenues of $25.9 billion compared with $20.4 billion a year ago. Pre-tax income was $9.2 billion compared with $5.5 billion in the prior year.⁸

Investment Banking revenues up 26% from a year ago:	($ millions)	FY 2020		FY 2019
Advisory revenues decreased from a year ago due to fewer large completed M&A transactions.	Net Revenues	$25,948		$20,386
Equity underwriting revenues increased 81% from a year ago driven by growth in blocks, IPOs and follow-on offerings as clients continued to access capital markets.
Fixed income underwriting revenues increased from a year ago on higher investment and non-investment grade bond issuances driven by elevated volumes as clients accessed capital markets, partially offset by lower investment grade loan issuances.	Investment Banking	$7,204		$5,734
	Advisory	$2,008		$2,116
Fixed income underwriting revenues increased from a year ago on higher investment and non-investment grade bond issuances driven by elevated volumes as clients accessed capital markets, partially offset by lower investment grade loan issuances.	Equity underwriting	$3,092		$1,708
	Fixed income underwriting	$2,104		$1,910
Sales and Trading net revenues up 37% from a year ago:	Sales and Trading	$18,792		$13,695
Equity sales and trading net revenues increased 22% from a year ago reflecting strong performance across products and geographies driven by increased client activity.	Equity	$9,801		$8,056
Fixed Income sales and trading net revenues increased 59% from a year ago reflecting strong performance across businesses benefitting from strong client engagement and market volatility, with notable strength in foreign exchange and credit products.	Fixed Income	$8,824		$5,546
	Other	$167		$93
Other sales and trading net revenues increased from a year ago primarily driven by gains on economic hedges associated with corporate lending activity, partially offset by lower rates on liquidity investments.
	Investments and Other	$(48)		$957
Investments and Other:	Investments	$166		$325
Revenues decreased from a year ago reflecting lower mark-to-market gains on investments.	Other	$(214)		$632
Other revenues decreased from a year ago due to mark-to-market losses on corporate loans held for sale and an increase in the provision for credit losses on loans held for investment.
Total Expenses:	Total Expenses	$16,797		$14,896
Compensation expense increased from a year ago driven by higher discretionary compensation expense as a result of higher revenues.	Compensation	$8,342		$7,433
Non-compensation expenses increased from a year ago driven by higher volume related expenses and an increase in the provision for credit losses on unfunded lending commitments.	Non-compensation	$8,455		$7,463

Wealth Management

Wealth Management reported net revenues of $19.1 billion compared with $17.7 billion a year ago. Pre-tax income of $4.4 billion resulted in a pre-tax margin of 23.0%^7,8 or 24.2% excluding the impact of integration-related expenses.⁵

Net revenues up 7% from a year ago:	($ millions)	FY 2020		FY 2019
Asset management revenues increased from a year ago on higher asset levels driven by market appreciation and record fee-based flows.	Net Revenues	$19,055		$17,737
Transactional revenues14 increased from a year ago primarily driven by an increase in commissions on higher client activity, gains on investments associated with certain employee deferred compensation plans, and incremental revenues in the fourth quarter as a result of the E*TRADE acquisition.	Asset management Transactional14	$10,955 $3,694		$10,199 $2,969
Net interest income decreased from a year ago primarily driven by the impact of lower interest rates, partially offset by increases due to higher deposits and bank lending as well as incremental NII as a result of the E*TRADE acquisition.	Net interest	$4,022		$4,222
	Other	$384		$347
Total Expenses:	Total Expenses	$14,668		$12,905
Compensation expense increased from a year ago primarily driven by higher compensable revenues, incremental compensation as a result of the E*TRADE acquisition and integration-related expenses,5 as well as increases in the fair value of deferred compensation plan referenced investments.	Compensation	$10,970		$9,774
Non-compensation expenses increased from a year ago primarily driven by incremental operating and other expenses as a result of the E*TRADE acquisition, integration-related expenses,5 and a regulatory charge, partially offset by lower marketing and business development expenses.	Non-compensation	$3,698		$3,131

Investment Management

Investment Management net revenues were essentially unchanged from a year ago. Pre-tax income was $870 million compared with $985 million in the prior year.⁸

Net revenues:	($ millions)	FY 2020		FY 2019
Asset management revenues increased from a year ago driven by record AUM, reflecting strong investment performance and positive net flows.	Net Revenues	$3,734		$3,763
	Asset management	$3,013		$2,629
Investments revenues decreased from a year ago driven by lower accrued carried interest.	Investments	$808		$1,213
	Other	$(87)		$(79)
Total Expenses:	Total Expenses	$2,864		$2,778
Compensation expense decreased from a year ago principally due to a decrease in carried interest.	Compensation	$1,542		$1,630
Non-compensation expenses increased from a year ago driven by higher brokerage and clearing costs.	Non-compensation	$1,322		$1,148

Other Matters

		4Q 2020		4Q 2019		FY 2020		FY 2019
The Firm’s Board of Directors authorized the repurchase of outstanding common stock of up to $10 billion in 2021.	Common Stock Repurchases
The Board of Directors declared a $0.35 quarterly dividend per share, payable on February 12, 2021 to common shareholders of record on January 29, 2021.	Repurchases ($MM)	NA		$1,500		$1,347		$5,360
	Number of Shares (MM)	NA		31		29		121
The Firm’s provision for credit losses on loans and lending commitments was $5 million for the fourth quarter of 2020, compared with $57 million for the fourth quarter of 2019 and $111 million for the third quarter of 2020. The allowance for credit losses on loans and lending commitments was $1.2 billion as of December 31, 2020, a decrease of approximately $29 million from September 30, 2020 and an increase of approximately $641 million from December 31, 2019.	Average Price	NA		$48.49		$46.01		$44.23
	Period End Shares (MM)	1,810		1,594		1,810		1,594
	Tax Rate	23.0%		15.7%		22.5%		18.3%
	Capital15
	Standardized Approach
	CET1 capital16	17.4%		16.4%
	Tier 1 capital16	19.4%		18.6%
	Advanced Approach
	CET1 capital16	17.7%		16.9%
	Tier 1 capital16	19.8%		19.2%
	Leverage-based capital
	Tier 1 leverage17	8.4%		8.3%
	SLR18	7.4%		6.4%

Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, wealth management and investment management services. With offices in more than 41 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com.

A financial summary follows. Financial, statistical and business-related information, as well as information regarding business and segment trends, is included in the Financial Supplement. Both the earnings release and the Financial Supplement are available online in the Investor Relations section at www.morganstanley.com.

NOTICE:

The information provided herein and in the financial supplement may include certain non-GAAP financial measures. The definition of such measures or reconciliation of such metrics to the comparable U.S. GAAP figures are included in this earnings release and the Financial Supplement, both of which are available on www.morganstanley.com.

This earnings release contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or negatives of these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the proposed transaction and the anticipated benefits thereof. All such forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in such forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to, (i) the completion of the proposed transaction on anticipated terms and timing, including obtaining required regulatory approvals, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined company’s operations and other conditions to the completion of the acquisition, including the possibility that any of the anticipated benefits of the proposed transaction will not be realized or will not be realized within the expected time period, (ii) the ability of Morgan Stanley and Eaton Vance to integrate the business successfully and to achieve anticipated synergies, risks and costs, (iii) potential litigation relating to the proposed transaction that could be instituted against Morgan Stanley, Eaton Vance or their respective directors, (iv) the risk that disruptions from the proposed transaction will harm Morgan Stanley’s and Eaton Vance’s business, including current plans and operations, (v) the ability of Morgan Stanley or Eaton Vance to retain and hire key personnel, (vi) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the acquisition, (vii) continued availability of capital and financing and rating agency actions, (viii) legislative, regulatory and economic developments, (ix) potential business uncertainty, including changes to existing business relationships, during the pendency of the acquisition that could affect Morgan Stanley’s and/or Eaton Vance’s financial performance, (x) certain restrictions during the pendency of the acquisition that may impact Morgan Stanley’s or Eaton Vance’s ability to pursue certain business opportunities or strategic transactions, (xi) unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as Morgan Stanley’s or Eaton Vance’s management’s response to any of the aforementioned factors, (xii) dilution caused by Morgan Stanley’s issuance of additional shares of its common stock in connection with the proposed transaction, (xiii) the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, (xiv) those risks described in Item 1A of Morgan Stanley’s most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K, (xv) those risks described in Item 1A of Eaton Vance’s most recently filed Annual Report on Form 10-K and any subsequent reports on Forms 10-Q and 8-K and (xvi) those risks that are described in the registration statement on Form S-4 available from the sources indicated above. These risks, as well as other risks associated with the proposed acquisition, are more fully discussed in the registration statement on Form S-4, as amended, filed with the SEC in connection with the proposed acquisition. While the list of factors presented here is, and the list of factors presented in the registration statement on Form S-4 will be, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on Morgan Stanley’s or Eaton Vance’s consolidated financial condition, results of operations, credit rating or liquidity. Neither Morgan Stanley nor Eaton Vance assumes any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.

¹ Includes preferred dividends related to the calculation of earnings per share for the fourth quarter of 2020 and 2019 of approximately $119 million and $154 million, respectively. Includes preferred dividends related to the calculation of earnings per share for the years ended 2020 and 2019 of approximately $496 million and $530 million, respectively.

² The Firm prepares its Consolidated Financial Statements using accounting principles generally accepted in the United States (U.S. GAAP). From time to time, Morgan Stanley may disclose certain “non-GAAP financial measures” in the course of its earnings releases, earnings conference calls, financial presentations and otherwise. The Securities and Exchange Commission defines a “non-GAAP financial measure” as a numerical measure of historical or future financial performance, financial position, or cash flows that is subject to adjustments that effectively exclude, or include amounts from the most directly comparable measure calculated and presented in accordance with U.S. GAAP. Non-GAAP financial measures disclosed by Morgan Stanley are provided as additional information to analysts, investors and other stakeholders in order to provide them with greater transparency about, or an alternative method for assessing our financial condition, operating results, or capital adequacy. These measures are not in accordance with, or a substitute for U.S. GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. Whenever we refer to a non-GAAP financial measure, we will also generally define it or present the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference and such comparable U.S. GAAP financial measure.

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

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

⁵ The Firm’s fourth quarter results include $231 million of integration-related expenses on a pre-tax basis ($189 million after-tax) as a result of the E*TRADE acquisition. Total non-interest expenses include $151 million in compensation expense and $80 million in non-compensation expense.

⁶ The Firm expense efficiency ratio of 70.1% represents total non-interest expenses as a percentage of net revenues. The Firm expense efficiency ratio excluding integration-related expenses of 69.6% represents total non-interest expenses adjusted for integration-related expenses as a percentage of net revenues. The Firm expense efficiency ratio excluding integration-related expenses is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance.

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

⁸ Pre-tax income represents income before taxes.

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

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

¹¹ Wealth Management net new assets represents client inflows (including dividend and interest) less client outflows (excluding activity from business combinations/divestitures and impact of fees and commissions).

¹² AUM is defined as assets under management or supervision.

¹³ Long-term net flows include the Equity, Fixed Income and Alternative/Other asset classes and exclude the Liquidity asset class.

¹⁴ Transactional revenues include investment banking, trading, and commissions and fee revenues. Transactional revenues excluding the impact of mark-to-market gains on investments associated with employee deferred cash-based compensation plans is a non-GAAP financial measure that the Firm considers useful for analysts, investors and other stakeholders to allow comparability of period-to-period operating performance.

¹⁵ Capital ratios are estimates as of the press release date, January 20, 2021.

¹⁶ CET1 capital is defined as Common Equity Tier 1 capital. The Firm’s risk-based capital ratios are computed under each of the (i) standardized approaches for calculating credit risk and market risk risk‐weighted assets (RWAs) (the “Standardized Approach”) and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”). For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s Form 10-Q for the period ended September 30, 2020 and in the Firm's 2019 Form 10‐K.

¹⁷ The Tier 1 leverage ratio is a leverage-based capital requirement that measures the Firm’s leverage. Tier 1 leverage ratio utilizes Tier 1 capital as the numerator and average adjusted assets as the denominator.

¹⁸ SLR is defined as supplementary leverage ratio. The Firm’s SLR utilizes a Tier 1 capital numerator of approximately $88.1 billion and $73.4 billion, and supplementary leverage exposure denominator of approximately $1.19 trillion and $1.16 trillion, for the fourth quarter of 2020 and 2019, respectively. Based on a Federal Reserve interim final rule in effect until March 31, 2021, our SLR and supplementary leverage exposure as of December 31, 2020 reflect the exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. The exclusion of these assets had the effect of increasing our SLR by 0.8% as of December 31, 2020.

Consolidated Income Statement Information
(unaudited, dollars in millions)
			Quarter Ended									Percentage Change From:				Twelve Months Ended						Percentage
			Dec 31, 2020			Sep 30, 2020			Dec 31, 2019			Sep 30, 2020		Dec 31, 2019		Dec 31, 2020			Dec 31, 2019			Change
Revenues:
Investment banking			$	2,435		$	1,826		$	1,696		33%		44%		$	7,674		$	6,163		25%
Trading				3,161			3,092			2,314		2%		37%			13,992			11,095		26%
Investments				327			346			739		(5%)		(56%)			986			1,540		(36%)
Commissions and fees				1,352			1,037			984		30%		37%			4,851			3,919		24%
Asset management				3,926			3,664			3,451		7%		14%			14,272			13,083		9%
Other				568			206			240		176%		137%			110			925		(88%)
Total non-interest revenues				11,769			10,171			9,424		16%		25%			41,885			36,725		14%
Interest income				2,245			2,056			3,952		9%		(43%)			10,162			17,098		(41%)
Interest expense				374			570			2,519		(34%)		(85%)			3,849			12,404		(69%)
Net interest				1,871			1,486			1,433		26%		31%			6,313			4,694		34%
Net revenues				13,640			11,657			10,857		17%		26%			48,198			41,419		16%
Non-interest expenses:
Compensation and benefits				5,450			5,086			5,228		7%		4%			20,854			18,837		11%
Non-compensation expenses:
Brokerage, clearing and exchange fees				776			697			633		11%		23%			2,929			2,493		17%
Information processing and communications				697			616			567		13%		23%			2,465			2,194		12%
Professional services				679			542			555		25%		22%			2,205			2,137		3%
Occupancy and equipment				456			373			375		22%		22%			1,559			1,428		9%
Marketing and business development				161			78			200		106%		(20%)			434			660		(34%)
Other				991			778			566		27%		75%			3,334			2,369		41%
Total non-compensation expenses				3,760			3,084			2,896		22%		30%			12,926			11,281		15%
Total non-interest expenses				9,210			8,170			8,124		13%		13%			33,780			30,118		12%
Income before provision for income taxes				4,430			3,487			2,733		27%		62%			14,418			11,301		28%
Provision for income taxes				1,018			736			428		38%		138%			3,239			2,064		57%
Net income			$	3,412		$	2,751		$	2,305		24%		48%		$	11,179		$	9,237		21%
Net income applicable to nonredeemable noncontrolling interests				27			34			66		(21%)		(59%)			183			195		(6%)
Net income applicable to Morgan Stanley				3,385			2,717			2,239		25%		51%			10,996			9,042		22%
Preferred stock dividend				119			120			154		(1%)		(23%)			496			530		(6%)
Earnings applicable to Morgan Stanley common shareholders			$	3,266		$	2,597		$	2,085		26%		57%		$	10,500		$	8,512		23%
The End Notes are an integral part of this presentation. Refer to the Financial Supplement on pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice for additional information.
10

Consolidated Financial Metrics, Ratios and Statistical Data
(unaudited)
			Quarter Ended									Percentage Change From:				Twelve Months Ended						Percentage
			Dec 31, 2020			Sep 30, 2020			Dec 31, 2019			Sep 30, 2020		Dec 31, 2019		Dec 31, 2020			Dec 31, 2019			Change
Financial Metrics:
	Earnings per basic share		$	1.84		$	1.68		$	1.33		10%		38%		$	6.55		$	5.26		25%
	Earnings per diluted share		$	1.81		$	1.66		$	1.30		9%		39%		$	6.46		$	5.19		24%
	Return on average common equity			14.7%			13.2%			11.3%							13.1%			11.7%
	Return on average tangible common equity			17.7%			15.0%			13.0%							15.2%			13.4%
	Book value per common share		$	51.13		$	50.67		$	45.82						$	51.13		$	45.82
	Tangible book value per common share		$	41.95		$	44.81		$	40.01						$	41.95		$	40.01
	Excluding integration-related expenses
	Adjusted earnings per diluted share		$	1.92		$	1.66		$	1.30		16%		48%		$	6.58		$	5.19		27%
	Adjusted return on average common equity			15.6%			13.2%			11.3%							13.3%			11.7%
	Adjusted return on average tangible common equity			18.7%			15.0%			13.0%							15.4%			13.4%
Financial Ratios:
	Pre-tax profit margin			32%			30%			25%							30%			27%
	Compensation and benefits as a % of net revenues			40%			44%			48%							43%			45%
	Non-compensation expenses as a % of net revenues			28%			26%			27%							27%			27%
	Firm expense efficiency ratio			68%			70%			75%							70%			73%
	Firm expense efficiency ratio excluding integration-related expenses			66%			70%			75%							70%			73%
	Effective tax rate			23.0%			21.1%			15.7%							22.5%			18.3%
Statistical Data:
	Period end common shares outstanding (millions)			1,810			1,576			1,594		15%		14%
	Average common shares outstanding (millions)
	Basic			1,774			1,542			1,573		15%		13%			1,603			1,617		(1%)
	Diluted			1,802			1,566			1,602		15%		12%			1,624			1,640		(1%)
	Worldwide employees			68,097			63,051			60,431		8%		13%

Notes:		-		The Firm’s fourth quarter results include $231 million of integration-related expenses on a pre-tax basis ($189 million after-tax) as a result of the E*TRADE acquisition. Total non-interest expenses include $151 million in compensation expense and $80 million in non-compensation expense.
		-		The End Notes are an integral part of this presentation. Refer to the Financial Supplement on pages 12 - 17 for Definition of U.S. GAAP to Non-GAAP Measures, Definitions of Performance Metrics and Terms, Supplemental Quantitative Details and Calculations, and Legal Notice for additional information.
11

 

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FAQ

What were Morgan Stanley's earnings for Q4 2020?

Morgan Stanley reported net income of $3.4 billion, or $1.81 per diluted share, for Q4 2020.

How did Morgan Stanley perform in 2020?

For the full year 2020, Morgan Stanley achieved record net revenues of $48.2 billion, a 16% increase from 2019.

What is Morgan Stanley's stock symbol?

The stock symbol for Morgan Stanley is MS.

What was the return on equity for Morgan Stanley in FY 2020?

The return on tangible equity for Morgan Stanley for FY 2020 was 15.2%.

What are the expected stock repurchases for Morgan Stanley in 2021?

Morgan Stanley's Board authorized a stock repurchase program of up to $10 billion in 2021.