Morgan Stanley Fourth Quarter and Full Year 2023 Earnings Results

Morgan Stanley Reports Fourth Quarter Net Revenues of $12.9 Billion, EPS of $0.85 and ROTCE of 8.4%; Full Year Net Revenues of $54.1 Billion, EPS of $5.18 and ROTCE of 12.8%

Morgan Stanley (NYSE: MS) today reported net revenues of $12.9 billion for the fourth quarter ended December 31, 2023 compared with $12.7 billion a year ago. Net income applicable to Morgan Stanley was $1.5 billion, or $0.85 per diluted share,¹ compared with $2.2 billion, or $1.26 per diluted share,¹ for the same period a year ago.

Pre-tax income for the fourth quarter includes $535 million of charges or $0.28 per diluted share^1,2: $286 million related to an FDIC special assessment and a $249 million legal charge related to a specific matter.

Full year net revenues were $54.1 billion compared with $53.7 billion a year ago. Net income applicable to Morgan Stanley was $9.1 billion, or $5.18 per diluted share,¹ compared with $11.0 billion, or $6.15 per diluted share,¹ a year ago.

Ted Pick, Chief Executive Officer, said, “In 2023, the Firm reported a solid ROTCE against a mixed market backdrop and a number of headwinds. We begin 2024 with a clear and consistent business strategy and a unified leadership team. We are focused on achieving our long-term financial goals and continuing to deliver for shareholders.”

Fourth Quarter Results

Institutional Securities

Institutional Securities reported net revenues for the current quarter of $4.9 billion compared with $4.8 billion a year ago. Pre-tax income was $408 million compared with $748 million a year ago.⁷

Wealth Management

Wealth Management net revenues of $6.6 billion in the current quarter were essentially unchanged from a year ago. Pre-tax income of $1.4 billion⁷ in the current quarter resulted in a pre-tax margin of 21.5%.⁸

Investment Management

Investment Management net revenues of $1.5 billion were essentially unchanged from a year ago. Pre-tax income was $265 million compared with $214 million a year ago.⁷

Full Year Results

Institutional Securities

Institutional Securities reported net revenues of $23.1 billion compared with $24.4 billion a year ago. Pre-tax income was $4.5 billion compared with $6.7 billion a year ago.⁷

Wealth Management

Wealth Management reported net revenues of $26.3 billion compared with $24.4 billion a year ago. Pre-tax income of $6.5 billion⁷ in the current year resulted in a pre-tax margin of 24.9%.⁸

Investment Management

Investment Management net revenues of $5.4 billion were essentially unchanged from a year ago. Pre-tax income was $842 million compared with $807 million a year ago.⁷

Other Matters

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 42 countries, the Firm’s employees serve clients worldwide including corporations, governments, institutions and individuals. For further information about Morgan Stanley, please visit www.morganstanley.com.

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

NOTICE:

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

This earnings release may contain forward-looking statements, including the attainment of certain financial and other targets, objectives and goals. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management’s current estimates, projections, expectations, assumptions, interpretations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of risks and uncertainties that may affect the future results of the Firm, please see “Forward-Looking Statements” preceding Part I, Item 1, “Competition” and “Supervision and Regulation” in Part I, Item 1, “Risk Factors” in Part I, Item 1A, “Legal Proceedings” in Part I, Item 3, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 and “Quantitative and Qualitative Disclosures about Risk” in Part II, Item 7A in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2022 and other items throughout the Form 10-K, the Firm’s Quarterly Reports on Form 10-Q and the Firm’s Current Reports on Form 8-K, including any amendments thereto.

¹ Includes preferred dividends related to the calculation of earnings per share for the fourth quarter of 2023 and 2022 of approximately $134 million and $123 million, respectively. Includes preferred dividends related to the calculation of earnings per share for the years ended 2023 and 2022 of approximately $557 million and $489 million, respectively.

² The Firm recorded a one-time FDIC Special Assessment of $286 million pre-tax ($218 million post-tax) and a legal charge related to a specific matter of $249 million pre-tax ($234 million post-tax) which negatively impacted earnings per diluted shares by $0.28.

³ 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.

⁴ Our earnings releases, earnings conference calls, financial presentations and other communications may also include certain metrics which we believe to be useful to us, analysts, investors, and other stakeholders by providing further transparency about, or an additional means of assessing, our financial condition and operating results.

⁵ Return on average tangible common equity 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 and capital adequacy. The calculation of return on average tangible common equity represents full year or annualized net income applicable to Morgan Stanley less preferred dividends as a percentage of average tangible common equity. Tangible common equity, also a non-GAAP financial measure, represents common equity less goodwill and intangible assets net of allowable mortgage servicing rights deduction.

⁶ “DCP” refers to certain employee deferred cash-based compensation programs. Please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Matters – Deferred Cash-Based Compensation” in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2022.

⁷ Pre-tax income represents income before provision for income taxes.

⁸ Pre-tax margin represents income before provision for income taxes divided by net revenues.

⁹ The expense efficiency ratio represents total non-interest expenses as a percentage of net revenues.

¹⁰ 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.

¹¹ Wealth Management fee-based asset flows include net new fee-based assets (including asset acquisitions), net account transfers, dividends, interest, and client fees, and exclude institutional cash management related activity.

¹² Wealth Management net new assets represent client inflows, including dividends and interest, and asset acquisitions, less client outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions.

¹³ AUM is defined as assets under management or supervision.

¹⁴ Long-term net flows include the Equity, Fixed Income and Alternative and Solutions asset classes and excludes the Liquidity and Overlay Services asset class.

¹⁵ 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. We recorded the cost of the entire special assessment of $286 million in the fourth quarter of 2023. Of the $286 million, $121 million was recorded in the Institutional Securities segment and $165 million was recorded in the Wealth Management segment.

¹⁶ Transactional revenues include investment banking, trading, and commissions and fee revenues.

¹⁷ Capital ratios are estimates as of the press release date, January 16, 2024.

¹⁸ CET1 capital is defined as Common Equity Tier 1 capital. The Firm’s risk-based capital ratios are computed under each of the (i) standardized approaches for calculating credit risk and market risk risk‐weighted assets (RWAs) (the “Standardized Approach”) and (ii) applicable advanced approaches for calculating credit risk, market risk and operational risk RWAs (the “Advanced Approach”). For information on the calculation of regulatory capital and ratios, and associated regulatory requirements, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Regulatory Requirements" in the Firm’s Annual Report on Form 10-K for the year ended December 31, 2022.

¹⁹ 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.

²⁰ The Firm’s supplementary leverage ratio (SLR) utilizes a Tier 1 capital numerator of approximately $78.2 billion and $77.2 billion, and supplementary leverage exposure denominator of approximately $1.43 trillion and $1.40 trillion, for the fourth quarter of 2023 and 2022, respectively.

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