MS 10-Q Quarterly Report June 30, 2022

MORGAN STANLEY

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ms-20220630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

Commission File Number 1-11758

(Exact name of Registrant as specified in its charter)

Delaware

1585 Broadway

36-3145972

(212)

761-4000

(State or other jurisdiction of

incorporation or organization)

New York,

10036

(I.R.S. Employer Identification No.)

(Registrant’s telephone number, including area code)

(Address of principal executive offices, including zip code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.01 par value	MS	New York Stock Exchange
Depositary Shares, each representing 1/1,000th interest in a share of Floating Rate	MS/PA	New York Stock Exchange
Non-Cumulative Preferred Stock, Series A, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate	MS/PE	New York Stock Exchange
Non-Cumulative Preferred Stock, Series E, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate	MS/PF	New York Stock Exchange
Non-Cumulative Preferred Stock, Series F, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate	MS/PI	New York Stock Exchange
Non-Cumulative Preferred Stock, Series I, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of Fixed-to-Floating Rate	MS/PK	New York Stock Exchange
Non-Cumulative Preferred Stock, Series K, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of 4.875%	MS/PL	New York Stock Exchange
Non-Cumulative Preferred Stock, Series L, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of 4.250%	MS/PO	New York Stock Exchange
Non-Cumulative Preferred Stock, Series O, $0.01 par value
Depositary Shares, each representing 1/1,000th interest in a share of 6.500%	MS/PP	New York Stock Exchange
Non-Cumulative Preferred Stock, Series P, $0.01 par value
Global Medium-Term Notes, Series A, Fixed Rate Step-Up Senior Notes Due 2026	MS/26C	New York Stock Exchange
of Morgan Stanley Finance LLC (and Registrant’s guarantee with respect thereto)
Global Medium-Term Notes, Series A, Floating Rate Notes Due 2029	MS/29	New York Stock Exchange
of Morgan Stanley Finance LLC (and Registrant’s guarantee with respect thereto)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 29, 2022, there were 1,716,826,307 shares of the Registrant’s Common Stock, par value $0.01 per share, outstanding.


Table of Contents

QUARTERLY REPORT ON FORM 10-Q

For the quarter ended June 30, 2022


Table of Contents		Part	Item	Page
Financial Information		I
Management’s Discussion and Analysis of Financial Condition and Results of Operations		I	2	1
Introduction				1
Executive Summary				2
Business Segments				8
Institutional Securities				9
Wealth Management				12
Investment Management				15
Supplemental Financial Information				17
Accounting Development Updates				17
Critical Accounting Policies				17
Liquidity and Capital Resources				18
Balance Sheet				18
Regulatory Requirements				21
Quantitative and Qualitative Disclosures about Risk		I	3	27
Market Risk				27
Credit Risk				29
Country and Other Risks				33
Report of Independent Registered Public Accounting Firm				35
Consolidated Financial Statements and Notes		I	1	36
Consolidated Income Statement (Unaudited)				36
Consolidated Comprehensive Income Statement (Unaudited)				36
Consolidated Balance Sheet (Unaudited at June 30, 2022)				37
Consolidated Statement of Changes in Total Equity (Unaudited)				38
Consolidated Cash Flow Statement (Unaudited)				39
Notes to Consolidated Financial Statements (Unaudited)				40
1.	Introduction and Basis of Presentation			40
2.	Significant Accounting Policies			41
3.	Cash and Cash Equivalents			41
4.	Fair Values			41
5.	Fair Value Option			47
6.	Derivative Instruments and Hedging Activities			48
7.	Investment Securities			51
8.	Collateralized Transactions			53
9.	Loans, Lending Commitments and Related Allowance for Credit Losses			55
10.	Other Assets—Equity Method Investments			57
11.	Deposits			57
12.	Borrowings and Other Secured Financings			57
13.	Commitments, Guarantees and Contingencies			58
14.	Variable Interest Entities and Securitization Activities			60
15.	Regulatory Requirements			62
16.	Total Equity			64
17.	Interest Income and Interest Expense			66
18.	Income Taxes			66
19.	Segment, Geographic and Revenue Information			66
Financial Data Supplement (Unaudited)				69
Glossary of Common Terms and Acronyms				70
Controls and Procedures		I	4	71
Other Information		II
Legal Proceedings		II	1	71
Risk Factors		II	1A	71
Unregistered Sales of Equity Securities and Use of Proceeds		II	2	71
Other Information		II	5	71
Exhibits		II	6	72
Signatures				72


			i


Table of Contents

Available Information

We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website, www.sec.gov , that contains annual, quarterly and current reports, proxy and information statements and other information that issuers file electronically with the SEC. Our electronic SEC filings are available to the public at the SEC’s website.

Our website is www.morganstanley.com . You can access our Investor Relations webpage at www.morganstanley.com/about-us-ir . We make available free of charge, on or through our Investor Relations webpage, our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We also make available, through our Investor Relations webpage, via a link to the SEC’s website, statements of beneficial ownership of our equity securities filed by our directors, officers, 10% or greater shareholders and others under Section 16 of the Exchange Act.

You can access information about our corporate governance at www.morganstanley.com/about-us-governance , our sustainability initiatives at www.morganstanley.com/about-us/sustainability-at-morgan-stanley and our commitment to diversity and inclusion at www.morganstanley.com/about-us/diversity . Our webpages include:

• Amended and Restated Certificate of Incorporation;

• Amended and Restated Bylaws;

• Charters for our Audit Committee, Compensation, Management Development and Succession Committee, Nominating and Governance Committee, Operations and Technology Committee, and Risk Committee;

• Corporate Governance Policies;

• Policy Regarding Corporate Political Activities;

• Policy Regarding Shareholder Rights Plan;

• Equity Ownership Commitment;

• Code of Ethics and Business Conduct;

• Code of Conduct;

• Integrity Hotline Information;

• Environmental and Social Policies;

• Sustainability Report;

• Climate Report; and

• Diversity and Inclusion Report.

Our Code of Ethics and Business Conduct applies to all directors, officers and employees, including our Chief Executive Officer, Chief Financial Officer and Deputy Chief Financial Officer. We will post any amendments to the Code of Ethics and Business Conduct and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange LLC (“NYSE”) on our website. You can request a copy of these documents, excluding exhibits, at no cost, by contacting Investor Relations, 1585 Broadway, New York, NY 10036 (212-761-4000). The information on our website is not incorporated by reference into this report.


			ii


Table of Contents

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. Disclosures reflect the effects of the acquisition of Eaton Vance Corp. (“Eaton Vance”) prospectively from the March 1, 2021 acquisition date. 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 and other securities, 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 customers. 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 covering: financial advisor-led brokerage and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; annuity and insurance products; 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 2021 Form 10-K .


June 2022 Form 10-Q			1


Table of Contents
Management’s Discussion and Analysis

Executive Summary

Overview of Financial Results

Consolidated Results—Three Months Ended June 30, 2022

• The Firm reported net revenues of $13.1 billion demonstrating the benefits of our diversified franchise as the businesses navigated a challenging market environment.

• The Firm delivered ROTCE of 13.8%, or 14.3% excluding the impact of integration-related expenses (see “Selected Non-GAAP Financial Information” herein).

• The Firm’s expense efficiency ratio was 74%, impacted by $200 million related to a regulatory matter concerning the use of unapproved personal devices and the Firm’s record-keeping requirements. In the first half of the year, the expense efficiency ratio was 71%, or 70% excluding the impact of integration-related expenses (see “Selected Non-GAAP Financial Information” herein).

• At June 30, 2022, our Standardized Common Equity Tier 1 capital ratio was 15.2%.

• Institutional Securities net revenues of $6.1 billion reflect increases in Fixed Income and Equity as clients remained engaged in volatile markets, while limited activity in Investment Banking was impacted by the uncertain macroeconomic environment.

• Wealth Management delivered a pre-tax margin of 26.5% or 28.2% excluding integration-related expenses (see “Selected Non-GAAP Financial Information” herein). Net revenues were $5.7 billion, negatively impacted by mark-to-market losses on investments associated with certain employee deferred compensation plans. The business added net new assets of $53 billion in the quarter and $195 billion in the first half of 2022. The quarter also saw continued growth in bank lending and $29 billion of fee-based flows.

• Investment Management net revenues were $1.4 billion. The diversified business helped results despite lower equity markets.

Net Revenues

($ in millions)

Net Income Applicable to Morgan Stanley

($ in millions)

Earnings per Diluted Common Share 1

1. Adjusted Diluted EPS was $1.44 for the current quarter and $1.89 for the prior year quarter. Adjusted Diluted EPS was $3.51 for the current year period and $4.11 for the prior year period (see “Selected Non-GAAP Financial Information” herein for further information).

We reported net revenues of $13.1 billion in the quarter ended June 30, 2022 (“current quarter,” or “2Q 2022”) compared with $14.8 billion in the quarter ended June 30, 2021 (“prior year quarter,” or “2Q 2021”). For the current quarter, net income applicable to Morgan Stanley was $2.5 billion, or $1.39 per diluted common share, compared with $3.5 billion or $1.85 per diluted common share in the prior year quarter.

We reported net revenues of $27.9 billion in the six months ended June 30, 2022 (“current year period,” or “YTD 2022”), compared with $30.5 billion in the period ended June 30, 2021 (“prior year period,” or “YTD 2021”). For the current year period, net income applicable to Morgan Stanley was $6.2 billion, or $3.41 per diluted common share, compared with $7.6 billion or $4.04 per diluted common share in the prior year period.


			2			June 2022 Form 10-Q


Table of Contents
Management’s Discussion and Analysis

Non-interest Expenses 1

($ in millions)

1. The percentages on the bars in the chart represent the contribution of compensation and benefits expenses and non-compensation expenses to the total.

• Compensation and benefits expenses of $5,550 million in the current quarter decreased 14% from the prior year quarter, primarily due to lower expenses related to certain deferred compensation plans linked to investment performance and lower stock-based compensation expense driven by the Firm’s share price, partially offset by the impact of higher headcount. Compensati on and benefits expenses of $11,824 million in the current year period decreased 11% from the prior year period, primarily due to lower expenses related to certain deferred compensation plans linked to investment performance and lower stock-based compensation expense driven by the Firm’s share price, and lower discretionary incentive compensation, partially offset by the impact of higher headcount, and an increase due to the formulaic payout to Wealth Management representatives driven by higher compensable revenues.

• Non-compensation expenses of $4,162 million in the current quarter increased 13% from the prior year quarter, primarily due to higher legal expenses, including $200 million related to the aforementioned regulato ry matter in the current quarter, increased volume-related expenses and increased investments in technology. Non-compensation expenses of $8,044 million in the current year period

increased 9% from the prior year period, primarily due to higher legal expenses, including $200 million related to the aforementioned regulatory matter in the current quarter, and increased investments in technology.

Provision for Credit Losses

The Provision for credit losses on loans and lending commitments of $101 million in the current quarter was primarily due to portfolio growth and deterioration in macroeconomic outlook. The Provision for credit losses on loans and lending commitments in the prior year quarter was $73 million, primarily driven by one secured lending facility.

The Provision for credit losses on loans and lending commitments of $158 million in the current year period was primarily due to portfolio growth and deterioration in macroeconomic outlook. The Provision for credit losses on loans and lending commitments in the prior year period was a net release of $25 million, primarily as a result of improvements in the outlook of macroeconomic conditions, as the forecasted effects of the COVID-19 pandemic became less severe, and the impact of paydowns on corporate loans, including by lower-rated borrowers, partially offset by the provision for one secured lending facility in the prior year period.

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


June 2022 Form 10-Q			3


Table of Contents
Management’s Discussion and Analysis

Business Segment Results

Net Revenues by Segment 1

($ in millions)

Net Income Applicable to Morgan Stanley by Segment 1

($ in millions)

1. The percentages on the bars in the charts represent the contribution of each business segment to the total of the applicable financial category and may not sum to 100% due to intersegment eliminations. See Note 19 to the financial statements for details of intersegment eliminations.

• Institutional Securities net revenues of $6,119 million in the current quarter decreased 14% from the prior year quarter and net revenues of $13,776 million in the current year period decreased 12% from the prior year period, primarily reflecting for both periods lower underwriting revenues, partially offset by higher Fixed Income business revenue.

• Wealth Management net revenues of $5,736 million in the current quarter decreased 6% from the prior year quarter and net revenues of $11,671 million in the current year period decreased 3% from the prior year period, primarily reflecting for both periods lower Transactional revenues, partially offset by higher Net interest and Asset management revenues.

• Investment Management net revenues of $1,411 million in the current quarter decreased 17% from the prior year quarter, as a result of lower Performance-based income and other revenues and lower Asset management and related fees. Net revenues of $2,746 million in the current year


			4			June 2022 Form 10-Q


Table of Contents
Management’s Discussion and Analysis

period decreased 9% from the prior year period, as a result of lower Performance-based income and other revenues, partially offset by higher Asset management and related fees, including incremental revenues related to the Eaton Vance acquisition.

Net Revenues by Region 1, 2

($ in millions)

1. The percentages on the bars in the charts represent the contribution of each region to the total.

2. For a discussion of how the geographic breakdown of net revenues is determined, see Note 23 to the financial statements in the 2021 Form 10-K.

Americas net revenues in the current quarter decreased 11% from the prior year quarter, primarily driven by the Investment banking business and Other net revenues within the Institutional Securities business segment and results from the Wealth Management business segment, partially offset by higher results from the Fixed Income business within the Institutional Securities business segment. EMEA net revenues decreased 20% from the prior year quarter, primarily driven by the Investment banking business within the Institutional Securities business segment and results from the Investment Management business segment.

Americas net revenues in the current year period decreased 9% from the prior year period, primarily driven by the Investment banking business and Other net revenues within the Institutional Securities business segment and results from the Wealth Management business segment. EMEA net revenues decreased 6% from the prior year quarter, primarily driven by the Investment banking business within the Institutional Securities business segment. Asia net revenues decreased 8% from the prior year quarter, primarily driven by the Investment banking business within the Institutional Securities business segment.


June 2022 Form 10-Q			5


Table of Contents
Management’s Discussion and Analysis

Selected Financial Information and Other Statistical Data


	Three Months Ended June 30,						Six Months Ended June 30,
$ in millions	2022			2021			2022			2021
Consolidated results
Net revenues	$	13,132		$	14,759		$	27,933		$	30,478
Earnings applicable to Morgan Stanley common shareholders	$	2,391		$	3,408		$	5,933		$	7,390
Earnings per diluted common share	$	1.39		$	1.85		$	3.41		$	4.04
Consolidated financial measures
Expense efficiency ratio 1	74		%	69		%	71		%	68		%
Adjusted expense efficiency ratio 1, 2	73		%	68		%	70		%	67		%
ROE 3	10.1		%	13.8		%	12.4		%	15.3		%
Adjusted ROE 2, 3	10.5		%	14.1		%	12.8		%	15.6		%
ROTCE 2, 3	13.8		%	18.6		%	16.8		%	19.8		%
Adjusted ROTCE 2, 3	14.3		%	19.0		%	17.3		%	20.1		%
Pre-tax margin 4	25		%	31		%	28		%	33		%
Effective tax rate	23.6		%	23.1		%	20.9		%	22.5		%
Average liquidity resources 5	$	306,370		$	351,914		N/M			N/M
Pre-tax margin by segment 4
Institutional Securities	25		%	35		%	32		%	37		%
Wealth Management	27		%	27		%	27		%	27		%
Wealth Management, adjusted 2	28		%	28		%	28		%	28		%
Investment Management	18		%	25		%	17		%	27		%
Investment Management, adjusted 2	19		%	27		%	19		%	28		%


in millions, except per share and employee data	At June 30, 2022			At December 31, 2021
Loans 6	$	214,573		$	200,761
Total assets	$	1,173,776		$	1,188,140
Deposits	$	347,148		$	347,574
Borrowings	$	226,177		$	233,127
Common shareholders' equity	$	93,846		$	97,691
Tangible common shareholders’ equity 2	$	69,043		$	72,499
Common shares outstanding	1,723			1,772
Book value per common share 7	$	54.46		$	55.12
Tangible book value per common share 2, 7	$	40.07		$	40.91
Worldwide employees (in thousands)	78			75
Client assets 8 (in billions)	$	5,597		$	6,554
Capital Ratios 9
Common Equity Tier 1 capital—Standardized	15.2		%	16.0		%
Tier 1 capital—Standardized	16.9		%	17.7		%
Common Equity Tier 1 capital—Advanced	15.5		%	17.4		%
Tier 1 capital—Advanced	17.1		%	19.1		%
Tier 1 leverage	6.6		%	7.1		%
SLR	5.4		%	5.6		%

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

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

3. 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.

4. Pre-tax margin represents income before 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 shareholders’ equity and tangible common shareholders’ 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 Manage ment products and are also included in Investment Management’s AUM. The prior period has been revised to conform to the current period presentation. See "Business Segments—Wealth Management" herein for additional information.

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

Russia and Ukraine War

We continue to monitor the war in Ukraine and its impact on both the Ukrainian and Russian economies, as well as related impacts on other world economies and the financial markets. Our direct exposure to both Russia and Ukraine remains limited. We are not entering any new business onshore in Russia and our activities in Russia are limited to helping global clients address and close out pre-existing obligations.

Refer to “Risk Factors” and “Forward-Looking Statements” in the 2021 Form 10-K for more information on the potential effects of geopolitical events and acts of war or aggression.

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 statement and otherwise. 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.

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


			6			June 2022 Form 10-Q


Table of Contents
Management’s Discussion and Analysis

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


	Three Months Ended June 30,						Six Months Ended June 30,
$ in millions, except per share data	2022			2021			2022			2021
Earnings applicable to Morgan Stanley common shareholders	$	2,391		$	3,408		$	5,933		$	7,390
Impact of adjustments:
Wealth Management—Compensation expenses	4			9			5			39
Wealth Management—Non-compensation expenses	92			51			166			85
Investment Management—Compensation expenses	7			16			16			19
Investment Management—Non-compensation expenses	17			14			40			22
Integration-related expenses	120			90			227			165
Related tax benefit	(28)			(21)			(53)			(38)
Adjusted earnings applicable to Morgan Stanley common shareholders—non-GAAP 1	$	2,483		$	3,477		$	6,107		$	7,517
Earnings per diluted common share	$	1.39		$	1.85		$	3.41		$	4.04
Impact of adjustments	0.05			0.04			0.10			0.07
Adjusted earnings per diluted common share—non-GAAP 1	$	1.44		$	1.89		$	3.51		$	4.11
Expense efficiency ratio	74		%	69		%	71		%	68		%
Impact of adjustments	(1)		%	(1)		%	(1)		%	(1)		%
Adjusted expense efficiency ratio—non-GAAP 1	73		%	68		%	70		%	67		%
Wealth Management Pre-tax margin	27		%	27		%	27		%	27		%
Impact of adjustments	1		%	1		%	1		%	1		%
Adjusted Wealth Management pre-tax margin—non-GAAP 1	28		%	28		%	28		%	28		%
Investment Management Pre-tax margin	18		%	25		%	17		%	27		%
Impact of adjustments	1		%	2		%	2		%	1		%
Adjusted Investment Management pre-tax margin—non-GAAP 1	19		%	27		%	19		%	28		%


$ in millions	At June 30, 2022		At December 31, 2021
Tangible equity
Common shareholders' equity	$	93,846	$	97,691
Less: Goodwill and net intangible assets	(24,803)		(25,192)
Tangible common shareholders' equity—non-GAAP	$	69,043	$	72,499


	Average Monthly Balance
	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Tangible equity
Common shareholders' equity	$	94,311	$	98,824	$	95,537	$	96,309
Less: Goodwill and net intangible assets	(24,934)		(25,611)		(25,021)		(21,738)
Tangible common shareholders' equity—non-GAAP	$	69,377	$	73,213	$	70,516	$	74,571


	Three Months Ended June 30,						Six Months Ended June 30,
$ in billions	2022			2021			2022			2021
Average common equity
Unadjusted—GAAP	$	94.3		$	98.8		$	95.5		$	96.3
Adjusted 1 —Non-GAAP	94.3			98.8			95.6			96.4
ROE 2
Unadjusted—GAAP	10.1		%	13.8		%	12.4		%	15.3		%
Adjusted 1 —Non-GAAP	10.5		%	14.1		%	12.8		%	15.6		%
Average tangible common equity—Non-GAAP
Unadjusted	$	69.4		$	73.2		$	70.5		$	74.6
Adjusted 1	69.4			73.2			70.6			74.6
ROTCE 2 —Non-GAAP
Unadjusted	13.8		%	18.6		%	16.8		%	19.8		%
Adjusted 1	14.3		%	19.0		%	17.3		%	20.1		%

Non-GAAP Financial Measures by Business Segment


	Three Months Ended June 30,						Six Months Ended June 30,
$ in billions	2022			2021			2022			2021
Average common equity 3
Institutional Securities	$	48.8		$	43.5		$	48.8		$	43.5
Wealth Management	31.0			28.6			31.0			28.6
Investment Management	10.6			10.7			10.6			7.1
ROE 4
Institutional Securities	9		%	17		%	13		%	20		%
Wealth Management	15		%	17		%	15		%	17		%
Investment Management	7		%	13		%	7		%	17		%
Average tangible common equity 3
Institutional Securities	$	48.3		$	42.9		$	48.3		$	42.9
Wealth Management	16.3			13.4			16.3			13.4
Investment Management	0.8			1.0			0.8			1.0
ROTCE 4
Institutional Securities	9		%	17		%	13		%	20		%
Wealth Management	29		%	37		%	29		%	36		%
Investment Management	99		%	172		%	102		%	117		%

1. Adjusted amounts exclude the effect of costs related to the integrations of E*TRADE and Eaton Vance, net of tax as appropriate.

2. ROE and ROTCE represent earnings applicable to Morgan Stanley common shareholders as a percentage of average common equity and average tangible common equity, respectively. When excluding integration-related costs, both the numerator and average denominator are adjusted.

3. 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 equity.

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

Return on Tangible Common Equity Goal

In January 2022, we established an ROTCE goal of over 20%, excluding integration-related expenses. Our ROTCE goal is a forward-looking statement that was based on a normal market environment and may be materially affected by many factors. See “Risk Factors” and “Forward-Looking Statements” in the 2021 Form 10-K for further information on market and economic conditions and their potential effects on our future operating results.

For further information on non-GAAP measures (ROTCE excluding integration-related expenses), see “Selected Non-GAAP Financial Information” herein.


June 2022 Form 10-Q			7


Table of Contents
Management’s Discussion and Analysis

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.

The global economic and geopolitical environment in the current quarter has been characterized by continued inflation, rising interest rates and volatility in global financial markets. This environment has had a mixed impact on our businesses, which is discussed further herein.

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 2021 Form 10-K.


			8			June 2022 Form 10-Q


Table of Contents
Management’s Discussion and Analysis

Institutional Securities

Income Statement Information


	Three Months Ended June 30,
$ in millions	2022		2021		% Change
Revenues
Advisory	$	598	$	664	(10)	%
Equity	148		1,072		(86)	%
Fixed income	326		640		(49)	%
Total Underwriting	474		1,712		(72)	%
Total Investment banking	1,072		2,376		(55)	%
Equity	2,960		2,827		5	%
Fixed income	2,500		1,682		49	%
Other	(413)		207		N/M
Net revenues	$	6,119	$	7,092	(14)	%
Provision for credit losses	82		70		17	%
Compensation and benefits	2,050		2,433		(16)	%
Non-compensation expenses	2,433		2,091		16	%
Total non-interest expenses	4,483		4,524		(1)	%
Income before provision for income taxes	1,554		2,498		(38)	%
Provision for income taxes	395		574		(31)	%
Net income	1,159		1,924		(40)	%
Net income applicable to noncontrolling interests	38		20		90	%
Net income applicable to Morgan Stanley	$	1,121	$	1,904	(41)	%


	Six Months Ended June 30,
$ in millions	2022		2021		% Change
Revenues
Advisory	$	1,542	$	1,144	35	%
Equity	406		2,574		(84)	%
Fixed income	758		1,271		(40)	%
Total Underwriting	1,164		3,845		(70)	%
Total Investment banking	2,706		4,989		(46)	%
Equity	6,134		5,702		8	%
Fixed income	5,423		4,648		17	%
Other	(487)		330		N/M
Net revenues	$	13,776	$	15,669	(12)	%
Provision for credit losses	126		(23)		N/M
Compensation and benefits	4,654		5,547		(16)	%
Non-compensation expenses	4,655		4,276		9	%
Total non-interest expenses	9,309		9,823		(5)	%
Income before provision for income taxes	4,341		5,869		(26)	%
Provision for income taxes	930		1,310		(29)	%
Net income	3,411		4,559		(25)	%
Net income applicable to noncontrolling interests	99		54		83	%
Net income applicable to Morgan Stanley	$	3,312	$	4,505	(26)	%

Investment Banking

Investment Banking Volumes


	Three Months Ended June 30,				Six Months Ended June 30,
$ in billions	2022		2021		2022		2021
Completed mergers and acquisitions 1	$	158	$	151	$	486	$	378
Equity and equity-related offerings 2, 3	3		33		11		70
Fixed income offerings 2, 4	52		108		133		213

Source: Refinitiv data as of July 1, 2022. 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 $1,072 million in the current quarter decreased 55% compared with the prior year quarter, primarily reflecting a decrease in equity underwriting and fixed income underwriting revenues.

• Advisory revenues decreased primarily due to fewer completed transactions.

• Equity underwriting revenues decreased on lower volumes in line with market levels, with lower revenues across all products.

• Fixed income underwriting revenues decreased primarily due to lower bond issuances and lower non-investment grade loan issuances.

Revenues of $2,706 million in the current year period decreased 46% compared with the prior year period, primarily reflecting a decrease in equity underwriting and fixed income underwriting revenues, partially offset by an increase in advisory revenues.

• Advisory revenues increased primarily due to higher levels of completed transactions.

• Equity underwriting revenues decreased on lower volumes in line with market levels, with lower revenues across all products.

• Fixed income underwriting revenues decreased primarily due to lower bond issuances and lower non-investment grade loan issuances.

See “Investment Banking Volumes” herein.


June 2022 Form 10-Q			9


Table of Contents
Management’s Discussion and Analysis

Equity, Fixed Income and Other Net Revenues

Equity and Fixed Income Net Revenues


	Three Months Ended June 30, 2022
					Net Interest 2		All Other 3
$ in millions	Trading		Fees 1		Net Interest 2		All Other 3		Total
Financing	$	1,354	$	140	$	33	$	2	$	1,529
Execution services	869		621		(9)		(50)		1,431
Total Equity	$	2,223	$	761	$	24	$	(48)	$	2,960
Total Fixed Income	$	2,077	$	82	$	404	$	(63)	$	2,500


	Three Months Ended June 30, 2021
					Net Interest 2		All Other 3
$ in millions	Trading		Fees 1		Net Interest 2		All Other 3		Total
Financing	$	1,138	$	121	$	117	$	3	$	1,379
Execution services	818		636		(45)		39		1,448
Total Equity	$	1,956	$	757	$	72	$	42	$	2,827
Total Fixed Income	$	1,148	$	72	$	417	$	45	$	1,682


	Six Months Ended June 30, 2022
					Net Interest 2		All Other 3
$ in millions	Trading		Fees 1		Net Interest 2		All Other 3		Total
Financing	$	2,606	$	272	$	120	$	5	$	3,003
Execution services	1,793		1,314		(43)		67		3,131
Total Equity	$	4,399	$	1,586	$	77	$	72	$	6,134
Total Fixed Income	$	4,335	$	179	$	912	$	(3)	$	5,423


	Six Months Ended June 30, 2021
					Net Interest 2		All Other 3
$ in millions	Trading		Fees 1		Net Interest 2		All Other 3		Total
Financing	$	1,783	$	251	$	299	$	6	$	2,339
Execution services	1,932		1,436		(107)		102		3,363
Total Equity	$	3,715	$	1,687	$	192	$	108	$	5,702
Total Fixed Income	$	3,461	$	153	$	856	$	178	$	4,648

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.

Current Quarter

Equity

Net revenues of $2,960 million in the current quarter increased 5% compared with the prior year quarter, primarily reflecting an increase in financing.

• Financing revenues increased primarily due to improved spreads driven by a change in client balance mix and elevated activity.

• Execution services revenues were relatively unchanged.

Fixed Income

Net revenues of $2,500 million in the current quarter increased 49% compared with the prior year quarter, reflecting an increase in global macro and commodities products.

• Global macro products saw improved client flow in the current quarter and revenues increased from the prior year quarter due to the impact of market conditions on inventory held to facilitate client activity and increased client activity.

• Credit products revenues was relatively unchanged from the prior year quarter.

• Commodities products and other fixed income revenues increased primarily driven by higher client activity and the impact of market conditions on inventory held to facilitate client activity in Commodities.

Other Net Revenues

Other Net revenues in the current quarter decreased compared with the prior year quarter, primarily due to higher mark-to-market losses on corporate loans held for sale, net of hedges, and losses compared with gains in the prior year quarter on investments associated with certain employee deferred compensation plans.

Current Year Period

Equity

Net revenues of $6,134 million in the current year period increased 8% compared with the prior year period, reflecting an increase in financing, partially offset by a decrease in exe cution services.

• Financing revenues increased primarily due to the prior year period being impacted by a credit event for a single client.

• Execution services revenues decreased primarily due to lower client activity and the impact of market conditions on inventory held to facilitate client activity in cash equities, partially offset by the absence of trading losses related to the aforementioned credit event and the impact of market conditions on inventory held to facilitate client activity in derivatives.

Fixed Income

Net revenues of $5,423 million in the current year period increased 17% compared with the prior year period, primarily reflecting an increase in global macro and commodities products, partially offset by a decrease in credit products.

• Global macro products saw improved client flow in the current year period and revenues increased from the prior year period due to the impact of market conditions on inventory held to facilitate client activity and increased client activity.

• Credit products revenues decreased primarily due to the impact of market conditions on inventory held to facilitate client activity across products.


			10			June 2022 Form 10-Q


Table of Contents
Management’s Discussion and Analysis

Other Net Revenues

Other Net revenues in the current year period decreased compared with the prior year period, primarily due to losses compared with gains in the prior year period on investments associated with certain employee deferred compensation plans, and higher mark-to-market losses on corporate loans held for sale, net of hedges.

Provision for Credit Losses

Provision for credit losses on loans and lending commitments of $82 million in the current quarter was primarily driven by portfolio growth and deterioration in macroeconomic outlook. The Provision for credit losses on loans and lending commitments was $70 million in the prior year quarter, primarily driven by one secured lending facility.

Provision for credit losses on loans and lending commitments of $126 million in the current year period was primarily driven by portfolio growth and deterioration in macroeconomic outlook. The Provision for credit losses on loans and lending commitments was a net release of $23 million in the prior year period, primarily as a result of improvements in the outlook for macroeconomic conditions, as the forecasted effects of the COVID-19 pandemic became less severe, and the impact of paydowns on corporate loans, including by lower-rated borrowers, partially offset by the provision for one secured lending facility in the prior year period.

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

Non-interest Expenses

Non-interest expenses of $4,483 million in the current quarter were relatively unchanged from the prior year quarter, with lower Compensation and benefits expenses offset by higher Non-compensation expenses.

• Compensation and benefits expenses decreased in the current quarter, primarily due to lower stock-based compensation expense driven by the Firm’s share price, lower expenses related to certain deferred compensation plans linked to investment performance, and lower discretionary in centive compensation on lower revenues, partially offset by the impact of higher headcount.

• Non-compensation expenses increased in the current quarter, primarily due to an increase in legal expenses, including $200 million related to the aforementioned regulatory matter in the current quarter, and higher volume-related expenses reflecting higher business activity.

Non-interest expenses of $9,309 million in the current year period decreased 5% compared with the prior year period, primarily as a result of lower Compensation and benefits expenses, partially offset by higher Non-compensation expenses.

• Compensation and benefits expenses decreased in the current year period, primarily due to lower discretionary incentive compensation on lower revenues, lower stock-based compensation expense driven by the Firm’s share price and lower expenses related to certain deferred compensation plans linked to investment performance, partially offset by the impact of higher headcount.

• Non-compensation expenses increased in the current year period, primarily due to an increase in legal expenses, including $200 million related to the aforementioned regulatory matter in the current quarter.


June 2022 Form 10-Q			11


Table of Contents
Management’s Discussion and Analysis

Wealth Management

Income Statement Information


	Three Months Ended June 30,
$ in millions	2022		2021		% Change
Revenues
Asset management	$	3,510	$	3,447	2	%
Transactional 1	291		1,172		(75)	%
Net interest	1,747		1,255		39	%
Other 1	188		221		(15)	%
Net revenues	5,736		6,095		(6)	%
Provision for credit losses	19		3		N/M
Compensation and benefits	2,895		3,275		(12)	%
Non-compensation expenses	1,301		1,181		10	%
Total non-interest expenses	4,196		4,456		(6)	%
Income before provision for income taxes	$	1,521	$	1,636	(7)	%
Provision for income taxes	331		372		(11)	%
Net income applicable to Morgan Stanley	$	1,190	$	1,264	(6)	%



	Six Months Ended June 30,
$ in millions	2022		2021		% Change
Revenues
Asset management	$	7,136	$	6,638	8	%
Transactional 1	926		2,400		(61)	%
Net interest	3,287		2,640		25	%
Other 1	322		376		(14)	%
Net revenues	11,671		12,054		(3)	%
Provision for credit losses	32		(2)		N/M
Compensation and benefits	6,020		6,445		(7)	%
Non-compensation expenses	2,525		2,375		6	%
Total non-interest expenses	8,545		8,820		(3)	%
Income before provision for income taxes	$	3,094	$	3,236	(4)	%
Provision for income taxes	632		730		(13)	%
Net income applicable to Morgan Stanley	$	2,462	$	2,506	(2)	%

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

Wealth Management Metrics


$ in billions	At June 30, 2022		At December 31, 2021
Total client assets 1	$	4,246	$	4,989
U.S. Bank Subsidiary loans	$	144	$	129
Margin and other lending 2	$	25	$	31
Deposits 3	$	340	$	346
Annualized weighted average cost of deposits	0.28%		0.10%


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net new assets 4	$	52.9	$	71.2	$	194.9	$	176.1

1. The prior period amount has been revised. See “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 are sourced from Wealth Management clients and other sources of funding on the U.S. Bank Subsidiaries. Deposits include sweep deposit programs, savings and other, and time deposits. Excludes approximately $8 billion and $9 billion of off-balance sheet deposits as of June 30, 2022 and December 31, 2021, respectively.

4. Net new assets represent client inflows, including dividends and inter est, and asset acquisitions, less client outflows, and exclude activity from business combinations/divestitures and the impact of fees and commissions.

Advisor-led Channel


$ in billions	At June 30, 2022		At December 31, 2021
Advisor-led client assets 1	$	3,427	$	3,886
Fee-based client assets 2	$	1,717	$	1,839
Fee-based client assets as a percentage of advisor-led client assets	50%		47%


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Fee-based asset flows 3	$	28.5	$	33.7	$	125.7	$	70.9

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 thos e 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 descript ion of the Inflows and Outflows included in Fee-based asset flows, see Fee-based client assets in the 2021 Form 10-K.

Self-directed Channel


$ in billions	At June 30, 2022		At December 31, 2021
Self-directed assets 1	$	819	$	1,103
Self-directed households (in millions) 2	7.8		7.4


	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Daily average revenue trades (“DARTs”) (in thousands) 3	880	1,042	948	1,324

1. Self-directed assets represent active accounts which are not advisor led. Active accounts are defined as having at least $25 in assets. The prior period amount has been revised to include certain additional vested client employee stock options to align the timing of recognition with other existing Morgan Stanley client assets.

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


			12			June 2022 Form 10-Q


Table of Contents
Management’s Discussion and Analysis

Workplace Channel 1


$ in billions	At June 30, 2022		At December 31, 2021
Stock plan unvested assets 2	$	323	$	509
Stock plan participants (in millions) 3	6.1		5.6

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 $3,510 million in the current quarter increased 2% compared with the prior year quarter, primarily due to higher fee-based asset levels in the current quarter as a result of positive fee-based flows, partially offset by lower market levels.

In the current year period, asset management increased 8% to $7,136 million compared with the pri or year period, primarily due to higher fee-based asset levels in the current year period as a result of positive fee-based flows and market appreciation since the prior year period.

See “Fee-Based Client Assets—Rollforwards” herein.

Transactional Revenues

Transactional revenues of $291 million in the current quarter decreased 75% compared with the prior year quarter, primarily due to losses on investments associated with certain employee deferred compensation plans, lower client activity, and lower revenues from the distribution of structured product and closed-end fund issuances.

In the current year period, transactional revenues decreased 61% to $926 million compared with the prior year period, primarily due to losses on investments associated with certain employee deferred compensation plans, lower client activity in equities, and lower revenues from the distribution of closed-end fund and structured product issuances.

Net Interest

Net interest of $1,747 million in the current quarter increased 39% compared with the prior year quarter, primarily due to net effect of higher interest rates and growth in bank lending.

In the current year period, Net interest increased 25% to $3,287 million compared with the prior year period, primarily due to net effect of higher interest rates and growth in bank lending.

Non-interest Expenses

Non-interest expenses of $4,196 million in the current quarter decreased 6% compared with the prior year quarter, primarily as a result of lower Compensation and benefits expenses, partially offset by higher Non-compensation expenses .

• Compensation and benefits expenses decreased in the current quarter primarily due to lower expenses related to certain deferred compensation plans linked to investment performance, partially offset by the impact of higher headcount, and an increase in the formulaic payout to Wealth Management representatives driven by higher compensable revenues.

• Non-compensation expenses increased in the current quarter primarily driven by investments in technology, as well as higher marketing and business development costs and higher integration-related expenses.

In the current year period, Non-interest expenses decreased 3% to $8,545 million compared with the prior year period, primarily as a result of lower Compensation and benefits expenses, partially offset by higher Non-compensation expenses.

• Compensation and benefits expenses decreased in the current year period primarily due to lower expenses related to certain deferred compensation plans linked to investment performance, partially offset by an increase in the formulaic payout to Wealth Management representatives driven by higher compensable revenues, as well as the impact of higher headcount.

• Non-compensation expenses increased in the current year period primarily driven by investments in technology and higher integration-related expenses.

Fee-Based Client Assets Rollforwards



$ in billions	At March 31, 2022		Inflows		Outflows		Market Impact		At June 30, 2022
Separately managed 1	$	565	$	26	$	(6)	$	(29)	$	556
Unified managed	447		18		(14)		(55)		396
Advisor	199		9		(10)		(26)		172
Portfolio manager	615		27		(21)		(75)		546
Subtotal	$	1,826	$	80	$	(51)	$	(185)	$	1,670
Cash management	47		9		(9)		—		47
Total fee-based client assets	$	1,873	$	89	$	(60)	$	(185)	$	1,717


June 2022 Form 10-Q			13


Table of Contents
Management’s Discussion and Analysis



$ in billions	At March 31, 2021		Inflows		Outflows		Market Impact		At June 30, 2021
Separately managed 1	$	385	$	13	$	(4)	$	13	$	407
Unified managed	405		25		(14)		20		436
Advisor	188		10		(8)		11		201
Portfolio manager	549		29		(17)		29		590
Subtotal	$	1,527	$	77	$	(43)	$	73	$	1,634
Cash management	47		8		(9)		—		46
Total fee-based client assets	$	1,574	$	85	$	(52)	$	73	$	1,680


$ in billions	At December 31, 2021		Inflows 2		Outflows		Market Impact		At June 30, 2022
Separately managed 1	$	479	$	112	$	(13)	$	(22)	$	556
Unified managed	467		42		(27)		(86)		396
Advisor	211		17		(20)		(36)		172
Portfolio manager	636		53		(38)		(105)		546
Subtotal	$	1,793	$	224	$	(98)	$	(249)	$	1,670
Cash management	46		18		(17)		—		47
Total fee-based client assets	$	1,839	$	242	$	(115)	$	(249)	$	1,717


$ in billions	At December 31, 2020		Inflows		Outflows		Market Impact		At June 30, 2021
Separately managed 1	$	359	$	26	$	(11)	$	33	$	407
Unified managed	379		51		(27)		33		436
Advisor	177		22		(17)		19		201
Portfolio manager	509		59		(32)		54		590
Subtotal	$	1,424	$	158	$	(87)	$	139	$	1,634
Cash management	48		15		(17)		—		46
Total fee-based client assets	$	1,472	$	173	$	(104)	$	139	$	1,680

1. Includes non-custody account values reflecting prior quarter-end balances due to lag in the reporting of asset values by third-party custodians.

2. Includes $75 billion of fee-based assets acquired in an asset acquisition in the current year period reflected in Separately managed.

Average Fee Rates 1


	Three Months Ended June 30,		Six Months Ended June 30,
Fee rate in bps	2022	2021	2022	2021
Separately managed	11	14	12	14
Unified managed	94	95	94	96
Advisor	81	82	81	82
Portfolio manager	92	93	92	93
Subtotal	66	72	67	73
Cash management	6	5	6	5
Total fee-based client assets	64	71	65	71

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

For a description of fee-based client assets and rollforward items 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 2021 Form 10-K.


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Management’s Discussion and Analysis

Investment Management

Income Statement Information


	Three Months Ended June 30,
$ in millions	2022		2021		% Change
Revenues
Asset management and related fees	$	1,304	$	1,418	(8)	%
Performance-based income and other 1	107		284		(62)	%
Net revenues	1,411		1,702		(17)	%
Compensation and benefits	605		715		(15)	%
Non-compensation expenses	557		557		—	%
Total non-interest expenses	1,162		1,272		(9)	%
Income before provision for income taxes	249		430		(42)	%
Provision for income taxes	58		108		(46)	%
Net income	191		322		(41)	%
Net income (loss) applicable to noncontrolling interests	3		(19)		116	%
Net income applicable to Morgan Stanley	$	188	$	341	(45)	%


	Six Months Ended June 30,
$ in millions	2022		2021		% Change
Revenues
Asset management and related fees	$	2,692	$	2,521	7	%
Performance-based income and other 1	54		495		(89)	%
Net revenues	2,746		3,016		(9)	%
Compensation and benefits	1,150		1,229		(6)	%
Non-compensation expenses	1,119		987		13	%
Total non-interest expenses	2,269		2,216		2	%
Income before provision for income taxes	477		800		(40)	%
Provision for income taxes	95		189		(50)	%
Net income	382		611		(37)	%
Net income (loss) applicable to noncontrolling interests	(9)		(5)		(80)	%
Net income applicable to Morgan Stanley	$	391	$	616	(37)	%

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

Acquisition of Eaton Vance

The comparison of the current year period results to the prior year period is impacted by the acquisition of Eaton Vance on March 1, 2021. For additional information on the acquisition of Eaton Vance, see Note 3 to the financial statements in the 2021 Form 10-K.

Net Revenues

Asset Management and Related Fees

Asset management and related fees of $1,304 million in the current quarter decreased 8% from the prior year quarter, primarily due to lower average AUM driven by the decline in the equity markets, partially offset by the impact of lower fee waivers in certain money market funds.

Asset management and related fees of $2,692 million in the current year period increased 7% from the prior year period, primarily due to incremental revenues and higher average AUM as a result of the Eaton Vance acquisition, and the impact of lower fee waivers in certain money market funds, partially offset by the decline in the equity markets.

See “Assets under Management or Supervision” herein.

Performance-based Income and Other

Performance-based income and other revenues of $107 million in the current quarter decreased 62% from the prior year quarter, primarily due to losses on investments associated with certain employee deferred compensation plans compared with gains in the prior year quarter and mark-to-market losses on public investments reflecting the decline in equity markets.

Performance-based income and other revenues of $54 million in the current year period decreased 89% from the prior year period, primarily due to losses on investments associated with certain employee deferred compensation plans compared with gains in the prior year period, lower accrued carried interest and mark-to-market losses on public investments reflecting the decline in equity markets.

Non-interest Expenses

Non-interest expenses of $1,162 million in the current quarter decreased 9% from the prior year quarter as a result of lower Compensation and benefits.

• Non-compensation expenses were relatively unchanged.


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Management’s Discussion and Analysis

Non-interest expenses of $2,269 million in the current year period increased 2% from the prior year period as a result of higher Non-compensation expenses, partially offset with lower Compensation and benefits.

• Compensation and benefits expenses decreased in the current year period primarily due to lower expenses related to certain deferred compensation plans linked to investment performance and lower compensation associated with carried interest, partially offset by incremental compensation as a result of the Eaton Vance acquisition.

• Non-compensation expenses increased in the current year period primarily due to incremental expenses as a result of the Eaton Vance acquisition.

Assets under Management or Supervision Rollforwards


$ in billions	Equity		Fixed Income		Alternatives and Solutions		Long-Term AUM Subtotal		Liquidity and Overlay Services		Total
March 31, 2022	$	337	$	195	$	449	$	981	$	466	$	1,447
Inflows	13		18		23		54		609		663
Outflows	(20)		(20)		(16)		(56)		(577)		(633)
Market Impact	(60)		(9)		(38)		(107)		(7)		(114)
Other	(5)		(3)		(3)		(11)		(1)		(12)
June 30, 2022	$	265	$	181	$	415	$	861	$	490	$	1,351


$ in billions	Equity		Fixed Income		Alternatives and Solutions		Long-Term AUM Subtotal		Liquidity and Overlay Services		Total
March 31, 2021	$	371	$	201	$	418	$	990	$	429	$	1,419
Inflows	24		19		29		72		454		526
Outflows	(21)		(15)		(20)		(56)		(419)		(475)
Market Impact	31		3		19		53		4		57
Other	(1)		(1)		(1)		(3)		—		(3)
June 30, 2021	$	404	$	207	$	445	$	1,056	$	468	$	1,524


$ in billions	Equity		Fixed Income		Alternatives and Solutions		Long-Term AUM Subtotal		Liquidity and Overlay Services		Total
December 31, 2021	$	395	$	207	$	466	$	1,068	$	497	$	1,565
Inflows	32		37		50		119		1,103		1,222
Outflows	(46)		(42)		(45)		(133)		(1,100)		(1,233)
Market Impact	(108)		(16)		(52)		(176)		(9)		(185)
Other	(8)		(5)		(4)		(17)		(1)		(18)
June 30, 2022	$	265	$	181	$	415	$	861	$	490	$	1,351


$ in billions	Equity		Fixed Income		Alternatives and Solutions		Long-Term AUM Subtotal		Liquidity and Overlay Services		Total
December 31, 2020	$	242	$	98	$	153	$	493	$	288	$	781
Inflows	55		32		44		131		913		1,044
Outflows	(44)		(24)		(30)		(98)		(852)		(950)
Market Impact	35		1		29		65		4		69
Acquired 1	119		103		251		473		116		589
Other	(3)		(3)		(2)		(8)		(1)		(9)
June 30, 2021	$	404	$	207	$	445	$	1,056	$	468	$	1,524

1. Related to the Eaton Vance acquisition.

Average AUM


	Three Months Ended June 30,				Six Months Ended June 30,
$ in billions	2022		2021		2022		2021
Equity	$	298	$	389	$	325	$	329
Fixed income	189		205		195		159
Alternatives and Solutions	432		434		442		314
Long-term AUM subtotal	919		1,028		962		802
Liquidity and Overlay Services	469		449		473		384
Total AUM	$	1,388	$	1,477	$	1,435	$	1,186

Average Fee Rates 1


	Three Months Ended June 30,		Six Months Ended June 30,
Fee rate in bps	2022	2021	2022	2021
Equity	69	72	70	77
Fixed income	36	38	36	38
Alternatives and Solutions	34	33	34	40
Long-term AUM	46	49	47	55
Liquidity and Overlay Services	12	5	10	6
Total AUM	35	35	35	39

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.

Certain Eaton Vance products may have higher or lower average fee rates than similar products prior to the acquisition, with the overall impact yielding a lower average fee rate; however, Asset management and related fees arising from the acquisition are incremental to our revenues.

For a description of the asset classes and rollforward items 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 2021 Form 10-K.


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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”) (collectively, “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 the U.S. Bank Subsidiaries from the Institutional Securities business segment primarily includes Secured lending facilities and Commercial real estate loans. Lending activity in the 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.” For a further discussion about loans and lending commitments, see Notes 9 and 13 to the financial statements.

U.S. Bank Subsidiaries’ Supplemental Financial Information 1


$ in billions	At June 30, 2022		At December 31, 2021
Investment securities portfolio:
Investment securities—AFS	$	67.1	$	81.6
Investment securities—HTM	58.7		61.7
Total investment securities	$	125.8	$	143.3
Wealth Management Loans 2
Residential real estate	$	50.4	$	44.2
Securities-based lending and Other 3	93.2		85.0
Total, net of ACL	$	143.6	$	129.2
Institutional Securities Loans 2
Corporate	$	6.5	$	6.5
Secured lending facilities	35.0		33.1
Commercial and Residential real estate	10.9		10.4
Securities-based lending and Other	5.9		6.3
Total, net of ACL	$	58.3	$	56.3
Total Assets	$	377.7	$	386.1
Deposits 4	$	339.6	$	346.2

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.

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 either determined to be not applicable or to not have a material impact on our financial condition or results of operations upon adoption.

The following accounting updates are currently being evaluated, however, we do not expect a material impact on our financial condition or results of operations upon adoption:

• Financial Instruments—Credit Losses. This accounting update eliminates the accounting guidance for Troubled Debt Restructurings (“TDRs”) and requires new disclosures regarding certain modifications of financing receivables ( i.e. , principal forgiveness, interest rate reductions, other-than-insignificant payment delays and term extensions) to borrowers experiencing financial difficulty. The update also requires disclosure of current period gross charge-offs by year of origination for financing receivables measured at amortized cost. The ASU is effective January 1, 2023 with early adoption permitted.

• Derivatives and Hedging. The accounting update allows entities to designate fair value hedging relationships to multiple layers in a closed portfolio of prepayable and non-prepayable financial assets. It also provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method. As of the adoption date, entities are permitted to reclassify HTM debt securities to AFS if the securities will be included in a closed portfolio that are designated in a portfolio layer method hedge. The ASU is effective January 1, 2023 with early adoption permitted.

• Fair Value Measurement . This accounting update clarifies, consistent with our current accounting policy, that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The update also requires additional disclosures including the fair value of equity securities subject to contractual sale restrictions, the nature and remaining duration of the restriction and circumstances that could cause the restriction to lapse. The ASU is effective January 1, 2024 with early adoption permitted.

Critical Accounting Policies

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 2021 Form 10-K and Note 2 to the financial statements), the fair value, goodwill and intangible assets, legal and regulatory contingencies 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 Policies” in the 2021 Form 10-K.


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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 the 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 Treasury department, Firm Risk Committee, Asset/Liability Management Committee, and other committees and control groups assist in evaluating, monitoring and controlling 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


	At June 30, 2022
$ in millions	IS		WM		IM		Total
Assets
Cash and cash equivalents	$	105,009	$	25,663	$	614	$	131,286
Trading assets at fair value	272,643		1,662		4,577		278,882
Investment securities	43,034		122,413		—		165,447
Securities purchased under agreements to resell	105,558		15,177		—		120,735
Securities borrowed	137,475		1,033		—		138,508
Customer and other receivables	49,720		31,807		1,232		82,759
Loans 1	62,794		143,684		4		206,482
Other assets 2	14,624		23,513		11,540		49,677
Total assets	$	790,857	$	364,952	$	17,967	$	1,173,776


	At December 31, 2021
$ in millions	IS		WM		IM		Total
Assets
Cash and cash equivalents	$	91,251	$	36,003	$	471	$	127,725
Trading assets at fair value	288,405		1,921		4,543		294,869
Investment securities	41,407		141,591		—		182,998
Securities purchased under agreements to resell	112,267		7,732		—		119,999
Securities borrowed	128,154		1,559		—		129,713
Customer and other receivables	57,009		37,643		1,366		96,018
Loans 1	58,822		129,307		5		188,134
Other assets 2	14,820		22,682		11,182		48,684
Total assets	$	792,135	$	378,438	$	17,567	$	1,188,140

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 Goodwill and Intangible assets, premises, equipment and software, ROU assets related to leases, other investments, and deferred tax assets.

A substantial portion of total assets consists of 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, comprising Investment securities, Cash and cash equivalents and Securities purchased under agreements to resell. Total assets of $1,174 billion at June 30, 2022 were relatively unchanged from $1,188 billion at December 31, 2021.

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 2021 Form 10-K.

At June 30, 2022 and December 31, 2021, 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.


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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 as well as 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


	Average Daily Balance Three Months Ended
$ in millions	June 30, 2022		March 31, 2022
Cash deposits with central banks	$	65,144	$	72,856
Unencumbered HQLA Securities 1 :
U.S. government obligations	123,950		137,129
U.S. agency and agency mortgage-backed securities	92,825		102,631
Non-U.S. sovereign obligations 2	15,661		16,434
Other investment grade securities	629		673
Total HQLA 1	$	298,209	$	329,723
Cash deposits with banks (non-HQLA)	8,161		8,558
Total Liquidity Resources	$	306,370	$	338,281

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

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

Liquidity Resources by Bank and Non-Bank Legal Entities


	Average Daily Balance Three Months Ended
$ in millions	June 30, 2022		March 31, 2022
Bank legal entities
U.S.	$	142,290	$	165,108
Non-U.S.	8,712		8,978
Total Bank legal entities	151,002		174,086
Non-Bank legal entities
U.S.:
Parent Company	43,158		44,846
Non-Parent Company	55,342		59,925
Total U.S.	98,500		104,771
Non-U.S.	56,868		59,424
Total Non-Bank legal entities	155,368		164,195
Total Liquidity Resources	$	306,370	$	338,281

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 requires that large banking organizations 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 requires large banking organizations to maintain sufficiently stable sources of funding over a one-year time horizon.

As of June 30, 2022, we and our U.S. Bank Subsidiaries are compliant with the minimum LCR and NSFR requirements of 100%.

Liquidity Coverage Ratio


	Average Daily Balance Three Months Ended
$ in millions	June 30, 2022			March 31, 2022
Eligible HQLA 1
Cash deposits with central banks	$	59,887		$	63,336
Securities 2	169,708			171,692
Total Eligible HQLA 1	$	229,595		$	235,028
LCR	128		%	130		%

1. Under the LCR rule, Eligible HQLA is calculated using weightings and excluding certain HQLA held in subsidiaries.

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

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, 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.

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 2021 Form 10-K.


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Management’s Discussion and Analysis

Collateralized Financing Transactions


$ in millions	At June 30, 2022		At December 31, 2021
Securities purchased under agreements to resell and Securities borrowed	$	259,243	$	249,712
Securities sold under agreements to repurchase and Securities loaned	$	79,964	$	74,487
Securities received as collateral 1	$	6,548	$	10,504


	Average Daily Balance Three Months Ended
$ in millions	June 30, 2022		December 31, 2021
Securities purchased under agreements to resell and Securities borrowed	$	268,271	$	236,327
Securities sold under agreements to repurchase and Securities loaned	$	77,057	$	69,565

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 2021 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 2021 Form 10-K.

Deposits


$ in millions	At June 30, 2022		At December 31, 2021
Savings and demand deposits:
Brokerage sweep deposits 1	$	285,871	$	298,352
Savings and other	46,143		34,395
Total Savings and demand deposits	332,014		332,747
Time deposits	15,134		14,827
Total 2	$	347,148	$	347,574

1. Amounts represent balances swept from client brokerage accounts.

2. Excludes approximately $8 billion and $9 billion of off-balance sheet deposits at unaffiliated financial institutions as of June 30, 2022 and December 31, 2021, respectively. This client cash held by third parties is not reflected in our balance sheet and is not immediately available for liquidity purposes.

Deposits are primarily sourced from our Wealth Management clients and are considered to have stable, low-cost funding

characteris tics. Total deposits were relatively unchanged in the current year period.

Borrowings by Remaining Maturity at June 30, 2022 1


$ in millions	Parent Company		Subsidiaries		Total
Original maturities of one year or less	$	—	$	4,198	$	4,198
Original maturities greater than one year
2022	$	3,358	$	3,313	$	6,671
2023	13,522		7,852		21,374
2024	19,669		8,413		28,082
2025	21,971		7,110		29,081
2026	20,966		4,985		25,951
Thereafter	85,844		24,976		110,820
Total	$	165,330	$	56,649	$	221,979
Total Borrowings	$	165,330	$	60,847	$	226,177
Maturities over next 12 months 2					$	19,737

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

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

Borrowings of $226 billion as of June 30, 2022 were relatively unchanged when compared with $233 billion at December 31, 2021.

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 availability of credit. We also engage in, and may continue to engage in, repurcha ses 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 2021 Form 10-K.


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Parent Company and U.S. Bank Subsidiaries Issuer Ratings at July 29, 2022


	Parent Company
	Short-Term Debt	Long-Term Debt	Rating Outlook
DBRS, Inc.	R-1 (middle)	A (high)	Stable
Fitch Ratings, Inc.	F1	A	Positive
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	A+	Positive
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

On May 17, 2022, S&P Global Ratings upgraded the issuer ratings of the Parent Company from BBB+ to A-, and revised the Parent Company outlook from positive to 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 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


	Three Months Ended June 30,				Six Months Ended June 30,
in millions, except for per share data	2022		2021		2022		2021
Number of shares	33		34		64		62
Average price per share	$	82.05	$	86.21	$	88.29	$	82.31
Total	$	2,738	$	2,939	$	5,610	$	5,074

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 14, 2022
Amount per share			$0.775
Date to be paid			August 15, 2022
Shareholders of record as of			July 29, 2022

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.

We utilize SPEs primarily in connection with securitization activities. For information on our securitization activities, see Note 16 to the financial statements in the 2021 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 an 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


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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 provisionally 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 2021 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 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


	At June 30, 2022 and December 31, 2021
	Standardized	Advanced
Capital buffers
Capital conservation buffer	—	2.5%
SCB 1	5.7%	N/A
G-SIB capital surcharge 2	3.0%	3.0%
CCyB 3	0%	0%
Capital buffer requirement	8.7%	5.5%

1. For additional information on the SCB, see “Capital Plans, Stress Tests and the Stress Capital Buffer” herein and in the 2021 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 2021 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 Common Equity Tier 1 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 Standardized Approach capital buffer requirement is equal to the sum of our SCB, G-SIB capital surcharge and CCyB, and our Advanced Approach capital buffer requirement is equal to our 2.5% capital conservation buffer, G-SIB capital surcharge and CCyB.


	Regulatory Minimum		At June 30, 2022 and December 31, 2021
			Standardized	Advanced
Required ratios 1
Common Equity Tier 1 capital ratio	4.5	%	13.2%	10.0%
Tier 1 capital ratio	6.0	%	14.7%	11.5%
Total capital ratio	8.0	%	16.7%	13.5%

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 approaches for calculating credit risk and market risk RWA (“Standardized Approach”) and (ii) the applicable advanced approaches for calculating credit risk, market risk and operational risk RWA (“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, whereas the Advanced Approach utilizes models to calculate exposure amounts and risk weights. At June 30, 2022 and December 31, 2021, 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. As of December 31, 2021, our risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure were calculated excluding the effect of the adoption of CECL based on our election to defer this effect over a five-year transition period that began on January 1, 2020. In 2022 the deferral impacts began to phase in at 25% per year and will become fully phased-in beginning in 2025.

Regulatory Capital Ratios


$ in millions	Required Ratio 1		At June 30, 2022			At December 31, 2021
Risk-based capital— Standardized
Common Equity Tier 1 capital			$	70,230		$	75,742
Tier 1 capital			77,778			83,348
Total capital			88,445			93,166
Total RWA			460,955			471,921
Common Equity Tier 1 capital ratio	13.2	%	15.2		%	16.0		%
Tier 1 capital ratio	14.7	%	16.9		%	17.7		%
Total capital ratio	16.7	%	19.2		%	19.7		%


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$ in millions	Required Ratio 1		At June 30, 2022			At December 31, 2021
Risk-based capital— Advanced
Common Equity Tier 1 capital			$	70,230		$	75,742
Tier 1 capital			77,778			83,348
Total capital			88,070			92,927
Total RWA			454,103			435,749
Common Equity Tier 1 capital ratio	10.0	%	15.5		%	17.4		%
Tier 1 capital ratio	11.5	%	17.1		%	19.1		%
Total capital ratio	13.5	%	19.4		%	21.3		%

$ in millions	Required Ratio 1		At June 30, 2022			At December 31, 2021
Leverage-based capital
Adjusted average assets 2			$	1,177,052		$	1,169,939
Tier 1 leverage ratio	4.0	%	6.6		%	7.1		%
Supplementary leverage exposure 3			$	1,453,445		$	1,476,962
SLR	5.0	%	5.4		%	5.6		%

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

2. 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.

3. 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.

Regulatory Capital


$ in millions	At June 30, 2022		At December 31, 2021		Change
Common Equity Tier 1 capital
Common stock and surplus	$	5,978	$	11,361	$	(5,383)
Retained earnings	93,075		89,679		3,396
AOCI	(5,021)		(3,102)		(1,919)
Regulatory adjustments and deductions:
Net goodwill	(16,509)		(16,641)		132
Net intangible assets	(6,427)		(6,704)		277
Other adjustments and deductions 1	(866)		1,149		(2,015)
Total Common Equity Tier 1 capital	$	70,230	$	75,742	$	(5,512)
Additional Tier 1 capital
Preferred stock	$	7,750	$	7,750	$	—
Noncontrolling interests	546		562		(16)
Additional Tier 1 capital	$	8,296	$	8,312	$	(16)
Deduction for investments in covered funds	(748)		(706)		(42)
Total Tier 1 capital	$	77,778	$	83,348	$	(5,570)
Standardized Tier 2 capital
Subordinated debt	$	9,058	$	8,609	$	449

Eligible ACL	1,516		1,155		361
Other adjustments and deductions	93		54		39
Total Standardized Tier 2 capital	$	10,667	$	9,818	$	849
Total Standardized capital	$	88,445	$	93,166	$	(4,721)
Advanced Tier 2 capital
Subordinated debt	$	9,058	$	8,609	$	449

Eligible credit reserves	1,141		916		225
Other adjustments and deductions	93		54		39
Total Advanced Tier 2 capital	$	10,292	$	9,579	$	713
Total Advanced capital	$	88,070	$	92,927	$	(4,857)

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.


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RWA Rollforward


	Six Months Ended June 30, 2022
$ in millions	Standardized		Advanced
Credit risk RWA
Balance at December 31, 2021	$	416,502	$	285,247
Change related to the following items:
Derivatives	(8,853)		8,764
Securities financing transactions	(7,051)		2,091
Investment securities	(2,227)		(5,706)
Commitments, guarantees and loans	7,955		5,265
Equity investments	(3,757)		(3,943)
Other credit risk	3,765		4,591
Total change in credit risk RWA	$	(10,168)	$	11,062
Balance at June 30, 2022	$	406,334	$	296,309
Market risk RWA
Balance at December 31, 2021	$	55,419	$	55,419
Change related to the following items:
Regulatory VaR	1,948		1,948
Regulatory stressed VaR	2,313		2,313
Incremental risk charge	(2,307)		(2,307)
Comprehensive risk measure	(139)		(139)
Specific risk	(2,613)		(2,613)
Total change in market risk RWA	$	(798)	$	(798)
Balance at June 30, 2022	$	54,621	$	54,621
Operational risk RWA
Balance at December 31, 2021	N/A		$	95,083
Change in operational risk RWA	N/A		8,090
Balance at June 30, 2022	N/A		$	103,173
Total RWA	$	460,955	$	454,103

Regulatory VaR—VaR for regulatory capital requirements

Credit risk RWA in the current year period decreased under the Standardized Approach, but increased under the Advanced Approach. Under the Standardized Approach, the decrease was primarily due to reduced equity and credit Derivatives exposures and lower client activity in Securities financing transactions, partially offset by lending growth. Under the Advanced Approach, the increase was primarily due to higher commodity Derivatives exposure and lending growth, partially offset by a decrease in Investment securities.

Market risk RWA was relatively unchanged in the current year period under both the Standardized and Advanced Approaches.

The increase in Operational risk RWA in the current year period reflects higher legal expenses and execution-related losses.

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


					Actual Amount/Ratio
$ in millions	Regulatory Minimum		Required Ratio 1		At June 30, 2022			At December 31, 2021
External TLAC 2					$	235,111		$	235,681
External TLAC as a % of RWA	18.0	%	21.5	%	51.0		%	49.9		%
External TLAC as a % of leverage exposure	7.5	%	9.5	%	16.2		%	16.0		%
Eligible LTD 3					$	148,236		$	144,659
Eligible LTD as a % of RWA	9.0	%	9.0	%	32.2		%	30.7		%
Eligible LTD as a % of leverage exposure	4.5	%	4.5	%	10.2		%	9.8		%

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, 2022 and December 31, 2021.

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 2021 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.

For the 2022 capital planning and stress test cycle, we submitted our capital plan and company-run stress test results to the Federal Reserve on April 5, 2022. On June 23, 2022, 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 improved from the prior annual supervisory stress test by 10 basis points, from 4.7% to 4.6% . Following the publication of the supervisory stress test results, and as a result of the increase in our common stock dividend and the resulting dividend add-on, we announced that our SCB will be 5.8% from October 1, 2022 through September 30, 2023. Together with other features of the regulatory capital framework, this SCB results in an aggregate Standardized Approach Common Equity Tier 1 ratio of


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13.3%. 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 $0.775 per share from $0.70, beginning with the common stock dividend announced on July 14, 2022. Additionally, our Board of Directors approved a new multi-year repurchase authorization of up to $20 billion of outstanding common stock, without a set expiration date, beginning in the third quarter of 2022, which will be exercised from time to time as conditions warrant.

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 2021 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 common equity. We generally hold Parent common equity for prospective regulatory requirements, organic growth, potential future acquisitions and other capital needs.

Average Common Equity Attribution under the Required Capital Framework 1


	Three Months Ended June 30,				Six Months Ended June 30,
$ in billions	2022		2021		2022		2021
Institutional Securities	$	48.8	$	43.5	$	48.8	$	43.5
Wealth Management	31.0		28.6		31.0		28.6
Investment Management 2	10.6		10.7		10.6		7.1
Parent	3.9		16.0		5.1		17.1
Total	$	94.3	$	98.8	$	95.5	$	96.3

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

2. The total average common equity and the allocation to the Investment Management business segment in 2021 reflect the Eaton Vance acquisition on March 1, 2021.

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 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 2021 targeted resolution plan on June 30, 2021. On July 1, 2022, the Federal Reserve and the FDIC announced that they have extended the period for issuing feedback for the U.S. G-SIBs’ 2021 resolution plans to allow the agencies additional time to analyze them.

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 material entities and/or the Funding IHC. The Funding IHC would be obligated to provide capital and liquidity, as applicable, to our material 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 long-term debt and other forms of eligible TLAC issued by the Parent Company before any losses are imposed on creditors of our material 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 2021 Form 10-K.

Regulatory Developments and Other Matters

Covered Funds Restrictions under the Volcker Rule

The Volcker Rule prohibits certain investments and relationships by banking entities with covered funds, as defined in the Volcker Rule. We requested and received additional time until July 21, 2023 to conform investments in certain legacy illiquid funds. As of June 30, 2022, the carrying value of our interests in these legacy funds, which is measured at NAV, was approximately $350 million. For


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additional information on the Volcker Rule, see “Business—Supervision and Regulation—Financial Holding Company—Activities Restrictions Under the Volcker Rule” in the 2021 Form 10-K. For information on investments measured at NAV, see Note 4 to the financial statements.

Replacement of London Interbank Offered Rate and Replacement or Reform of Other Interest Rate Benchmarks

Central banks around the world, including the Federal Reserve, have commissioned committees and working groups of market participants and official sector representatives to replace LIBOR and replace or reform other interest rate benchmarks (collectively, the “IBORs”). A transition away from use of the IBORs to alternative rates and other potential interest rate benchmark reforms is underway and will continue through the cessation dates.

The publication of most non-U.S. dollar LIBOR rates ceased as of the end of December 2021. The publication of certain non-U.S. dollar LIBOR rates on the basis of a “synthetic” methodology (known as “synthetic LIBOR”) will continue at least until the end of 2022 and certain U.S. dollar LIBOR tenors are expected to continue to be published until June 30, 2023 . On March 15, 2022 the U.S. enacted federal legislation that is intended to minimize legal and economic uncertainty following U.S. dollar LIBOR’s cessation by replacing LIBOR references in certain contracts under certain circumstances with a SOFR-based rate to be established in a Federal Reserve rule that incorporates a spread adjustment specified in the statute. On July 19, 2022, the Federal Reserve issued a proposed rule to implement the federal legislation. While some states have already adopted LIBOR legislation, the federal legislation expressly preempts any provision of any state or local law, statute, rule, regulation or standard.

As of June 30, 2022 , our LIBOR-referenced contracts were primarily concentrated in derivative contracts and to a lesser extent, loans, floating rate notes, preferred shares, securitizations and mortgages. A significant majority of our derivative contracts, and a majority of our non-derivative contracts contain fallback provisions or otherwise have an expected path that will allow for the transition to an alternative reference rate upon the cessation of the applicable LIBOR rate.

While we have made substantial progress in the transition away from the IBORs, we nonetheless currently remain party to a significant number of U.S. dollar LIBOR-linked contracts. For the limited number of U.S. dollar LIBOR-linked contracts without a current market standard fallback, or for which the federal legislation does not apply, we are actively developing appropriate transition plans in light of the planned June 30, 2023 cessation date for the remaining U.S. dollar LIBOR tenors.

Our IBOR transition plan is overseen by a global steering committee, with senior management oversight, and we

continue to execute against our Firm-wide IBOR transition plan to complete the transition to alternative reference rates.

See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Regulatory Requirements—Regulatory Developments and Other Matters” and “Risk Factors—Risk Management” in the 2021 Form 10-K for a further discussion of the replacement of the IBORs and/or reform of other interest rate benchmarks and related risks.


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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 2021 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 2021 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 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 2021 Form 10-K.

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


	Three Months Ended
	June 30, 2022
$ in millions	Period End		Average		High 1		Low 1
Interest rate and credit spread	$	33	$	30	$	43	$	24
Equity price	24		24		28		19
Foreign exchange rate	6		7		15		4
Commodity price	24		31		40		24
Less: Diversification benefit 2	(42)		(48)		N/A		N/A
Primary Risk Categories	$	45	$	44	$	57	$	36
Credit Portfolio	15		15		18		14
Less: Diversification benefit 2	(10)		(13)		N/A		N/A
Total Management VaR	$	50	$	46	$	57	$	40


	Three Months Ended
	March 31, 2022
$ in millions	Period End		Average		High 1		Low 1
Interest rate and credit spread	$	30	$	25	$	33	$	21
Equity price	28		25		41		17
Foreign exchange rate	16		8		19		3
Commodity price	24		20		27		15
Less: Diversification benefit 2	(51)		(41)		N/A		N/A
Primary Risk Categories	$	47	$	37	$	47	$	31
Credit Portfolio	15		13		15		12
Less: Diversification benefit 2	(15)		(11)		N/A		N/A
Total Management VaR	$	47	$	39	$	48	$	32

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 also are taken into account within each component.

Average Total Management VaR and average Management VaR for the Primary Risk Categories increased from the three months ended March 31, 2022, primarily from the commodity price and interest rate and credit spread risk categories, which were driven by increased market volatility and by increased exposure in the Fixed Income business.

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 loss day in the current quarter, which did not exceed 95% Total Management VaR.


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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)

The previous histogram shows the distribution of daily net trading revenues for the current quarter. 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 Sensitivity 1


$ in millions	At June 30, 2022		At March 31, 2022
Derivatives	$	7	$	7
Borrowings carried at fair value	38		44

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

Credit spread risk sensitivity for borrowings carried at fair value as of June 30, 2022 decreased from March 31, 2022 primarily due to widening credit spreads, partially offset by new debt issuances.

The Wealth Management business segment reflects a substantial portion of our non-trading interest rate risk. Historically, net interest income sensitivity for our U.S. Bank Subsidiaries was representative of such sensitivity for the Wealth Management business segment and, accordingly, we presented net interest income sensitivity for our U.S. Bank Subsidiaries. However, over time the Wealth Management business segment has grown its assets that generate net interest income outside of the U.S. Bank Subsidiaries, such as margin and other lending on non-bank entities, and this growth has been further accelerated by the acquisition of E*TRADE. Net interest in the Wealth Management business segment primarily consists of interest income earned on non-trading assets, 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 1


$ in millions	At June 30, 2022		At March 31, 2022
Basis point change
+100	$	93	$	470
-100	(360)		(883)

1. The prior period has been revised to conform to the current period presentation.

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 business activity.

We do not manage to any single rate scenario but rather manage net interest income in our Wealth Management business segment to optimize 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. The change in sensitivity to interest rates between June 30,


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Risk Disclosures

2022 and March 31, 2022 was primarily driven by the significant changes in market rates.

Investments Sensitivity, Including Related Carried Interest


	Loss from 10% Decline
$ in millions	At June 30, 2022		At March 31, 2022
Investments related to Investment Management activities	$	423	$	415
Other investments:
MUMSS	139		158
Other Firm investments	348		344

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 rel ated 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. The overall level of these revenues depends on multiple factors that include, but are 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 do 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 2021 Form 10-K.

Loans and Lending Commitments


	At June 30, 2022
$ in millions	HFI		HFS		FVO		Total
Institutional Securities:
Corporate	$	6,739	$	6,366	$	—	$	13,105
Secured lending facilities	32,687		4,223		7		36,917
Commercial and Residential real estate	8,434		2,159		2,345		12,938
Securities-based lending and Other	2,681		126		5,523		8,330
Total Institutional Securities	50,541		12,874		7,875		71,290
Wealth Management:
Residential real estate	50,449		5		—		50,454
Securities-based lending and Other	93,221		150		—		93,371
Total Wealth Management	143,670		155		—		143,825
Total Investment Management 1	4		—		216		220
Total loans 2	194,215		13,029		8,091		215,335
ACL	(762)						(762)
Total loans, net of ACL	$	193,453	$	13,029	$	8,091	$	214,573
Lending commitments 3							$	141,123
Total exposure							$	355,696


	At December 31, 2021
$ in millions	HFI		HFS		FVO		Total
Institutional Securities:
Corporate	$	5,567	$	8,107	$	8	$	13,682
Secured lending facilities	31,471		3,879		—		35,350
Commercial and Residential real estate	7,227		1,777		4,774		13,778
Securities-based lending and Other	1,292		45		7,710		9,047
Total Institutional Securities	45,557		13,808		12,492		71,857
Wealth Management:
Residential real estate	44,251		7		—		44,258
Securities-based lending and Other	85,143		17		—		85,160
Total Wealth Management	129,394		24		—		129,418
Total Investment Management 1	5		—		135		140
Total loans 2	174,956		13,832		12,627		201,415
ACL	(654)						(654)
Total loans, net of ACL	$	174,302	$	13,832	$	12,627	$	200,761
Lending commitments 3							$	134,934
Total exposure							$	335,695

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

1. Investment Management business segment loans are related to certain of our activities as an investment advisor 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.

2. FVO also includes the fair value of certain unfunded lending commitments.

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.

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 2021 Form 10-K.


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Risk Disclosures

Total loans and lending commitments increased by approximately $20 billion since December 31, 2021, primarily due to growth in Securities-based loans and Residential real estate loans within the Wealth Management business segment, as well as an increase in Secured lending facilities and Corporate lending commitments within the Institutional Securities business segment.

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

Allowance for Credit Losses—Loans and Lending Commitments


$ in millions
ACL—Loans	$	654
ACL—Lending Commitments	444
Total at December 31, 2021	1,098
Gross charge-offs	(17)
Recoveries	4
Net (charge-offs) recoveries	(13)
Provision for credit losses	158
Other	(17)
Total at June 30, 2022	$	1,226
ACL—Loans	$	762
ACL—Lending commitments	464

Provision for Credit Losses by Business Segment


	Three Months Ended June 30, 2022						Six Months Ended June 30, 2022
$ in millions	IS		WM		Total		IS		WM		Total
Loans	$	73	$	19	$	92	$	97	$	34	$	131
Lending commitments	9		—		9		29		(2)		27
Total	$	82	$	19	$	101	$	126	$	32	$	158

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 aggregate allowance for credit losses for loans and lending commitments increased in the current year period, reflecting the Provision for credit losses primarily due to portfolio growth and deterioration in macroeconomic outlook.

Forecasted U.S. GDP Growth Rates in Base Scenario


	4Q 2022		4Q 2023
Year-over-year growth rate	1.6	%	1.9	%

See Note 9 to the financial statements for further information. See Note 2 to the financial statements in the 2021 Form 10-K for a discussion of the Firm’s ACL methodology under CECL.

Status of Loans Held for Investment


	At June 30, 2022				At December 31, 2021
	IS		WM		IS		WM
Accrual	99.0	%	99.8	%	98.7	%	99.8	%
Nonaccrual 1	1.0	%	0.2	%	1.3	%	0.2	%

1. These loans are on nonaccrual status because the loans were past due for a period of 90 days or more or payment of principal or interest was in doubt.

Net Charge-off Ratios for Loans Held for Investment


$ in millions	Corporate			Secured Lending Facilities			CRE			Residential Real Estate			SBL and Other			Total
For the Six Months Ended June 30, 2022
Net charge-off (recovery) ratio 1	(0.07)		%	0.01		%	0.09		%	—		%	0.01		%	0.01		%
Average loans	$	6,138		$	31,777		$	8,062		$	47,158		$	91,274		$	184,409
For the Six Months Ended June 30, 2021
Net charge-off ratio 1	0.26		%	0.25		%	0.29		%	—		%	—		%	0.07		%
Average loans	$	5,303		$	26,849		$	7,150		$	36,828		$	69,609		$	145,739

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

Institutional Securities Loans and Lending Commitments 1


	At June 30, 2022
	Contractual Years to Maturity
$ in millions	<1		1-5		5-15		>15		Total
Loans
AA	$	25	$	12	$	6	$	—	$	43
A	1,123		603		321		—		2,047
BBB	6,694		9,448		386		—		16,528
BB	10,419		19,223		1,877		125		31,644
Other NIG	5,594		10,378		1,145		146		17,263
Unrated 2	59		690		701		1,694		3,144
Total loans, net of ACL	23,914		40,354		4,436		1,965		70,669
Lending commitments
AAA	—		50		—		—		50
AA	3,025		3,054		92		—		6,171
A	4,275		18,720		150		317		23,462
BBB	6,850		40,766		1,285		—		48,901
BB	5,775		18,478		1,587		52		25,892
Other NIG	1,127		13,248		6,787		1		21,163
Unrated 2	—		54		—		—		54
Total lending commitments	21,052		94,370		9,901		370		125,693
Total exposure	$	44,966	$	134,724	$	14,337	$	2,335	$	196,362


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Risk Disclosures


	At December 31, 2021
	Contractual Years to Maturity
$ in millions	<1		1-5		5-15		>15		Total
Loans
AA	$	—	$	35	$	38	$	—	$	73
A	890		1,089		675		—		2,654
BBB	5,335		8,944		563		—		14,842
BB	10,734		18,349		814		18		29,915
Other NIG	4,656		10,475		3,439		160		18,730
Unrated 2	171		665		511		3,753		5,100
Total loans, net of ACL	21,786		39,557		6,040		3,931		71,314
Lending commitments
AAA	—		50		—		—		50
AA	3,283		2,690		—		—		5,973
A	5,255		17,646		407		303		23,611
BBB	6,703		36,096		766		—		43,565
BB	2,859		19,698		3,122		—		25,679
Other NIG	992		13,420		6,180		55		20,647
Unrated 2	672		40		3		—		715
Total lending commitments	19,764		89,640		10,478		358		120,240
Total exposure	$	41,550	$	129,197	$	16,518	$	4,289	$	191,554

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


$ in millions	At June 30, 2022		At December 31, 2021
Industry
Financials	$	51,422	$	52,066
Real estate	34,399		31,560
Communications services	15,690		12,645
Industrials	14,384		17,446
Information technology	13,248		13,471
Healthcare	12,411		12,618
Consumer discretionary	12,253		11,628
Utilities	9,943		10,310
Energy	9,893		8,544
Consumer staples	8,424		7,855
Materials	7,083		6,394
Insurance	5,363		4,954
Other	1,849		2,063
Total exposure	$	196,362	$	191,554

Institutional Securities Lending Activities

The Institutional Securities business segment lending activities include Corporate, Secured lending facilities, Commercial real estate and Securities-based lending and Other. As of June 30, 2022, over 90% of our total lending exposure, which consists of loans and lending commitments, is 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 2021 Form 10-K.

Institutional Securities Event-Driven Loans and Lending Commitments


	At June 30, 2022
	Contractual Years to Maturity
$ in millions	<1		1-5		5-15		Total
Loans, net of ACL	$	1,155	$	1,648	$	309	$	3,112
Lending commitments	1,621		7,171		7,823		16,615
Total exposure	$	2,776	$	8,819	$	8,132	$	19,727


	At December 31, 2021
	Contractual Years to Maturity
$ in millions	<1		1-5		5-15		Total
Loans, net of ACL	$	951	$	2,088	$	1,803	$	4,842
Lending commitments	1,619		5,288		8,879		15,786
Total exposure	$	2,570	$	7,376	$	10,682	$	20,628

Event-driven loans and lending commitments are associated with a particular event or transaction, such as to support client 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.

Institutional Securities Loans and Lending Commitments Held for Investment


	At June 30, 2022
$ in millions	Loans		Lending Commitments		Total
Corporate	$	6,739	$	76,300	$	83,039
Secured lending facilities	32,687		12,760		45,447
Commercial real estate	8,434		611		9,045
Securities-based lending and Other	2,681		821		3,502
Total, before ACL	$	50,541	$	90,492	$	141,033
ACL	$	(621)	$	(449)	$	(1,070)


	At December 31, 2021
$ in millions		Loans		Lending Commitments		Total
Corporate		$	5,567	$	73,585	$	79,152
Secured lending facilities		31,471		10,003		41,474
Commercial real estate		7,227		1,475		8,702
Securities-based lending and Other		1,292		887		2,179
Total, before ACL		$	45,557	$	85,950	$	131,507
ACL		$	(543)	$	(426)	$	(969)


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Risk Disclosures

Institutional Securities Allowance for Credit Losses—Loans and Lending Commitments


$ in millions	Corporate		Secured Lending Facilities		Commercial Real Estate		Other		Total
ACL—Loans	$	165	$	163	$	206	$	9	$	543
ACL—Lending commitments	356		41		20		9		426
Total at December 31, 2021	$	521	$	204	$	226	$	18	$	969
Gross charge-offs	—		(3)		(7)		(2)		(12)
Recoveries	4		—		—		—		4
Net (charge-offs) recoveries	4		(3)		(7)		(2)		(8)
Provision for credit losses	71		15		34		6		126
Other	(11)		(1)		(6)		1		(17)
Total at June 30, 2022	$	585	$	215	$	247	$	23	$	1,070
ACL—Loans	$	212	$	167	$	229	$	13	$	621
ACL—Lending commitments	373		48		18		10		449

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


	At June 30, 2022		At December 31, 2021
Corporate	3.1	%	3.0	%
Secured lending facilities	0.5	%	0.5	%
Commercial real estate	2.7	%	2.9	%
Securities-based lending and Other	0.5	%	0.7	%
Total Institutional Securities loans	1.2	%	1.2	%

Wealth Management Loans and Lending Commitments


	At June 30, 2022
	Contractual Years to Maturity
$ in millions	<1		1-5		5-15		>15		Total
Securities-based lending and Other loans	$	82,547	$	8,909	$	1,717	$	140	$	93,313
Residential real estate loans	1		18		1,335		49,017		50,371
Total loans, net of ACL	$	82,548	$	8,927	$	3,052	$	49,157	$	143,684
Lending commitments	12,008		3,068		83		271		15,430
Total exposure	$	94,556	$	11,995	$	3,135	$	49,428	$	159,114


	At December 31, 2021
	Contractual Years to Maturity
$ in millions	<1		1-5		5-15		>15		Total
Securities-based lending and Other loans	$	74,466	$	8,927	$	1,571	$	144	$	85,108
Residential real estate loans	4		10		1,231		42,954		44,199
Total loans, net of ACL	$	74,470	$	8,937	$	2,802	$	43,098	$	129,307
Lending commitments	11,894		2,467		51		282		14,694
Total exposure	$	86,364	$	11,404	$	2,853	$	43,380	$	144,001

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. For more information about our Securities-based lending and Residential real estate loans, see “Quantitative and Qualitative Disclosures about Risk—Credit Risk” in the 2021 Form 10-K.

Wealth Management Allowance for Credit Losses—Loans and Lending Commitments


$ in millions
ACL—Loans	$	111
ACL—Lending commitments	18
Total at December 31, 2021	129
Gross charge-offs	(5)
Provision for credit losses	32

Total at June 30, 2022	$	156
ACL—Loans	$	141
ACL—Lending commitments	15

At June 30, 2022, 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


$ in millions	At June 30, 2022		At December 31, 2021
Institutional Securities	$	21,151	$	40,545
Wealth Management	24,791		30,987
Total	$	45,942	$	71,532

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 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 2021 Form 10-K.

Employee Loans

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


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Risk Disclosures

Derivatives

Fair Value of OTC Derivative Assets


	Counterparty Credit Rating 1
$ in millions	AAA		AA		A		BBB		NIG		Total
At June 30, 2022
Less than 1 year	$	3,315	$	20,103	$	48,393	$	43,184	$	16,501	$	131,496
1-3 years	1,029		7,015		18,939		19,729		9,301		56,013
3-5 years	1,302		6,210		9,464		10,020		4,847		31,843
Over 5 years	4,225		36,596		47,520		45,539		9,065		142,945
Total, gross	$	9,871	$	69,924	$	124,316	$	118,472	$	39,714	$	362,297
Counterparty netting	(4,709)		(56,709)		(85,220)		(90,736)		(22,314)		(259,688)
Cash and securities collateral	(2,935)		(10,743)		(32,860)		(17,826)		(6,978)		(71,342)
Total, net	$	2,227	$	2,472	$	6,236	$	9,910	$	10,422	$	31,267


	Counterparty Credit Rating 1
$ in millions	AAA		AA		A		BBB		NIG		Total
At December 31, 2021
Less than 1 year	$	1,561	$	11,088	$	32,069	$	25,680	$	11,924	$	82,322
1-3 years	780		4,577		16,821		15,294		6,300		43,772
3-5 years	593		4,807		6,805		8,030		3,317		23,552
Over 5 years	4,359		26,056		61,091		44,091		4,633		140,230
Total, gross	$	7,293	$	46,528	$	116,786	$	93,095	$	26,174	$	289,876
Counterparty netting	(3,093)		(36,957)		(91,490)		(68,365)		(11,642)		(211,547)
Cash and securities collateral	(3,539)		(7,608)		(20,500)		(17,755)		(5,762)		(55,164)
Total, net	$	661	$	1,963	$	4,796	$	6,975	$	8,770	$	23,165


$ in millions	At June 30, 2022		At December 31, 2021
Industry
Utilities	$	8,304	$	5,918
Financials	7,950		5,096
Energy	5,261		2,587
Regional governments	1,983		963
Consumer Discretionary	1,837		3,069
Industrials	1,209		985
Communications services	886		348
Information technology	631		1,060
Sovereign governments	610		386
Healthcare	507		682
Consumer staples	497		324
Materials	339		240
Not-for-profit organizations	297		531
Insurance	260		174
Real estate	93		280
Other	603		522
Total	$	31,267	$	23,165

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 2021 Form 10-K and Note 6 to the financial statements.

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 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 2021 Form 10-K.

Top 10 Non-U.S. Country Exposures at June 30, 2022


$ in millions	United Kingdom		Japan		Germany		France		India
Sovereign
Net inventory 1	$	(830)	$	5,693	$	1,010	$	1,517	$	1,737
Net counterparty exposure 2	4		97		235		13		1


Exposure before hedges	(826)		5,790		1,245		1,530		1,738
Hedges 3	(252)		(128)		(286)		(6)		—
Net exposure	$	(1,078)	$	5,662	$	959	$	1,524	$	1,738

Non-sovereign
Net inventory 1	$	1,604	$	733	$	587	$	563	$	1,230
Net counterparty exposure 2	18,701		4,212		4,129		2,987		1,404
Loans	5,230		382		1,320		483		170
Lending commitments	7,124		—		3,685		3,118		—
Exposure before hedges	32,659		5,327		9,721		7,151		2,804
Hedges 3	(1,623)		(143)		(1,386)		(2,043)		—
Net exposure	$	31,036	$	5,184	$	8,335	$	5,108	$	2,804
Total net exposure	$	29,958	$	10,846	$	9,294	$	6,632	$	4,542


June 2022 Form 10-Q			33


Table of Contents
Risk Disclosures


$ in millions	Spain		Brazil		Australia		Canada		Korea
Sovereign
Net inventory 1	$	222	$	2,689	$	(1,851)	$	(315)	$	1,134
Net counterparty exposure 2	44		—		108		37		453


Exposure before hedges	266		2,689		(1,743)		(278)		1,587
Hedges 3	(7)		(142)		—		—		(38)
Net exposure	$	259	$	2,547	$	(1,743)	$	(278)	$	1,549

Non-sovereign
Net inventory 1	$	393	$	133	$	572	$	615	$	271
Net counterparty exposure 2	1,005		467		1,675		1,149		896
Loans	2,109		380		1,711		185		136
Lending commitments	986		326		1,463		1,424		30
Exposure before hedges	4,493		1,306		5,421		3,373		1,333
Hedges 3	(702)		(39)		(218)		(142)		(12)
Net exposure	$	3,791	$	1,267	$	5,203	$	3,231	$	1,321
Total net exposure	$	4,050	$	3,814	$	3,460	$	2,953	$	2,870

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 2021 Form 10-K.

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

Collateral Held against Net Counterparty Exposure 1


$ in millions		At June 30, 2022
Country of Risk	Collateral 2
United Kingdom	U.K., U.S. and France	$	10,104
Japan	Japan and U.S.	8,113
Other	France, U.S. and Spain	19,433

1. The benefit of collateral received is reflected in the Top 10 Non-U.S. Country Exposures at June 30, 2022.

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. , cyber attacks 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 2021 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 2021 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 2021 Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” herein.

Legal and Compliance Risk

Legal 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 and Compliance Risk” in the 2021 Form 10-K.


			34			June 2022 Form 10-Q


Table of Contents

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, 2022, 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, 2022 and 2021, and the cash flow statements for the six-month periods ended June 30, 2022 and 2021, 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, 2021, 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 24, 2022, 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, 2021 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, 2022


June 2022 Form 10-Q			35


Table of Contents
Consolidated Income Statement (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
in millions, except per share data	2022		2021		2022		2021
Revenues
Investment banking	$	1,150	$	2,560	$	2,908	$	5,400
Trading	3,597		3,330		7,580		7,555
Investments	23		381		98		699
Commissions and fees	1,220		1,308		2,636		2,934
Asset management	4,912		4,973		10,031		9,371
Other	( 52 )		342		182		626
Total non-interest revenues	10,850		12,894		23,435		26,585
Interest income	3,612		2,212		6,262		4,649
Interest expense	1,330		347		1,764		756
Net interest	2,282		1,865		4,498		3,893
Net revenues	13,132		14,759		27,933		30,478
Provision for credit losses	101		73		158		( 25 )
Non-interest expenses
Compensation and benefits	5,550		6,423		11,824		13,221
Brokerage, clearing and exchange fees	878		795		1,760		1,705
Information processing and communications	857		765		1,686		1,498
Professional services	757		746		1,462		1,370
Occupancy and equipment	430		414		857		819
Marketing and business development	220		146		395		292
Other	1,020		831		1,884		1,688
Total non-interest expenses	9,712		10,120		19,868		20,593
Income before provision for income taxes	3,319		4,566		7,907		9,910
Provision for income taxes	783		1,054		1,656		2,230
Net income	$	2,536	$	3,512	$	6,251	$	7,680
Net income applicable to noncontrolling interests	41		1		90		49
Net income applicable to Morgan Stanley	$	2,495	$	3,511	$	6,161	$	7,631
Preferred stock dividends	104		103		228		241
Earnings applicable to Morgan Stanley common shareholders	$	2,391	$	3,408	$	5,933	$	7,390
Earnings per common share
Basic	$	1.40	$	1.88	$	3.45	$	4.10
Diluted	$	1.39	$	1.85	$	3.41	$	4.04
Average common shares outstanding
Basic	1,704		1,814		1,718		1,804
Diluted	1,723		1,841		1,739		1,829

Consolidated Comprehensive Income Statement

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Net income	$	2,536	$	3,512	$	6,251	$	7,680
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	( 288 )		41		( 393 )		( 178 )
Change in net unrealized gains (losses) on available-for-sale securities	( 1,076 )		( 7 )		( 3,471 )		( 783 )
Pension and other	3		12		8		17
Change in net debt valuation adjustment	1,152		186		1,812		323
Total other comprehensive income (loss)	$	( 209 )	$	232	$	( 2,044 )	$	( 621 )
Comprehensive income	$	2,327	$	3,744	$	4,207	$	7,059
Net income applicable to noncontrolling interests	41		1		90		49
Other comprehensive income (loss) applicable to noncontrolling interests	( 90 )		1		( 125 )		( 60 )
Comprehensive income applicable to Morgan Stanley	$	2,376	$	3,742	$	4,242	$	7,070


June 2022 Form 10-Q			36			See Notes to Consolidated Financial Statements


Table of Contents
Consolidated Balance Sheet


$ in millions, except share data	(Unaudited) At June 30, 2022		At December 31, 2021
Assets
Cash and cash equivalents	$	131,286	$	127,725
Trading assets at fair value ( $ 96,885 and $ 104,186 were pledged to various parties)	278,882		294,869
Investment securities (includes $ 85,970 and $ 102,830 at fair value)	165,447		182,998
Securities purchased under agreements to resell (includes $ — and $ 7 at fair value)	120,735		119,999
Securities borrowed	138,508		129,713
Customer and other receivables	82,759		96,018
Loans:
Held for investment (net of allowance for credit losses of $ 762 and $ 654 )	193,453		174,302
Held for sale	13,029		13,832
Goodwill	16,757		16,833
Intangible assets (net of accumulated amortization of $ 4,118 and $ 3,819 )	8,046		8,360
Other assets	24,874		23,491
Total assets	$	1,173,776	$	1,188,140
Liabilities
Deposits (includes $ 2,956 and $ 1,940 at fair value)	$	347,148	$	347,574
Trading liabilities at fair value	149,969		158,328
Securities sold under agreements to repurchase (includes $ 956 and $ 791 at fair value)	66,179		62,188
Securities loaned	13,785		12,299
Other secured financings (includes $ 4,130 and $ 5,133 at fair value)	7,237		10,041
Customer and other payables	234,007		228,685
Other liabilities and accrued expenses	26,612		29,300
Borrowings (includes $ 70,672 and $ 76,340 at fair value)	226,177		233,127
Total liabilities	1,071,114		1,081,542
Commitments and contingent liabilities (see Note 13)
Equity
Morgan Stanley shareholders’ equity:
Preferred stock	7,750		7,750
Common stock, $ 0.01 par value:
Shares authorized: 3,500,000,000 ; Shares issued: 2,038,893,979 ; Shares outstanding: 1,723,083,208 and 1,772,226,530	20		20
Additional paid-in capital	28,394		28,841
Retained earnings	92,889		89,432
Employee stock trusts	4,900		3,955
Accumulated other comprehensive income (loss)	( 5,021 )		( 3,102 )
Common stock held in treasury at cost, $ 0.01 par value ( 315,810,771 and 266,667,449 shares)	( 22,436 )		( 17,500 )
Common stock issued to employee stock trusts	( 4,900 )		( 3,955 )
Total Morgan Stanley shareholders’ equity	101,596		105,441
Noncontrolling interests	1,066		1,157
Total equity	102,662		106,598
Total liabilities and equity	$	1,173,776	$	1,188,140


See Notes to Consolidated Financial Statements			37			June 2022 Form 10-Q


Table of Contents
Consolidated Statement of Changes in Total Equity (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Preferred Stock
Beginning balance	$	7,750	$	7,750	$	7,750	$	9,250

Redemption of preferred stock	—		—		—		( 1,500 )
Ending balance	7,750		7,750		7,750		7,750
Common Stock
Beginning and ending balance	20		20		20		20
Additional Paid-in Capital
Beginning balance	28,007		27,406		28,841		25,546
Share-based award activity	386		624		( 448 )		292

Issuance of common stock for the acquisition of Eaton Vance	—		—		—		2,185
Other net increases (decreases)	1		—		1		7
Ending balance	28,394		28,030		28,394		28,030
Retained Earnings
Beginning balance	91,722		82,034		89,432		78,694
Net income applicable to Morgan Stanley	2,495		3,511		6,161		7,631
Preferred stock dividends 1	( 104 )		( 103 )		( 228 )		( 241 )
Common stock dividends 1	( 1,221 )		( 651 )		( 2,473 )		( 1,286 )
Other net increases (decreases)	( 3 )		—		( 3 )		( 7 )
Ending balance	92,889		84,791		92,889		84,791
Employee Stock Trusts
Beginning balance	4,975		3,861		3,955		3,043
Share-based award activity	( 75 )		( 93 )		945		725
Ending balance	4,900		3,768		4,900		3,768
Accumulated Other Comprehensive Income (Loss)
Beginning balance	( 4,902 )		( 2,754 )		( 3,102 )		( 1,962 )
Net change in Accumulated other comprehensive income (loss)	( 119 )		231		( 1,919 )		( 561 )
Ending balance	( 5,021 )		( 2,523 )		( 5,021 )		( 2,523 )
Common Stock Held in Treasury at Cost
Beginning balance	( 19,696 )		( 8,197 )		( 17,500 )		( 9,767 )
Share-based award activity	97		17		1,582		1,037
Repurchases of common stock and employee tax withholdings	( 2,837 )		( 3,018 )		( 6,518 )		( 5,600 )
Issuance of common stock for the acquisition of Eaton Vance	—		—		—		3,132
Ending balance	( 22,436 )		( 11,198 )		( 22,436 )		( 11,198 )
Common Stock Issued to Employee Stock Trusts
Beginning balance	( 4,975 )		( 3,861 )		( 3,955 )		( 3,043 )
Share-based award activity	75		93		( 945 )		( 725 )
Ending balance	( 4,900 )		( 3,768 )		( 4,900 )		( 3,768 )
Noncontrolling Interests
Beginning balance	1,174		1,329		1,157		1,368
Net income applicable to noncontrolling interests	41		1		90		49
Net change in Accumulated other comprehensive income (loss) applicable to noncontrolling interests	( 90 )		1		( 125 )		( 60 )
Other net increases (decreases)	( 59 )		( 39 )		( 56 )		( 65 )
Ending balance	1,066		1,292		1,066		1,292
Total Equity	$	102,662	$	108,162	$	102,662	$	108,162

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


June 2022 Form 10-Q			38			See Notes to Consolidated Financial Statements


Table of Contents
Consolidated Cash Flow Statement (Unaudited)


	Six Months Ended June 30,
$ in millions	2022		2021
Cash flows from operating activities
Net income	$	6,251	$	7,680
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Stock-based compensation expense	849		1,136
Depreciation and amortization	1,863		1,944
Provision for credit losses	158		( 25 )
Other operating adjustments	356		( 165 )
Changes in assets and liabilities:
Trading assets, net of Trading liabilities	( 15,183 )		( 1,526 )
Securities borrowed	( 8,795 )		( 14,312 )
Securities loaned	1,486		1,843
Customer and other receivables and other assets	13,193		( 2,360 )
Customer and other payables and other liabilities	11,719		9,917
Securities purchased under agreements to resell	( 736 )		20,304
Securities sold under agreements to repurchase	3,991		7,058
Net cash provided by (used for) operating activities	15,152		31,494
Cash flows from investing activities
Proceeds from (payments for):
Other assets—Premises, equipment and software, net	( 1,451 )		( 1,039 )
Changes in loans, net	( 18,525 )		( 17,426 )
AFS securities 1 :
Purchases	( 18,623 )		( 18,272 )
Proceeds from sales	21,368		17,546
Proceeds from paydowns and maturities	8,444		16,917
HTM securities 1 :
Purchases	( 4,910 )		( 21,853 )
Proceeds from paydowns and maturities	5,662		7,562
Cash paid as part of the Eaton Vance acquisition, net of cash acquired	—		( 2,648 )
Other investing activities	( 334 )		( 231 )
Net cash provided by (used for) investing activities	( 8,369 )		( 19,444 )
Cash flows from financing activities
Net proceeds from (payments for):
Other secured financings	( 1,859 )		( 1,107 )
Deposits	( 7,807 )		9,643
Proceeds from issuance of Borrowings	39,773		49,100
Payments for:
Borrowings	( 19,514 )		( 40,300 )
Repurchases of common stock and employee tax withholdings	( 6,518 )		( 5,600 )
Cash dividends	( 2,618 )		( 1,501 )
Other financing activities	( 151 )		( 186 )
Net cash provided by (used for) financing activities	1,306		10,049
Effect of exchange rate changes on cash and cash equivalents	( 4,528 )		( 1,273 )
Net increase (decrease) in cash and cash equivalents	3,561		20,826
Cash and cash equivalents, at beginning of period	127,725		105,654
Cash and cash equivalents, at end of period	$	131,286	$	126,480
Supplemental Disclosure of Cash Flow Information
Cash payments for:
Interest	$	1,407	$	881
Income taxes, net of refunds	1,988		2,033

1. The prior period amounts have been revised to present Purchases, Proceeds from sales and Proceeds from paydowns and maturities separately between AFS securities and HTM securities.


See Notes to Consolidated Financial Statements			39			June 2022 Form 10-Q


Table of Contents
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. Disclosures reflect the effects of the acquisition of Eaton Vance Corp. (“Eaton Vance”) prospectively from the March 1, 2021 acquisition date. See Note 3 to the financial statements in the 2021 Form 10-K for further information. 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:

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 2021 Form 10-K. Certain footnote disclosures included in the 2021 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 2021 Form 10-K.


June 2022 Form 10-Q			40


Table of Contents
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, see Note 2 to the financial statements in the 2021 Form 10-K.

During the six months ended June 30, 2022 (“current year period”), there were no significant updates to the Firm’s significant accounting policies.

3. Cash and Cash Equivalents


$ in millions	At June 30, 2022		At December 31, 2021
Cash and due from banks	$	7,666	$	8,394
Interest bearing deposits with banks	123,620		119,331
Total Cash and cash equivalents	$	131,286	$	127,725
Restricted cash	$	43,147	$	40,887

For additional information on cash and cash equivalents, including restricted cash, see Note 2 to the financial statements in the 2021 Form 10-K.

4. Fair Values

Recurring Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis


	At June 30, 2022
$ in millions	Level 1		Level 2		Level 3		Netting 1		Total
Assets at fair value
Trading assets:
U.S. Treasury and agency securities	$	35,543	$	27,047	$	9	$	—	$	62,599
Other sovereign government obligations	25,226		5,161		161		—		30,548
State and municipal securities	—		1,718		29		—		1,747
MABS	—		1,373		339		—		1,712
Loans and lending commitments 2	—		5,584		2,507		—		8,091
Corporate and other debt	—		25,746		2,113		—		27,859
Corporate equities 3	80,141		866		246		—		81,253
Derivative and other contracts:
Interest rate	7,035		161,441		983		—		169,459
Credit	—		11,663		645		—		12,308
Foreign exchange	34		120,825		225		—		121,084
Equity	1,566		57,582		483		—		59,631
Commodity and other	10,694		33,958		4,116		—		48,768
Netting 1	( 16,267 )		( 278,419 )		( 1,453 )		( 60,030 )		( 356,169 )
Total derivative and other contracts	3,062		107,050		4,999		( 60,030 )		55,081
Investments 4	604		741		1,027		—		2,372
Physical commodities	—		2,425		—		—		2,425
Total trading assets 4	144,576		177,711		11,430		( 60,030 )		273,687
Investment securities—AFS	54,658		31,274		38		—		85,970

Total assets at fair value	$	199,234	$	208,985	$	11,468	$	( 60,030 )	$	359,657


	At June 30, 2022
$ in millions	Level 1		Level 2		Level 3		Netting 1		Total
Liabilities at fair value
Deposits	$	—	$	2,937	$	19	$	—	$	2,956
Trading liabilities:
U.S. Treasury and agency securities	10,926		40		—		—		10,966
Other sovereign government obligations	17,361		1,892		—		—		19,253
Corporate and other debt	—		10,973		44		—		11,017
Corporate equities 3	68,634		185		60		—		68,879
Derivative and other contracts:
Interest rate	5,839		152,045		1,085		—		158,969
Credit	—		11,378		455		—		11,833
Foreign exchange	43		112,713		556		—		113,312
Equity	1,844		66,612		1,013		—		69,469
Commodity and other	11,884		27,405		2,772		—		42,061
Netting 1	( 16,267 )		( 278,419 )		( 1,453 )		( 59,651 )		( 355,790 )
Total derivative and other contracts	3,343		91,734		4,428		( 59,651 )		39,854
Total trading liabilities	100,264		104,824		4,532		( 59,651 )		149,969
Securities sold under agreements to repurchase	—		442		514		—		956
Other secured financings	—		4,018		112		—		4,130
Borrowings	—		68,347		2,325		—		70,672
Total liabilities at fair value	$	100,264	$	180,568	$	7,502	$	( 59,651 )	$	228,683


	At December 31, 2021
$ in millions	Level 1		Level 2		Level 3		Netting 1		Total
Assets at fair value
Trading assets:
U.S. Treasury and agency securities	$	45,970	$	29,749	$	2	$	—	$	75,721
Other sovereign government obligations	28,041		4,533		211		—		32,785
State and municipal securities	—		1,905		13		—		1,918
MABS	—		1,237		344		—		1,581
Loans and lending commitments 2	—		8,821		3,806		—		12,627
Corporate and other debt	—		27,309		1,973		—		29,282
Corporate equities 3	91,630		832		115		—		92,577
Derivative and other contracts:
Interest rate	1,364		153,048		1,153		—		155,565
Credit	—		8,441		509		—		8,950
Foreign exchange	28		74,571		132		—		74,731
Equity	1,562		68,519		251		—		70,332
Commodity and other	4,462		20,194		3,057		—		27,713
Netting 1	( 5,696 )		( 241,814 )		( 794 )		( 50,833 )		( 299,137 )
Total derivative and other contracts	1,720		82,959		4,308		( 50,833 )		38,154
Investments 4	735		846		1,125		—		2,706
Physical commodities	—		2,771		—		—		2,771
Total trading assets 4	168,096		160,962		11,897		( 50,833 )		290,122
Investment securities—AFS	59,021		43,809		—		—		102,830
Securities purchased under agreements to resell	—		7		—		—		7
Total assets at fair value	$	227,117	$	204,778	$	11,897	$	( 50,833 )	$	392,959


			41			June 2022 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	At December 31, 2021
$ in millions	Level 1		Level 2		Level 3		Netting 1		Total
Liabilities at fair value
Deposits	$	—	$	1,873	$	67	$	—	$	1,940
Trading liabilities:
U.S. Treasury and agency securities	16,433		319		—		—		16,752
Other sovereign government obligations	20,771		2,062		—		—		22,833
Corporate and other debt	—		8,707		16		—		8,723
Corporate equities 3	75,181		226		45		—		75,452
Derivative and other contracts:
Interest rate	1,087		145,670		445		—		147,202
Credit	—		9,090		411		—		9,501
Foreign exchange	19		73,096		80		—		73,195
Equity	2,119		77,363		1,196		—		80,678
Commodity and other	4,563		16,837		1,528		—		22,928
Netting 1	( 5,696 )		( 241,814 )		( 794 )		( 50,632 )		( 298,936 )
Total derivative and other contracts	2,092		80,242		2,866		( 50,632 )		34,568
Total trading liabilities	114,477		91,556		2,927		( 50,632 )		158,328
Securities sold under agreements to repurchase	—		140		651		—		791
Other secured financings	—		4,730		403		—		5,133
Borrowings	—		74,183		2,157		—		76,340
Total liabilities at fair value	$	114,477	$	172,482	$	6,205	$	( 50,632 )	$	242,532

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.

Detail of Loans and Lending Commitments at Fair Value


$ in millions	At June 30, 2022		At December 31, 2021
Corporate	$	—	$	8
Secured lending facilities	7		—
Commercial Real Estate	532		863
Residential Real Estate	1,813		3,911
Securities-based lending and Other loans	5,739		7,845
Total	$	8,091	$	12,627

Unsettled Fair Value of Futures Contracts 1


$ in millions	At June 30, 2022		At December 31, 2021
Customer and other receivables (payables), net	$	442	$	948

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 5 to the financial statements in the 2021 Form 10-K. During the current quarter, 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


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
U.S. Treasury and agency securities
Beginning balance	$	8	$	12	$	2	$	9
Realized and unrealized gains (losses)	—		44		—		59
Purchases	4		22		4		25
Sales	( 3 )		( 68 )		( 2 )		( 68 )

Net transfers	—		15		5		—
Ending balance	$	9	$	25	$	9	$	25
Unrealized gains (losses)	$	—	$	44	$	—	$	58
Other sovereign government obligations
Beginning balance	$	188	$	17	$	211	$	268

Purchases	20		75		44		76
Sales	( 45 )		( 16 )		( 104 )		( 260 )

Net transfers	( 2 )		2		10		( 6 )
Ending balance	$	161	$	78	$	161	$	78
Unrealized gains (losses)	$	—	$	—	$	—	$	—
State and municipal securities
Beginning balance	$	—	$	—	$	13	$	—

Purchases	—		4		—		4


Net transfers	29		—		16		—
Ending balance	$	29	$	4	$	29	$	4
Unrealized gains (losses)	$	—	$	—	$	—	$	—
MABS
Beginning balance	$	351	$	374	$	344	$	322
Realized and unrealized gains (losses)	( 1 )		8		( 2 )		59
Purchases	45		21		82		128
Sales	( 62 )		( 58 )		( 149 )		( 123 )

Net transfers	6		12		64		( 29 )
Ending balance	$	339	$	357	$	339	$	357
Unrealized gains (losses)	$	( 2 )	$	6	$	( 2 )	$	1
Loans and lending commitments
Beginning balance	$	3,141	$	5,045	$	3,806	$	5,759
Realized and unrealized gains (losses)	11		22		37		3
Purchases and originations	367		1,527		677		2,673
Sales	( 382 )		( 1,438 )		( 618 )		( 2,569 )
Settlements	( 660 )		( 712 )		( 981 )		( 933 )
Net transfers	30		452		( 414 )		( 37 )
Ending balance	$	2,507	$	4,896	$	2,507	$	4,896
Unrealized gains (losses)	$	6	$	38	$	21	$	9


June 2022 Form 10-Q			42


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Corporate and other debt
Beginning balance	$	1,753	$	3,319	$	1,973	$	3,435
Realized and unrealized gains (losses)	5		207		15		135
Purchases and originations	267		883		595		1,413
Sales	( 360 )		( 908 )		( 548 )		( 1,087 )
Settlements	( 16 )		—		( 130 )		—
Net transfers 1	464		( 1,700 )		208		( 2,095 )
Ending balance	$	2,113	$	1,801	$	2,113	$	1,801
Unrealized gains (losses)	$	7	$	264	$	11	$	248
Corporate equities
Beginning balance	$	239	$	114	$	115	$	86
Realized and unrealized gains (losses)	—		12		( 1 )		26
Purchases	51		25		78		50
Sales	( 87 )		( 36 )		( 72 )		( 38 )

Net transfers	43		35		126		26
Ending balance	$	246	$	150	$	246	$	150
Unrealized gains (losses)	$	—	$	15	$	—	$	28
Investments
Beginning balance	$	1,120	$	924	$	1,125	$	828
Realized and unrealized gains (losses)	( 111 )		47		( 135 )		107
Purchases	27		28		46		92
Sales	( 11 )		( 9 )		( 14 )		( 24 )

Net transfers	2		( 12 )		5		( 25 )
Ending balance	$	1,027	$	978	$	1,027	$	978
Unrealized gains (losses)	$	( 106 )	$	47	$	( 131 )	$	94
Investment securities —AFS
Beginning balance	$	—	$	127	$	—	$	2,804
Realized and unrealized gains (losses)	( 2 )		—		( 2 )		( 4 )

Sales	—		( 11 )		—		( 203 )

Net transfers 2	40		( 116 )		40		( 2,597 )
Ending balance	$	38	$	—	$	38	$	—
Unrealized gains (losses)	$	( 2 )	$	—	$	( 2 )	$	—









Net derivatives: Interest rate
Beginning balance	$	634	$	691	$	708	$	682
Realized and unrealized gains (losses)	( 275 )		( 43 )		( 533 )		( 388 )
Purchases	2		41		—		57
Issuances	( 3 )		( 52 )		—		( 66 )
Settlements	( 173 )		18		( 131 )		103
Net transfers	( 287 )		13		( 146 )		280
Ending balance	$	( 102 )	$	668	$	( 102 )	$	668
Unrealized gains (losses)	$	( 266 )	$	( 40 )	$	( 372 )	$	( 370 )


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Net derivatives: Credit
Beginning balance	$	93	$	( 82 )	$	98	$	49
Realized and unrealized gains (losses)	( 21 )		( 88 )		232		( 75 )
Purchases	8		17		—		25
Issuances	( 7 )		( 24 )		( 3 )		( 38 )
Settlements	94		36		( 168 )		( 60 )
Net transfers	23		( 62 )		31		( 104 )
Ending balance	$	190	$	( 203 )	$	190	$	( 203 )
Unrealized gains (losses)	$	( 4 )	$	( 76 )	$	224	$	( 75 )
Net derivatives: Foreign exchange
Beginning balance	$	( 33 )	$	( 110 )	$	52	$	61
Realized and unrealized gains (losses)	124		96		( 13 )		( 26 )
Purchases	4		2		—		4
Issuances	—		—		—		( 2 )
Settlements	( 148 )		1		( 46 )		( 67 )
Net transfers	( 278 )		44		( 324 )		63
Ending balance	$	( 331 )	$	33	$	( 331 )	$	33
Unrealized gains (losses)	$	123	$	( 49 )	$	7	$	25
Net derivatives: Equity
Beginning balance	$	( 654 )	$	( 2,117 )	$	( 945 )	$	( 2,231 )
Realized and unrealized gains (losses)	142		283		171		344
Purchases	28		28		28		71
Issuances	( 69 )		( 143 )		( 52 )		( 461 )
Settlements	167		105		290		5
Net transfers 1	( 144 )		1,007		( 22 )		1,435
Ending balance	$	( 530 )	$	( 837 )	$	( 530 )	$	( 837 )
Unrealized gains (losses)	$	113	$	( 36 )	$	289	$	( 25 )
Net derivatives: Commodity and other
Beginning balance	$	1,434	$	1,944	$	1,529	$	1,709
Realized and unrealized gains (losses)	359		122		187		348
Purchases	10		—		10		10
Issuances	( 21 )		—		( 26 )		( 13 )
Settlements	( 384 )		( 170 )		( 238 )		( 222 )
Net transfers	( 54 )		( 466 )		( 118 )		( 402 )
Ending balance	$	1,344	$	1,430	$	1,344	$	1,430
Unrealized gains (losses)	$	219	$	( 63 )	$	( 174 )	$	69
Deposits
Beginning balance	$	26	$	177	$	67	$	126
Realized and unrealized losses (gains)	—		4		—		2

Issuances	2		—		2		—
Settlements	( 2 )		( 2 )		( 6 )		( 2 )
Net transfers	( 7 )		( 93 )		( 44 )		( 40 )
Ending balance	$	19	$	86	$	19	$	86
Unrealized losses (gains)	$	—	$	4	$	—	$	2
Nonderivative trading liabilities
Beginning balance	$	48	$	62	$	61	$	79
Realized and unrealized losses (gains)	—		( 4 )		( 4 )		4
Purchases	( 43 )		( 38 )		( 48 )		( 43 )
Sales	37		16		29		16

Net transfers	62		23		66		3
Ending balance	$	104	$	59	$	104	$	59
Unrealized losses (gains)	$	—	$	( 2 )	$	( 4 )	$	4


			43			June 2022 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Securities sold under agreements to repurchase
Beginning balance	$	516	$	441	$	651	$	444
Realized and unrealized losses (gains)	( 10 )		8		( 7 )		6


Issuances	9		—		9		—
Settlements	( 1 )		—		( 12 )		—
Net transfers	—		—		( 127 )		( 1 )
Ending balance	$	514	$	449	$	514	$	449
Unrealized losses (gains)	$	( 10 )	$	8	$	( 7 )	$	6
Other secured financings
Beginning balance	$	120	$	555	$	403	$	516
Realized and unrealized losses (gains)	( 4 )		9		( 6 )		4

Issuances	4		37		31		407
Settlements	( 8 )		( 176 )		( 313 )		( 498 )
Net transfers	—		( 24 )		( 3 )		( 28 )
Ending balance	$	112	$	401	$	112	$	401
Unrealized losses (gains)	$	( 4 )	$	10	$	( 6 )	$	4
Borrowings
Beginning balance	$	2,399	$	4,262	$	2,157	$	4,374
Realized and unrealized losses (gains)	( 312 )		125		( 476 )		36

Issuances	158		146		308		276
Settlements	( 183 )		( 217 )		( 215 )		( 326 )
Net transfers 1	263		( 2,341 )		551		( 2,385 )
Ending balance	$	2,325	$	1,975	$	2,325	$	1,975
Unrealized losses (gains)	$	( 306 )	$	121	$	( 479 )	$	29
Portion of Unrealized losses (gains) recorded in OCI—Change in net DVA	( 63 )		( 4 )		( 96 )		( 8 )

1. Net transfers from Level 3 to Level 2 in the prior year quarter reflect $ 2.0 billion of Corporate and Other Debt, $ 1.0 billion of net Equity derivatives, and $ 2.2 billion of Borrowings as the unobservable inputs were not significant to the overall fair value measurements.

2. Net transfers in the prior year period reflect the transfer in the first quarter of the prior year of $ 2.5 billion of AFS securities from Level 3 to Level 2 due to increased trading activity and observability of pricing inputs.

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.

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

Valuation Techniques and Unobservable Inputs


	Balance / Range (Average 1 )
$ in millions, except inputs	At June 30, 2022		At December 31, 2021
Assets at Fair Value on a Recurring Basis



Other sovereign government obligations	$	161	$	211
Comparable pricing:
Bond price	84 to 106 points ( 96 points)		100 to 140 points ( 120 points)



MABS	$	339	$	344
Comparable pricing:
Bond price	0 to 95 points ( 63 points)		0 to 86 points ( 59 points)
Loans and lending commitments	$	2,507	$	3,806
Margin loan model:



Margin loan rate	2 % to 4 % ( 3 %)		1 % to 4 % ( 3 %)
Comparable pricing:
Loan price	84 to 101 points ( 97 points)		89 to 101 points ( 97 points)
Corporate and other debt	$	2,113	$	1,973
Comparable pricing:
Bond price	52 to 158 points ( 90 points)		50 to 163 points ( 99 points)
Discounted cash flow:
Loss given default	54 % to 84 % ( 62 % / 54 %)		54 % to 84 % ( 62 % / 54 %)



Corporate equities	$	246	$	115
Comparable pricing:
Equity price	100 %		100 %
Investments	$	1,027	$	1,125
Discounted cash flow:
WACC	13 % to 18 % ( 17 %)		10 % to 16 % ( 15 %)
Exit multiple	8 to 17 times ( 13 times)		8 to 17 times ( 12 times)
Market approach:
EBITDA multiple	8 to 21 times ( 10 times)		8 to 25 times ( 10 times)
Comparable pricing:
Equity price	49 % to 100 % ( 90 %)		43 % to 100 % ( 99 %)





Net derivative and other contracts:
Interest rate	$	( 102 )	$	708
Option model:
IR volatility skew	42 % to 76 % ( 59 % / 59 %)		39 % to 79 % ( 64 % / 63 %)
IR curve correlation	39 % to 99 % ( 77 % / 79 %)		62 % to 98 % ( 83 % / 84 %)
Bond volatility	N/M		5 % to 32 % ( 12 % / 9 %)
Inflation volatility	24 % to 62 % ( 44 % / 40 %)		24 % to 65 % ( 44 % / 40 %)
IR curve	N/M		4 %


June 2022 Form 10-Q			44


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	Balance / Range (Average 1 )
$ in millions, except inputs	At June 30, 2022			At December 31, 2021
Credit	$	190		$	98
Credit default swap model:
Cash-synthetic basis	7 points			7 points
Bond price	0 to 83 points ( 43 points)			0 to 83 points ( 46 points)
Credit spread	10 to 529 bps ( 111 bps)			14 to 477 bps ( 68 bps)
Funding spread	18 to 593 bps ( 69 bps)			15 to 433 bps ( 55 bps)


Foreign exchange 2	$	( 331 )		$	52
Option model:
IR - FX correlation	N/M			53 % to 56 % ( 55 % / 54 %)
IR volatility skew	N/M			39 % to 79 % ( 64 % / 63 %)
IR curve	0 % to 26 % ( 9 % / 7 %)			- 1 % to 7 % ( 2 % / 0 %)
Foreign exchange volatility skew	- 33 % to 27 % ( 0 % / 0 %)			- 4 % to - 2 % (- 3 % / - 3 %)
Contingency probability	95		%	90 % to 95 % ( 94 % / 95 %)
Equity 2	$	( 530 )		$	( 945 )
Option model:
Equity volatility	5 % to 96 % ( 28 %)			5 % to 99 % ( 24 %)
Equity volatility skew	- 4 % to 0 % (- 1 %)			- 4 % to 0 % (- 1 %)
Equity correlation	5 % to 96 % ( 82 %)			5 % to 99 % ( 73 %)
FX correlation	- 85 % to 65 % (- 47 %)			- 85 % to 37 % (- 42 %)
IR correlation	13 % to 30 % ( 15 %)			13 % to 30 % ( 15 %)
Commodity and other	$	1,344		$	1,529
Option model:
Forward power price	$ 1 to $ 268 ($ 55 ) per MWh			$ 4 to $ 263 ($ 39 ) per MWh
Commodity volatility	8 % to 159 % ( 42 %)			8 % to 385 % ( 22 %)
Cross-commodity correlation	41 % to 100 % ( 94 %)			43 % to 100 % ( 94 %)
Liabilities Measured at Fair Value on a Recurring Basis
Deposits	$	19		$	67
Option model:
Equity volatility	N/M			7 %

Nonderivative trading liabilities —Corporate equities	$	60		$	45
Comparable pricing:
Equity price	100 %			100 %
Securities sold under agreements to repurchase	$	514		$	651
Discounted cash flow:
Funding spread	115 to 146 bps ( 130 bps)			112 to 127 bps ( 120 bps)
Other secured financings	$	112		$	403


Comparable pricing:
Loan price	23 to 101 points ( 81 points)			30 to 100 points ( 83 points)


	Balance / Range (Average 1 )
$ in millions, except inputs	At June 30, 2022		At December 31, 2021
Borrowings	$	2,325	$	2,157
Option model:
Equity volatility	7 % to 93 % ( 21 %)		7 % to 85 % ( 20 %)
Equity volatility skew	- 2 % to 0 % (- 1 %)		- 1 % to 0 % ( 0 %)
Equity correlation	39 % to 95 % ( 86 %)		41 % to 95 % ( 81 %)
Equity - FX correlation	- 55 % to 25 % (- 23 %)		- 55 % to 25 % (- 30 %)
IR FX Correlation	- 14 % to 5 % (- 5 % / - 5 %)		- 26 % to 8 % (- 5 % / - 5 %)
IR curve correlation	39 % to 99 % ( 77 % / 79 %)		N/M
IR volatility skew	42 % to 76 % ( 59 % / 59 %)		N/M
Discounted cash flow:
Loss given default	54 % to 84 % ( 62 % / 54 %)		54 % to 84 % ( 62 % / 54 %)
Nonrecurring Fair Value Measurement
Loans	$	2,572	$	1,576
Corporate loan model:
Credit spread	111 to 749 bps ( 343 bps)		108 to 565 bps ( 284 bps)
Comparable pricing:
Loan price	48 to 80 points ( 69 points)		40 to 80 points ( 61 points)
Warehouse model:
Credit spread	119 to 267 bps ( 198 bps)		182 to 446 bps ( 376 bps)

Points—Percentage of par

IR—Interest rate

FX—Foreign exchange

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 5 to the financial statements in the 2021 Form 10-K. During the current quarter, there were no significant revisions made to the descriptions of the Firm’s significant unobservable inputs.


			45			June 2022 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Net Asset Value Measurements

Fund Interests


	At June 30, 2022				At December 31, 2021
$ in millions	Carrying Value		Commitment		Carrying Value		Commitment
Private equity	$	2,823	$	540	$	2,492	$	615
Real estate	2,170		249		2,064		248
Hedge 1	202		2		191		2
Total	$	5,195	$	791	$	4,747	$	865

1. Investments in hedge funds may be subject to initial period lock-up or gate provisions, which restrict an investor from withdrawing from the fund during a certain initial period or restrict the redemption amount on any redemption date, respectively.

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 5 to the financial statements in the 2021 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


	Carrying Value at June 30, 2022
$ in millions	Private Equity		Real Estate
Less than 5 years	$	1,034	$	794
5-10 years	1,264		1,354
Over 10 years	525		22
Total	$	2,823	$	2,170

Nonrecurring Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis


	At June 30, 2022
	Fair Value
$ in millions	Level 2		Level 3 1		Total
Assets
Loans	$	3,411	$	2,572	$	5,983


Other assets—Other investments	—		5		5

Other assets—ROU assets	7		—		7
Total	$	3,418	$	2,577	$	5,995
Liabilities
Other liabilities and accrued expenses—Lending commitments	$	359	$	142	$	501
Total	$	359	$	142	$	501


	At December 31, 2021
	Fair Value
$ in millions	Level 2		Level 3 1		Total
Assets
Loans	$	4,035	$	1,576	$	5,611
Other assets—Other investments	—		8		8
Other assets—ROU assets	16		—		16
Total	$	4,051	$	1,584	$	5,635
Liabilities
Other liabilities and accrued expenses—Lending commitments	$	173	$	70	$	243
Total	$	173	$	70	$	243

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 Remeasurements 1


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Assets
Loans 2	$	( 167 )	$	( 38 )	$	( 221 )	$	( 55 )
Goodwill	—		—		—		( 8 )
Intangibles	—		( 1 )		—		( 3 )
Other assets—Other investments 3	( 4 )		( 2 )		( 6 )		( 53 )
Other assets—Premises, equipment and software	( 1 )		( 2 )		( 2 )		( 4 )
Other assets—ROU assets	( 4 )		—		( 6 )		—
Total	$	( 176 )	$	( 43 )	$	( 235 )	$	( 123 )
Liabilities
Other liabilities and accrued expenses—Lending commitments 2	$	( 191 )	$	5	$	( 210 )	$	40
Total	$	( 191 )	$	5	$	( 210 )	$	40

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.

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.


June 2022 Form 10-Q			46


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Financial Instruments Not Measured at Fair Value


	At June 30, 2022
	Carrying Value		Fair Value
$ in millions			Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	131,286	$	131,286	$	—	$	—	$	131,286
Investment securities—HTM	79,477		29,093		41,619		1,030		71,742
Securities purchased under agreements to resell	120,735		—		118,453		2,205		120,658
Securities borrowed	138,508		—		138,506		—		138,506
Customer and other receivables	78,752		—		74,975		3,516		78,491
Loans 1	206,482		—		26,339		175,334		201,673
Other assets	722		—		722		—		722
Financial liabilities
Deposits	$	344,192	$	—	$	344,259	$	—	$	344,259
Securities sold under agreements to repurchase	65,223		—		65,163		—		65,163
Securities loaned	13,785		—		13,791		—		13,791
Other secured financings	3,107		—		3,108		—		3,108
Customer and other payables	233,719		—		233,719		—		233,719
Borrowings	155,505		—		152,737		4		152,741
	Commitment Amount
Lending commitments 2	$	139,858	$	—	$	2,086	$	805	$	2,891


	At December 31, 2021
	Carrying Value		Fair Value
$ in millions			Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	127,725	$	127,725	$	—	$	—	$	127,725
Investment securities—HTM	80,168		29,454		49,352		1,076		79,882
Securities purchased under agreements to resell	119,992		—		117,922		2,075		119,997
Securities borrowed	129,713		—		129,713		—		129,713
Customer and other receivables	91,664		—		88,091		3,442		91,533
Loans 1	188,134		—		25,706		163,784		189,490
Other assets	528		—		528		—		528
Financial liabilities
Deposits	$	345,634	$	—	$	345,911	$	—	$	345,911
Securities sold under agreements to repurchase	61,397		—		61,419		—		61,419
Securities loaned	12,299		—		12,296		—		12,296
Other secured financings	4,908		—		4,910		—		4,910
Customer and other payables	228,631		—		228,631		—		228,631
Borrowings	156,787		—		162,154		4		162,158
	Commitment Amount
Lending commitments 2	$	133,519	$	—	$	890	$	470	$	1,360

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

2. 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


$ in millions	At June 30, 2022		At December 31, 2021
Business Unit Responsible for Risk Management
Equity	$	35,253	$	37,046
Interest rates	24,473		28,638
Commodities	8,409		7,837
Credit	1,349		1,347
Foreign exchange	1,188		1,472
Total	$	70,672	$	76,340

Net Revenues from Borrowings under the Fair Value Option


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Trading revenues	$	7,672	$	( 2,931 )	$	12,327	$	( 446 )
Interest expense	64		84		136		157
Net revenues 1	$	7,608	$	( 3,015 )	$	12,191	$	( 603 )

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


	Three Months Ended June 30,
	2022				2021
$ in millions	Trading Revenues		OCI		Trading Revenues		OCI
Loans and other receivables 1	$	( 15 )	$	—	$	95	$	—
Lending commitments	( 1 )		—		1		—
Deposits	—		21		—		10
Borrowings	1		1,499		( 10 )		237


	Six Months Ended June 30,
	2022				2021
$ in millions	Trading Revenues		OCI		Trading Revenues		OCI
Loans and other receivables 1	$	9	$	—	$	253	$	—
Lending commitments	( 1 )		—		1		—
Deposits	—		14		—		9
Borrowings	1		2,377		( 27 )		422


			47			June 2022 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


$ in millions	At June 30, 2022		At December 31, 2021
Cumulative pre-tax DVA gain (loss) recognized in AOCI	$	( 48 )	$	( 2,439 )

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 Value 1


$ in millions	At June 30, 2022		At December 31, 2021
Loans and other receivables 2	$	11,527	$	12,633
Nonaccrual loans 2	8,647		9,999
Borrowings 3	3,678		( 2,106 )

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


$ in millions	At June 30, 2022		At December 31, 2021
Nonaccrual loans	$	593	$	989
Nonaccrual loans 90 or more days past due	110		363

6. Derivative Instruments and Hedging Activities

Fair Values of Derivative Contracts


	Assets at June 30, 2022
$ in millions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	148	$	6	$	—	$	154
Foreign exchange	308		59		—		367
Total	456		65		—		521
Not designated as accounting hedges
Economic hedges of loans
Credit	7		98		—		105
Other derivatives
Interest rate	139,530		27,927		1,848		169,305
Credit	9,429		2,774		—		12,203
Foreign exchange	117,553		3,099		65		120,717
Equity	24,787		—		34,844		59,631
Commodity and other	36,572		—		12,196		48,768
Total	327,878		33,898		48,953		410,729
Total gross derivatives	$	328,334	$	33,963	$	48,953	$	411,250
Amounts offset
Counterparty netting	( 228,091 )		( 31,597 )		( 46,715 )		( 306,403 )
Cash collateral netting	( 48,546 )		( 1,220 )		—		( 49,766 )
Total in Trading assets	$	51,697	$	1,146	$	2,238	$	55,081
Amounts not offset 1
Financial instruments collateral	( 21,576 )		—		—		( 21,576 )
Net amounts	$	30,121	$	1,146	$	2,238	$	33,505
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable							$	8,620


	Liabilities at June 30, 2022
$ in millions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	334	$	—	$	—	$	334
Foreign exchange	4		5		—		9
Total	338		5		—		343
Not designated as accounting hedges
Economic hedges of loans
Credit	10		238		—		248
Other derivatives
Interest rate	128,906		28,846		883		158,635
Credit	8,706		2,879		—		11,585
Foreign exchange	110,398		2,828		77		113,303
Equity	30,920		—		38,549		69,469
Commodity and other	28,568		—		13,493		42,061
Total	307,508		34,791		53,002		395,301
Total gross derivatives	$	307,846	$	34,796	$	53,002	$	395,644
Amounts offset
Counterparty netting	( 228,091 )		( 31,597 )		( 46,715 )		( 306,403 )
Cash collateral netting	( 46,548 )		( 2,839 )		—		( 49,387 )
Total in Trading liabilities	$	33,207	$	360	$	6,287	$	39,854
Amounts not offset 1
Financial instruments collateral	( 2,431 )		—		( 3,222 )		( 5,653 )
Net amounts	$	30,776	$	360	$	3,065	$	34,201
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable							8,001


			48			June 2022 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	Assets at December 31, 2021
$ in millions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	594	$	1	$	—	$	595
Foreign exchange	191		6		—		197
Total	785		7		—		792
Not designated as accounting hedges
Economic hedges of loans
Credit	—		15		—		15
Other derivatives
Interest rate	147,585		7,002		383		154,970
Credit	5,749		3,186		—		8,935
Foreign exchange	73,276		1,219		39		74,534
Equity	28,877		—		41,455		70,332
Commodity and other	22,175		—		5,538		27,713
Total	277,662		11,422		47,415		336,499
Total gross derivatives	$	278,447	$	11,429	$	47,415	$	337,291
Amounts offset
Counterparty netting	( 201,729 )		( 9,818 )		( 42,883 )		( 254,430 )
Cash collateral netting	( 43,495 )		( 1,212 )		—		( 44,707 )
Total in Trading assets	$	33,223	$	399	$	4,532	$	38,154
Amounts not offset 1
Financial instruments collateral	( 10,457 )		—		—		( 10,457 )
Net amounts	$	22,766	$	399	$	4,532	$	27,697
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable							$	6,725


	Liabilities at December 31, 2021
$ in millions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	86	$	1	$	—	$	87
Foreign exchange	57		50		—		107
Total	143		51		—		194
Not designated as accounting hedges
Economic hedges of loans
Credit	17		412		—		429
Other derivatives
Interest rate	140,770		6,112		233		147,115
Credit	5,609		3,463		—		9,072
Foreign exchange	71,851		1,196		41		73,088
Equity	39,597		—		41,081		80,678
Commodity and other	17,188		—		5,740		22,928
Total	275,032		11,183		47,095		333,310
Total gross derivatives	$	275,175	$	11,234	$	47,095	$	333,504
Amounts offset
Counterparty netting	( 201,729 )		( 9,818 )		( 42,883 )		( 254,430 )
Cash collateral netting	( 43,305 )		( 1,201 )		—		( 44,506 )
Total in Trading liabilities	$	30,141	$	215	$	4,212	$	34,568
Amounts not offset 1
Financial instruments collateral	( 5,866 )		( 8 )		( 39 )		( 5,913 )
Net amounts	$	24,275	$	207	$	4,173	$	28,655
Net amounts for which master netting or collateral agreements are not in place or may not be legally enforceable							$	6,194

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 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


	Assets at June 30, 2022
$ in billions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	2	$	50	$	—	$	52
Foreign exchange	10		3		—		13
Total	12		53		—		65
Not designated as accounting hedges
Economic hedges of loans
Credit	—		3		—		3
Other derivatives
Interest rate	3,582		8,236		688		12,506
Credit	228		107		—		335
Foreign exchange	3,478		146		9		3,633
Equity	482		—		399		881
Commodity and other	160		—		77		237
Total	7,930		8,492		1,173		17,595
Total gross derivatives	$	7,942	$	8,545	$	1,173	$	17,660


	Liabilities at June 30, 2022
$ in billions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	3	$	167	$	—	$	170
Foreign exchange	2		1		—		3
Total	5		168		—		173
Not designated as accounting hedges
Economic hedges of loans
Credit	—		10		—		10
Other derivatives
Interest rate	3,585		8,424		610		12,619
Credit	211		109		—		320
Foreign exchange	3,275		134		17		3,426
Equity	506		—		634		1,140
Commodity and other	122		—		87		209
Total	7,699		8,677		1,348		17,724
Total gross derivatives	$	7,704	$	8,845	$	1,348	$	17,897


	Assets at December 31, 2021
$ in billions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	4	$	104	$	—	$	108
Foreign exchange	8		1		—		9
Total	12		105		—		117
Not designated as accounting hedges
Economic hedges of loans
Credit	—		—		—		—
Other derivatives
Interest rate	3,488		7,082		570		11,140
Credit	216		105		—		321
Foreign exchange	3,386		95		10		3,491
Equity	495		—		407		902
Commodity and other	139		—		73		212
Total	7,724		7,282		1,060		16,066
Total gross derivatives	$	7,736	$	7,387	$	1,060	$	16,183


			49			June 2022 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	Liabilities at December 31, 2021
$ in billions	Bilateral OTC		Cleared OTC		Exchange- Traded		Total
Designated as accounting hedges
Interest rate	$	—	$	99	$	—	$	99
Foreign exchange	5		3		—		8
Total	5		102		—		107
Not designated as accounting hedges
Economic hedges of loans
Credit	1		12		—		13
Other derivatives
Interest rate	3,827		6,965		445		11,237
Credit	225		106		—		331
Foreign exchange	3,360		88		12		3,460
Equity	552		—		735		1,287
Commodity and other	110		—		81		191
Total	8,075		7,171		1,273		16,519
Total gross derivatives	$	8,080	$	7,273	$	1,273	$	16,626

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 7 to the financial statements in the 2021 Form 10-K.

Gains (Losses) on Accounting Hedges


	Three Months Ended				Six Months Ended
	June 30,				June 30,
$ in millions	2022		2021		2022		2021
Fair value hedges—Recognized in Interest income
Interest rate contracts	$	396	$	( 331 )	$	1,191	$	500
Investment Securities—AFS	( 373 )		345		( 1,124 )		( 427 )
Fair value hedges—Recognized in Interest expense
Interest rate contracts	$	( 4,017 )	$	1,238	$	( 10,250 )	$	( 2,870 )
Deposits	30		22		118		58
Borrowings	3,972		( 1,270 )		10,127		2,751
Net investment hedges—Foreign exchange contracts
Recognized in OCI	$	635	$	( 106 )	$	774	$	299
Forward points excluded from hedge effectiveness testing—Recognized in Interest income	( 36 )		( 14 )		( 77 )		( 13 )

Fair Value Hedges—Hedged Items


$ in millions	At June 30, 2022		At December 31, 2021
Investment Securities—AFS
Amortized cost basis currently or previously hedged	$	13,808	$	17,902
Basis adjustments included in amortized cost 1	$	( 1,010 )	$	( 591 )
Deposits
Carrying amount currently or previously hedged	$	4,361	$	6,279
Basis adjustments included in carrying amount 1	$	( 113 )	$	5
Borrowings
Carrying amount currently or previously hedged	$	134,037	$	122,919
Basis adjustments included in carrying amount — Outstanding hedges	$	( 7,755 )	$	2,324
Basis adjustments included in carrying amount — Terminated hedges	$	( 729 )	$	( 743 )

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

Gains (Losses) on Economic Hedges of Loans


	Three Months Ended				Six Months Ended
	June 30,				June 30,
$ in millions	2022		2021		2022		2021
Recognized in Other revenues
Credit contracts 1	$	153	$	( 44 )	$	204	$	( 149 )

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

Net Derivative Liabilities and Collateral Posted


$ in millions	At June 30, 2022		At December 31, 2021
Net derivative liabilities with credit risk-related contingent features	$	20,019	$	20,548
Collateral posted	12,423		14,789

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


$ in millions	At June 30, 2022
One-notch downgrade	$	570
Two-notch downgrade	453
Bilateral downgrade agreements included in the amounts above 1	$	988

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 either or both of Moody’s Investors Service, Inc. and S&P Global Ratings. 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.


June 2022 Form 10-Q			50


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

Maximum Potential Payout/Notional of Credit Protection Sold 1


	Years to Maturity at June 30, 2022
$ in billions	< 1		1-3		3-5		Over 5		Total
Single-name CDS
Investment grade	$	11	$	29	$	27	$	9	$	76
Non-investment grade	7		16		18		2		43
Total	$	18	$	45	$	45	$	11	$	119
Index and basket CDS
Investment grade	$	2	$	11	$	103	$	12	$	128
Non-investment grade	9		15		34		14		72
Total	$	11	$	26	$	137	$	26	$	200
Total CDS sold	$	29	$	71	$	182	$	37	$	319
Other credit contracts	—		—		—		—		—
Total credit protection sold	$	29	$	71	$	182	$	37	$	319
CDS protection sold with identical protection purchased									$	279


	Years to Maturity at December 31, 2021
$ in billions	< 1		1-3		3-5		Over 5		Total
Single-name CDS
Investment grade	$	10	$	26	$	29	$	9	$	74
Non-investment grade	5		13		17		2		37
Total	$	15	$	39	$	46	$	11	$	111
Index and basket CDS
Investment grade	$	2	$	11	$	106	$	15	$	134
Non-investment grade	9		14		37		12		72
Total	$	11	$	25	$	143	$	27	$	206
Total CDS sold	$	26	$	64	$	189	$	38	$	317
Other credit contracts	—		—		—		—		—
Total credit protection sold	$	26	$	64	$	189	$	38	$	317
CDS protection sold with identical protection purchased									$	278

Fair Value Asset (Liability) of Credit Protection Sold 1


$ in millions	At June 30, 2022		At December 31, 2021
Single-name CDS
Investment grade	$	322	$	1,428
Non-investment grade	( 3,502 )		( 370 )
Total	$	( 3,180 )	$	1,058
Index and basket CDS
Investment grade	$	( 148 )	$	1,393
Non-investment grade	( 4,091 )		( 650 )
Total	$	( 4,239 )	$	743
Total CDS sold	$	( 7,419 )	$	1,801
Other credit contracts	( 3 )		( 3 )
Total credit protection sold	$	( 7,422 )	$	1,798

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


	Notional
$ in billions	At June 30, 2022		At December 31, 2021
Single name	$	138	$	126
Index and basket	188		204
Tranched index and basket	23		18
Total	$	349	$	348


	Fair Value Asset (Liability)
$ in millions	At June 30, 2022		At December 31, 2021
Single name	$	3,505	$	( 1,338 )
Index and basket	3,846		( 563 )
Tranched index and basket	543		( 451 )
Total	$	7,894	$	( 2,352 )

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 information on credit derivatives and other credit contracts, see Note 7 to the financial statements in the 2021 Form 10-K.

7. Investment Securities

AFS and HTM Securities


	At June 30, 2022
$ in millions	Amortized Cost 1		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS securities
U.S. Treasury securities	$	56,570	$	3	$	1,915	$	54,658
U.S. agency securities 2	23,566		4		1,917		21,653
Agency CMBS	6,449		5		285		6,169


State and municipal securities	2,322		13		91		2,244
FFELP student loan ABS 3	1,281		—		35		1,246

Total AFS securities	90,188		25		4,243		85,970
HTM securities
U.S. Treasury securities	30,133		3		1,043		29,093
U.S. agency securities 2	46,138		—		6,458		39,680
Agency CMBS	2,079		—		140		1,939
Non-agency CMBS	1,127		—		97		1,030
Total HTM securities	79,477		3		7,738		71,742
Total investment securities	$	169,665	$	28	$	11,981	$	157,712


			51			June 2022 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	At December 31, 2021
$ in millions	Amortized Cost 1		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS securities
U.S. Treasury securities	$	58,974	$	343	$	296	$	59,021
U.S. agency securities 2	26,780		274		241		26,813
Agency CMBS	14,476		289		89		14,676


State and municipal securities	613		37		2		648
FFELP student loan ABS 3	1,672		11		11		1,672

Total AFS securities	102,515		954		639		102,830
HTM securities
U.S. Treasury securities	28,653		882		81		29,454
U.S. agency securities 2	48,195		169		1,228		47,136
Agency CMBS	2,267		—		51		2,216
Non-agency CMBS	1,053		28		5		1,076
Total HTM securities	80,168		1,079		1,365		79,882
Total investment securities	$	182,683	$	2,033	$	2,004	$	182,712

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


	At June 30, 2022				At December 31, 2021
$ in millions	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury securities
Less than 12 months	$	40,014	$	1,408	$	31,459	$	296
12 months or longer	10,018		507		—		—
Total	50,032		1,915		31,459		296
U.S. agency securities
Less than 12 months	16,475		1,400		12,283		219
12 months or longer	3,494		517		1,167		22
Total	19,969		1,917		13,450		241
Agency CMBS
Less than 12 months	4,297		270		2,872		89
12 months or longer	351		15		10		—
Total	4,648		285		2,882		89








State and municipal securities
Less than 12 months	1,699		82		21		2
12 months or longer	( 25 )		9		7		—
Total	1,674		91		28		2
FFELP student loan ABS
Less than 12 months	854		22		320		1
12 months or longer	380		13		591		10
Total	1,234		35		911		11




Total AFS securities in an unrealized loss position
Less than 12 months	63,339		3,182		46,955		607
12 months or longer	14,218		1,061		1,775		32
Total	$	77,557	$	4,243	$	48,730	$	639

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 2021 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, 2022 and December 31, 2021, the securities in an unrealized loss position are predominantly investment grade.

The HTM securities net carrying amounts at June 30, 2022 and December 31, 2021 reflect an ACL of $ 32 million and $ 33 million, respectively, related to Non-agency CMBS. See Note 2 in the 2021 Form 10-K for a description of the ACL methodology used for HTM Securities. As of June 30, 2022, and December 31, 2021, 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.

Investment Securities by Contractual Maturity


	At June 30, 2022
$ in millions	Amortized Cost 1		Fair Value		Annualized Average Yield 2
AFS securities
U.S. Treasury securities:
Due within 1 year	$	10,416	$	10,300	1.2	%
After 1 year through 5 years	43,015		41,233		1.1	%
After 5 years through 10 years	3,139		3,125		1.1	%

Total	56,570		54,658
U.S. agency securities:
Due within 1 year	14		14		0.7	%
After 1 year through 5 years	326		310		1.2	%
After 5 years through 10 years	1,105		1,051		1.8	%
After 10 years	22,121		20,278		1.8	%
Total	23,566		21,653
Agency CMBS:
Due within 1 year	151		151		1.8	%
After 1 year through 5 years	798		760		2.0	%
After 5 years through 10 years	4,082		3,997		1.8	%
After 10 years	1,418		1,261		1.3	%
Total	6,449		6,169












State and municipal securities:
Due within 1 year	38		39		2.3	%
After 1 year through 5 years	46		47		2.3	%
After 5 years through 10 years	112		110		2.5	%
After 10 Years	2,126		2,048		3.2	%
Total	2,322		2,244
FFELP student loan ABS:

After 1 year through 5 years	127		122		0.9	%
After 5 years through 10 years	135		131		0.7	%
After 10 years	1,019		993		1.5	%
Total	1,281		1,246






Total AFS securities	90,188		85,970		1.4	%


June 2022 Form 10-Q			52


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	At June 30, 2022
$ in millions	Amortized Cost 1	Fair Value	Annualized Average Yield 2
HTM securities
U.S. Treasury securities:
Due within 1 year	3,654	3,641	1.9	%
After 1 year through 5 years	20,949	20,322	1.8	%
After 5 years through 10 years	3,968	3,817	2.4	%
After 10 years	1,562	1,313	2.3	%
Total	30,133	29,093
U.S. agency securities:


After 5 years through 10 years	425	407	2.1	%
After 10 years	45,713	39,273	1.8	%
Total	46,138	39,680
Agency CMBS:
Due within 1 year	105	104	1.0	%
After 1 year through 5 years	1,421	1,341	1.3	%
After 5 years through 10 years	405	365	1.4	%
After 10 years	148	129	1.5	%
Total	2,079	1,939












Non-agency CMBS:
Due within 1 year	178	177	4.1	%
After 1 year through 5 years	145	138	3.6	%
After 5 years through 10 years	751	665	3.6	%
After 10 years	53	50	3.7	%
Total	1,127	1,030
Total HTM securities	79,477	71,742	1.8	%
Total investment securities	169,665	157,712	1.6	%

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 considers the contractual coupon, amortization of premiums and accretion of discounts, and the effect of related hedging derivatives.

Gross Realized Gains (Losses) on Sales of AFS Securities


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Gross realized gains	$	24	$	74	$	150	$	219
Gross realized (losses)	( 6 )		( 16 )		( 88 )		( 27 )
Total 1	$	18	$	58	$	62	$	192

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

8. Collateralized Transactions

Offsetting of Certain Collateralized Transactions


	At June 30, 2022
$ in millions	Gross Amounts		Amounts Offset		Balance Sheet Net Amounts		Amounts Not Offset 1		Net Amounts
Assets
Securities purchased under agreements to resell	$	230,176	$	( 109,441 )	$	120,735	$	( 117,865 )	$	2,870
Securities borrowed	151,152		( 12,644 )		138,508		( 132,191 )		6,317
Liabilities
Securities sold under agreements to repurchase	$	175,620	$	( 109,441 )	$	66,179	$	( 62,302 )	$	3,877
Securities loaned	26,429		( 12,644 )		13,785		( 13,475 )		310
Net amounts for which master netting agreements are not in place or may not be legally enforceable
Securities purchased under agreements to resell									$	2,470
Securities borrowed									493
Securities sold under agreements to repurchase									3,366
Securities loaned									160


	At December 31, 2021
$ in millions	Gross Amounts		Amounts Offset		Balance Sheet Net Amounts		Amounts Not Offset 1		Net Amounts
Assets
Securities purchased under agreements to resell	$	197,486	$	( 77,487 )	$	119,999	$	( 106,896 )	$	13,103
Securities borrowed	139,395		( 9,682 )		129,713		( 124,028 )		5,685
Liabilities
Securities sold under agreements to repurchase	$	139,675	$	( 77,487 )	$	62,188	$	( 53,692 )	$	8,496
Securities loaned	21,981		( 9,682 )		12,299		( 12,019 )		280
Net amounts for which master netting agreements are not in place or may not be legally enforceable
Securities purchased under agreements to resell									$	12,514
Securities borrowed									1,041
Securities sold under agreements to repurchase									8,295
Securities loaned									139

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 Note 2 and Note 9 to the financial statements in the 2021 Form 10-K. For information related to offsetting of derivatives, see Note 6.

Gross Secured Financing Balances by Remaining Contractual Maturity


	At June 30, 2022
$ in millions	Overnight and Open		Less than 30 Days		30-90 Days		Over 90 Days		Total
Securities sold under agreements to repurchase	$	59,629	$	59,400	$	19,437	$	37,154	$	175,620
Securities loaned	15,569		—		876		9,984		26,429
Total included in the offsetting disclosure	$	75,198	$	59,400	$	20,313	$	47,138	$	202,049
Trading liabilities— Obligation to return securities received as collateral	22,164		—		—		—		22,164
Total	$	97,362	$	59,400	$	20,313	$	47,138	$	224,213


			53			June 2022 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	At December 31, 2021
$ in millions	Overnight and Open		Less than 30 Days		30-90 Days		Over 90 Days		Total
Securities sold under agreements to repurchase	$	29,271	$	53,987	$	17,099	$	39,318	$	139,675
Securities loaned	11,480		364		650		9,487		21,981
Total included in the offsetting disclosure	$	40,751	$	54,351	$	17,749	$	48,805	$	161,656
Trading liabilities— Obligation to return securities received as collateral	30,104		—		—		—		30,104
Total	$	70,855	$	54,351	$	17,749	$	48,805	$	191,760

Gross Secured Financing Balances by Class of Collateral Pledged


$ in millions	At June 30, 2022		At December 31, 2021
Securities sold under agreements to repurchase
U.S. Treasury and agency securities	$	55,320	$	30,790
Other sovereign government obligations	93,222		73,063
Corporate equities	14,025		25,881
Other	13,053		9,941
Total	$	175,620	$	139,675
Securities loaned
Other sovereign government obligations	$	1,003	$	748
Corporate equities	24,759		20,656
Other	667		577
Total	$	26,429	$	21,981
Total included in the offsetting disclosure	$	202,049	$	161,656
Trading liabilities—Obligation to return securities received as collateral
Corporate equities	$	22,147	$	30,048
Other	17		56
Total	$	22,164	$	30,104
Total	$	224,213	$	191,760

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


$ in millions	At June 30, 2022		At December 31, 2021
Trading assets	$	36,400	$	32,458

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


$ in millions	At June 30, 2022		At December 31, 2021
Collateral received with right to sell or repledge	$	650,664	$	672,104
Collateral that was sold or repledged 1	511,247		510,000

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

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


$ in millions	At June 30, 2022		At December 31, 2021
Segregated securities 1	$	38,525	$	20,092

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


$ in millions	At June 30, 2022		At December 31, 2021
Margin and other lending	$	45,942	$	71,532

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 9 to the financial statements in the 2021 Form 10-K.

Also included in the amounts in the previous table is non-purpose securities-based lending on non-bank 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.


June 2022 Form 10-Q			54


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

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

Loans by Type


	At June 30, 2022
$ in millions	HFI Loans		HFS Loans		Total Loans
Corporate	$	6,739	$	6,366	$	13,105
Secured lending facilities	32,687		4,223		36,910
Commercial real estate	8,434		2,159		10,593
Residential real estate	50,449		5		50,454
Securities-based lending and Other loans	95,906		276		96,182
Total loans	194,215		13,029		207,244
ACL	( 762 )				( 762 )
Total loans, net	$	193,453	$	13,029	$	206,482
Loans to non-U.S. borrowers, net					$	24,925


	At December 31, 2021
$ in millions	HFI Loans		HFS Loans		Total Loans
Corporate	$	5,567	$	8,107	$	13,674
Secured lending facilities	31,471		3,879		35,350
Commercial real estate	7,227		1,777		9,004
Residential real estate	44,251		7		44,258
Securities-based lending and Other loans	86,440		62		86,502
Total loans	174,956		13,832		188,788
ACL	( 654 )				( 654 )
Total loans, net	$	174,302	$	13,832	$	188,134
Loans to non-U.S. borrowers, net					$	24,322

For additional information on the Firm’s held-for-investment and held-for-sale loan portfolios, see Note 10 to the financial statements in the 2021 Form 10-K.

Loans by Interest Rate Type


	At June 30, 2022				At December 31, 2021
$ in millions	Fixed Rate		Floating or Adjustable Rate		Fixed Rate		Floating or Adjustable Rate
Corporate	$	—	$	13,106	$	—	$	13,674
Secured lending facilities	—		36,910		—		35,350
Commercial real estate	342		10,252		343		8,661
Residential real estate	22,774		27,680		18,966		25,292
Securities-based lending and Other loans	24,596		71,584		22,832		63,670
Total loans, before ACL	$	47,712	$	159,532	$	42,141	$	146,647

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.

Loans Held for Investment before Allowance by Origination Year


	At June 30, 2022						At December 31, 2021
	Corporate
$ in millions	IG		NIG		Total		IG		NIG		Total
Revolving	$	3,020	$	3,084	$	6,104	$	2,356	$	2,328	$	4,684
2022	—		80		80
2021	—		94		94		—		85		85
2020	17		25		42		111		26		137
2019	—		158		158		—		176		176
2018	146		—		146		196		—		196
Prior	114		1		115		229		60		289
Total	$	3,297	$	3,442	$	6,739	$	2,892	$	2,675	$	5,567


	At June 30, 2022						At December 31, 2021
	Secured Lending Facilities
$ in millions	IG		NIG		Total		IG		NIG		Total
Revolving	$	8,784	$	19,756	$	28,540	$	7,603	$	20,172	$	27,775
2022	209		1,230		1,439
2021	251		209		460		32		467		499
2020	—		123		123		35		160		195
2019	43		689		732		43		819		862
2018	—		308		308		297		703		1,000
Prior	143		942		1,085		144		996		1,140
Total	$	9,430	$	23,257	$	32,687	$	8,154	$	23,317	$	31,471


	At June 30, 2022						At December 31, 2021
	Commercial Real Estate
$ in millions	IG		NIG		Total		IG		NIG		Total
Revolving	$	4	$	163	$	167	$	3	$	149	$	152
2022	348		1,384		1,732
2021	279		1,629		1,908		423		1,292		1,715
2020	92		790		882		91		819		910
2019	915		985		1,900		976		1,266		2,242
2018	504		308		812		527		416		943
Prior	87		946		1,033		189		1,076		1,265
Total	$	2,229	$	6,205	$	8,434	$	2,209	$	5,018	$	7,227


	At June 30, 2022
	Residential Real Estate
	by FICO Scores						by LTV Ratio				Total
$ in millions	≥ 740		680-739		≤ 679		≤ 80%		> 80%
Revolving	$	71	$	26	$	4	$	101	$	—	$	101
2022	7,104		1,536		224		8,217		647		8,864
2021	11,907		2,572		267		13,756		990		14,746
2020	7,520		1,544		118		8,713		469		9,182
2019	4,377		987		131		5,156		339		5,495
2018	1,698		467		52		2,044		173		2,217
Prior	7,290		2,230		324		9,039		805		9,844
Total	$	39,967	$	9,362	$	1,120	$	47,026	$	3,423	$	50,449


	At December 31, 2021
	Residential Real Estate
	by FICO Scores						by LTV Ratio				Total
$ in millions	≥ 740		680-739		≤ 679		≤ 80%		> 80%
Revolving	$	65	$	27	$	4	$	96	$	—	$	96
2021	12,230		2,638		257		14,116		1,009		15,125
2020	7,941		1,648		131		9,210		510		9,720
2019	4,690		1,072		140		5,536		366		5,902
2018	1,865		497		55		2,231		186		2,417
2017	2,157		558		65		2,588		192		2,780
Prior	5,973		1,919		319		7,485		726		8,211
Total	$	34,921	$	8,359	$	971	$	41,262	$	2,989	$	44,251


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Notes to Consolidated Financial Statements (Unaudited)


	At June 30, 2022
	Securities-based Lending 1		Other 2
$ in millions			IG		NIG		Total
Revolving	$	79,571	$	5,625	$	1,082	$	86,278
2022	1,479		745		109		2,333
2021	725		632		92		1,449
2020	—		520		684		1,204
2019	19		709		872		1,600
2018	213		269		279		761
Prior	16		1,615		650		2,281
Total	$	82,023	$	10,115	$	3,768	$	95,906


	December 31, 2021
	Securities-based Lending 1		Other 2
$ in millions			IG		NIG		Total
Revolving	$	71,485	$	6,170	$	858	$	78,513
2021	807		708		103		1,618
2020	—		651		626		1,277
2019	19		1,079		633		1,731
2018	232		273		375		880
2017	—		531		217		748
Prior	16		1,294		363		1,673
Total	$	72,559	$	10,706	$	3,175	$	86,440

IG—Investment Grade

NIG—Non-investment Grade

1. Securities-based loans are subject to collateral maintenance provisions, and at June 30, 2022 and December 31, 2021, 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 2021 Form 10-K.

2. Other loans primarily include certain loans originated in the tailored lending business within the Wealth Management business segment.

Past Due Loans Held for Investment before Allowance 1


$ in millions	At June 30, 2022		At December 31, 2021
Corporate	$	47	$	—


Residential real estate	150		209

Total	$	197	$	209

1. The majority of the amounts are past due for a period of less than 90 days.

Nonaccrual Loans Held for Investment before Allowance


$ in millions	At June 30, 2022		At December 31, 2021
Corporate	$	76	$	34
Secured lending facilities	105		375
Commercial real estate	325		195
Residential real estate	121		138
Securities-based lending and Other loans	183		151
Total 1	$	810	$	893
Nonaccrual loans without an ACL	$	122	$	356

1. Includes all loans held for investment that are 90 days or more past due as of June 30, 2022 and December 31, 2021.

See Note 2 to the financial statements in the 2021 Form 10-K for a description of the ACL calculated under the CECL methodology, including credit quality indicators, used for HFI loans.

Troubled Debt Restructurings


$ in millions	At June 30, 2022		At December 31, 2021
Loans, before ACL	$	28	$	49

Allowance for credit losses	—		8

Troubled debt restructurings typically include modifications of interest rates, collateral requirements, other loan covenants and payment extensions. See Note 2 to the financial statements in the 2021 Form 10-K for further information on TDR guidance issued by Congress in the CARES Act as well as by the U.S. banking agencies.

Allowance for Credit Losses Rollforward and Allocation—Loans


$ in millions	Corporate			Secured Lending Facilities			CRE			Residential Real Estate			SBL and Other			Total
December 31, 2021	$	165		$	163		$	206		$	60		$	60		$	654
Gross charge-offs	—			( 3 )			( 7 )			—			( 7 )			( 17 )
Recoveries	4			—			—			—			—			4
Net (charge-offs) recoveries	4			( 3 )			( 7 )			—			( 7 )			( 13 )
Provision (release)	47			8			36			24			16			131
Other	( 4 )			( 1 )			( 6 )			—			1			( 10 )
June 30, 2022	$	212		$	167		$	229		$	84		$	70		$	762
Percent of loans to total loans 1	3		%	17		%	4		%	26		%	50		%	100		%


$ in millions	Corporate			Secured Lending Facilities			CRE			Residential Real Estate			SBL and Other			Total
December 31, 2020	$	309		$	198		$	211		$	59		$	58		$	835
Gross charge-offs	( 14 )			( 67 )			( 21 )			—			—			( 102 )


Provision (release)	( 95 )			48			5			( 2 )			2			( 42 )
Other	( 1 )			( 2 )			( 1 )			—			—			( 4 )
June 30, 2021	$	199		$	177		$	194		$	57		$	60		$	687
Percent of loans to total loans 1	4		%	18		%	5		%	25		%	48		%	100		%

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.

Allowance for Credit Losses Rollforward—Lending Commitments


$ in millions	Corporate		Secured Lending Facilities		CRE		Residential Real Estate		SBL and Other		Total
December 31, 2021	$	356	$	41	$	20	$	1	$	26	$	444
Provision (release)	24		7		( 2 )		1		( 3 )		27
Other	( 7 )		—		—		—		—		( 7 )
June 30, 2022	$	373	$	48	$	18	$	2	$	23	$	464


$ in millions	Corporate		Secured Lending Facilities		CRE		Residential Real Estate		SBL and Other		Total
December 31, 2020	$	323	$	38	$	11	$	1	$	23	$	396
Provision (release)	18		1		—		—		( 2 )		17
Other	( 1 )		1		( 1 )		—		—		( 1 )
June 30, 2021	$	340	$	40	$	10	$	1	$	21	$	412

Provision for Credit Losses


	Three Months Ended June 30,
$ in millions	2022		2021
Loans	$	92	$	16
Lending commitments	9		57


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The base scenario used in our ACL models as of June 30, 2022 was generated using a combination of industry consensus economic forecasts, forward rates, and internally developed and validated models, and assumes continued economic growth over the forecast period. Given the nature of our lending portfolio, the most sensitive model input is U.S. gross domestic product. For a further discussion of the Firm’s loans as well as the Firm’s allowance methodology, refer to Notes 2 and 10 to the financial statements in the 2021 Form 10-K.

Selected Credit Ratios


	At June 30, 2022		At December 31, 2021
ACL to total loans 1	0.4	%	0.4	%
Nonaccrual loans to total loans 2	0.4	%	0.5	%
ACL to nonaccrual loans 3	94.1	%	73.2	%

1. Allowance for credit losses for loans to total loans held for investment.

2. Nonaccrual loans held for investment, which are loans that are 90 days or more past due, to total loans held for investment.

3. Allowance for credit losses for loans to nonaccrual loans held for investment.

Employee Loans


$ in millions	At June 30, 2022		At December 31, 2021
Currently employed by the Firm 1	$	3,819	$	3,613
No longer employed by the Firm 2	107		113
Employee loans	$	3,926	$	3,726
ACL	( 147 )		( 153 )
Employee loans, net of ACL	$	3,779	$	3,573
Remaining repayment term, weighted average in years	5.8		5.7

1. These loans are predominantly current as of June 30, 2022 and December 31, 2021.

2. These loans are predominantly past due for a period of 90 days or more as of June 30, 2022 and December 31, 2021.

Employee loans are granted in conjunction with a program established primarily to recruit certain Wealth Management representatives, 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 2021 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


$ in millions	At June 30, 2022		At December 31, 2021
Investments	$	1,965	$	2,214


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Income (loss)	$	17	$	51	$	23	$	27

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


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Income (loss) from investment in MUMSS	$	14	$	52	$	18	$	84

For more information on MUMSS and other relationships with MUFG, see Note 12 to the financial statements in the 2021 Form 10-K.

11. Deposits

Deposits


$ in millions	At June 30, 2022		At December 31, 2021
Savings and demand deposits	$	332,014	$	332,747
Time deposits	15,134		14,827
Total	$	347,148	$	347,574
Deposits subject to FDIC insurance	$	236,573	$	230,894
Deposits not subject to FDIC insurance	$	110,575	$	116,680

Time Deposit Maturities


$ in millions	At June 30, 2022
2022	$	1,964
2023	6,076
2024	3,846
2025	1,728
2026	457
Thereafter	1,063
Total	$	15,134

12 . Borrowings and Other Secured Financings

Borrowings


$ in millions	At June 30, 2022		At December 31, 2021
Original maturities of one year or less	$	4,198	$	5,764
Original maturities greater than one year
Senior	$	207,326	$	213,776
Subordinated	14,653		13,587
Total	$	221,979	$	227,363
Total borrowings	$	226,177	$	233,127
Weighted average stated maturity, in years 1	7.0		7.7

1. Only includes borrowings wit h original maturities greater than one year.


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Other Secured Financings


$ in millions	At June 30, 2022		At December 31, 2021
Original maturities:
One year or less	$	307	$	4,573
Greater than one year	6,930		5,468
Total	$	7,237	$	10,041
Transfers of assets accounted for as secured financings	$	967	$	1,556

O ther 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


	Years to Maturity at June 30, 2022
$ in millions	Less than 1		1-3		3-5		Over 5		Total
Lending:
Corporate	$	12,496	$	32,333	$	52,395	$	9,225	$	106,449
Secured lending facilities	6,978		5,853		2,325		713		15,869
Commercial and Residential real estate	1,495		319		24		272		2,110
Securities-based lending and Other	12,090		3,657		531		417		16,695
Forward-starting secured financing receivables	52,750		—		—		—		52,750
Central counterparty	300		—		—		4,662		4,962
Underwriting	3,150		—		—		—		3,150
Investment activities	1,255		188		54		340		1,837
Letters of credit and other financial guarantees	153		—		—		3		156
Total	$	90,667	$	42,350	$	55,329	$	15,632	$	203,978
Lending commitments participated to third parties									$	7,518
Forward-starting secured financing receivables settled within three business days									$	46,531

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 15 to the financial statements in the 2021 Form 10-K.

Guarantees


	At June 30, 2022
	Maximum Potential Payout/Notional of Obligations by Years to Maturity								Carrying Amount Asset (Liability)
$ in millions	Less than 1		1-3		3-5		Over 5
Non-credit derivatives 1	$	1,144,292	$	969,485	$	350,610	$	790,897	$	( 83,477 )
Standby letters of credit and other financial guarantees issued 2	1,595		883		1,299		2,680		10
Market value guarantees	6		2		—		—		—
Liquidity facilities	4,002		—		—		—		( 3 )
Whole loan sales guarantees	—		3		83		23,050		—
Securitization representations and warranties 3	—		—		—		79,057		( 3 )
General partner guarantees	352		12		32		157		( 88 )
Client clearing guarantees	46		—		—		—		—

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. As of June 30, 2022, the carrying amount of standby letters of credit and other financial guarantees issued includes an allowance for credit losses of $ 82 million.

3. 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 15 to the financial statements in the 2021 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 15 to the financial statements in the 2021 Form 10-K.

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


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Notes to Consolidated Financial Statements (Unaudited)

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 matter 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, as well as being subject to regulatory investigations arising in connection with its activities as a global diversified financial services institution. Certain of the actual or threatened legal actions or regulatory investigations include claims for substantial penalties, compensatory and/or punitive damages or claims for indeterminate amounts of penalties or damages. In some cases, the entities that would otherwise be the primary defendants in such legal actions are bankrupt or are in financial distress. These actions and investigations have included, but are not limited to, antitrust, false claims act, residential mortgage and credit crisis-related matters.

While the Firm has identified below any individual proceedings where the Firm believes a material loss to be reasonably possible and reasonably estimable, there can be no assurance that material losses will not be incurred from claims that have not yet been asserted or those where potential losses have not yet been determined to be probable or possible and reasonably estimable.


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Legal expenses	$	262	$	25	$	346	$	49

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

In many proceedings and investigations, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is not always possible to reasonably estimate the size of the possible loss or range of loss, particularly for proceedings and investigations where the factual record is being developed or contested or where plaintiffs or government entities seek substantial or indeterminate damages, restitution, disgorgement or penalties. Numerous issues may need to be resolved before a loss or

additional loss, or range of loss or additional range of loss, can be reasonably estimated for a proceeding or investigation, including through potentially lengthy discovery and determination of important factual matters, determination of issues related to class certification and the calculation of damages or other relief, and consideration of novel or unsettled legal questions relevant to the proceedings or investigations in question.

For certain other legal proceedings and investigations, the Firm can estimate reasonably possible losses, additional losses, ranges of loss or ranges of additional loss in excess of amounts accrued but 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, other than the matter referred to in the following paragraph.

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 $ 130 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 June 22, 2020, the Firm filed an appeal against the decision of the Court of Appeal in Amsterdam before the Dutch High Court. On January 29, 2021, the Advocate General of the Dutch High Court issued an advisory opinion on the Firm’s appeal, which rejected the Firm’s principal grounds of appeal. On February 11, 2021, the Firm and the Dutch Authority each responded to this opinio n. 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 and the maintenance of its books and records for 2007 to 2012.


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14. Variable Interest Entities and Securitization Activities

Consolidated VIE Assets and Liabilities by Type of Activity


	At June 30, 2022				At December 31, 2021
$ in millions	VIE Assets		VIE Liabilities		VIE Assets		VIE Liabilities
MABS 1	$	1,027	$	455	$	1,177	$	409
Investment vehicles 2	636		269		717		294
Operating entities	509		33		508		39
Other	628		330		510		286
Total	$	2,800	$	1,087	$	2,912	$	1,028

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


$ in millions	At June 30, 2022		At December 31, 2021
Assets
Cash and cash equivalents	$	337	$	341


Trading assets at fair value	1,885		1,965
Investment securities	32		37
Securities purchased under agreements to resell	200		200
Customer and other receivables	25		31

Intangible assets	79		85
Other assets	242		253
Total	$	2,800	$	2,912
Liabilities
Other secured financings	$	929	$	767
Other liabilities and accrued expenses	158		261
Total	$	1,087	$	1,028
Noncontrolling interests	$	117	$	115

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.

Non-consolidated VIEs


	At June 30, 2022
$ in millions	MABS 1		CDO		MTOB		OSF		Other 2
VIE assets (UPB)	$	118,492	$	2,199	$	6,108	$	2,026	$	47,989
Maximum exposure to loss 3
Debt and equity interests	$	13,038	$	133	$	—	$	1,480	$	11,298
Derivative and other contracts	—		—		4,023		—		4,128
Commitments, guarantees and other	613		—		—		—		1,469
Total	$	13,651	$	133	$	4,023	$	1,480	$	16,895
Carrying value of variable interests—Assets
Debt and equity interests	$	13,038	$	133	$	—	$	1,480	$	11,298
Derivative and other contracts	—		—		4		—		1,867
Total	$	13,038	$	133	$	4	$	1,480	$	13,165
Additional VIE assets owned 4									$	13,348
Carrying value of variable interests—Liabilities

Derivative and other contracts	$	—	$	—	$	7	$	—	$	419


	At December 31, 2021
$ in millions	MABS 1		CDO		MTOB		OSF		Other 2
VIE assets (UPB)	$	146,071	$	667	$	6,089	$	2,086	$	52,111
Maximum exposure to loss 3
Debt and equity interests	$	18,062	$	129	$	—	$	1,459	$	10,339
Derivative and other contracts	—		—		4,100		—		5,599
Commitments, guarantees and other	771		—		—		—		1,005
Total	$	18,833	$	129	$	4,100	$	1,459	$	16,943
Carrying value of variable interests – Assets
Debt and equity interests	$	18,062	$	129	$	—	$	1,459	$	10,339
Derivative and other contracts	—		—		5		—		2,006
Total	$	18,062	$	129	$	5	$	1,459	$	12,345
Additional VIE assets owned 4									$	15,392
Carrying value of variable interests—Liabilities
Derivative and other contracts	$	—	$	—	$	—	$	—	$	362

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.

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 majority of the VIEs included in the previous tables are sponsored by unrelated parties; 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


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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


	At June 30, 2022				At December 31, 2021
$ in millions	UPB		Debt and Equity Interests		UPB		Debt and Equity Interests
Residential mortgages	$	14,441	$	2,174	$	15,216	$	2,182
Commercial mortgages	69,267		4,489		68,503		4,092
U.S. agency collateralized mortgage obligations	31,057		4,562		57,972		9,835
Other consumer or commercial loans	3,727		1,813		4,380		1,953
Total	$	118,492	$	13,038	$	146,071	$	18,062

Transferred Assets with Continuing Involvement


	At June 30, 2022
$ in millions	RML		CML		U.S. Agency CMO		CLN and Other 1
SPE assets (UPB) 2	$	9,743	$	98,239	$	30,558	$	11,749
Retained interests
Investment grade	$	122	$	707	$	486	$	—
Non-investment grade	25		550		13		50
Total	$	147	$	1,257	$	499	$	50
Interests purchased in the secondary market
Investment grade	$	7	$	299	$	181	$	—
Non-investment grade	46		48		—		—
Total	$	53	$	347	$	181	$	—
Derivative assets	$	—	$	—	$	—	$	1,225
Derivative liabilities	—		—		—		257


	At December 31, 2021
$ in millions	RML		CML		U.S. Agency CMO		CLN and Other 1
SPE assets (UPB) 2	$	6,802	$	94,276	$	28,697	$	13,121
Retained interests
Investment grade	$	72	$	638	$	465	$	—
Non-investment grade	19		586		—		69
Total	$	91	$	1,224	$	465	$	69
Interests purchased in the secondary market
Investment grade	$	18	$	118	$	33	$	—
Non-investment grade	38		53		—		4
Total	$	56	$	171	$	33	$	4
Derivative assets	$	—	$	—	$	—	$	891
Derivative liabilities	—		—		—		284


	Fair Value At June 30, 2022
$ in millions	Level 2		Level 3		Total
Retained interests
Investment grade	$	590	$	2	$	592
Non-investment grade	27		38		65
Total	$	617	$	40	$	657
Interests purchased in the secondary market
Investment grade	$	443	$	44	$	487
Non-investment grade	64		30		94
Total	$	507	$	74	$	581
Derivative assets	$	1,225	$	—	$	1,225
Derivative liabilities	200		57		257


	Fair Value at December 31, 2021
$ in millions	Level 2		Level 3		Total
Retained interests
Investment grade	$	536	$	2	$	538
Non-investment grade	40		40		80
Total	$	576	$	42	$	618
Interests purchased in the secondary market
Investment grade	$	168	$	1	$	169
Non-investment grade	70		25		95
Total	$	238	$	26	$	264
Derivative assets	$	891	$	—	$	891
Derivative liabilities	194		90		284

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.

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. These retained interests are generally 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 2021 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


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
New transactions 1	$	6,217	$	16,410	$	14,477	$	31,200
Retained interests	1,431		2,985		3,053		5,564
Sales of corporate loans to CLO SPEs 1, 2	12		73		16		73

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.

2. Sponsored by non-affiliates.


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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


$ in millions	At June 30, 2022		At December 31, 2021
Gross cash proceeds from sale of assets 1	$	58,370	$	67,930
Fair value
Assets sold	$	56,020	$	68,992
Derivative assets recognized in the balance sheet	156		1,195
Derivative liabilities recognized in the balance sheet	2,506		132

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 16 to the financial statements in the 2021 Form 10-K.

15. Regulatory Requirements

Regulatory Capital Framework and Requirements

For a discussion of the Firm’s regulatory capital framework, see Note 17 to the financial statements in the 2021 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 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, 2022 and December 31, 2021, the differences between the actual and required ratios were lower under the Standardized Approach.

CECL Deferral. As of December 31, 2021, the risk-based and leverage-based capital amounts and ratios, as well as RWA, adjusted average assets and supplementary leverage exposure were calculated excluding the effect of the adoption of CECL based on the Firm’s election to defer this effect over a five-year transition period that began on January 1, 2020. In 2022 t he deferral impacts began to phase in at 25% per year and will become fully phased-in beginning in 2025.

Capital Buffer Requirements


	At June 30, 2022 and December 31, 2021
	Standardized	Advanced
Capital buffers
Capital conservation buffer	—	2.5 %
SCB	5.7 %	N/A
G-SIB capital surcharge	3.0 %	3.0 %
CCyB 1	0 %	0 %
Capital buffer requirement	8.7 %	5.5 %

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 Standardized Approach capital buffer requirement is equal to the sum of the SCB, G-SIB capital surcharge and CCyB, and the Advanced Approach capital buffer requirement is equal to the 2.5 % capital conservation buffer, G-SIB capital surcharge and CCyB.

Risk-Based Regulatory Capital Ratio Requirements


	Regulatory Minimum		At June 30, 2022 and December 31, 2021
			Standardized	Advanced
Required ratios 1
Common Equity Tier 1 capital ratio	4.5	%	13.2 %	10.0 %
Tier 1 capital ratio	6.0	%	14.7 %	11.5 %
Total capital ratio	8.0	%	16.7 %	13.5 %

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


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Notes to Consolidated Financial Statements (Unaudited)

The Firm’s Regulatory Capital and Capital Ratios



$ in millions	Required Ratio 1		At June 30, 2022			At December 31, 2021
Risk-based capital
Common Equity Tier 1 capital			$	70,230		$	75,742
Tier 1 capital			77,778			83,348
Total capital			88,445			93,166
Total RWA			460,955			471,921
Common Equity Tier 1 capital ratio	13.2	%	15.2		%	16.0		%
Tier 1 capital ratio	14.7	%	16.9		%	17.7		%
Total capital ratio	16.7	%	19.2		%	19.7		%

$ in millions	Required Ratio 1		At June 30, 2022			At December 31, 2021
Leverage-based capital
Adjusted average assets 2			$	1,177,052		$	1,169,939
Tier 1 leverage ratio	4.0	%	6.6		%	7.1		%
Supplementary leverage exposure 3			$	1,453,445		$	1,476,962
SLR	5.0	%	5.4		%	5.6		%

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

2. 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 the Firm’s own capital instruments, certain defined tax assets and other capital deductions.

3. 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.

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

The OCC establishes capital requirements for the Firm’s U.S. bank subsidiaries, which includes Morgan Stanley Bank, N.A. (“MSBNA”) and Morgan Stanley Private Bank, National Association (“MSPBNA”) (collectively, “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, 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, 2022 and December 31, 2021, MSBNA and MSPBNA risk-based capital ratios are based on the Standardized Approach rules. As of December 31, 2021, the risk-based and leverage-based capital amounts and ratios were calculated excluding the effect of the adoption of CECL based

on MSBNA’s and MSPBNA’s election to defer this effect over a five-year transition period that began on January 1, 2020. In 2022 t he deferral impacts began to phase in at 25% per year and will become fully phased-in beginning in 2025.

MSBNA’s Regulatory Capital


	Well-Capitalized Requirement		Required Ratio 1		At June 30, 2022				At December 31, 2021
$ in millions					Amount		Ratio		Amount		Ratio
Risk-based capital
Common Equity Tier 1 capital	6.5	%	7.0	%	$	18,617	19.2	%	$	18,960	20.5	%
Tier 1 capital	8.0	%	8.5	%	18,617		19.2	%	18,960		20.5	%
Total capital	10.0	%	10.5	%	19,216		19.8	%	19,544		21.1	%
Leverage-based capital
Tier 1 leverage	5.0	%	4.0	%	$	18,617	9.5	%	$	18,960	10.2	%
SLR	6.0	%	3.0	%	18,617		7.5	%	18,960		8.1	%

MSPBNA’s Regulatory Capital


	Well-Capitalized Requirement		Required Ratio 1		At June 30, 2022 2				At December 31, 2021
$ in millions					Amount		Ratio		Amount		Ratio
Risk-based capital
Common Equity Tier 1 capital	6.5	%	7.0	%	$	15,608	29.6	%	$	10,293	24.3	%
Tier 1 capital	8.0	%	8.5	%	15,608		29.6	%	10,293		24.3	%
Total capital	10.0	%	10.5	%	15,724		29.9	%	10,368		24.5	%




Leverage-based capital
Tier 1 leverage	5.0	%	4.0	%	$	15,608	7.8	%	$	10,293	6.9	%
SLR	6.0	%	3.0	%	15,608		7.6	%	10,293		6.7	%

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.

2. Regulatory capital amounts and ratios as of June 30, 2022 include the amounts from E*TRADE Bank (“ETB”) and E*TRADE Savings Bank (“ETSB”) as a result of the merger described herein.

Additionally, MSBNA is conditionally registered with the SEC as a security-based swap dealer and is provisionally 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


$ in millions	At June 30, 2022		At December 31, 2021
Net capital	$	15,214	$	18,383
Excess net capital	10,547		14,208

MS&Co. is registered as a broker-dealer and a futures commission merchant with the SEC and the CFTC, respectively, and provisionally 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 provisionally-registered swap dealer, MS&Co. is subject to CFTC capital requirements. In addition, MS&Co. must notify


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Notes to Consolidated Financial Statements (Unaudited)

the SEC if its tentative net capital falls below certain levels. At June 30, 2022 and December 31, 2021, MS&Co. exceeded its net capital requirement and had tentative net capital in excess of the minimum and notification requirements.

Other Regulated Subsidiaries

The following subsidiaries are also subject to various regulatory capital requirements and operated with capital in excess of their respective regulatory capital requirements as of June 30, 2022 and December 31, 2021, as applicable:

• MSSB,

• MSIP,

• Morgan Stanley Europe Holdings SE Group, including MSESE,

• MSMS,

• MSCS,

• MSCG, and

• E*TRADE Securities LLC.

ETB and ETSB were each previously subject to the capital requirements of the OCC until January 1, 2022, when ETSB merged with and into ETB, and subsequently ETB merged with and into MSPBNA, with MSPBNA as the surviving bank.

See Note 17 to the financial statements in the 2021 Form 10- K for further information.

16. Total Equity

Preferred Stock


	Shares Outstanding			Carrying Value
$ in millions, except per share data	At June 30, 2022	Liquidation Preference per Share		At June 30, 2022		At December 31, 2021
Series
A	44,000	$	25,000	$	1,100	$	1,100
C 1	519,882	1,000		408		408
E	34,500	25,000		862		862
F	34,000	25,000		850		850
I	40,000	25,000		1,000		1,000
K	40,000	25,000		1,000		1,000
L	20,000	25,000		500		500
M	400,000	1,000		430		430
N	3,000	100,000		300		300
O	52,000	25,000		1,300		1,300
Total				$	7,750	$	7,750
Shares authorized						30,000,000

1. Series C preferred stock is held by MUFG.

For a description of Series A through Series O preferred stock, see Note 18 to the financial statements in the 2021 Form 10-K. The Firm’s preferred stock has a preference over its 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).

On August 2, 2022, the Firm issued 40 million depositary shares of Series P Preferred Stock, for an aggregate price of $ 1.0 billion. Each depositary share represents a 1/1000th interest in a share of 6.500 % Non-Cumulative Preferred Stock, Series P, $ 0.01 par value (“Series P Preferred Stock”). The Series P 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, 2027 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 P Preferred Stock also has a preference over the Firm’s common stock upon liquidation and qualifies as Tier 1 capital.

Share Repurchases


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Repurchases of common stock under the Firm’s Share Repurchase Authorization	$	2,738	$	2,939	$	5,610	$	5,074

On June 27, 2022, the Firm announced that its Board of Directors approved a new multi-year repurchase authorization of up to $ 20 billion of outstanding common stock, without a set expiration date, beginning in the third quarter of 2022, which will be exercised from time to time as conditions warrant. For mor e information on share repurchases, see Note 18 to the fi nancial statements in the 2021 Form 10-K.

Common Shares Outstanding for Basic and Diluted EPS


	Three Months Ended June 30,		Six Months Ended June 30,
in millions	2022	2021	2022	2021
Weighted average common shares outstanding, basic	1,704	1,814	1,718	1,804
Effect of dilutive RSUs and PSUs	19	27	20	25
Weighted average common shares outstanding and common stock equivalents, diluted	1,723	1,841	1,739	1,829
Weighted average antidilutive common stock equivalents (excluded from the computation of diluted EPS)	8	—	7	—

Dividends



$ in millions, except per share data	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
	Per Share 1		Total		Per Share 1		Total
Preferred stock series
A	$	253	$	11	$	253	$	11
C	25		13		25		13
E	445		15		445		15
F	430		14		430		15
H 2	—		—		240		12
I	398		16		398		16

K	366		15		366		15
L	305		6		305		6


O 6	266		14		—		—
Total Preferred stock			$	104			$	103
Common stock	$	0.70	$	1,221	$	0.35	$	651


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Notes to Consolidated Financial Statements (Unaudited)


$ in millions, except per share data	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
	Per Share 1		Total		Per Share 1		Total
Preferred stock series
A	$	494	$	22	$	503	$	22
C	50		26		50		26
E	891		30		891		30
F	859		29		859		29
H 2	—		—		480		25
I	797		32		797		32
J 3	—		—		253		15
K	731		30		731		30
L	609		12		609		12
M 4	29		12		29		12
N 5	2,650		8		2,650		8
O 6	531		27		—		—
Total Preferred stock			$	228			$	241
Common stock	$	1.40	$	2,473	$	0.70	$	1,286

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

2. A notice of redemption was issued for Series H preferred stock on November 19, 2021.

3. Series J was payable semiannually until July 15, 2020, after which it was payable quarterly until its redemption.

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

5. Series N is payable semiannually until March 15, 2023 and thereafter will be payable quarterly.

6. Series O is payable semiannually until January 15, 2027 and thereafter will be payable quarterly.

Accumulated Other Comprehensive Income (Loss) 1


$ in millions	CTA		AFS Securities		Pension and Other		DVA		Total
March 31, 2022	$	( 1,050 )	$	( 2,150 )	$	( 546 )	$	( 1,156 )	$	( 4,902 )
OCI during the period	( 176 )		( 1,076 )		3		1,130		( 119 )
June 30, 2022	$	( 1,226 )	$	( 3,226 )	$	( 543 )	$	( 26 )	$	( 5,021 )
March 31, 2021	$	( 936 )	$	1,011	$	( 493 )	$	( 2,336 )	$	( 2,754 )
OCI during the period	41		( 7 )		12		185		231
June 30, 2021	$	( 895 )	$	1,004	$	( 481 )	$	( 2,151 )	$	( 2,523 )
December 31, 2021	$	( 1,002 )	$	245	$	( 551 )	$	( 1,794 )	$	( 3,102 )
OCI during the period	( 224 )		( 3,471 )		8		1,768		( 1,919 )
June 30, 2022	$	( 1,226 )	$	( 3,226 )	$	( 543 )	$	( 26 )	$	( 5,021 )
December 31, 2020	$	( 795 )	$	1,787	$	( 498 )	$	( 2,456 )	$	( 1,962 )
OCI during the period	( 100 )		( 783 )		17		305		( 561 )
June 30, 2021	$	( 895 )	$	1,004	$	( 481 )	$	( 2,151 )	$	( 2,523 )

1. Amounts are net of tax and noncontrolling interests.

Components of Period Changes in OCI



	Three Months Ended June 30, 2022
$ in millions	Pre-tax Gain (Loss)		Income Tax Benefit (Provision)		After-tax Gain (Loss)		Non- controlling Interests		Net
CTA
OCI activity	$	( 134 )	$	( 213 )	$	( 347 )	$	( 112 )	$	( 235 )
Reclassified to earnings	—		59		59		—		59
Net OCI	$	( 134 )	$	( 154 )	$	( 288 )	$	( 112 )	$	( 176 )
Change in net unrealized gains (losses) on AFS securities
OCI activity	$	( 1,387 )	$	325	$	( 1,062 )	$	—	$	( 1,062 )
Reclassified to earnings	( 18 )		4		( 14 )		—		( 14 )
Net OCI	$	( 1,405 )	$	329	$	( 1,076 )	$	—	$	( 1,076 )
Pension and other
OCI activity	$	( 2 )	$	—	$	( 2 )	$	—	$	( 2 )
Reclassified to earnings	6		( 1 )		5		—		5
Net OCI	$	4	$	( 1 )	$	3	$	—	$	3
Change in net DVA
OCI activity	$	1,521	$	( 368 )	$	1,153	$	22	$	1,131
Reclassified to earnings	( 1 )		—		( 1 )		—		( 1 )
Net OCI	$	1,520	$	( 368 )	$	1,152	$	22	$	1,130


	Three Months Ended June 30, 2021
$ in millions	Pre-tax Gain (Loss)		Income Tax Benefit (Provision)		After-tax Gain (Loss)		Non- controlling Interests		Net
CTA
OCI activity	$	12	$	29	$	41	$	—	$	41
Reclassified to earnings	—		—		—		—		—
Net OCI	$	12	$	29	$	41	$	—	$	41
Change in net unrealized gains (losses) on AFS securities
OCI activity	$	47	$	( 10 )	$	37	$	—	$	37
Reclassified to earnings	( 58 )		14		( 44 )		—		( 44 )
Net OCI	$	( 11 )	$	4	$	( 7 )	$	—	$	( 7 )
Pension and other
OCI activity	$	8	$	—	$	8	$	—	$	8
Reclassified to earnings	7		( 3 )		4		—		4
Net OCI	$	15	$	( 3 )	$	12	$	—	$	12
Change in net DVA
OCI activity	$	237	$	( 59 )	$	178	$	1	$	177
Reclassified to earnings	10		( 2 )		8		—		8
Net OCI	$	247	$	( 61 )	$	186	$	1	$	185


	Six Months Ended June 30, 2022
$ in millions	Pre-tax Gain (Loss)		Income Tax Benefit (Provision)		After-tax Gain (Loss)		Non- controlling Interests		Net
CTA
OCI activity	$	( 194 )	$	( 258 )	$	( 452 )	$	( 169 )	$	( 283 )
Reclassified to earnings	—		59		59		—		59
Net OCI	$	( 194 )	$	( 199 )	$	( 393 )	$	( 169 )	$	( 224 )
Change in net unrealized gains (losses) on AFS securities
OCI activity	$	( 4,471 )	$	1,047	$	( 3,424 )	$	—	$	( 3,424 )
Reclassified to earnings	( 62 )		15		( 47 )		—		( 47 )
Net OCI	$	( 4,533 )	$	1,062	$	( 3,471 )	$	—	$	( 3,471 )
Pension and other
OCI activity	$	( 2 )	$	—	$	( 2 )	$	—	$	( 2 )
Reclassified to earnings	11		( 1 )		10		—		10
Net OCI	$	9	$	( 1 )	$	8	$	—	$	8
Change in net DVA
OCI activity	$	2,392	$	( 579 )	$	1,813	$	44	$	1,769
Reclassified to earnings	( 1 )		—		( 1 )		—		( 1 )
Net OCI	$	2,391	$	( 579 )	$	1,812	$	44	$	1,768


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Notes to Consolidated Financial Statements (Unaudited)


	Six Months Ended June 30, 2021
$ in millions	Pre-tax Gain (Loss)		Income Tax Benefit (Provision)		After-tax Gain (Loss)		Non- controlling Interests		Net
CTA
OCI activity	$	( 92 )	$	( 86 )	$	( 178 )	$	( 78 )	$	( 100 )
Reclassified to earnings	—		—		—		—		—
Net OCI	$	( 92 )	$	( 86 )	$	( 178 )	$	( 78 )	$	( 100 )
Change in net unrealized gains (losses) on AFS securities
OCI activity	$	( 829 )	$	193	$	( 636 )	$	—	$	( 636 )
Reclassified to earnings	( 192 )		45		( 147 )		—		( 147 )
Net OCI	$	( 1,021 )	$	238	$	( 783 )	$	—	$	( 783 )
Pension and other
OCI activity	$	8	$	—	$	8	$	—	$	8
Reclassified to earnings	14		( 5 )		9		—		9
Net OCI	$	22	$	( 5 )	$	17	$	—	$	17
Change in net DVA
OCI activity	$	404	$	( 102 )	$	302	$	18	$	284
Reclassified to earnings	27		( 6 )		21		—		21
Net OCI	$	431	$	( 108 )	$	323	$	18	$	305

17. Interest Income and Interest Expense


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Interest income
Investment securities	$	741	$	608	$	1,518	$	1,457
Loans	1,402		1,040		2,559		2,028
Securities purchased under agreements to resell 1,2	193		( 56 )		206		( 111 )
Securities borrowed 1,3	( 70 )		( 265 )		( 287 )		( 506 )
Trading assets, net of Trading liabilities	562		486		1,087		996
Customer receivables and Other 4	784		399		1,179		785
Total interest income	$	3,612	$	2,212	$	6,262	$	4,649

Interest expense
Deposits	$	135	$	108	$	209	$	228
Borrowings	934		719		1,619		1,433
Securities sold under agreements to repurchase 1,5	174		26		222		63
Securities loaned 1,6	111		90		205		167
Customer payables and Other 7	( 24 )		( 596 )		( 491 )		( 1,135 )
Total interest expense	$	1,330	$	347	$	1,764	$	756
Net interest	$	2,282	$	1,865	$	4,498	$	3,893

1. Certain prior period amounts have been reclassified to conform to the current prese ntation.

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

3. Includes fees paid on Securities borrowed.

4. Includes interest from Cash and cash equivalents.

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


$ in millions	At June 30, 2022		At December 31, 2021
Customer and other receivables	$	2,620	$	1,800
Customer and other payables	2,900		2,164

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


	Three Months Ended June 30, 2022
$ in millions	IS		WM		IM		I/E		Total
Investment banking	$	1,072	$	97	$	—	$	( 19 )	$	1,150
Trading	3,976		( 409 )		15		15		3,597
Investments	( 95 )		15		103		—		23
Commissions and fees 1	688		603		—		( 71 )		1,220
Asset management 1,2	155		3,510		1,304		( 57 )		4,912
Other	( 223 )		173		1		( 3 )		( 52 )
Total non-interest revenues	5,573		3,989		1,423		( 135 )		10,850
Interest income	1,846		1,945		9		( 188 )		3,612
Interest expense	1,300		198		21		( 189 )		1,330
Net interest	546		1,747		( 12 )		1		2,282
Net revenues	$	6,119	$	5,736	$	1,411	$	( 134 )	$	13,132
Provision for credit losses	$	82	$	19	$	—	$	—	$	101
Compensation and benefits	2,050		2,895		605		—		5,550
Non-compensation expenses	2,433		1,301		557		( 129 )		4,162
Total non-interest expenses	$	4,483	$	4,196	$	1,162	$	( 129 )	$	9,712
Income before provision for income taxes	$	1,554	$	1,521	$	249	$	( 5 )	$	3,319
Provision for income taxes	395		331		58		( 1 )		783


Net income	1,159		1,190		191		( 4 )		2,536
Net income applicable to noncontrolling interests	38		—		3		—		41
Net income applicable to Morgan Stanley	$	1,121	$	1,190	$	188	$	( 4 )	$	2,495


June 2022 Form 10-Q			66


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)


	Three Months Ended June 30, 2021
$ in millions	IS		WM		IM		I/E		Total
Investment banking	$	2,376	$	203	$	—	$	( 19 )	$	2,560
Trading 3	3,078		255		( 22 )		19		3,330
Investments	61		14		306		—		381
Commissions and fees 1	682		714		1		( 89 )		1,308
Asset management 1,2	148		3,447		1,418		( 40 )		4,973
Other	137		207		1		( 3 )		342
Total non-interest revenues	6,482		4,840		1,704		( 132 )		12,894
Interest income	873		1,366		10		( 37 )		2,212
Interest expense	263		111		12		( 39 )		347
Net interest	610		1,255		( 2 )		2		1,865
Net revenues	$	7,092	$	6,095	$	1,702	$	( 130 )	$	14,759
Provision for credit losses	$	70	$	3	$	—	$	—	$	73
Compensation and benefits	2,433		3,275		715		—		6,423
Non-compensation expenses	2,091		1,181		557		( 132 )		3,697
Total non-interest expenses	$	4,524	$	4,456	$	1,272	$	( 132 )	$	10,120
Income before provision for income taxes	$	2,498	$	1,636	$	430	$	2	$	4,566
Provision for income taxes	574		372		108		—		1,054


Net income	1,924		1,264		322		2		3,512
Net income applicable to noncontrolling interests	20		—		( 19 )		—		1
Net income applicable to Morgan Stanley	$	1,904	$	1,264	$	341	$	2	$	3,511


	Six Months Ended June 30, 2022
$ in millions	IS		WM		IM		I/E		Total
Investment banking	$	2,706	$	240	$	—	$	( 38 )	$	2,908
Trading	8,181		( 640 )		6		33		7,580
Investments	4		27		67		—		98
Commissions and fees 1	1,462		1,326		—		( 152 )		2,636
Asset management 1,2	302		7,136		2,692		( 99 )		10,031
Other	( 106 )		295		( 1 )		( 6 )		182
Total non-interest revenues	12,549		8,384		2,764		( 262 )		23,435
Interest income	2,908		3,582		16		( 244 )		6,262
Interest expense	1,681		295		34		( 246 )		1,764
Net interest	1,227		3,287		( 18 )		2		4,498
Net revenues	$	13,776	$	11,671	$	2,746	$	( 260 )	$	27,933
Provision for credit losses	$	126	$	32	$	—	$	—	$	158
Compensation and benefits	4,654		6,020		1,150		—		11,824
Non-compensation expenses	4,655		2,525		1,119		( 255 )		8,044
Total non-interest expenses	$	9,309	$	8,545	$	2,269	$	( 255 )	$	19,868
Income before provision for income taxes	$	4,341	$	3,094	$	477	$	( 5 )	$	7,907
Provision for income taxes	930		632		95		( 1 )		1,656


Net income	3,411		2,462		382		( 4 )		6,251
Net income applicable to noncontrolling interests	99		—		( 9 )		—		90
Net income applicable to Morgan Stanley	$	3,312	$	2,462	$	391	$	( 4 )	$	6,161


	Six Months Ended June 30, 2021
$ in millions	IS		WM		IM		I/E		Total
Investment banking	$	4,989	$	454	$	—	$	( 43 )	$	5,400
Trading	7,151		381		( 19 )		42		7,555
Investments	147		16		536		—		699
Commissions and fees 1	1,552		1,565		1		( 184 )		2,934
Asset management 1,2	287		6,638		2,521		( 75 )		9,371
Other	295		360		( 23 )		( 6 )		626
Total non-interest revenues	14,421		9,414		3,016		( 266 )		26,585
Interest income	1,843		2,852		18		( 64 )		4,649
Interest expense	595		212		18		( 69 )		756
Net interest	1,248		2,640		—		5		3,893
Net revenues	$	15,669	$	12,054	$	3,016	$	( 261 )	$	30,478
Provision for credit losses	$	( 23 )	$	( 2 )	$	—	$	—	$	( 25 )
Compensation and benefits	5,547		6,445		1,229		—		13,221
Non-compensation expenses	4,276		2,375		987		( 266 )		7,372
Total non-interest expenses	$	9,823	$	8,820	$	2,216	$	( 266 )	$	20,593
Income before provision for income taxes	$	5,869	$	3,236	$	800	$	5	$	9,910
Provision for income taxes	1,310		730		189		1		2,230


Net income	4,559		2,506		611		4		7,680
Net income applicable to noncontrolling interests	54		—		( 5 )		—		49
Net income applicable to Morgan Stanley	$	4,505	$	2,506	$	616	$	4	$	7,631

1. Substantially all revenues are from contracts with customers.

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

For a discussion about the Firm’s business segments, see Note 23 to the financial statements in the 2021 Form 10-K.

Detail of Investment Banking Revenues


	Three Months Ended June 30,						Six Months Ended June 30,
$ in millions	2022			2021			2022			2021
Institutional Securities Advisory	$	598		$	664		$	1,542		$	1,144
Institutional Securities Underwriting	474			1,712			1,164			3,845
Firm Investment banking revenues from contracts with customers	88		%	90		%	89		%	91		%

Trading Revenues by Product Type


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Interest rate	$	469	$	17	$	860	$	876
Foreign exchange	475		314		1,123		588
Equity 1	1,990		2,033		3,997		3,728
Commodity and other	484		680		1,009		1,541
Credit	179		286		591		822
Total	$	3,597	$	3,330	$	7,580	$	7,555

1. Dividend income is included within equity contracts.

The previous table summarizes realized and unrealized gains and losses, 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


			67			June 2022 Form 10-Q


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

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


$ in millions	At June 30, 2022		At December 31, 2021
Net cumulative unrealized performance-based fees at risk of reversing	$	867	$	802

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


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Fee waivers	$	41	$	131	$	165	$	225

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


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Transaction taxes	$	228	$	217	$	486	$	455

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


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Americas	$	9,662	$	10,885	$	20,126	$	22,076
EMEA	1,678		2,093		3,989		4,252
Asia	1,792		1,781		3,818		4,150
Total	$	13,132	$	14,759	$	27,933	$	30,478

For a discussion about the Firm’s geographic net revenues, see Note 23 to the financial statements in the 2021 Form 10-K.

Revenues Recognized from Prior Services


	Three Months Ended June 30,				Six Months Ended June 30,
$ in millions	2022		2021		2022		2021
Non-interest revenues	$	613	$	677	$	1,551	$	1,066

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


$ in millions	At June 30, 2022		At December 31, 2021
Customer and other receivables	$	3,321	$	3,591

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


$ in millions	At June 30, 2022		At December 31, 2021
Institutional Securities	$	790,857	$	792,135
Wealth Management	364,952		378,438
Investment Management	17,967		17,567
Total 1	$	1,173,776	$	1,188,140

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


June 2022 Form 10-Q			68


Table of Contents
Financial Data Supplement (Unaudited)

Average Balances and Interest Rates and Net Interest Income


	Three Months Ended June 30,
	2022						2021
$ in millions	Average Daily Balance		Interest		Annualized Average Rate		Average Daily Balance		Interest		Annualized Average Rate
Interest earning assets
Investment securities 1	$	168,415	$	741	1.8	%	$	181,482	$	608	1.3	%
Loans 1	203,664		1,402		2.8	%	161,767		1,040		2.6	%
Securities purchased under agreements to resell 2,3 :
U.S.	52,937		170		1.3	%	53,495		18		0.1	%
Non-U.S.	69,458		23		0.1	%	57,283		(74)		(0.5)	%
Securities borrowed 2,4 :
U.S.	124,437		(29)		(0.1)	%	99,275		(218)		(0.9)	%
Non-U.S.	21,439		(41)		(0.8)	%	15,935		(47)		(1.2)	%
Trading assets, net of Trading liabilities 5 :
U.S.	71,077		452		2.6	%	77,814		409		2.1	%
Non-U.S.	14,198		110		3.1	%	17,897		77		1.7	%
Customer receivables and Other 6 :
U.S.	116,533		664		2.3	%	130,618		340		1.0	%
Non-U.S.	79,993		120		0.6	%	76,329		59		0.3	%
Total	$	922,151	$	3,612	1.6	%	$	871,895	$	2,212	1.0	%
Interest bearing liabilities
Deposits 1	$	341,413	$	135	0.2	%	$	321,138	$	108	0.1	%
Borrowings 1,7	226,994		934		1.7	%	221,911		719		1.3	%
Securities sold under agreements to repurchase 2,8,10 :
U.S.	19,104		122		2.6	%	32,704		37		0.5	%
Non-U.S.	44,267		52		0.5	%	24,215		(11)		(0.2)	%
Securities loaned 2,9,10 :
U.S.	6,473		1		0.1	%	5,145		(4)		(0.3)	%
Non-U.S.	7,213		110		6.1	%	5,504		94		6.9	%
Customer payables and Other 11 :
U.S.	148,197		(55)		(0.1)	%	129,695		(481)		(1.5)	%
Non-U.S.	75,116		31		0.2	%	75,829		(115)		(0.6)	%
Total	$	868,777	$	1,330	0.6	%	$	816,141	$	347	0.2	%
Net interest income and net interest rate spread			$	2,282	1.0	%			$	1,865	0.8	%


	Six Months Ended June 30,
	2022						2021
$ in millions	Average Daily Balance		Interest		Annualized Average Rate		Average Daily Balance		Interest		Annualized Average Rate
Interest earning assets
Investment securities 1	$	172,968	$	1,518	1.8	%	$	184,377	$	1,457	1.6	%
Loans 1	197,641		2,559		2.6	%	156,729		2,028		2.6	%
Securities purchased under agreements to resell 2,3 :
U.S.	53,207		206		0.8	%	57,483		45		0.2	%
Non-U.S.	66,277		—		—	%	54,990		(156)		(0.6)	%
Securities borrowed 2,4 :
U.S.	122,963		(205)		(0.3)	%	91,957		(414)		(0.9)	%
Non-U.S.	21,697		(82)		(0.8)	%	15,907		(92)		(1.2)	%
Trading assets, net of Trading liabilities 5 :
U.S.	75,351		883		2.4	%	75,563		819		2.2	%
Non-U.S.	15,321		204		2.7	%	17,518		177		2.0	%
Customer receivables and Other 6 :
U.S.	122,874		1,018		1.7	%	134,298		677		1.0	%
Non-U.S.	78,113		161		0.4	%	75,249		108		0.3	%
Total	$	926,412	$	6,262	1.4	%	$	864,071	$	4,649	1.1	%
Interest bearing liabilities
Deposits 1	$	341,576	$	209	0.1	%	$	320,688	$	228	0.1	%
Borrowings 1,7	227,963		1,619		1.4	%	218,816		1,433		1.3	%
Securities sold under agreements to repurchase 2,8,10 :
U.S.	21,157		162		1.5	%	31,106		84		0.5	%
Non-U.S.	40,104		60		0.3	%	23,803		(21)		(0.2)	%
Securities loaned 2,9,10 :
U.S.	5,931		1		—	%	4,785		(7)		(0.3)	%
Non-U.S.	7,544		204		5.5	%	4,683		174		7.5	%
Customer payables and Other 11 :
U.S.	144,149		(424)		(0.6)	%	130,065		(918)		(1.4)	%
Non-U.S.	76,612		(67)		(0.2)	%	71,608		(217)		(0.6)	%
Total	$	865,036	$	1,764	0.4	%	$	805,554	$	756	0.2	%
Net interest income and net interest rate spread			$	4,498	1.0	%			$	3,893	0.9	%

1. Amounts include primarily U.S. balances.

2. Certain prior period amounts have been reclassified to conform to the current presentation.

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

4. Includes fees paid on Securities borrowed.

5. Excludes non-interest earning assets and non-interest bearing liabilities, such as equity securities.

6. Includes Cash and cash equivalents.

7. 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.

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

9. Includes fees received on Securities loaned.

10. 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.

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


			69			June 2022 Form 10-Q


Table of Contents
Glossary of Common Terms and Acronyms


2021 Form 10-K			Annual report on Form 10-K for year ended December 31, 2021 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
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)
CRM			Credit Risk Management Department
CTA			Cumulative foreign currency translation adjustments

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 banks

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
LIBOR			London Interbank Offered Rate
LTV			Loan-to-value

MSBNA			Morgan Stanley Bank, N.A.
MS&Co.			Morgan Stanley & Co. LLC
MSCG			Morgan Stanley Capital Group Inc.
MSCS			Morgan Stanley Capital Services LLC
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
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
SOFR			Secured Overnight Financing Rate
S&P			Standard & Poor’s
SPE			Special purpose entity
SPOE			Single point of entry
TDR			Troubled debt restructuring
TLAC			Total loss-absorbing capacity
U.K.			United Kingdom
UPB			Unpaid principal balance
U.S.			United States of America
U.S. GAAP			Accounting principles generally accepted in the United States of America
VaR			Value-at-Risk
VIE			Variable interest entity
WACC			Implied weighted average cost of capital
WM			Wealth Management


June 2022 Form 10-Q			70


Table of Contents

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

The following developments have occurred since previously reporting certain matters in the Firm’s 2021 Form 10-K and the Firm’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 (the “First Quarter Form 10-Q”). See also the disclosures set forth under “Legal Proceedings” in the 2021 Form 10-K.

Residential Mortgage and Credit Crisis Matters

On April 27, 2022, the Firm filed a motion for summary judgment in Deutsche Bank National Trust Company, as Trustee for the Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC1 v. Morgan Stanley ABS Capital I, Inc. concerning plaintiff’s remaining claim.

On April 27, 2022, the Firm filed a motion for summary judgment in Deutsche Bank National Trust Company, solely in its capacity as Trustee for Morgan Stanley ABS Capital I Inc. Trust, Series 2007-NC3 v. Morgan Stanley ABS Capital I, Inc. concerning plaintiff’s remaining claim.

On May 12, 2022, the parties in Financial Guaranty Insurance Company v. Morgan Stanley ABS Capital I Inc. et al. filed a stipulation of voluntary discontinuance, dismissing the action with prejudice.

On July 15, 2022, the Firm filed a motion for summary judgment in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. on all remaining claims.

Antitrust Matter

On June 30, 2022, a magistrate judge issued a recommendation that the court certify a class in Iowa Public Employees’ Retirement System et al. v. Bank of America Corporation et al.

Record Keeping Matter

The Firm has reached agreements in principle with two regulatory agencies—the SEC for $125 million and the CFTC for $75 million—to resolve record-keeping related investigations by those agencies relating to business communications on messaging platforms that had not been approved by the Firm.

Risk Factors

For a discussion of the risk factors affecting the Firm, see “Risk Factors” in Part I, Item 1A of the 2021 Form 10-K.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities


$ in millions, except per share data	Total Number of Shares Purchased 1	Average Price Paid per Share		Total Shares Purchased as Part of Share Repurchase Authorization 2,3	Dollar Value of Remaining Authorized Repurchase
April	7,589,050	$	86.04	6,599,569	$	2,172
May	17,143,338	$	81.63	17,106,570	$	775
June	9,776,131	$	80.27	9,668,856	$	—
Three Months Ended June 30, 2022	34,508,519	$	82.21	33,374,995

1. Includes 1,133,524 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, 2022.

2. 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.

3. The Firm’s Board of Directors has approved the repurchase of the Firm’s outstanding common stock under a share repurchase authorization (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 27, 2022, the Firm announced that its Board of Directors approved a new multi-year repurchase authorization of up to $20 billion of outstanding common stock, without a set expiration date, beginning in the third quarter of 2022, 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.


			71			June 2022 Form 10-Q


Table of Contents

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 , 2022 , 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).

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


MORGAN STANLEY (Registrant)

By:			/s/ S HARON Y ESHAYA
			Sharon Yeshaya Executive Vice President and Chief Financial Officer

By:			/s/ R AJA J. A KRAM
			Raja J. Akram Deputy Chief Financial Officer, Chief Accounting Officer and Controller

Date: August 5, 2022


June 2022 Form 10-Q			72

TABLE OF CONTENTS

Exhibits

3.1 Amended and Restated Certificate of Incorporation of Morgan Stanley, as amended to date. 15 Letter of awareness from Deloitte& Touche LLP, datedAugust5, 2022, 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 Section1350 Certification of Chief Executive Officer. 32.2 Section1350 Certification of Chief Financial Officer.

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MS 10-Q Quarter ended June 30, 2022

Exhibits