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 September 30, 2017
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-11758
(Exact Name of Registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
1585 Broadway New York, NY 10036 (Address of principal executive offices, including zip code) |
36-3145972 (I.R.S. Employer Identification No.) |
(212) 761-4000 (Registrants telephone number, including area code) |
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 ☐ | |
(Do not check if a 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 October 31, 2017, there were 1,807,899,161 shares of the Registrants Common Stock, par value $0.01 per share, outstanding.
QUARTERLY REPORT ON FORM 10-Q
For the quarter ended September 30, 2017
Table of Contents | Part | Item | Page | |||||
I | 1 | |||||||
Managements Discussion and Analysis of Financial Condition and Results of Operations |
2 | 1 | ||||||
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7 | ||||||||
18 | ||||||||
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3 | 32 | |||||||
4 | 42 | |||||||
43 | ||||||||
1 | 44 | |||||||
44 | ||||||||
44 | ||||||||
45 | ||||||||
Consolidated Balance Sheets (Unaudited at September 30, 2017) |
46 | |||||||
Consolidated Statements of Changes in Total Equity (Unaudited) |
47 | |||||||
48 | ||||||||
49 | ||||||||
49 | ||||||||
50 | ||||||||
51 | ||||||||
63 | ||||||||
67 | ||||||||
70 | ||||||||
72 | ||||||||
75 | ||||||||
75 | ||||||||
75 | ||||||||
76 | ||||||||
12. Variable Interest Entities and Securitization Activities |
80 | |||||||
83 | ||||||||
86 | ||||||||
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88 | ||||||||
89 | ||||||||
89 | ||||||||
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II | 95 | |||||||
1 | 95 | |||||||
2 | 96 | |||||||
6 | 96 | |||||||
E-1 | ||||||||
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S-1 |
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i
Available Information
We file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (the SEC). You may read and copy any document we file with the SEC at the SECs public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for information on the public reference room. The SEC maintains an internet site, 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 SECs internet site.
Our internet site 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 (the 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 SECs internet site, 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 Corporate Governance webpage includes:
| 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; and |
| Environmental and Social Policies. |
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 internet site. 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 internet site is not incorporated by reference into this report.
ii
Managements Discussion and Analysis |
3 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 4 |
Managements Discussion and Analysis |
5 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 6 |
Managements Discussion and Analysis |
7 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
Institutional Securities
Income Statement Information
September 2017 Form 10-Q | 8 |
Managements Discussion and Analysis |
9 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 10 |
Managements Discussion and Analysis |
11 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 12 |
Managements Discussion and Analysis |
13 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 14 |
Managements Discussion and Analysis |
15 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 16 |
Managements Discussion and Analysis |
17 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 18 |
Managements Discussion and Analysis |
19 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 20 |
Managements Discussion and Analysis |
21 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 22 |
Managements Discussion and Analysis |
23 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 24 |
Managements Discussion and Analysis |
25 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 26 |
Managements Discussion and Analysis |
27 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 28 |
Managements Discussion and Analysis |
29 | September 2017 Form 10-Q |
Managements Discussion and Analysis |
September 2017 Form 10-Q | 30 |
Managements Discussion and Analysis |
31 | September 2017 Form 10-Q |
Risk Disclosures |
33 | September 2017 Form 10-Q |
Risk Disclosures |
September 2017 Form 10-Q | 34 |
Risk Disclosures |
35 | September 2017 Form 10-Q |
Risk Disclosures |
September 2017 Form 10-Q | 36 |
Risk Disclosures |
37 | September 2017 Form 10-Q |
Risk Disclosures |
September 2017 Form 10-Q | 38 |
Risk Disclosures |
39 | September 2017 Form 10-Q |
Risk Disclosures |
Top Ten Country Exposures at September 30, 2017
$ in millions | Net Inventory1 | Net Counterparty Exposure2 |
Loans | Lending Commitments |
Exposure Before Hedges |
Hedges3 | Net Exposure | |||||||||||||||||||||
Country |
||||||||||||||||||||||||||||
United Kingdom: |
||||||||||||||||||||||||||||
Sovereigns |
$ | 487 | $ | 29 | $ | | $ | | $ | 516 | $ | (280 | ) | $ | 236 | |||||||||||||
Non-sovereigns |
306 | 8,516 | 1,843 | 5,976 | 16,641 | (1,916 | ) | 14,725 | ||||||||||||||||||||
Total |
$ | 793 | $ | 8,545 | $ | 1,843 | $ | 5,976 | $ | 17,157 | $ | (2,196 | ) | $ | 14,961 | |||||||||||||
Japan: |
||||||||||||||||||||||||||||
Sovereigns |
$ | 5,391 | $ | 54 | $ | | $ | | $ | 5,445 | $ | (103 | ) | $ | 5,342 | |||||||||||||
Non-sovereigns |
696 | 3,365 | 65 | | 4,126 | (114 | ) | 4,012 | ||||||||||||||||||||
Total |
$ | 6,087 | $ | 3,419 | $ | 65 | $ | | $ | 9,571 | $ | (217 | ) | $ | 9,354 | |||||||||||||
Brazil: |
||||||||||||||||||||||||||||
Sovereigns |
$ | 3,729 | $ | | $ | | $ | | $ | 3,729 | $ | (11 | ) | $ | 3,718 | |||||||||||||
Non-sovereigns |
196 | 577 | 755 | 75 | 1,603 | (343 | ) | 1,260 | ||||||||||||||||||||
Total |
$ | 3,925 | $ | 577 | $ | 755 | $ | 75 | $ | 5,332 | $ | (354 | ) | $ | 4,978 | |||||||||||||
Canada: |
||||||||||||||||||||||||||||
Sovereigns |
$ | 84 | $ | 25 | $ | | $ | | $ | 109 | $ | | $ | 109 | ||||||||||||||
Non-sovereigns |
211 | 1,885 | 110 | 1,605 | 3,811 | (384 | ) | 3,427 | ||||||||||||||||||||
Total |
$ | 295 | $ | 1,910 | $ | 110 | $ | 1,605 | $ | 3,920 | $ | (384 | ) | $ | 3,536 | |||||||||||||
India: |
||||||||||||||||||||||||||||
Sovereigns |
$ | 1,503 | $ | | $ | | $ | | $ | 1,503 | $ | | $ | 1,503 | ||||||||||||||
Non-sovereigns |
615 | 467 | | | 1,082 | | 1,082 | |||||||||||||||||||||
Total |
$ | 2,118 | $ | 467 | $ | | $ | | $ | 2,585 | $ | | $ | 2,585 | ||||||||||||||
Italy: |
||||||||||||||||||||||||||||
Sovereigns |
$ | 1,201 | $ | (14 | ) | $ | | $ | | $ | 1,187 | $ | 9 | $ | 1,196 | |||||||||||||
Non-sovereigns |
99 | 447 | 348 | 748 | 1,642 | (286 | ) | 1,356 | ||||||||||||||||||||
Total |
$ | 1,300 | $ | 433 | $ | 348 | $ | 748 | $ | 2,829 | $ | (277 | ) | $ | 2,552 | |||||||||||||
China: |
||||||||||||||||||||||||||||
Sovereigns |
$ | (24 | ) | $ | 227 | $ | | $ | | $ | 203 | $ | (79 | ) | $ | 124 | ||||||||||||
Non-sovereigns |
774 | 215 | 657 | 524 | 2,170 | (10 | ) | 2,160 | ||||||||||||||||||||
Total |
$ | 750 | $ | 442 | $ | 657 | $ | 524 | $ | 2,373 | $ | (89 | ) | $ | 2,284 | |||||||||||||
Singapore: |
||||||||||||||||||||||||||||
Sovereigns |
$ | 1,670 | $ | 107 | $ | | $ | | $ | 1,777 | $ | | $ | 1,777 | ||||||||||||||
Non-sovereigns |
70 | 189 | 106 | 37 | 402 | | 402 | |||||||||||||||||||||
Total |
$ | 1,740 | $ | 296 | $ | 106 | $ | 37 | $ | 2,179 | $ | | $ | 2,179 | ||||||||||||||
Netherlands: |
||||||||||||||||||||||||||||
Sovereigns |
$ | (286 | ) | $ | | $ | | $ | | $ | (286 | ) | $ | (20 | ) | $ | (306 | ) | ||||||||||
Non-sovereigns |
125 | 565 | 922 | 1,156 | 2,768 | (383 | ) | 2,385 | ||||||||||||||||||||
Total |
$ | (161 | ) | $ | 565 | $ | 922 | $ | 1,156 | $ | 2,482 | $ | (403 | ) | $ | 2,079 | ||||||||||||
Ireland: |
||||||||||||||||||||||||||||
Sovereigns |
$ | (57 | ) | $ | 3 | $ | | $ | | $ | (54 | ) | $ | (81 | ) | $ | (135 | ) | ||||||||||
Non-sovereigns |
52 | 205 | 1,770 | 149 | 2,176 | | 2,176 | |||||||||||||||||||||
Total |
$ | (5 | ) | $ | 208 | $ | 1,770 | $ | 149 | $ | 2,122 | $ | (81 | ) | $ | 2,041 |
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 any fair value receivable or payable). |
2. | Net counterparty exposure (i.e., repurchase transactions, securities lending and OTC derivatives) takes into consideration legally enforceable master netting agreements and collateral. |
3. | Amounts represent CDS hedges (purchased and sold) on net counterparty exposure and lending executed by trading desks responsible for hedging counterparty and lending credit risk exposures for us. Amounts are based on the CDS notional amount assuming zero recovery adjusted for any fair value receivable or payable. For a further description of the contractual terms for purchased credit protection and whether they may limit the effectiveness of our hedges, see Credit ExposureDerivatives herein. |
September 2017 Form 10-Q | 40 |
Risk Disclosures |
41 | September 2017 Form 10-Q |
September 2017 Form 10-Q | 42 |
Financial Statements |
Consolidated Financial Statements and Notes
Consolidated Income Statements
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||
in millions, except per share data | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Revenues |
||||||||||||||||||||
Investment banking |
$ | 1,380 | $ | 1,225 | $ | 4,455 | $ | 3,556 | ||||||||||||
Trading |
2,704 | 2,609 | 8,870 | 7,420 | ||||||||||||||||
Investments |
167 | 87 | 495 | 179 | ||||||||||||||||
Commissions and fees |
937 | 991 | 2,997 | 3,066 | ||||||||||||||||
Asset management, distribution and administration fees |
3,026 | 2,686 | 8,695 | 7,943 | ||||||||||||||||
Other |
200 | 308 | 628 | 631 | ||||||||||||||||
Total non-interest revenues |
8,414 | 7,906 | 26,140 | 22,795 | ||||||||||||||||
Interest income |
2,340 | 1,734 | 6,411 | 5,148 | ||||||||||||||||
Interest expense |
1,557 | 731 | 4,106 | 2,333 | ||||||||||||||||
Net interest |
783 | 1,003 | 2,305 | 2,815 | ||||||||||||||||
Net revenues |
9,197 | 8,909 | 28,445 | 25,610 | ||||||||||||||||
Non-interest expenses |
||||||||||||||||||||
Compensation and benefits |
4,169 | 4,097 | 12,887 | 11,795 | ||||||||||||||||
Occupancy and equipment |
330 | 339 | 990 | 997 | ||||||||||||||||
Brokerage, clearing and exchange fees |
522 | 491 | 1,556 | 1,440 | ||||||||||||||||
Information processing and communications |
459 | 456 | 1,320 | 1,327 | ||||||||||||||||
Marketing and business development |
128 | 130 | 419 | 418 | ||||||||||||||||
Professional services |
534 | 489 | 1,622 | 1,550 | ||||||||||||||||
Other |
573 | 526 | 1,719 | 1,481 | ||||||||||||||||
Total non-interest expenses |
6,715 | 6,528 | 20,513 | 19,008 | ||||||||||||||||
Income from continuing operations before income taxes |
2,482 | 2,381 | 7,932 | 6,602 | ||||||||||||||||
Provision for income taxes |
697 | 749 | 2,358 | 2,160 | ||||||||||||||||
Income from continuing operations |
1,785 | 1,632 | 5,574 | 4,442 | ||||||||||||||||
Income (loss) from discontinued operations, net of income taxes |
6 | 8 | (21 | ) | 1 | |||||||||||||||
Net income |
$ | 1,791 | $ | 1,640 | $ | 5,553 | $ | 4,443 | ||||||||||||
Net income applicable to noncontrolling interests |
10 | 43 | 85 | 130 | ||||||||||||||||
Net income applicable to Morgan Stanley |
$ | 1,781 | $ | 1,597 | $ | 5,468 | $ | 4,313 | ||||||||||||
Preferred stock dividends and other |
93 | 79 | 353 | 314 | ||||||||||||||||
Earnings applicable to Morgan Stanley common shareholders |
$ | 1,688 | $ | 1,518 | $ | 5,115 | $ | 3,999 | ||||||||||||
Earnings per basic common share |
||||||||||||||||||||
Income from continuing operations |
$ | 0.95 | $ | 0.82 | $ | 2.87 | $ | 2.15 | ||||||||||||
Income (loss) from discontinued operations |
| 0.01 | (0.01 | ) | | |||||||||||||||
Earnings per basic common share |
$ | 0.95 | $ | 0.83 | $ | 2.86 | $ | 2.15 | ||||||||||||
Earnings per diluted common share |
||||||||||||||||||||
Income from continuing operations |
$ | 0.93 | $ | 0.80 | $ | 2.81 | $ | 2.11 | ||||||||||||
Income (loss) from discontinued operations |
| 0.01 | (0.02 | ) | | |||||||||||||||
Earnings per diluted common share |
$ | 0.93 | $ | 0.81 | $ | 2.79 | $ | 2.11 | ||||||||||||
Dividends declared per common share |
$ | 0.25 | $ | 0.20 | $ | 0.65 | $ | 0.50 | ||||||||||||
Average common shares outstanding |
||||||||||||||||||||
Basic |
1,776 | 1,838 | 1,789 | 1,863 | ||||||||||||||||
Diluted |
1,818 | 1,879 | 1,830 | 1,898 |
September 2017 Form 10-Q | 44 | See Notes to Consolidated Financial Statements |
Consolidated Comprehensive Income Statements (Unaudited) |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
$ in millions | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income |
$ | 1,791 | $ | 1,640 | $ | 5,553 | $ | 4,443 | ||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||
Foreign currency translation adjustments |
$ | 61 | $ | 43 | 223 | 360 | ||||||||||
Change in net unrealized gains (losses) on available-for-sale securities |
26 | (99 | ) | 218 | 439 | |||||||||||
Pension, postretirement and other |
| (1 | ) | 4 | (5) | |||||||||||
Change in net debt valuation adjustment |
(149 | ) | (93 | ) | (323 | ) | 255 | |||||||||
Total other comprehensive income (loss) |
$ | (62 | ) | $ | (150 | ) | $ | 122 | $ | 1,049 | ||||||
Comprehensive income |
$ | 1,729 | $ | 1,490 | $ | 5,675 | $ | 5,492 | ||||||||
Net income applicable to noncontrolling interests |
10 | 43 | 85 | 130 | ||||||||||||
Other comprehensive income (loss) applicable to noncontrolling interests |
(6 | ) | 15 | 23 | 151 | |||||||||||
Comprehensive income applicable to Morgan Stanley |
$ | 1,725 | $ | 1,432 | $ | 5,567 | $ | 5,211 |
See Notes to Consolidated Financial Statements | 45 | September 2017 Form 10-Q |
Consolidated Balance Sheets |
$ in millions, except share data | (Unaudited) At September 30, 2017 |
At December 31, 2016 |
||||||
Assets |
||||||||
Cash and due from banks |
$ | 24,047 | $ | 22,017 | ||||
Interest bearing deposits with banks |
24,144 | 21,364 | ||||||
Trading assets at fair value ($158,445 and $152,548 were pledged to various parties) |
285,088 | 262,154 | ||||||
Investment securities (includes $54,954 and $63,170 at fair value) |
79,086 | 80,092 | ||||||
Securities purchased under agreements to resell (includes $101 and $302 at fair value) |
90,106 | 101,955 | ||||||
Securities borrowed |
132,892 | 125,236 | ||||||
Customer and other receivables |
54,388 | 46,460 | ||||||
Loans: |
||||||||
Held for investment (net of allowance of $245 and $274) |
91,207 | 81,704 | ||||||
Held for sale |
13,224 | 12,544 | ||||||
Goodwill |
6,590 | 6,577 | ||||||
Intangible assets (net of accumulated amortization of $2,651 and $2,421) |
2,491 | 2,721 | ||||||
Other assets |
50,430 | 52,125 | ||||||
Total assets |
$ | 853,693 | $ | 814,949 | ||||
Liabilities |
||||||||
Deposits (includes $174 and $63 at fair value) |
$ | 154,639 | $ | 155,863 | ||||
Short-term borrowings (includes $658 and $406 at fair value) |
1,087 | 941 | ||||||
Trading liabilities at fair value |
127,237 | 128,194 | ||||||
Securities sold under agreements to repurchase (includes $810 and $729 at fair value) |
53,983 | 54,628 | ||||||
Securities loaned |
15,630 | 15,844 | ||||||
Other secured financings (includes $6,514 and $5,041 at fair value) |
14,244 | 11,118 | ||||||
Customer and other payables |
198,792 | 190,513 | ||||||
Other liabilities and accrued expenses |
16,290 | 15,896 | ||||||
Long-term borrowings (includes $46,231 and $38,736 at fair value) |
191,677 | 164,775 | ||||||
Total liabilities |
773,579 | 737,772 | ||||||
Commitments and contingent liabilities (see Note 11) |
||||||||
Equity |
||||||||
Morgan Stanley shareholders equity: |
||||||||
Preferred stock |
8,520 | 7,520 | ||||||
Common stock, $0.01 par value: |
||||||||
Shares authorized: 3,500,000,000; Shares issued: 2,038,893,979; Shares outstanding: 1,812,472,419 and 1,852,481,601 |
20 | 20 | ||||||
Additional paid-in capital |
23,389 | 23,271 | ||||||
Retained earnings |
57,554 | 53,679 | ||||||
Employee stock trusts |
2,899 | 2,851 | ||||||
Accumulated other comprehensive income (loss) |
(2,544 | ) | (2,643) | |||||
Common stock held in treasury at cost, $0.01 par value (226,421,560 and 186,412,378 shares) |
(7,961 | ) | (5,797) | |||||
Common stock issued to employee stock trusts |
(2,899 | ) | (2,851) | |||||
Total Morgan Stanley shareholders equity |
78,978 | 76,050 | ||||||
Noncontrolling interests |
1,136 | 1,127 | ||||||
Total equity |
80,114 | 77,177 | ||||||
Total liabilities and equity |
$ | 853,693 | $ | 814,949 |
September 2017 Form 10-Q | 46 | See Notes to Consolidated Financial Statements |
Consolidated Statements of Changes in Total Equity (Unaudited) |
$ in millions |
Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Employee Stock Trusts |
Accumulated Other Comprehensive Income (Loss) |
Common Stock Held in Treasury at Cost |
Common Stock Issued to Employee Stock Trusts |
Non- controlling Interests |
Total Equity |
||||||||||||||||||||||||||||||
Balance at December 31, 2016 |
$ | 7,520 | $ | 20 | $ | 23,271 | $ | 53,679 | $ | 2,851 | $ | (2,643 | ) | $ | (5,797 | ) | $ | (2,851 | ) | $ | 1,127 | $ 77,177 | ||||||||||||||||||
Cumulative adjustment for accounting |
| | 45 | (35 | ) | | | | | | 10 | |||||||||||||||||||||||||||||
Net income applicable to Morgan Stanley |
| | | 5,468 | | | | | | 5,468 | ||||||||||||||||||||||||||||||
Net income applicable to noncontrolling interests |
| | | | | | | | 85 | 85 | ||||||||||||||||||||||||||||||
Dividends |
| | | (1,558 | ) | | | | | | (1,558) | |||||||||||||||||||||||||||||
Shares issued under employee plans |
| | 79 | | 48 | | 844 | (48 | ) | | 923 | |||||||||||||||||||||||||||||
Repurchases of common stock and employee tax withholdings |
| | | | | | (3,008 | ) | | | (3,008) | |||||||||||||||||||||||||||||
Net change in Accumulated other comprehensive income (loss) |
| | | | | 99 | | | 23 | 122 | ||||||||||||||||||||||||||||||
Issuance of preferred stock |
1,000 | | (6 | ) | | | | | | | 994 | |||||||||||||||||||||||||||||
Other net decreases |
| | | | | | | | (99 | ) | (99) | |||||||||||||||||||||||||||||
Balance at September 30, 2017 |
$ | 8,520 | $ | 20 | $ | 23,389 | $ | 57,554 | $ | 2,899 | $ | (2,544 | ) | $ | (7,961 | ) | $ | (2,899 | ) | $ | 1,136 | $ 80,114 | ||||||||||||||||||
Balance at December 31, 2015 |
$ | 7,520 | $ | 20 | $ | 24,153 | $ | 49,204 | $ | 2,409 | $ | (1,656 | ) | $ | (4,059 | ) | $ | (2,409 | ) | $ | 1,002 | $ 76,184 | ||||||||||||||||||
Cumulative adjustment for accounting change related to DVA2 |
| | | 312 | | (312 | ) | | | | | |||||||||||||||||||||||||||||
Net adjustment for accounting change related to consolidation3 |
| | | | | | | | 106 | 106 | ||||||||||||||||||||||||||||||
Net income applicable to Morgan Stanley |
| | | 4,313 | | | | | | 4,313 | ||||||||||||||||||||||||||||||
Net income applicable to noncontrolling interests |
| | | | | | | | 130 | 130 | ||||||||||||||||||||||||||||||
Dividends |
| | | (1,284 | ) | | | | | | (1,284) | |||||||||||||||||||||||||||||
Shares issued under employee plans and related tax effects |
| | (1,168 | ) | | 430 | | 2,106 | (430 | ) | | 938 | ||||||||||||||||||||||||||||
Repurchases of common stock and employee tax withholdings |
| | | | | | (2,908 | ) | | | (2,908) | |||||||||||||||||||||||||||||
Net change in Accumulated other comprehensive income (loss) |
| | | | | 898 | | | 151 | 1,049 | ||||||||||||||||||||||||||||||
Other net increase (decreases) |
| | 10 | | | | | | (76 | ) | (66) | |||||||||||||||||||||||||||||
Balance at September 30, 2016 |
$ | 7,520 | $ | 20 | $ | 22,995 | $ | 52,545 | $ | 2,839 | $ | (1,070 | ) | $ | (4,861 | ) | $ | (2,839 | ) | $ | 1,313 | $ 78,462 |
1. | The cumulative adjustment relates to the adoption of the following accounting updates on January 1, 2017: Improvements to Employee Share-Based Payment Accounting, for which the Firm recorded a cumulative catch-up adjustment to reflect its election to account for forfeitures as they occur (see Note 2 for further information); and Intra-Entity Transfers of Assets Other Than Inventory, for which the Firm recorded a cumulative catch-up adjustment to reflect the tax impact from an intercompany sale of assets. |
2. | Debt valuation adjustment (DVA) represents the change in the fair value resulting from fluctuations in the Firms credit spreads and other credit factors related to liabilities carried at fair value under the fair value option, primarily related to certain Long-term and Short-term borrowings. In accordance with the early adoption of a provision of the accounting update Recognition and Measurement of Financial Assets and Financial Liabilities, a cumulative catch-up adjustment was recorded as of January 1, 2016 to move the cumulative unrealized DVA amount, net of noncontrolling interests and tax, related to outstanding liabilities under the fair value option election from Retained earnings into Accumulated other comprehensive income (loss) (AOCI). See Note 2 to the consolidated financial statements in the Firms Annual Report on Form 10-K for the year ended December 31, 2016 (the 2016 Form 10-K) and Note 14 for further information. |
3. | In accordance with the accounting update Amendments to the Consolidation Analysis, a net adjustment was recorded as of January 1, 2016 to both consolidate and deconsolidate certain entities under the new guidance. See Note 2 to the consolidated financial statements in the 2016 Form 10-K for further information. |
See Notes to Consolidated Financial Statements | 47 | September 2017 Form 10-Q |
Consolidated Cash Flow Statements (Unaudited) |
Nine Months Ended September 30, |
||||||||
$ in millions | 2017 | 2016 | ||||||
Cash flows from operating activities |
||||||||
Net income |
$ | 5,553 | $ | 4,443 | ||||
Adjustments to reconcile net income to net cash provided by (used for) operating activities: |
||||||||
(Income) loss from equity method investments |
| 39 | ||||||
Compensation payable in common stock and options |
775 | 794 | ||||||
Depreciation and amortization |
1,340 | 1,357 | ||||||
Net gain on sale of available-for-sale securities |
(27 | ) | (127) | |||||
Impairment charges |
13 | 102 | ||||||
Provision for credit losses on lending activities |
32 | 138 | ||||||
Other operating adjustments |
(48 | ) | (36) | |||||
Changes in assets and liabilities: |
||||||||
Trading assets, net of Trading liabilities |
(18,599 | ) | (20,509) | |||||
Securities borrowed |
(7,656 | ) | 16,136 | |||||
Securities loaned |
(214 | ) | (2,843) | |||||
Customer and other receivables and other assets |
(6,682 | ) | (2,800) | |||||
Customer and other payables and other liabilities |
8,196 | 3,849 | ||||||
Securities purchased under agreements to resell |
11,849 | (2,922) | ||||||
Securities sold under agreements to repurchase |
(645 | ) | 10,244 | |||||
Net cash provided by (used for) operating activities |
(6,113 | ) | 7,865 | |||||
Cash flows from investing activities |
||||||||
Proceeds from (payments for): |
||||||||
Other assetsPremises, equipment and software, net |
(1,177 | ) | (941) | |||||
Changes in loans, net |
(9,350 | ) | (7,709) | |||||
Investment securities: |
||||||||
Purchases |
(19,713 | ) | (41,230) | |||||
Proceeds from sales |
16,111 | 28,960 | ||||||
Proceeds from paydowns and maturities |
5,378 | 5,956 | ||||||
Other investing activities |
(77 | ) | (24) | |||||
Net cash provided by (used for) investing activities |
(8,828 | ) | (14,988) | |||||
Cash flows from financing activities |
||||||||
Net proceeds from (payments for): |
||||||||
Short-term borrowings |
64 | (1,233) | ||||||
Noncontrolling interests |
(43 | ) | (47) | |||||
Other secured financings |
1,400 | (278) | ||||||
Deposits |
(1,224 | ) | (4,191) | |||||
Proceeds from: |
||||||||
Derivatives financing activities |
73 | | ||||||
Issuance of preferred stock, net of issuance costs |
994 | | ||||||
Issuance of long-term borrowings |
45,334 | 27,528 | ||||||
Payments for: |
||||||||
Long-term borrowings |
(24,480 | ) | (22,902) | |||||
Derivatives financing activities |
(73 | ) | (120) | |||||
Repurchases of common stock and employee tax withholdings |
(3,008 | ) | (2,908) | |||||
Cash dividends |
(1,562 | ) | (1,311) | |||||
Other financing activities |
58 | | ||||||
Net cash provided by (used for) financing activities |
17,533 | (5,462) | ||||||
Effect of exchange rate changes on cash and cash equivalents |
2,218 | 1,054 | ||||||
Net increase (decrease) in cash and cash equivalents |
4,810 | (11,531) | ||||||
Cash and cash equivalents, at beginning of period |
43,381 | 54,083 | ||||||
Cash and cash equivalents, at end of period |
$ | 48,191 | $ | 42,552 | ||||
Cash and cash equivalents include: |
||||||||
Cash and due from banks |
$ | 24,047 | $ | 26,899 | ||||
Interest bearing deposits with banks |
24,144 | 15,653 | ||||||
Cash and cash equivalents, at end of period |
$ | 48,191 | $ | 42,552 |
Supplemental Disclosure of Cash Flow Information
Cash payments for interest were $3,422 million and $1,784 million.
Cash payments for income taxes, net of refunds, were $967 million and $504 million.
September 2017 Form 10-Q | 48 | See Notes to Consolidated Financial Statements |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 50 |
Notes to Consolidated Financial Statements (Unaudited) |
51 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 52 |
Notes to Consolidated Financial Statements (Unaudited) |
Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Current Quarter
$ in millions | Beginning Balance at June 30, 2017 |
Realized and Unrealized Gains (Losses) |
Purchases1 | Sales and Issuances2 |
Settlements1 | Net Transfers |
Ending Balance at September 30, 2017 |
Unrealized Gains (Losses) at September 30, 2017 |
||||||||||||||||||||||||
Assets at Fair Value |
||||||||||||||||||||||||||||||||
Trading assets: |
||||||||||||||||||||||||||||||||
Other sovereign government obligations |
$ | 100 | $ | 2 | $ | 86 | $ | (82 | ) | $ | | $ | (2 | ) | $ | 104 | $ | 1 | ||||||||||||||
Corporate and other debt: |
||||||||||||||||||||||||||||||||
State and municipal securities |
9 | | 4 | (3 | ) | | | 10 | | |||||||||||||||||||||||
MABS |
264 | 4 | 52 | (54 | ) | | 8 | 274 | 1 | |||||||||||||||||||||||
Corporate bonds |
449 | 29 | 120 | (144 | ) | | (35 | ) | 419 | 27 | ||||||||||||||||||||||
CDO |
58 | 7 | 20 | (15 | ) | (4 | ) | 10 | 76 | 6 | ||||||||||||||||||||||
Loans and lending commitments |
4,864 | 25 | 1,772 | (1,431 | ) | (236 | ) | (129 | ) | 4,865 | 17 | |||||||||||||||||||||
Other debt |
186 | 5 | 80 | (82 | ) | | 4 | 193 | 1 | |||||||||||||||||||||||
Total corporate and other debt |
5,830 | 70 | 2,048 | (1,729 | ) | (240 | ) | (142 | ) | 5,837 | 52 | |||||||||||||||||||||
Corporate equities |
500 | (9 | ) | 24 | (268 | ) | | 49 | 296 | | ||||||||||||||||||||||
Net derivative and other contracts3: |
||||||||||||||||||||||||||||||||
Interest rate |
970 | 105 | 13 | (29 | ) | 33 | (16 | ) | 1,076 | 92 | ||||||||||||||||||||||
Credit |
(305 | ) | (33 | ) | 7 | (9 | ) | 35 | 2 | (303 | ) | (33 | ) | |||||||||||||||||||
Foreign exchange |
2 | (59 | ) | 9 | | 17 | (47 | ) | (78 | ) | (50 | ) | ||||||||||||||||||||
Equity |
1,093 | 114 | 60 | (77 | ) | 79 | (38 | ) | 1,231 | 110 | ||||||||||||||||||||||
Commodity and other |
1,509 | 158 | 1 | (1 | ) | (112 | ) | (21 | ) | 1,534 | 45 | |||||||||||||||||||||
Total net derivative and other contracts |
3,269 | 285 | 90 | (116 | ) | 52 | (120 | ) | 3,460 | 164 | ||||||||||||||||||||||
Investments |
946 | (4 | ) | 13 | (17 | ) | (16 | ) | 3 | 925 | (5 | ) | ||||||||||||||||||||
Liabilities at Fair Value |
||||||||||||||||||||||||||||||||
Deposits |
$ | 79 | $ | (1 | ) | $ | | $ | 32 | $ | | $ | (6 | ) | $ | 106 | $ | (1 | ) | |||||||||||||
Trading liabilities: |
||||||||||||||||||||||||||||||||
Corporate and other debt: |
||||||||||||||||||||||||||||||||
Corporate bonds |
13 | (2 | ) | (18 | ) | 9 | | | 6 | (1 | ) | |||||||||||||||||||||
Other debt |
2 | | | | | | 2 | | ||||||||||||||||||||||||
Total corporate and other debt |
15 | (2 | ) | (18 | ) | 9 | | | 8 | (1 | ) | |||||||||||||||||||||
Corporate equities |
28 | 1 | (10 | ) | 24 | | 10 | 51 | 2 | |||||||||||||||||||||||
Securities sold under agreements to repurchase |
148 | (1 | ) | | | | | 149 | (1 | ) | ||||||||||||||||||||||
Other secured financings |
244 | (5 | ) | | 2 | (1 | ) | | 250 | (5 | ) | |||||||||||||||||||||
Long-term borrowings |
2,646 | (53 | ) | | 679 | (49 | ) | (726 | ) | 2,603 | (47 | ) |
1. | Loan originations and consolidations of VIEs are included in purchases and deconsolidations of VIEs are included in settlements. |
2. | Amounts related to entering into Net derivatives and other contracts, Deposits, Short-term borrowings, Other secured financings and Long-term borrowings primarily represent issuances. Amounts for other line items primarily represent sales. |
3. | Net derivative and other contracts represent Trading assetsDerivative and other contracts, net of Trading liabilitiesDerivative and other contracts. |
53 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Prior Year Quarter
$ in millions | Beginning Balance at June 30, 2016 |
Realized and Unrealized Gains (Losses) |
Purchases1 | Sales and Issuances2 |
Settlements1 | Net Transfers |
Ending Balance at September 30, 2016 |
Unrealized (Losses) at |
||||||||||||||||||||||||
Assets at Fair Value |
||||||||||||||||||||||||||||||||
Trading assets: |
||||||||||||||||||||||||||||||||
U.S. Treasury and agency securities |
$ | 20 | $ | | $ | | $ | (18 | ) | $ | | $ | 6 | $ | 8 | $ | | |||||||||||||||
Other sovereign government obligations |
2 | | 6 | (1 | ) | | 5 | 12 | | |||||||||||||||||||||||
Corporate and other debt: |
||||||||||||||||||||||||||||||||
State and municipal securities |
10 | 1 | | (7 | ) | | | 4 | | |||||||||||||||||||||||
MABS |
355 | (7 | ) | 74 | (156 | ) | | (2 | ) | 264 | (15 | ) | ||||||||||||||||||||
Corporate bonds |
276 | (55 | ) | 20 | (23 | ) | | (19 | ) | 199 | (55 | ) | ||||||||||||||||||||
CDO |
109 | 6 | 9 | (38 | ) | | (1 | ) | 85 | 10 | ||||||||||||||||||||||
Loans and lending commitments |
5,418 | (12 | ) | 501 | (206 | ) | (733 | ) | (813 | ) | 4,155 | (12 | ) | |||||||||||||||||||
Other debt |
528 | | 191 | (212 | ) | | (261 | ) | 246 | | ||||||||||||||||||||||
Total corporate and other debt |
6,696 | (67 | ) | 795 | (642 | ) | (733 | ) | (1,096 | ) | 4,953 | (72 | ) | |||||||||||||||||||
Corporate equities |
572 | (28 | ) | 43 | (36 | ) | | (214 | ) | 337 | (26 | ) | ||||||||||||||||||||
Net derivative and other contracts3: |
||||||||||||||||||||||||||||||||
Interest rate |
(235 | ) | (60 | ) | 3 | (15 | ) | 11 | 337 | 41 | (45 | ) | ||||||||||||||||||||
Credit |
(1,114 | ) | 147 | | | 2 | 82 | (883 | ) | 147 | ||||||||||||||||||||||
Foreign exchange |
(1 | ) | (27 | ) | | | (42 | ) | (37 | ) | (107 | ) | (27 | ) | ||||||||||||||||||
Equity |
(1,473 | ) | 220 | 31 | (39 | ) | 567 | 834 | 140 | 239 | ||||||||||||||||||||||
Commodity and other |
1,287 | 269 | | (14 | ) | (170 | ) | (78 | ) | 1,294 | 104 | |||||||||||||||||||||
Total net derivative and other contracts |
(1,536 | ) | 549 | 34 | (68 | ) | 368 | 1,138 | 485 | 418 | ||||||||||||||||||||||
Investments |
974 | (41 | ) | 2 | (8 | ) | (27 | ) | 36 | 936 | (36 | ) | ||||||||||||||||||||
Liabilities at Fair Value |
||||||||||||||||||||||||||||||||
Deposits |
$ | 30 | $ | 1 | $ | | $ | 5 | $ | | $ | (3 | ) | $ | 31 | $ | 1 | |||||||||||||||
Short-term borrowings |
| | | | | 2 | 2 | | ||||||||||||||||||||||||
Trading liabilities: |
||||||||||||||||||||||||||||||||
Corporate and other debt: |
||||||||||||||||||||||||||||||||
Corporate bonds |
6 | (1 | ) | (3 | ) | 2 | | 7 | 13 | (1 | ) | |||||||||||||||||||||
Other debt |
3 | | | | | | 3 | | ||||||||||||||||||||||||
Total corporate and other debt |
9 | (1 | ) | (3 | ) | 2 | | 7 | 16 | (1 | ) | |||||||||||||||||||||
Corporate equities |
26 | 2 | (2 | ) | 3 | | (5 | ) | 20 | | ||||||||||||||||||||||
Securities sold under agreements to repurchase |
150 | 1 | | | | | 149 | 2 | ||||||||||||||||||||||||
Other secured financings |
441 | (11 | ) | | | (2 | ) | | 450 | (11 | ) | |||||||||||||||||||||
Long-term borrowings |
1,929 | (88 | ) | | 193 | (147 | ) | (21 | ) | 2,042 | (87 | ) |
1. | Loan originations and consolidations of VIEs are included in purchases and deconsolidations of VIEs are included in settlements. |
2. | Amounts related to entering into Net derivatives and other contracts, Deposits, Short-term borrowings, Other secured financings and Long-term borrowings primarily represent issuances. Amounts for other line items primarily represent sales. |
3. | Net derivative and other contracts represent Trading assetsDerivative and other contracts, net of Trading liabilitiesDerivative and other contracts. |
September 2017 Form 10-Q | 54 |
Notes to Consolidated Financial Statements (Unaudited) |
Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Current Year Period
$ in millions | Beginning Balance at December 31, 2016 |
Realized and Unrealized Gains (Losses) |
Purchases1 | Sales and Issuances2 |
Settlements1 | Net Transfers |
Ending Balance at September 30, 2017 |
Unrealized Gains (Losses) at September 30, 2017 |
||||||||||||||||||||||||
Assets at Fair Value |
||||||||||||||||||||||||||||||||
Trading assets: |
||||||||||||||||||||||||||||||||
U.S. Treasury and agency securities |
$ | 74 | $ | (1 | ) | $ | | $ | (240 | ) | $ | | $ | 167 | $ | | $ | | ||||||||||||||
Other sovereign government obligations |
6 | | 104 | (5 | ) | | (1 | ) | 104 | | ||||||||||||||||||||||
Corporate and other debt: |
||||||||||||||||||||||||||||||||
State and municipal securities |
250 | 3 | 6 | (81 | ) | | (168 | ) | 10 | | ||||||||||||||||||||||
MABS |
217 | 49 | 120 | (120 | ) | (16 | ) | 24 | 274 | 13 | ||||||||||||||||||||||
Corporate bonds |
232 | 30 | 310 | (205 | ) | | 52 | 419 | (6 | ) | ||||||||||||||||||||||
CDO |
63 | 6 | 33 | (18 | ) | (7 | ) | (1 | ) | 76 | 3 | |||||||||||||||||||||
Loans and lending commitments |
5,122 | 88 | 2,470 | (1,927 | ) | (964 | ) | 76 | 4,865 | 85 | ||||||||||||||||||||||
Other debt |
180 | 31 | 94 | (160 | ) | | 48 | 193 | 6 | |||||||||||||||||||||||
Total corporate and other debt |
6,064 | 207 | 3,033 | (2,511 | ) | (987 | ) | 31 | 5,837 | 101 | ||||||||||||||||||||||
Corporate equities |
446 | 8 | 74 | (604 | ) | | 372 | 296 | 3 | |||||||||||||||||||||||
Net derivative and other contracts3: |
||||||||||||||||||||||||||||||||
Interest rate |
420 | 137 | 36 | (42 | ) | 658 | (133 | ) | 1,076 | 146 | ||||||||||||||||||||||
Credit |
(373 | ) | (18 | ) | 6 | (9 | ) | 96 | (5 | ) | (303 | ) | (34 | ) | ||||||||||||||||||
Foreign exchange |
(43 | ) | (92 | ) | 9 | | 48 | | (78 | ) | (72 | ) | ||||||||||||||||||||
Equity |
184 | 168 | 816 | (231 | ) | 209 | 85 | 1,231 | 277 | |||||||||||||||||||||||
Commodity and other |
1,600 | 523 | 13 | (21 | ) | (431 | ) | (150 | ) | 1,534 | 88 | |||||||||||||||||||||
Total net derivative and other contracts |
1,788 | 718 | 880 | (303 | ) | 580 | (203 | ) | 3,460 | 405 | ||||||||||||||||||||||
Investments |
958 | 16 | 96 | (44 | ) | (78 | ) | (23 | ) | 925 | 10 | |||||||||||||||||||||
Liabilities at Fair Value |
||||||||||||||||||||||||||||||||
Deposits |
$ | 42 | $ | (2 | ) | $ | | $ | 62 | $ | | $ | | $ | 106 | $ | (2 | ) | ||||||||||||||
Short-term borrowings |
2 | | | | (2 | ) | | | | |||||||||||||||||||||||
Trading liabilities: |
||||||||||||||||||||||||||||||||
Corporate and other debt: |
||||||||||||||||||||||||||||||||
Corporate bonds |
34 | (1 | ) | (54 | ) | 98 | | (73 | ) | 6 | | |||||||||||||||||||||
Other debt |
2 | | (1 | ) | 1 | | | 2 | | |||||||||||||||||||||||
Total corporate and other debt |
36 | (1 | ) | (55 | ) | 99 | | (73 | ) | 8 | | |||||||||||||||||||||
Corporate equities |
35 | | (69 | ) | 27 | | 58 | 51 | (1 | ) | ||||||||||||||||||||||
Securities sold under agreements to repurchase |
149 | | | | | | 149 | 1 | ||||||||||||||||||||||||
Other secured financings |
434 | (28 | ) | | 54 | (223 | ) | (43 | ) | 250 | (21 | ) | ||||||||||||||||||||
Long-term borrowings |
2,012 | (142 | ) | | 1,418 | (326 | ) | (643 | ) | 2,603 | (136 | ) |
1. | Loan originations and consolidations of VIEs are included in purchases and deconsolidations of VIEs are included in settlements. |
2. | Amounts related to entering into Net derivatives and other contracts, Deposits, Short-term borrowings, Other secured financings and Long-term borrowings primarily represent issuances. Amounts for other line items primarily represent sales. |
3. | Net derivative and other contracts represent Trading assetsDerivative and other contracts, net of Trading liabilitiesDerivative and other contracts. |
55 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Prior Year Period
$ in millions | Beginning Balance at |
Realized and Unrealized Gains (Losses) |
Purchases1 | Sales and Issuances2 |
Settlements1 | Net Transfers |
Ending Balance at September 30, 2016 |
Unrealized Gains (Losses) at September 30, 2016 |
||||||||||||||||||||||||
Assets at Fair Value |
||||||||||||||||||||||||||||||||
Trading assets: |
||||||||||||||||||||||||||||||||
U.S. Treasury and agency securities |
$ | | $ | | $ | 3 | $ | (37 | ) | $ | | $ | 42 | $ | 8 | $ | | |||||||||||||||
Other sovereign government obligations |
4 | | 10 | (6 | ) | | 4 | 12 | | |||||||||||||||||||||||
Corporate and other debt: |
||||||||||||||||||||||||||||||||
State and municipal securities |
19 | | | (16 | ) | | 1 | 4 | | |||||||||||||||||||||||
MABS |
438 | (35 | ) | 88 | (314 | ) | | 87 | 264 | (31) | ||||||||||||||||||||||
Corporate bonds |
267 | (4 | ) | 146 | (276 | ) | | 66 | 199 | (17) | ||||||||||||||||||||||
CDO |
430 | 9 | 13 | (295 | ) | | (72 | ) | 85 | 16 | ||||||||||||||||||||||
Loans and lending commitments |
5,936 | (65 | ) | 921 | (860 | ) | (986 | ) | (791 | ) | 4,155 | (51) | ||||||||||||||||||||
Other debt |
448 | 1 | 92 | (35 | ) | | (260 | ) | 246 | 65 | ||||||||||||||||||||||
Total corporate and other debt |
7,538 | (94 | ) | 1,260 | (1,796 | ) | (986 | ) | (969 | ) | 4,953 | (18) | ||||||||||||||||||||
Corporate equities |
434 | (57 | ) | 62 | (324 | ) | | 222 | 337 | (80) | ||||||||||||||||||||||
Net derivative and other contracts3: |
||||||||||||||||||||||||||||||||
Interest rate |
260 | 257 | 3 | (15 | ) | (59 | ) | (405 | ) | 41 | (156) | |||||||||||||||||||||
Credit |
(844 | ) | (255 | ) | 1 | | 155 | 60 | (883 | ) | (277) | |||||||||||||||||||||
Foreign exchange |
141 | (104 | ) | | | (224 | ) | 80 | (107 | ) | (102) | |||||||||||||||||||||
Equity |
(2,031 | ) | 334 | 816 | (168 | ) | 1,083 | 106 | 140 | 172 | ||||||||||||||||||||||
Commodity and other |
1,050 | 377 | 33 | (20 | ) | (312 | ) | 166 | 1,294 | 162 | ||||||||||||||||||||||
Total net derivative and other contracts |
(1,424 | ) | 609 | 853 | (203 | ) | 643 | 7 | 485 | (201) | ||||||||||||||||||||||
Investments |
707 | (60 | ) | 374 | (37 | ) | (67 | ) | 19 | 936 | (63) | |||||||||||||||||||||
Intangible assets |
5 | | | | | (5 | ) | | | |||||||||||||||||||||||
Liabilities at Fair Value |
||||||||||||||||||||||||||||||||
Deposits |
$ | 19 | $ | (1 | ) | $ | | $ | 15 | $ | | $ | (4 | ) | $ | 31 | $ | (1) | ||||||||||||||
Short-term borrowings |
1 | | | | (1 | ) | 2 | 2 | | |||||||||||||||||||||||
Trading liabilities: |
||||||||||||||||||||||||||||||||
Corporate and other debt: |
||||||||||||||||||||||||||||||||
Corporate bonds |
| (3 | ) | (7 | ) | 32 | | (15 | ) | 13 | (3) | |||||||||||||||||||||
Other debt |
4 | | (1 | ) | | | | 3 | | |||||||||||||||||||||||
Total corporate and other debt |
4 | (3 | ) | (8 | ) | 32 | | (15 | ) | 16 | (3) | |||||||||||||||||||||
Corporate equities |
18 | 4 | (37 | ) | 14 | | 29 | 20 | 32 | |||||||||||||||||||||||
Securities sold under agreements to repurchase |
151 | 2 | | | | | 149 | 3 | ||||||||||||||||||||||||
Other secured financings |
461 | (42 | ) | | 69 | (44 | ) | (78 | ) | 450 | (42) | |||||||||||||||||||||
Long-term borrowings |
1,987 | (103 | ) | | 366 | (262 | ) | (152 | ) | 2,042 | 91 |
1. | Loan originations and consolidations of VIEs are included in purchases and deconsolidations of VIEs are included in settlements. |
2. | Amounts related to entering into Net derivatives and other contracts, Deposits, Short-term borrowings, Other secured financings and Long-term borrowings primarily represent issuances. Amounts for other line items primarily represent sales. |
3. | Net derivative and other contracts represent Trading assetsDerivative and other contracts, net of Trading liabilitiesDerivative and other contracts. |
Significant Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements
September 2017 Form 10-Q | 56 |
Notes to Consolidated Financial Statements (Unaudited) |
Valuation Techniques and Sensitivity of Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements
Predominant Valuation Techniques/ Significant Unobservable Inputs |
Range (Weighted Average or Simple Average/Median)1 | |||||
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||
Recurring Fair Value Measurement |
||||||
Assets at Fair Value |
||||||
U.S. Treasury and agency securities ($ and $74) |
||||||
Comparable pricing: |
Comparable bond price | N/A | 96 to 105 points (102 points) | |||
Other sovereign government obligations ($104 and $6) |
||||||
Comparable pricing: |
Comparable bond price | 86 to 97 points (88 points) | N/M | |||
State and municipal securities ($10 and $250) |
||||||
Comparable pricing: |
Comparable bond price | N/M | 53 to 100 points (91 points) | |||
MABS ($274 and $217) |
||||||
Comparable pricing: |
Comparable bond price | 0 to 100 points (33 points) | 0 to 86 points (27 points) | |||
Corporate bonds ($419 and $232) |
||||||
Comparable pricing: |
Comparable bond price | 3 to 132 points (60 points) | 3 to 130 points (70 points) | |||
Discounted cash flow: |
Recovery rate | 5% to 33% (25%) | N/A | |||
Option model: |
At the money volatility | 16% to 35% (25%) | 23% to 33% (30%) | |||
CDO ($76 and $63) |
||||||
Comparable pricing: |
Comparable bond price | 15 to 101 points (66 points) | 0 to 103 points (50 points) | |||
Correlation model: |
Credit correlation | 43% to 54% (51%) | N/M | |||
Loans and lending commitments ($4,865 and $5,122) |
||||||
Corporate loan model: |
Credit spread | N/M | 402 to 672 bps (557 bps) | |||
Expected recovery: |
Asset coverage | 37% to 100% (83%) | 43% to 100% (83%) | |||
Margin loan model: |
Discount rate | 1% to 3% (1%) | 2% to 8% (3%) | |||
Volatility skew | 8% to 43% (19%) | 21% to 63% (33%) | ||||
Comparable pricing: |
Comparable loan price | 46 to 102 points (92 points) | 45 to 100 points (84 points) | |||
Discounted cash flow: |
Implied weighted average cost of capital | N/M | 5% | |||
Capitalization rate | N/M | 4% to 10% (4%) | ||||
Other debt ($193 and $180) |
||||||
Option model: |
At the money volatility | 17% to 52% (47%) | 16% to 52% (52%) | |||
Discounted cash flow: |
Discount rate | 7% to 18% (9%) | 7% to 12% (11%) | |||
Comparable pricing: |
Comparable loan price | 1 to 5 points (2 points) | 1 to 74 points (23 points) | |||
Corporate equities ($296 and $446) |
||||||
Comparable pricing: |
Comparable equity price | 100% | 100% | |||
Net derivative and other contracts2: |
||||||
Interest rate ($1,076 and $420) |
||||||
Option model: |
Interest rate Foreign exchange correlation | N/M | 28% to 58% (44% / 43%) | |||
Interest rate volatility skew | 29% to 106% (44% / 44%) | 19% to 117% (55% / 56%) | ||||
Interest rate quanto correlation | N/M | -17% to 31% (1% / -5%) | ||||
Interest rate curve correlation | 30% to 96% (75% / 78%) | 28% to 96% (68% / 72%) | ||||
Inflation volatility | 24% to 64% (45% / 43%) | 23% to 55% (40% / 39%) | ||||
Interest rate curve | 1% to 2% (1% / 1%) | N/M | ||||
Credit ($(303) and $(373)) |
||||||
Comparable pricing: |
Cash synthetic basis | 14 to 15 points (14 points) | 5 to 12 points (11 points) | |||
Comparable bond price | 0 to 70 points (25 points) | 0 to 70 points (23 points) | ||||
Correlation model: |
Credit correlation | 29% to 99% (51%) | 32% to 70% (45%) | |||
Foreign exchange3 ($(78) and $(43)) |
||||||
Option model: |
Interest rate Foreign exchange correlation | 27% to 59% (44% / 44%) | 28% to 58% (44% / 43%) | |||
Interest rate volatility skew | N/M | 34% to 117% (55% / 56%) | ||||
Contingency probability | 95% | N/M | ||||
Interest rate quanto correlation | N/M | -17% to 31% (1% / -5%) |
57 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Predominant Valuation Techniques/ Significant Unobservable Inputs |
Range (Weighted Average or Simple Average/Median)1 | |||||
$ in millions | At September 30, 2017 | At December 31, 2016 | ||||
Equity3 ($1,231 and $184) |
||||||
Option model: |
At the money volatility | 5% to 55% (36%) | 7% to 66% (33%) | |||
Volatility skew | -3% to 0% (-1%) | -4% to 0% (-1%) | ||||
Equity Equity correlation | 5% to 99% (73%) | 25% to 99% (73%) | ||||
Equity Foreign exchange correlation | -70% to 30% (-28%) | -63% to 30% (-43%) | ||||
Equity Interest rate correlation | -7% to 52% (17% / 21%) | -8% to 52% (12% / 4%) | ||||
Commodity and other ($1,534 and $1,600) |
||||||
Option model: |
Forward power price | $6 to $84 ($30) per MWh | $7 to $90 ($32) per MWh | |||
Commodity volatility | 5% to 56% (16%) | 6% to 130% (18%) | ||||
Cross-commodity correlation | 5% to 99% (92%) | 5% to 99% (92%) | ||||
Investments ($925 and $958) |
||||||
Discounted cash flow: |
Implied weighted average cost of capital | N/M | 10% | |||
Exit multiple | N/M | 10 to 24 times (11 times) | ||||
Market approach: |
EBITDA multiple | 6 to 24 times (12 times) | 6 to 24 times (12 times) | |||
Comparable pricing: |
Comparable equity price | 45% to 100% (90%) | 75% to 100% (93%) | |||
Liabilities at Fair Value |
||||||
Deposits ($106 and $42) |
||||||
Option model: |
At the money volatility | 15% to 37% (32%) | N/M | |||
Volatility skew | -1% to 0% (-1%) | N/M | ||||
Securities sold under agreements to repurchase ($149 and $149) |
||||||
Discounted cash flow: |
Funding spread | 145 to 154 bps (151 bps) | 118 to 127 bps (121 bps) | |||
Other secured financings ($250 and $434) |
||||||
Discounted cash flow: |
Funding spread | 38 to 81 bps (60 bps) | 63 to 92 bps (78 bps) | |||
Option model: |
Volatility skew | -1% | -1% | |||
At the money volatility | 10% to 40% (25%) | N/M | ||||
Comparable pricing: |
Comparable bond price | 14 to 58 points (30 points) | N/M | |||
Discounted cash flow: |
Discount rate | N/M | 4% | |||
Long-term borrowings ($2,603 and $2,012) |
||||||
Option model: |
At the money volatility | 5% to 35% (21%) | 7% to 42% (30%) | |||
Volatility skew | -3% to 0% (-1%) | -2% to 0% (-1%) | ||||
Equity Equity correlation | 36% to 98% (88%) | 35% to 99% (84%) | ||||
Equity Foreign exchange correlation | -51% to 10% (-32%) | -63% to 13% (-40%) | ||||
Option model: |
Interest rate volatility skew | 29% to 106% (44% / 44%) |
25% | |||
Equity volatility discount | 8% to 11% (9% / 8%) | 7% to 11% (10% / 10%) | ||||
Interest rate Foreign exchange correlation | 21% to 22% (23% / 22%) | N/M | ||||
Comparable pricing: |
Comparable equity price | 100% | N/M | |||
Nonrecurring Fair Value Measurement |
||||||
Assets at Fair Value |
||||||
Loans ($1,448 and $2,443) |
||||||
Corporate loan model: |
Credit spread | 86 to 563 bps (229 bps) | 90 to 487 bps (208 bps) | |||
Expected recovery: |
Asset coverage | 73% to 95% (84%) | 73% to 99% (97%) |
bpsBasis points. One basis point equals 1/100th of 1%.
PointsPercentage of par
MWhMegawatt hours
EBITDAEarnings before interest, taxes, depreciation and amortization
N/ANot Applicable
N/MNot Meaningful
1. | Amounts represent weighted averages except where simple averages and the median of the inputs are provided when more relevant. |
2. | Credit valuation adjustment (CVA) and funding valuation adjustments (FVA) are included in the balance but excluded from the Valuation Technique(s) and Significant Unobservable Inputs in the previous table. CVA is a Level 3 input when the underlying counterparty credit curve is unobservable. FVA is a Level 3 input in its entirety given the lack of observability of funding spreads in the principal market. |
3. | Includes derivative contracts with multiple risks (i.e., hybrid products). |
September 2017 Form 10-Q | 58 |
Notes to Consolidated Financial Statements (Unaudited) |
59 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 60 |
Notes to Consolidated Financial Statements (Unaudited) |
61 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 62 |
Notes to Consolidated Financial Statements (Unaudited) |
63 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 64 |
Notes to Consolidated Financial Statements (Unaudited) |
65 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Credit Ratings of Reference Obligation and Maturities of Credit Protection Sold
At September 30, 2017 | ||||||||||||||||||||||||
Maximum Potential Payout/Notional | Fair Value (Asset)/ Liability |
|||||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||||||
Single name credit default swaps |
||||||||||||||||||||||||
Investment grade |
$ | 46,372 | $ | 44,877 | $ | 21,662 | $ | 11,411 | $ | 124,322 | $ | (1,220) | ||||||||||||
Non-investment grade |
20,527 | 19,378 | 6,959 | 2,016 | 48,880 | (180) | ||||||||||||||||||
Total single name credit default swaps |
66,899 | 64,255 | 28,621 | 13,427 | 173,202 | (1,400) | ||||||||||||||||||
Index and basket credit default swaps |
||||||||||||||||||||||||
Investment grade |
23,097 | 13,752 | 28,918 | 19,124 | 84,891 | (885) | ||||||||||||||||||
Non-investment grade |
28,650 | 7,293 | 25,129 | 21,193 | 82,265 | 281 | ||||||||||||||||||
Total index and basket credit default swaps |
51,747 | 21,045 | 54,047 | 40,317 | 167,156 | (604) | ||||||||||||||||||
Total credit default swaps sold |
$ | 118,646 | $ | 85,300 | $ | 82,668 | $ | 53,744 | $ | 340,358 | $ | (2,004) | ||||||||||||
Other credit contracts |
14 | | | 135 | 149 | 13 | ||||||||||||||||||
Total credit derivatives and other credit contracts |
$ | 118,660 | $ | 85,300 | $ | 82,668 | $ | 53,879 | $ | 340,507 | $ | (1,991) |
At December 31, 2016 | ||||||||||||||||||||||||
Maximum Potential Payout/Notional | Fair Value (Asset)/ Liability |
|||||||||||||||||||||||
Years to Maturity | ||||||||||||||||||||||||
$ in millions | Less than 1 | 1-3 | 3-5 | Over 5 | Total | |||||||||||||||||||
Single name credit default swaps |
||||||||||||||||||||||||
Investment grade |
$ | 79,449 | $ | 70,796 | $ | 34,529 | $ | 10,293 | $ | 195,067 | $ | (1,060) | ||||||||||||
Non-investment grade |
34,571 | 25,820 | 10,436 | 1,024 | 71,851 | 307 | ||||||||||||||||||
Total single name credit default swaps |
$ | 114,020 | $ | 96,616 | $ | 44,965 | $ | 11,317 | $ | 266,918 | $ | (753) | ||||||||||||
Index and basket credit default swaps |
||||||||||||||||||||||||
Investment grade |
$ | 26,530 | $ | 21,388 | $ | 35,060 | $ | 9,096 | $ | 92,074 | $ | (846) | ||||||||||||
Non-investment grade |
26,135 | 22,983 | 11,759 | 9,861 | 70,738 | 550 | ||||||||||||||||||
Total index and basket credit default swaps |
$ | 52,665 | $ | 44,371 | $ | 46,819 | $ | 18,957 | $ | 162,812 | $ | (296) | ||||||||||||
Total credit default swaps sold |
$ | 166,685 | $ | 140,987 | $ | 91,784 | $ | 30,274 | $ | 429,730 | $ | (1,049) | ||||||||||||
Other credit contracts |
49 | 6 | | 215 | 270 | | ||||||||||||||||||
Total credit derivatives and other credit contracts |
$ | 166,734 | $ | 140,993 | $ | 91,784 | $ | 30,489 | $ | 430,000 | $ | (1,049) |
September 2017 Form 10-Q | 66 |
Notes to Consolidated Financial Statements (Unaudited) |
67 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
Investment Securities in an Unrealized Loss Position
At September 30, 2017 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
$ in millions | Fair Value | Gross Unrealized Losses |
Fair Value | Gross Unrealized Losses |
Fair Value | Gross Unrealized Losses |
||||||||||||||||||
AFS debt securities |
||||||||||||||||||||||||
U.S. government and agency securities: |
||||||||||||||||||||||||
U.S. Treasury securities |
$ | 21,910 | $ | 364 | $ | 2,371 | $ | 61 | $ | 24,281 | $ | 425 | ||||||||||||
U.S. agency securities |
10,737 | 136 | 1,431 | 28 | 12,168 | 164 | ||||||||||||||||||
Total U.S. government and agency securities |
32,647 | 500 | 3,802 | 89 | 36,449 | 589 | ||||||||||||||||||
Corporate and other debt: |
||||||||||||||||||||||||
CMBS: |
||||||||||||||||||||||||
Agency |
991 | 42 | | | 991 | 42 | ||||||||||||||||||
Non-agency |
192 | 2 | 571 | 5 | 763 | 7 | ||||||||||||||||||
Corporate bonds |
186 | 1 | 332 | 6 | 518 | 7 | ||||||||||||||||||
FFELP student loan ABS |
1,058 | 8 | | | 1,058 | 8 | ||||||||||||||||||
Total corporate and other debt |
2,427 | 53 | 903 | 11 | 3,330 | 64 | ||||||||||||||||||
Total AFS debt securities |
35,074 | 553 | 4,705 | 100 | 39,779 | 653 | ||||||||||||||||||
AFS equity securities |
| | 4 | 11 | 4 | 11 | ||||||||||||||||||
Total AFS securities |
35,074 | 553 | 4,709 | 111 | 39,783 | 664 | ||||||||||||||||||
HTM securities |
||||||||||||||||||||||||
U.S. government and agency securities: |
||||||||||||||||||||||||
U.S. Treasury securities |
9,848 | 249 | | | 9,848 | 249 | ||||||||||||||||||
U.S. agency securities |
10,084 | 151 | | | 10,084 | 151 | ||||||||||||||||||
Total U.S. government and agency securities |
19,932 | 400 | | | 19,932 | 400 | ||||||||||||||||||
Corporate and other debt: |
||||||||||||||||||||||||
CMBS: |
||||||||||||||||||||||||
Non-agency |
71 | 1 | | | 71 | 1 | ||||||||||||||||||
Total corporate and other debt |
71 | 1 | | | 71 | 1 | ||||||||||||||||||
Total HTM securities |
20,003 | 401 | | | 20,003 | 401 | ||||||||||||||||||
Total investment securities |
$ | 55,077 | $ | 954 | $ | 4,709 | $ | 111 | $ | 59,786 | $ | 1,065 |
September 2017 Form 10-Q | 68 |
Notes to Consolidated Financial Statements (Unaudited) |
At December 31, 2016 | ||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
$ in millions | Fair Value | Gross Unrealized Losses |
Fair Value | Gross Unrealized Losses |
Fair Value | Gross Unrealized Losses |
||||||||||||||||||
AFS debt securities |
||||||||||||||||||||||||
U.S. government and agency securities: |
||||||||||||||||||||||||
U.S. Treasury securities |
$ | 25,323 | $ | 545 | $ | | $ | | $ | 25,323 | $ | 545 | ||||||||||||
U.S. agency securities |
16,760 | 278 | 125 | | 16,885 | 278 | ||||||||||||||||||
Total U.S. government and agency securities |
42,083 | 823 | 125 | | 42,208 | 823 | ||||||||||||||||||
Corporate and other debt: |
||||||||||||||||||||||||
CMBS: |
||||||||||||||||||||||||
Agency |
1,245 | 44 | | | 1,245 | 44 | ||||||||||||||||||
Non-agency |
763 | 11 | 594 | 5 | 1,357 | 16 | ||||||||||||||||||
Auto loan ABS |
659 | 1 | 123 | | 782 | 1 | ||||||||||||||||||
Corporate bonds |
2,050 | 21 | 142 | 1 | 2,192 | 22 | ||||||||||||||||||
CLO |
178 | | 239 | 1 | 417 | 1 | ||||||||||||||||||
FFELP student loan ABS |
2,612 | 61 | | | 2,612 | 61 | ||||||||||||||||||
Total corporate and other debt |
7,507 | 138 | 1,098 | 7 | 8,605 | 145 | ||||||||||||||||||
Total AFS debt securities |
49,590 | 961 | 1,223 | 7 | 50,813 | 968 | ||||||||||||||||||
AFS equity securities |
6 | 9 | | | 6 | 9 | ||||||||||||||||||
Total AFS securities |
49,596 | 970 | 1,223 | 7 | 50,819 | 977 | ||||||||||||||||||
HTM securities |
||||||||||||||||||||||||
U.S. government and agency securities: |
||||||||||||||||||||||||
U.S. Treasury securities |
5,057 | 283 | | | 5,057 | 283 | ||||||||||||||||||
U.S. agency securities |
10,612 | 188 | | | 10,612 | 188 | ||||||||||||||||||
Total HTM securities |
15,669 | 471 | | | 15,669 | 471 | ||||||||||||||||||
Total investment securities |
$ | 65,265 | $ | 1,441 | $ | 1,223 | $ | 7 | $ | 66,488 | $ | 1,448 |
69 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 70 |
Notes to Consolidated Financial Statements (Unaudited) |
71 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 72 |
Notes to Consolidated Financial Statements (Unaudited) |
73 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 74 |
Notes to Consolidated Financial Statements (Unaudited) |
75 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 76 |
Notes to Consolidated Financial Statements (Unaudited) |
77 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 78 |
Notes to Consolidated Financial Statements (Unaudited) |
79 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 80 |
Notes to Consolidated Financial Statements (Unaudited) |
81 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 82 |
Notes to Consolidated Financial Statements (Unaudited) |
83 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 84 |
Notes to Consolidated Financial Statements (Unaudited) |
85 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 86 |
Notes to Consolidated Financial Statements (Unaudited) |
87 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 88 |
Notes to Consolidated Financial Statements (Unaudited) |
89 | September 2017 Form 10-Q |
Notes to Consolidated Financial Statements (Unaudited) |
September 2017 Form 10-Q | 90 |
Notes to Consolidated Financial Statements (Unaudited) |
91 | September 2017 Form 10-Q |
Financial Data Supplement (Unaudited) Average Balances and Interest Rates and Net Interest Income |
Three Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
$ in millions | Average Daily Balance |
Interest | Annualized Average Rate |
Average Daily Balance |
Interest | Annualized Average Rate |
||||||||||||||||||
Interest earning assets1 |
||||||||||||||||||||||||
Investment securities2 |
$ | 73,599 | $ | 313 | 1.7 | % | $ | 79,948 | $ | 289 | 1.4 % | |||||||||||||
Loans2 |
99,655 | 853 | 3.4 | 91,010 | 698 | 3.0 | ||||||||||||||||||
Interest bearing deposits with banks2 |
25,196 | 84 | 1.3 | 23,993 | 30 | 0.5 | ||||||||||||||||||
Securities purchased under agreements |
||||||||||||||||||||||||
U.S. |
128,127 | 190 | 0.6 | 138,420 | (58) | (0.2) | ||||||||||||||||||
Non-U.S. |
99,019 | (114 | ) | (0.5 | ) | 84,881 | (60) | (0.3) | ||||||||||||||||
Trading assets, net of Trading liabilities4: |
||||||||||||||||||||||||
U.S. |
58,000 | 463 | 3.2 | 52,490 | 452 | 3.4 | ||||||||||||||||||
Non-U.S. |
5,826 | 43 | 3.0 | 12,001 | 74 | 2.4 | ||||||||||||||||||
Customer receivables and Other5: |
||||||||||||||||||||||||
U.S. |
47,916 | 364 | 3.0 | 48,637 | 298 | 2.4 | ||||||||||||||||||
Non-U.S. |
25,429 | 144 | 2.2 | 22,162 | 11 | 0.2 | ||||||||||||||||||
Total |
$ | 562,767 | $ | 2,340 | 1.7 | % | $ | 553,542 | $ | 1,734 | 1.2 % | |||||||||||||
Interest bearing liabilities1 |
|
|||||||||||||||||||||||
Deposits2 |
$ | 150,116 | $ | 63 | 0.2 | % | $ | 153,036 | $ | 12 | % | |||||||||||||
Short-term and Long-term borrowings2, 6 |
192,575 | 1,109 | 2.3 | 166,271 | 814 | 1.9 | ||||||||||||||||||
Securities sold under agreements |
||||||||||||||||||||||||
U.S. |
30,027 | 234 | 3.1 | 33,361 | 133 | 1.6 | ||||||||||||||||||
Non-U.S. |
38,536 | 91 | 0.9 | 33,487 | 95 | 1.1 | ||||||||||||||||||
Customer payables and Other8: |
||||||||||||||||||||||||
U.S. |
129,365 | (13 | ) | | 125,931 | (217) | (0.7) | |||||||||||||||||
Non-U.S. |
66,697 | 73 | 0.4 | 64,241 | (106) | (0.7) | ||||||||||||||||||
Total |
$ | 607,316 | $ | 1,557 | 1.0 | % | $ | 576,327 | $ | 731 | 0.5 % | |||||||||||||
Net interest income |
$ | 783 | 0.7 | % | $ | 1,003 | 0.7 % |
September 2017 Form 10-Q | 92 |
Financial Data Supplement (Unaudited) Average Balances and Interest Rates and Net Interest Income |
Nine Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
$ in millions | Average Daily Balance |
Interest | Annualized Average Rate |
Average Daily Balance |
Interest | Annualized Average Rate |
||||||||||||||||||
Interest earning assets1 |
||||||||||||||||||||||||
Investment securities2 |
$ | 76,356 | $ | 943 | 1.7 | % | $ | 77,989 | $ | 762 | 1.3 % | |||||||||||||
Loans2 |
97,099 | 2,399 | 3.3 | 88,995 | 2,026 | 3.0 | ||||||||||||||||||
Interest bearing deposits with banks2 |
21,685 | 206 | 1.3 | 28,329 | 134 | 0.6 | ||||||||||||||||||
Securities purchased under agreements |
||||||||||||||||||||||||
U.S. |
126,738 | 406 | 0.4 | 148,918 | (184) | (0.2) | ||||||||||||||||||
Non-U.S. |
96,419 | (320 | ) | (0.4 | ) | 84,802 | (131) | (0.2) | ||||||||||||||||
Trading assets, net of Trading liabilities4: |
||||||||||||||||||||||||
U.S. |
58,260 | 1,385 | 3.2 | 48,274 | 1,426 | 3.9 | ||||||||||||||||||
Non-U.S. |
3,701 | 76 | 2.7 | 14,706 | 225 | 2.0 | ||||||||||||||||||
Customer receivables and Other5: |
||||||||||||||||||||||||
U.S. |
49,155 | 950 | 2.6 | 47,723 | 838 | 2.3 | ||||||||||||||||||
Non-U.S. |
24,514 | 366 | 2.0 | 22,209 | 52 | 0.3 | ||||||||||||||||||
Total |
$ | 553,927 | $ | 6,411 | 1.5 | % | $ | 561,945 | $ | 5,148 | 1.2 % | |||||||||||||
Interest bearing liabilities1 |
|
|||||||||||||||||||||||
Deposits2 |
$ | 150,244 | $ | 88 | 0.1 | % | $ | 155,598 | $ | 48 | % | |||||||||||||
Short-term and Long-term borrowings2, 6 |
181,544 | 3,197 | 2.4 | 163,474 | 2,633 | 2.2 | ||||||||||||||||||
Securities sold under agreements |
||||||||||||||||||||||||
U.S. |
31,958 | 651 | 2.7 | 32,183 | 424 | 1.8 | ||||||||||||||||||
Non-U.S. |
39,449 | 261 | 0.9 | 29,970 | 337 | 1.5 | ||||||||||||||||||
Customer payables and Other8: |
||||||||||||||||||||||||
U.S. |
128,420 | (196 | ) | (0.2 | ) | 126,468 | (826) | (0.9) | ||||||||||||||||
Non-U.S. |
64,257 | 105 | 0.2 | 64,221 | (283) | (0.6) | ||||||||||||||||||
Total |
$ | 595,872 | $ | 4,106 | 0.9 | % | $ | 571,914 | $ | 2,333 | 0.5 % | |||||||||||||
Net interest income |
$ | 2,305 | 0.6 | % | $ | 2,815 | 0.7 % |
1. | Certain revisions have been made to prior periods to conform to the current presentation. |
2. | Amounts include primarily U.S. balances. |
3. | Includes fees paid on Securities borrowed. |
4. | Trading assets, net of Trading liabilities exclude non-interest earning assets and non-interest bearing liabilities, such as equity securities. |
5. | Includes interest from customer receivables and cash deposited with clearing organizations or segregated under federal and other regulations or requirements. |
6. | The Firm also issues structured notes that have coupon or repayment terms linked to the performance of debt or equity securities, indices, currencies or commodities, which are recorded within Trading revenues (see Note 3 to the financial statements). |
7. | Includes fees received on Securities loaned. |
8. | Includes fees received from prime brokerage customers for stock loan transactions incurred to cover customers short positions. |
93 | September 2017 Form 10-Q |
Financial Data Supplement (Unaudited) Rate/Volume Analysis |
Effect of Volume and Rate Changes on Net Interest Income
Three Months Ended September 30, 2017 versus Three Months Ended September 30, 2016 |
Nine Months Ended September 30, 2017 versus Nine Months Ended September 30, 2016 |
|||||||||||||||||||||||
Increase (decrease) due to change in: |
Increase (decrease) due to change in: |
|||||||||||||||||||||||
$ in millions | Volume | Rate | Net Change | Volume | Rate | Net Change | ||||||||||||||||||
Interest earning assets |
|
|||||||||||||||||||||||
Investment securities |
$ | (23 | ) | $ | 47 | $ | 24 | $ | (16 | ) | $ | 197 | $ | 181 | ||||||||||
Loans |
66 | 89 | 155 | 184 | 189 | 373 | ||||||||||||||||||
Interest bearing deposits with banks |
2 | 52 | 54 | (31 | ) | 103 | 72 | |||||||||||||||||
Securities purchased under agreements |
|
|||||||||||||||||||||||
U.S. |
4 | 244 | 248 | 27 | 563 | 590 | ||||||||||||||||||
Non-U.S. |
(10 | ) | (44 | ) | (54 | ) | (18 | ) | (171 | ) | (189) | |||||||||||||
Trading assets, net of Trading liabilities: |
||||||||||||||||||||||||
U.S. |
47 | (36 | ) | 11 | 295 | (336 | ) | (41) | ||||||||||||||||
Non-U.S. |
(38 | ) | 7 | (31 | ) | (168 | ) | 19 | (149) | |||||||||||||||
Customer receivables and Other: |
|
|||||||||||||||||||||||
U.S. |
(4 | ) | 70 | 66 | 25 | 87 | 112 | |||||||||||||||||
Non-U.S. |
2 | 131 | 133 | 5 | 309 | 314 | ||||||||||||||||||
Change in interest income |
$ | 46 | $ | 560 | $ | 606 | $ | 303 | $ | 960 | $ | 1,263 | ||||||||||||
Interest bearing liabilities |
|
|||||||||||||||||||||||
Deposits |
$ | | $ | 51 | $ | 51 | $ | (2 | ) | $ | 42 | $ | 40 | |||||||||||
Short-term and Long-term borrowings |
129 | 166 | 295 | 291 | 273 | 564 | ||||||||||||||||||
Securities sold under agreements |
||||||||||||||||||||||||
U.S. |
(13 | ) | 114 | 101 | (3 | ) | 230 | 227 | ||||||||||||||||
Non-U.S. |
14 | (18 | ) | (4 | ) | 107 | (183 | ) | (76) | |||||||||||||||
Customer payables and Other: |
|
|||||||||||||||||||||||
U.S. |
(6 | ) | 210 | 204 | (13 | ) | 643 | 630 | ||||||||||||||||
Non-U.S. |
(4 | ) | 183 | 179 | | 388 | 388 | |||||||||||||||||
Change in interest expense |
$ | 120 | $ | 706 | $ | 826 | $ | 380 | $ | 1,393 | $ | 1,773 | ||||||||||||
Change in net interest income |
$ | (74 | ) | $ | (146 | ) | $ | (220 | ) | $ | (77 | ) | $ | (433 | ) | $ | (510) |
September 2017 Form 10-Q | 94 |
Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth the information with respect to purchases made by or on behalf of the Firm of its common stock during the quarterly period ended September 30, 2017.
Issuer Purchases of Equity Securities
$ in millions, except per share data | Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1 |
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs |
||||||||||||
Month #1 (July 1, 2017July 31, 2017) |
||||||||||||||||
Share Repurchase Program2 |
2,729,000 | $ | 47.07 | 2,729,000 | $ | 4,872 | ||||||||||
Employee transactions3 |
769,637 | $ | 46.21 | | | |||||||||||
Month #2 (August 1, 2017August 31, 2017) |
||||||||||||||||
Share Repurchase Program2 |
13,740,000 | $ | 46.56 | 13,740,000 | $ | 4,232 | ||||||||||
Employee transactions3 |
96,764 | $ | 46.66 | | | |||||||||||
Month #3 (September 1, 2017September 30, 2017) |
||||||||||||||||
Share Repurchase Program2 |
10,448,247 | $ | 46.12 | 10,448,247 | $ | 3,750 | ||||||||||
Employee transactions3 |
192,674 | $ | 46.11 | | | |||||||||||
Quarter ended at September 30, 2017 |
||||||||||||||||
Share Repurchase Program2 |
26,917,247 | $ | 46.44 | 26,917,247 | $ | 3,750 | ||||||||||
Employee transactions3 |
1,059,075 | $ | 46.23 | | |
1. | Share purchases under publicly announced programs 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. |
2. | The Firms Board of Directors has authorized the repurchase of the Firms outstanding stock under a share repurchase program (the Share Repurchase Program). The Share Repurchase Program is a program for capital management purposes that considers, among other things, business segment capital needs, as well as equity-based compensation and benefit plan requirements. The Share Repurchase Program has no set expiration or termination date. Share repurchases by the Firm are subject to regulatory approval. On June 28, 2017, the Board of Governors of the Federal Reserve System (the Federal Reserve) announced that they did not object to our 2017 capital plan, which included a share repurchase of up to $5.0 billion of the Firms outstanding common stock during the period beginning July 1, 2017 through June 30, 2018. During the quarter ended September 30, 2017, the Firm repurchased approximately $1.25 billion of the Firms outstanding common stock as part of its Share Repurchase Program. For further information, see Liquidity and Capital ResourcesCapital Management in Part I, Item 2. |
3. | Includes shares acquired by the Firm in satisfaction of the tax withholding obligations on stock-based awards and the exercise of stock options granted under the Firms stock-based compensation plans. |
An exhibit index has been filed as part of this Report on page E-1.
September 2017 Form 10-Q | 96 |
Morgan Stanley
Quarter Ended September 30, 2017
Exhibit No.
|
Description
| |
12 |
||
15 |
||
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 (unaudited): (i) the Consolidated Income StatementsThree Months and Nine Months Ended September 30, 2017 and 2016, (ii) the Consolidated Comprehensive Income StatementsThree Months and Nine Months Ended September 30, 2017 and 2016, (iii) the Consolidated Balance Sheetsat September 30, 2017 and December 31, 2016, (iv) the Consolidated Statements of Changes in Total EquityNine Months Ended September 30, 2017 and 2016, (v) the Consolidated Cash Flow StatementsNine Months Ended September 30, 2017 and 2016, and (vi) Notes to Consolidated Financial Statements. |
E-1 | September 2017 Form 10-Q |
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/ JONATHAN PRUZAN | |||
Jonathan Pruzan Executive Vice President and Chief Financial Officer | ||||
By:
|
/s/ PAUL C. WIRTH | |||
Paul C. Wirth Deputy Chief Financial Officer |
Date: November 3, 2017
S-1 | September 2017 Form 10-Q |