MORGAN STANLEY

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Management’s Discussion and Analysis

Institutional Securities

Investment Banking Volumes

Source: Refinitiv data as of January 2, 2024. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal, change in value or change in timing of certain transactions.

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

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

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

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

Investment Banking Revenues

Net revenues of $4,578 million in 2023 decreased 13% compared with the prior year, primarily reflecting lower Advisory revenues.

•Advisory revenues decreased primarily due to fewer completed M&A transactions on lower market volumes.

•Equity underwriting revenues increased on higher volumes, primarily in secondary offerings and convertible issuances, partially offset by lower revenues from initial public offerings.

•Fixed income underwriting revenues were relatively unchanged from the prior year, primarily reflecting higher investment-grade loan and bond issuances, offset by lower non-investment grade loan issuances.

Investment Banking continues to operate in a market environment characterized by lower completed M&A and underwriting activity amid market uncertainty, including the future path of interest rates.

See “Investment Banking Volumes” herein.

Equity, Fixed Income and Other Net Revenues

Equity and Fixed Income Net Revenues

1. Includes Commissions and fees and Asset management revenues.

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

3. Includes Investments and Other revenues.

Equity

Net revenues of $9,986 million in 2023 decreased 7% compared with the prior year, reflecting decreases in Financing and Execution services.

•Financing revenues decreased primarily due to higher funding and liquidity costs compared with the prior year.

•Execution services revenues decreased primarily due to lower gains on inventory held to facilitate client activity in derivatives and cash equities and lower client activity in cash equities, partially offset by mark-to-market gains on business-related investments compared with losses in the prior year.

Fixed Income

Net revenues of $7,673 million in 2023 decreased 15% compared with the prior year, primarily reflecting a decrease in foreign exchange and commodities products.

•Global macro products revenues decreased primarily due to a decline in foreign exchange products.

•Credit products revenues decreased primarily due to lower client activity across products.

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Management’s Discussion and Analysis

•Commodities products and other fixed income revenues decreased compared to elevated results in the prior year, primarily due to lower gains on inventory held to facilitate client activity and lower client activity.

Other Net Revenues

Other net revenues were $823 million in 2023 compared with losses of $633 million in the prior year, primarily due to lower mark-to-market losses on corporate loans held for sale, inclusive of hedges, and higher net interest income and fees on corporate loans, mark-to-market gains compared with losses in the prior year on DCP investments and impacts from liquidity and funding costs.

In 2023, the Provision for credit losses on loans and lending commitments of $401 million was primarily related to deteriorating conditions in the commercial real estate sector, including provisions for certain specific loans, mainly in the office portfolio, and modest growth in certain other loan portfolios. The Provision for credit losses on loans and lending commitments of $211 million in 2022 was primarily driven by portfolio growth and deterioration in the macroeconomic outlook.

Non-interest expenses of $18,183 million in 2023 increased 4% compared with the prior year due to higher Non-compensation expenses and Compensation and benefits expenses.

•Compensation and benefits expenses increased primarily due to higher expenses related to DCP and higher stock-based compensation expenses driven by the Firm’s share price movement in the prior year, partially offset by lower expenses related to outstanding deferred equity compensation.

•Non-compensation expenses increased primarily due to increased spend on technology, an FDIC special assessment of $121 million, higher legal expenses, including $249 million related to a specific matter, higher execution-related and marketing and business development expenses.